authID Inc. Q1 FY2024 Earnings Call

Greetings, and good afternoon. This is Graham Arad, General Counsel of authID. Welcome to the authID First Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. With me on today's call are our CEO, Rhon Daguro; our CFO, Ed Sellitto; and our CTO, Tom Szoke. By now, you should have access to today's press release announcing our Q1 2024 results. If you have not received this, the release can be found on our website at www.authid.ai under the Investor Relations section. Throughout this conference call, we will be presenting certain non-GAAP financial information. This information is not calculated in accordance with GAAP, and may be calculated differently from other companies' similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appear in today's press release. Before we begin our formal remarks, let me remind everyone that part of our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance, and, therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's press release. Others are discussed in our Form 10-K and other filings, which are available at www.sec.gov. I'd now like to introduce our CFO, Ed Sellitto.

Thanks, Graham. I'm pleased to report that Q1 2024 has been a pivotal turning point for authID's revenue growth. Our sales, engineering, and customer success teams have worked tirelessly to launch new customers so that we could begin to recognize revenue from customers booked in 2023. Turning to slide four, the following highlights compare our GAAP results from continuing operations for the three-month period ended March 31, 2024, with the three-month period ended March 31, 2023, unless otherwise specified. Total revenue for the quarter increased to $0.16 million, compared with $0.04 million for the same period last year, as the result of the launch of several new customers that were signed in 2023, including both consumer and workforce use cases. Q1 revenue is already approaching $0.19 million in revenue earned in all of 2023. Operating expenses for the quarter totaled $3.31 million, compared to $1.02 million for the same period last year. This increase was driven by a one-time non-cash expense reversal in Q1 2023 of $3.4 million from the reversal of certain stock-based compensation related to employee terminations, which was not repeated in 2024. From a quarter-over-quarter perspective, operating expenses for Q1 2024 remained in line with the operating expenses incurred in Q4 of 2023. Losses from continuing operations for the quarter was $3.06 million, of which non-cash charges were $0.77 million, compared with the loss of $1.78 million in Q1 of 2023. Looking again from a quarter-over-quarter perspective, loss from continuing operations decreased approximately 4%, from $3.2 million in Q4 of 2023, to $3.06 million in Q1 2024. Net loss per share for the quarter was $0.32, compared with $0.56 for the same period last year. Moving to slide five, as reported on our 2023 Annual Results Call, held in March, we also monitor and manage our remaining performance obligation or RPO in accordance with GAAP as noted in our financial statements for the period. RPO provides a measure of the minimum revenue expected to be recognized from our signed contracts based on customers' contractual commitments. As of Q1 2024, our total RPO was $4.03 million, which equaled the RPO from Q4 of 2023. The quarter-end RPO includes deferred revenue of $0.31 million, an increase over 2023 of $0.18 million, which moves to additional non-cancellable revenue as a result of customers invoiced in Q1. Deferred revenue represents advanced payments received which are not yet recognized as revenue. The Q1 2024 RPO also includes $3.73 million in additional non-cancellable revenue under contracts that were signed in 2023 and Q1 of 2024 but which has not yet been recognized. Total RPO remains flat quarter-over-quarter as new contractual commitments signed in Q1 of 2024 were largely offset with revenue recognized in the quarter. We expect to recognize the full RPO of $4.03 million over the entire life of the contracts, which are typically signed with a three-year term. Over the next 12 months, ending in March 31, 2025, the company expects to recognize approximately 40% or $1.6 million of the $4.03 million in RPO as revenue based on contractual commitments and expected usage patterns. While the RPO is based on contractual terms as agreed to by our customers, the expected time to recognize revenue is based on our best estimates given the current known facts and circumstances. Of course, while RPO is based only on minimum contractual commitments, we have reason to believe that each of these customers will exceed their minimum commitments. Moving to slide six, before we review our non-GAAP results, I want to take a moment to discuss how, going forward, we will provide additional detail to explain our bookings metric, known as bARR. In 2023, we reported our metric for bARR, or booked Annual Recurring Revenue, which is the projected amount of annual recurring revenue we believe will be earned under contracted orders, looking at 18 months from the date of signing of each customer contract. Starting with this quarter, we're providing additional details by breaking bARR into two components; Committed Annual Recurring Revenue, or cARR, and Usage Above Commitment or UAC. The chart shown here on the slide illustrates how both measures convert into revenue over a three-year period. cARR, as shown on the dark purple on the left side of the chart, represents the total annual customer contractual commitment through fixed license fees and minimum usage commitments. These commitments are directly recognized as revenue in each contract year after the customer goes live with the service. UAC, as shown in light blue on the right side of the chart, is an estimate of annual customer usage that will exceed contractual commitments. By the time a customer fully ramps its usage by month 18 of its contract, cARR is expected to comprise approximately one-half of the recognized revenue, with UAC making up the other half. On the slide, I've illustrated the breakdown of the $3.0 million in 2023 bARR bookings, and how we expect that to translate into revenue over a three-year period. The $3.0 million in bARR was comprised of $1.4 million of cARR and $1.6 million of estimated UAC, as shown in the fully ramped year of 2026 at the bottom of the chart. The cARR of $1.4 million is recognized consistently each contact year once the customer is live with the product, as shown in the dark purple bar, for years one, two, and three. The UAC component begins to show in the second year, or 18 months, as usage exceeds the annual minimum commitment. This chart illustrates how we would expect around $0.8 million or half the full-year UAC to be recognized in the second year of the contract. In year three, the customer is fully ramped for the full-year, with $1.4 million or 47% from cARR, and $1.6 million or 53% from UAC, expected to be recognized for a total of $3.0 million in recognized revenue. Turning to our non-GAAP results on slide seven, adjusted EBITDA loss for the quarter was $2.39 million, compared with $2.20 million for the same period last year, an increase of 9%. Additionally, adjusted EBITDA loss for the current period declined 11% from the fourth quarter of 2023. As noted on the previous slide, we're providing additional details on our bARR or booked Annual Recurring Revenue. Net bARR reflects the deduction of bARR from contracts previously included in the reported bARR which was subject to attrition during the quarter. The gross and net amount of bARR signed in the first quarter of 2024 was $0.1 million, compared to $0.01 million of bARR signed in the first quarter of 2023. The $0.1 million in Q1 bARR is comprised of $0.04 million in Committed Annual Recurring Revenue or cARR, and $0.06 million in estimated Usage Above Commitment or UAC. From a quarter-to-quarter perspective, Q1 2024 bARR declined from the Q4 2023 bARR. Given the size of our sales organization in the latter part of 2023, we recognize the need to build a more efficient pipeline through the pursuit of larger enterprise customers that require longer sales cycles and are estimated to return larger revenue potential and therefore increase our enterprise value. We also focus efforts on building a strengthened channel partner network that will help us increase the breadth of our sales force and help us more quickly and efficiently acquire new customers. These efforts have shown up in Q1 through newly signed partnerships and strong progression of pipeline with key enterprise prospects, which Ron will speak to in more detail. We estimate that the cARR and bARR from these efforts will begin to show in Q2 with the majority of growth in the second half of 2024. Based on our sales pipeline, we reiterate that we are on target to realize our previously stated 2024 bARR target of $9 million. authID also monitors the reports on annual recurring revenue or ARR, which is defined as the amount of recurring revenue derived from sales of our biometric identity products during the last three months of the relevant period as determined in accordance with GAAP multiplied by four. The amount of ARR as of March 31, 2024 increased by $0.4 million to $0.63 million as compared to $0.15 million of ARR from the same period last year. Turning to slide eight, given our strong performance in bringing customers live in the first quarter of 2024, I'm excited to report that we will begin to provide full-year revenue guidance on a quarterly basis as well as targets for our booked ARR and RPO measures. Starting with booked ARR, as I mentioned on the last slide, we're reiterating our previously stated target of $9 million for 2024, and we'll also provide detail on cARR and UAC as we report our progress. By achieving $9 million in bARR, dependent on the level of our customer commitments and term lengths, we expect to also grow our remaining performance obligation to a range of $12 million to $13 million by the end of 2024. Regarding revenue growth, building on our Q1 revenue of $0.16 million, we estimate our total revenue for 2024 will be in the range of $1.4 million to $1.6 million, driven by the recognition of revenue from contracts held in our RPO. At the midpoint of this range, this represents a year-over-year increase of $1.3 million over the $0.2 million in revenue reported in 2023. Turning to slide nine, as we work to build a sustainable recurring revenue stream, we will continually review our progress through our revenue growth stages. Looking from left to right on this slide, the first milestone we've used to monitor our progress is bookings, measured by bARR, which we will continue to measure as we progress through 2024 and remain committed to our $9 million target. Regarding customer financial commitments, we monitor our remaining performance obligation, or RPO. As I detailed earlier, as of the end of Q1 2024, we've secured over $4 million in RPO, and we expect this metric to significantly increase to approximately $12 million to $13 million in proportion with the committed annual recurring revenue that we sign in 2024. Our third reporting metric is revenue, which is recognized in accordance with GAAP when new customers are onboarded onto our platform and usage of our service kicks off. To recap our guidance here, we are estimating 2024 revenue in the range of $1.4 million to $1.6 million, a significant year-over-year increase based on our estimates of customer go-live progress and revenue commitments. As we move into 2025 and our contracts mature, we'll increase our focus on monitoring customer retention and expansion. Key efforts will include refining our sales and support methodologies, deepening our customer relationships and increasing the value added by our services through continued usage growth, use case expansions, renewals, and the upsell of new relevant products. In summary, I'm extremely excited that the first quarter of 2024 marks a pivotal turning point in authID's revenue growth story. We will continue to build upon and monitor our progress on these measures as we progress into the next stages of market penetration and growth. With that, I'd now like to turn the call over to our CEO, Rhon Daguro.

Thank you, Ed. I'm also very excited, and I'm very proud of our team's accomplishments. In just under one year, our new team has laid a strong foundation for continued growth and market leadership. We are laser-focused on our mission statement to help our enterprise customers eliminate authentication fraud and deliver 100% zero-trust identity assurance across their workforce and consumer platforms. Today, too many organizations rely on outdated authentication strategies that merely assume the correct user is accessing a system or resetting an account. authID helps our customers defeat today's rampant fraud and malicious AI-generated cyber-attacks with strong identity assurance to know who's behind the device every time. The value proposition of our biometric technology continues to resonate strongly in the market. Let's look at our continued market momentum and progress. A little less than one year ago, I joined authID as CEO, excited by the strength and value of authID's technology and the opportunity to build a high-performance sales machine. Along with the newly reconstituted board of directors and a small team of identity domain experts, we have launched a turnaround of authID, and I am pleased that in every quarter we have made progress across multiple facets of the business. By shifting the company to a sales-focused mindset in 2023, we secured a record $3 million in booked contracts that supported use cases for identity verification and authentication across financial services, fintech, social commerce, and workforce authentication on shared devices. Turning to Q1 of 2024, we focused our efforts in three key areas. First, technology hardening and feature enhancement. Second, securing fast customer go-lives for revenue. And third, refocusing our sales strategy to concentrate our efforts on building stronger channel partner opportunities. During the first quarter, our highly talented engineering team worked to harden our biometric platform to ensure the high availability and absolute stability required to efficiently manage the increased volume and throughput of identity transaction processing that our sales bookings predict. As we learned more about what our customers need and want versus what they had before with other vendors, our engineering team has enhanced our platform with new product features. A highly demanded feature that we are happy to pre-announce today is our recently signed agreement with Equifax. authID's strength relies on biometrics of a live person, but our customers currently use many signals to help them determine other business and compliance decisions, including phone and address verification and KYC checks. Building on relationships with Equifax, it only made sense that we would partner up to bring to the industry a broader world-class identity verification and authentication service for our customers. Adding the Equifax product set to our platform will allow our customers to be serviced through a single authentication platform for a variety of use cases. We are excited about this additional feature, and more details on the service will be shared later through a press release. Another key achievement in Q1 2024 was the efforts of our sales, customer success, and engineering teams in realizing the go-live of three customers that were signed in 2023. Those customers, including a lending fintech company, a digital wallet provider, and a Fortune 500 facilities services provider, directly contributed to our record first quarter revenue of $0.16 million. This is a pivotal business milestone as in just one quarter we earned revenue approximately equal to all of the revenue earned in all of 2023. Looking ahead, we continue to make progress on customer launches as we are in the process of taking another six customers live in Q2. We are also in the middle of our largest go-live with a very large customer and the early performance results are better than they have seen with any other vendor. While still in a phased rollout, we are excited to see the results when they go to full user volume. Our ability to earn revenue in Q1 based on contracts booked last year combined with our Q1 2024 revenue performance obligation metric of $4 million serves as strong market proof that our team, our processes, and our technology are delivering on our promises to our customers. As Ed announced earlier, this progress allows us for the first time to provide guidance on 2024 revenue with an estimated range of $1.4 million to $1.6 million. Note that this estimate does not account for any new deals that we will book in 2024 and may bring live this year. I am especially positive that in less than one year of leading this business under our new business offering, our team has secured the most deal bookings, brought the most customers live, earned the most revenue in a single quarter, and projected higher revenue in a single year in authID's entire history. Turning to our third focus, our sales pipeline generation and booked deals. I am pleased to report that in the first quarter, our sales team secured almost $9.5 million in pipeline, slightly ahead of our targeted $9 million per quarter, and we have made significant progress in realizing our target of an additional $36 million in sales pipeline for the year of 2024. While our Q1 bARR of $0.1 million was lower than our Q4 2023 bARR, these results were anticipated as we aggressively work to close a number of both small and large opportunities in Q4 of 2023, while at the same time, we began to progress our go-to-market strategy and renew our sales pipeline to focus on signing larger enterprise clients and new channel partners who would sell on our behalf. Let me illustrate the progression of our go-to-market strategy. When we started this journey in June of 2023, we focused our small direct sales team on our FAST 100, generally smaller logos, meaning smaller opportunities that can be closed more quickly given their smaller layers of management and decision makers. We focused on these FAST 100 opportunities to provide reference customers to drive quicker sales closings, earlier go-lives, and quick growth. And we had success, as our Q1 revenue was derived largely from the FAST 100, including a lending fintech provider, a digital wallet start-up, and a workforce facility services provider. As our team knows from previous experience, while some of our FAST 100 companies may be small right now and possibly in early stage, these companies can grow significantly. Additionally, authID's help in onboarding valid users while reducing fraud costs and reputational risk will help accelerate our customers' growth. And the more they grow, the larger their user base becomes, resulting in a larger opportunity for authID. Signing a lot of small deals, however, is not a sustainable long-term growth strategy. Accordingly, in late 2023 and into this year, we began to progress our go-to-market strategy. First, we leveraged our proven use cases to successfully begin the expansion of our channel partner program. Channel partners are a force multiplier with more feet on the street, more exposure and more market validation, and the ability to sign more FAST 100 deals at a quicker pace. Channel partners accelerate our entry into the verticals they service and introduce us to their customers who need authID. Our team has many combined years of working with partners of various types. Value-added resellers that we have signed recently, including IBM Works and most recently, Centro, who offers services such as consulting and systems integration for particular verticals or technologies, help us find our way into their existing client base and pipeline. OEM partners such as Verified make us part of their entire offering. Our second progression in our go-to-market strategy involved redirecting our authID sales team to focus on our FAT 100. These accounts generally take longer to sign, where deal cycles can extend to six to nine months or sometimes even longer, depending on the customer's buying and contract approvals process. Larger accounts, especially in the financial services space, generally have multiple tiers of compliance and regulatory decisioning, whereas in less expansive organizations, the number of people required to make buying and compliance decisions are more concentrated. While typically taking longer to sign, the value of the FAT 100 accounts is that they are larger in deal size, expected to generate higher revenue, and thus drive longer-term enterprise value for the company. As you've seen in our recent announcements, we were successful in signing channel reselling partners in the first quarter, and we anticipate signing additional partners shortly. Further, we anticipate seeing our focus on partners and FAT 100 enterprise accounts to come through in Q2, with the majority of our sales being signed in Q3 and Q4. Now that we've shared our current go-to-market strategy, let's look at our progress towards achieving our target sales and revenue growth. Our current total pipeline right now is $21.3 million and has a good mixture of deal sizes, including 52 deals valued at less than $100,000 or greater than $100,000 and 12 FAT 100 deals valued greater than $500,000. These opportunities extend across large banks, payment providers, hotels, and payroll providers. We continue to identify more FAT 100 opportunities with large payments companies, credit unions, retail, pharma, and insurance. Through our expanded partner network, we have already generated several opportunities that are heading to close this quarter. While our channel partners and direct sales teams will continue to identify new prospects and add deals to our pipeline, at this point in the year, we are estimating that we can achieve the 42% close ratio to attain the $9 million bARR target for 2024. Now that you've heard about our sales and go-to-market strategy and its progression, I want to provide you with additional insight on why the world needs authID. The majority of corporate identity services all use one or more of these traditional authentication methods, and we are all too familiar with these. And if they all worked as advertised, we would all be safe. Yet, fraud keeps happening repeatedly with headlines dominating the news every single day. The proof is in the headlines: social engineering attacks, deep fake attacks tricking employees, SMS scams, and compromised PII. I highlight this because these security methods are not protecting us. What makes existing security measures so vulnerable? These measures are all based on the assumption that the person in possession of the device is the actual owner and not an imposter. These measures rely on proxies such as Telcos who are handling the SMS messages with one-time pins and passwords, making them vulnerable to SIM swaps and other mobile device scams. These measures also rely on knowledge-based questions that are harvested from the very data brokers whose data breaches have been feeding fraud in the first place. They depend on the weakest link in the chain, which is the password, and assume that the user's device, e-mail, and phone are in the hands of the rightful owner. These dependencies are fatal. So, let's look at a sophisticated yet easy breach that can trick almost every security system out there. Make no mistake, everyone on this call or anyone who listens to this webcast is subject to these kinds of attacks. Even the least talented fraudster can launch these because of easy access to Gen AI tools. These deep fake attacks can fill any human manual review process and any digital process. But with authID, the enterprise can't be fooled. Let me quickly walk you through this. Starting on the left, the first step for a fraudster is to steal your ID or create a deep fake ID of you. The next step is for the fraudster to generate a deep fake impersonation of your picture on the ID. This deep fake looks alive, can move, and show motions and facial expressions. The next step is for the fraudster to open a bank account with your information. The fraudster will start by entering your PII or personally identifiable information and will be asked to submit their ID, starting with the front of the ID using the camera, then the back. Then, the fraudster will easily fire up the deep fake tool, hijack the camera sensor, and submit the deep biometric by signing the camera window over the deep fake impersonation of you. Within 700 milliseconds, the authID platform automatically performs over 100 checks and detects the deep fake using our layered liveness and injection attack defenses, and automatically rejects the submission. I can take a picture of anyone on this call, generate a fake ID, and open up accounts on your behalf without your permission. This is incredibly scary, and somebody needs to step up to protect us. Deep fakes are just getting started. authID offers a cutting-edge defense against malicious generated AI fraud. This is another example of why the world needs authID. In closing, to reiterate what Ed started at the beginning of the call, we've been working to accelerate this business over the last 12 months and continue to build our pipeline at our intended pace of $9 million a quarter. We are steady in our guidance for triple growth of $9 million in bARR bookings, increasing our RPO to $12 million to $13 million, and guiding towards $1.4 million to $1.6 million in revenue for 2024. Also, keeping in mind, this does not include anything we open in the year and bring revenue in year. AuthID continues to work on growing every facet of our business as we continue to bring on the best people, the best customers, the best technology, and produce strong business performance metrics, all contributing to our mission to eliminate authentication fraud. I want to thank the authID team who've done a great job over the last 12 months. We expect to achieve a lot more in the upcoming years. And thank our investors for their confidence and support. We would now like to open up for questions. Let's turn back to Graham, who will moderate the questions.

Thank you, Rhon. I'm going to open the line for questions. Gary, please go ahead and ask your question.

Thanks, Graham, I appreciate it. Ed, really nice job breaking out bARR into Committed Annual Recurring Revenue and Usage Above Commitment. It was a great presentation. Rhon, I want to ask you an important question. In my opinion, the two key things the company is going to need later this year are new contract signings, which you talked about a lot in the second half, and a secondary offering later this year. It's not a secret that the company is going to need additional financing to get to the point where you're self-financing. Would you mind talking a little bit about your level of confidence in being able to achieve each of these goals?

Thank you for the question. We definitely aim for quarter-over-quarter growth in each quarter with our businesses, and we're working on improving our predictive capabilities. As a former CRO, I focus on our ability to build pipeline as a leading indicator. If we can effectively build a pipeline, we can anticipate achieving larger numbers beyond our targets. Currently, our pipeline building rate stands at $9 million a quarter, which is strong in addition to the existing $21.3 million we have. This provides us with ample pipeline to close business by year-end. Regarding our ability to convert that pipeline, our win ratio in 2023 was over 90%, but entering 2024, it has decreased to around 25%. However, if we average these figures, we remain confident in our ability to close deals. I believe we can meet the required 40% closure rate and even exceed it. We have a clear view of the pipeline and the historical close ratios to support our goals, along with a skilled sales team to achieve this.

Sure, yes. So, as you mentioned, we do need to raise money in the balance of the year, as we stated in our 10-Q. Our balance sheet, as of the end of the quarter, started off pretty strong at $7.2 million, but we will need to raise money sometime this year. We do feel confident in our business model and with the relationships we have with various fundraising resources. We do intend to raise money throughout the year as judiciously as we can.

Sounds good, guys. Thanks. I'll get back in line for a follow-up question later. Thank you.

Thank you, Gary. The next question comes from George Sutton. George, please go ahead and unmute yourself and ask your question.

Great, thank you. Hi, Rhon. I wanted to get a sense of the range of use cases that you are going after. Obviously, the facilities provider you mentioned is a shared device scenario for the workplace. But as you're building up this pipeline, I'm just curious what kind of the top use cases you're finding to be?

I'll give you the top three core use cases and the sub-derivatives, which makes it exciting for us. So, the first use case is account opening and new user onboarding. So, when I did the demo, you can see that all the institutions that have any way to apply for a loan or a credit card have to try to do it digitally and remotely. They have to do that first-time check of whether George is really George, or Gary pretending to be George. So, that user onboard identity verification use case is absolutely one that we have been accelerating into our - helping us create our pipeline. The sub-derivatives of that, what's making it exciting is you had your kind of like old-school fraud or old-school fraudster who would maybe print a paper ID or manufacture IDs off of Etsy or order them on Poshmark. But now, with the new Gen AI tools, these people can actually get a printer at their own house, shift to them from Amazon for $600 and produce the highest quality fakes and fake IDs from the comfort of their homes. So, the increasing rate of technology in Gen AI is enabling a ton more fraudsters, which will obviously overwhelm the existing technology and existing legacy systems in place today. So, that's one of the use cases where we can try to prevent the onboarding of fraudulent users. The second use case is actual strong authentication. So, let's say the account is already opened. George, you already have your bank account. And I, Rhon, know that you have a Telco provider and probably have an email account or hopefully be with the top 5 banks. I could pretty much determine what your login ID could be. Then I can initiate a password reset on any of your accounts. Just like I did in the demo, I can even walk into a Telco provider and try to take over your phone so that when I initiated password reset of those accounts, it will go to my phone, not your phone, and then I can go ahead and access your bank accounts, and no one will be the wiser. So, the re-authentication of accounts is another major use case that everybody is worried about. That's actually been a big driver in some of the new things we’ve been doing with customers and the clients. Again, authID is a very small company, but they don't have a solution for this, and that's basically allowing them to come talk to us regardless of how big or small or how established we've been. We're the only players that have been solely dedicated to this particular use case around re-authentication, liveness of the authentication, and making sure it flows into the accounts. The third one is around account recovery. Think about the MGM breach. People can call into the call center and say, 'Hey, I need my password account reset. I need this done. I'm locked out. Please help me.' If you think about a call center worker, making $24 an hour versus a high-net-worth individual, you are now subject to a $24 an hour worker, and whether they can determine on the other line without using deep fakes about all these technologies available to them, how are they going to determine that the other person on the line is really who they say they are? They just won't know. So, authID can provide the highest level of assurance at a 700-millisecond response time and give that capability to not rely on the 24-hour worker to make that call and instead, protect that enterprise risk and brand reputation. Those are the high-level ones, and we've seen other specific cases such as wire transfer fraud and romance scams where individuals are tricked to send money to someone who they are not really in love with.

Just one other question, I'm curious if you look through your pipeline, how much of it is an organic new application that a company is looking to pursue versus a required competitive replacement.

They're pretty much competitive replacements right now because the current technology in place fundamentally rooted in passwords doesn't work. That's why they invented this thing called one-time passwords or SMS codes to your phone or a stronger authenticator. Because those are reliant on a Telco, T-Mobile, AT&T, the bank is relying on the strong authentication on another company. We know the hack right now is that fraudsters will target workers at Telcos and pay them $600. That's the going rate to be able to do passive resets on people's phones and perform SIM swaps. Our financial institutions that we're working with current customers are sophisticated, yet not everybody understands that they can now protect ourselves with biometrics. We need to show this. The innovators are starting to realize that they cannot outsource their security to Telco and phone systems.

Rhon, thank you very much.

Thank you, George. The next question comes from Gary. Please go ahead and unmute yourself and ask your question.

I do. Thanks, Graham. I don't know if this question should be directed to Rhon or Ed, either one of you would be great. So, you guys did about $200,000 of revenue in the first quarter, which is roughly what you did in all of last year. If we take the low end of your guidance this year of $1.4 million, that means $1.2 million of revenue for the rest of the year, assuming that we're evenly dispersed, which I know it won't be, that would be about $400,000 per quarter, which would be double the rate from this quarter. So, first quarter, you matched your revenue for the full year last year, and you're basically saying for the rest of the year, we're going to be at a run rate that's double what you did in the first quarter. What gives you confidence that the revenue will start to ramp so quickly?

A big question, Gary, I could take that one, Rhon.

Yes, go ahead.

So the main reason we would see that ramp up the way you described, Gary, is that we are starting to recognize revenue from our contracted customers as they go live with our service, and we started going live during Q1. So, we've had several customers with revenue beginning to be recognized in Q1, though it would be a partial quarter, maybe half of the quarter, one-third. As new customers go live with our service, we'll have that flow from a lower first quarter to a steady state as a full quarter of recognized revenue rolls in.

Okay. And just to reiterate, that $1.4 million to $1.6 million, that's from your existing signed customer base, correct, not assuming additional sales throughout the year?

That's right. That's right. We are assuming that it's going to be a recognition of our existing contracted customers as well as a smaller subset of customers that are currently on usage revenue only and don't have broader overarching commitments. So, that will add to a smaller degree. But we're not assuming any signings in year to be converted to revenue in '24 when we provided that guidance. So, that would be additional upside.

Okay, that is helpful. Thanks. I'm going to mute myself now. I appreciate the solid answer.

Graham Arad: Okay. We've had a question to Rhon. Can you explain a little bit more about the significance of the deal with Equifax and what that offers in terms of new products that we're able to roll out to our customers?

So traditionally, today, in the compliance world, there are KYC checks, and we play a part in that whole entire KYC process. We don’t check the phone number associated with the user; we don't check their address associated with the user, or even the phone number. We simply check if that is the person who registered and does their ID match their government-issued ID. This partnership allows us to be a broader service to our customers. Our customers want our products and also say, 'Hey, can you also do this? Can I just buy it for me instead of having another vendor?' It made complete sense because we know how to win business together.

Thank you. I have another question. We’ve talked about the FAT 100 and the large customers that you are working in the pipeline that we expect to sign. Can you give some indication how large these customers are? Are we talking potential seven-figure revenue numbers for some of these customers?

So, the quick answer is yes. In my presentation, we highlighted over 10 customers over the 500-plus mark. Right now in our pipeline, we're getting volumes from our customers and the use cases. If you can imagine a large organization, just in one line of business could be millions of consumers. If they then open that to additional lines of business with the same customer base, it can grow larger. Certainly, those accounts can be in multiple seven figures. It just depends on how many use cases they're going to live with that first deal.

Thank you. George, I see you still have your hand up or do you have another question? If not, but if anyone else has any other questions, please do put them in the Q&A or raise your hand. In the meantime, Rhon, perhaps you can talk a little about the TAM for our current product and how we look in the marketplace.

This gets me excited because it's just way bigger than I can ever imagine. We're fortunate that the product we sell affects consumers, employees, anyone that does anything digital. We can absolutely provide a solution to ensure that you are who you say you are. With that being said, I look at market leaders and public companies in the authentication space, companies like Okta. They all put out their numbers, saying that the market has grown from $18 billion to $50 billion, heading to $80 billion in terms of a TAM. Certainly, authID would love a piece of that, and we believe we've carved out a specialty niche. We've been far ahead of the game with the deep fake demo I showed. Nobody's doing that the way we're doing it. We are focused on this next-generation authentication, and we're trying to make the best user experience possible, and that story has resonated, contributing to our ability to build pipeline at $9 million a quarter.

Okay. Thank you, Rhon. Our next questioner is Dean Cadaques. Dean, please unmute yourself and go ahead with your question.

Yes, Rhon, great presentation, a good explanation of everything. I have a couple of questions. One, is Equifax going to be marketing our services for their customer base?

There are two phases to this partnership. And so, Phase 1 was to bring their services into our components. Phase 2 is something we're working on, which is the ability to have them resell our products, but we're still working on that. We just completed Phase 1.

Okay. The other question I have is how many users are active right now that we're servicing? Not customers, but those customers that have multiple users. How many users would you say we're at now and where do you see us being in a quarter or two?

I don't have an exact volume, Dean. As Rhon said, we have about 69 customers currently using it, and we have a mixture of user types. We have those that are day zero who come onboard and then those that are passed through to our customer, and then we have what we call the monthly recurring ones. So, it's a mixture of both. We can definitely provide more input, but on a weekly or monthly basis, it varies because of that. Sometimes you have ramp ups during some months where there's a lot of onboarding activity that converts over to monthly active users.

Do you have any idea how the user base is looking right now? Not the customers. Each customer might have 10, 20, 200,000 users. What's that look like?

Yes. Again, we have customers that are ramping up as Rhon described. They're going through their use case, and their first step is onboarding, which becomes a monthly active user as we protect and reauthenticate those individuals in their accounts. That process is ongoing. We had a small legacy set of users we've been working with for the past years on our platform, and the new customers we just signed are in their first phase of ramp. We see growth happening.

Okay. Thank you.

I'll give another minute or two for anyone who would like to ask a question. We have a few more minutes on the call. Perhaps we could talk a little bit while we're waiting for additional questions, if there are any, in terms of the pipeline and how you see that converting over the remaining quarters.

Ed, do you want to take that?

Yes. This is what Rhon had spoken to earlier. We see our pipeline of over $21 million converting into one deal over the balance of this year from Q2 to Q4. We expect some of that remaining $9 million to be coming in Q2, and the majority of it would probably be spread over Q3 and Q4 as we convert that pipeline into deals.

Okay. Our next questioner is Andy Stern. Andy, please go ahead and unmute yourself and ask your question.

First of all, congratulations; you're making tons of progress and doing just what you said. It's really great to see. I guess it feels like this is a race to get the sales and revenue traction against the need to raise money. It seems to me that you probably need to raise money by the middle of this year or thereabouts. The sales traction you're projecting isn't until the second half of the year or the end of the year. I just wonder how much of that is dependent on generating the revenue ramp. How are you thinking about the confidence you need to raise the next round?

Yes. Thanks, Andy, and good to hear your voice. I think about it in two parts. One is this business and with shareholders who are interested in this business; the first thing they need to see is that we can execute and execute on a full plan, not just small stuff, but big stuff, scale, and increase the value of the company. Fortunately, that aligns with our ability to be able to raise money. You need to demonstrate the right metrics and behaviors to be successful in a fundraise. Our mission has always been to prove that this technology has product market fit through bookings, going live, and recognizing revenue. We've been working on that plan and doing a decent job in very short order. It is no secret we will need money and funding to do that because the revenue will not offset some of those costs. We're making the right investments to service our customers. They want us to make those investments, and we are going to rely on funding. The timing is up in the air. We'll figure that out because we're being very conscious as well, but it's no secret that we have to raise money.

Sure. Thank you very much. I'm not sure if Rhon might have answered part of this already with his previous comment, but if you were to get a customer today, how much can you onboard based on your current capacity if everybody were working full tilt? How much revenue per quarter would you be able to onboard if everybody were ready to go? Is that part of this delay as far as going from bARR to revenue, or do you have the people there, and you're just waiting for another milestone to hit?

Great question because it falls in two buckets that we look at internally. When we look at our FAT 100 opportunities, if you think about the way we separated the FAST 100 versus the FAT, the FAST 100 were accounts that we knew we could close without a tremendous amount of effort from the company; we could get them to go live and earn revenue. We saw success there. We did the bookings in 2023, signed customers faster than projected, and got them live pretty close to our model. Now with larger accounts, these FAT 100, many of them are using that, wanting to use the stuff off the shelf. We hope we can get them live faster than what's in the model. But, then, there are those accounts that want to be integrated with a core system. Our engineering teams are building those enterprise capabilities to service larger customers, but we can handle volumes for those who can use our technology right off the shelf.

Okay. Thank you.

And we are a little bit over time, but I think we have time for one more question. Dean Cadaques has another question. Dean, if you'd like to go ahead and ask your question.

Yes, real quickly, what is the breakdown roughly by industry category of the pipeline that you have right now?

The predominant vertical right now is financial services. That includes banks, credit unions, and payments. We are closing opportunities in gaming and the cannabis space around age verification. But predominantly, everything is around financial services. That is where we see investment happening, and financial services is a place for that.

Dean, I just like to add. In the last quarter, we processed approximately 500,000 users. Just in the last quarter.

That's an impressive number, actually. And it's growing by geometric factors, I guess, right?

Okay. Well, thank you very much, everyone. That's really all the time we have. We've run a little bit over the time. And thank you for your patience and your questions. Rhon, would you like to just wrap up the call?

Absolutely. Thank you again, everyone, for the questions and your time. I certainly enjoyed that. I definitely want to thank our investors for their continued support to be able to take authID to a high-growth company that it should be. I assure you that we continue to be focused on our mission to help today's digital enterprises know who is behind the device. Thank you, everyone.

That ends the call. Thank you very much.