Greetings and welcome to the Intellicheck Fourth Quarter and Year-End 2023 Earnings Call. This conference is being recorded. It is now my pleasure to introduce your host, Gar Jackson with Investor Relations. Thank you. Mr. Jackson, you may begin.

Thank you, operator. Good afternoon and thank you for joining us today for the Intellicheck fourth quarter and full year 2023 earnings call. Before we get started, I will take a few minutes to read the forward-looking statement. Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. When used in this conference call, words such as will, believe, expect, anticipate, encourage and similar expressions as they relate to the company or its management as well as assumptions made by and information currently available to the company's management identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. And the company undertakes no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements, whether resulting from such changes, new information, subsequent events or otherwise. Additional information concerning forward-looking statements is contained under the headings of Safe Harbor Statement and Risk Factors listed from time to time in the company's filings with the Securities and Exchange Commission. Statements made on today's call are as of today, March 21, 2024. Management will use the financial term adjusted EBITDA in today's call. Please refer to the company's press release issued this afternoon for further definition, reconciliation and context for use of this term. We will begin today's call with Bryan Lewis, Intellicheck's CEO; and then Jeff Ishmael, Intellicheck's COO and CFO, who will discuss the Q4 and full year 2023 financial results. Following their prepared remarks, we will take questions from our analysts and institutional investors. Today's call will be limited to 1 hour. And I will now turn the call over to Bryan.

Thanks, Gar, and thank you all for joining us today for the Intellicheck Q4 2023 and fiscal year 2023 earnings call. One of the things Jeff and I have been emphasizing throughout previous calls and meetings is that we were going to end the year with adjusted EBITDA breakeven or better. I'm excited to point out that we delivered on that goal. For Q4, we achieved net income of positive $757,000, adjusted EBITDA of a positive $1.17 million and the adjusted EBITDA for the full 2023 year of a positive $377,000. Our gross profit margins continue to remain strong, running at 92% for the year. Given our growth expectations, we expect this trend will continue into 2024 and anticipate that we will also end 2024 adjusted EBITDA positive. Before I get into some of the wins for the fourth quarter and recap some highlights from 2023, I'm first going to share with you some of the substantive changes we have made to the organization. Driven by the changes we made in the engineering team, we reduced year-over-year IT costs by approximately 10%. At the same time, we have realized some significant upgrades to our software. We are now cloud-agnostic, which throughout 2024 will further reduce our cloud expenses as we move clients off of Azure. This improvement is an important milestone. Not only does it provide more security to data in transit, but it will essentially eliminate downtime as we are now active-active on parallel platforms. This is a noteworthy distinction because active-active means we have redundancy and can switch over immediately if the cloud provider has an issue. This advancement has also led to a complete rewrite of our API. This too is another distinctive step forward because it makes them much simpler to integrate. Anyone can go through our website and program against our test bed and get simulated results. We're already seeing the positive impact. For example, we had a prospect integrate in one day and call us the next day and tell us they were ready for the production keys. We love how excited they were with the ease of integration. We had to tell them we were happy to give them the keys, but in their excitement, they had missed a key step. We needed the contract signed, which they promptly did. Our technology improvements don't stop there, thanks to our revitalized IT organization. We also released a new and much simpler way for our digital clients to capture documents and facial biometrics if needed. Previously, our clients built their own proprietary remote capture screens. While we still allow clients to do so if they choose, we now offer a tool that can be white labeled and can be integrated into the client's existing system with two simple web hooks. This has been extremely well received, and we currently have seven either existing clients switching over to this tool or new clients integrating it. We have seen with existing clients that they experience an increase of 20% in completed transactions with the new tool. This is important to highlight because we believe that this new tool will substantially decrease time to revenue for new digital clients. Data science and machine learning began in earnest in Q4. The data lake is complete, and our data team has already come up with new methods to make our ability to spot base even more accurate. Throughout the course of 2024, they will continue to enhance our product, while in conjunction with our clients, we will continue to build and create new ones. Across all of our use cases, the number of people in North America that are processed through Intellicheck is impressive, continues to grow and we believe provides value to our clients. We also had notable changes in marketing. I'm happy to say that in Q4, we hired Christine Elson as our new VP of Marketing. She has a fantastic track record of helping to ignite sales at several high-growth cybersecurity and technology companies. I am pleased to report that she is already making an impact. As previously discussed, we hired a branding and design company to help with our branding to make our message clear. Through interviews with our clients and the collaborative work with the branding and design team, we think we succeeded. Our clients reinforce two important distinctions that we are certainly calling out: no hardware and the ease of use and simplicity of the process for their clients. We truly are the hardware-free, go-anywhere identity validation platform that we believe provides the best identity experience for their customers that their customers never knew they had. We said we would be upping the Intellicheck profile in 2024, and we have moved forward. Christine has Intellicheck lined up with speaking engagements in some of the most important industry conferences and trade shows. We had a strong presence at Fintech Meetup a few weeks ago. Fintech Meetup is a high-profile event that brings together more than 4,000 leaders from fintech, banking, payments, and lending to discuss, shape and create the future of fintech. The agenda there is designed to focus on the biggest issues, challenges, and opportunities facing the industry. Our SVP of Sales, Chris Meyer, delivered a well-attended tech talk on next-gen fraud prevention and how it increases conversion rates by 20%. He and enterprise account executive, Joshua Baker, held a number of one-on-one meetings during the event. Previously in February, Chris attended a Stadium Managers trade show. This event brings together personnel from teams, colleges, and universities, facility managers, public sports authorities, and suppliers to the industry. It was yet another important opportunity to build brand awareness and connect with influencers. These are just the first of many trade shows that we'll be attending this year. Coming up, we'll be attending Datas Insights, which focuses on financial crime and cybersecurity and provides a forum for senior-level executive to focus on fraud, AML, cybersecurity and risk. So turning now to Q4. We saw new client wins in addition to an expansion of use cases with our long-standing financial services company clients that are also bringing on additional retailers. One of the things we as a management team foresaw was that retail was potentially running into challenges. So focusing on diversifying our portfolio of verticals served became a focus. Given the fact that major retailers are shutting down locations, we were correct in our assumptions as Q4 transactions at our largest retailers were off 15%. You will see that by our wins with new banking clients and new banking use cases in addition to clients in new verticals not tied to traditional retail that we are confident that this pivot is working. We believe that over time, these new channels should more than offset the retail reductions we are currently seeing, and we believe that we made the right decision. That being said, we continue to expand our retail penetration and anticipate more than 3,000 new retail doors by the end of the year. During the fourth quarter, financial services company #2 brought online a 565-location wholesale beauty supply company. In addition, they launched a branded credit card, utilizing Intellicheck as a first step in the digital application. They have also begun integrations with two additional retailers they expect to bring live by year-end: one is a clothing store with over 1,000 locations for new account openings and account lookup, and the other is a 170-location hotel and gaming company for new card account openings. Financial services company #3 is expanding in-branches cases with the addition of wire transfers and new account openings in addition to the current use cases of transactions over a certain count, no debit card present, and account lookup. They anticipate volume for the new use cases to be about 100,000 transactions in a month. They are also working on the integration to bring live a retailer with over 2,200 locations throughout 49 states that provides home improvement, lawn and garden products and farming equipment and supplies. They expect to go live in Q3 of this year. The two regional bank pilots were completed in Q4 and were fully implemented and revenue-generating in February, a bit behind schedule, but they are now up and running. If you recall, the first bank with 1,300 locations had an in-branch proof of concept. This runs so well that they are now viewing the work to incorporate Intellicheck into their digital use cases. They expect rollout in late Q2 or early Q3. The other regional bank with over 2,000 locations started the other way around with a single digital use case, opening new accounts. Because of how Intellicheck simplifies account opening, they had hoped for a 2% increase in new account openings after we were implemented. But because of how Intellicheck simplifies account opening, they realized an impressive 20% increase. They are now expanding to other digital use cases and are working to incorporate Intellicheck into their bank branches. You may remember, we have been working to secure an agreement with a top 3 bank. I am very pleased to report they completed their security audits in Q4, and we now have a signed contract with them. Like all very large organizations, bringing on a new initiative takes time. And our sense is that just like the audits were an extensive time-consuming effort, so will be the implementation. Right now, they are targeting Q4 this year to go live with their digital mobile banking app. We will continue to provide updates on the integration progress on future calls. We are excited by the win. We believe that when a bank of this size goes with Intellicheck, this is a tremendous validation of what we do and provides a great foundation for 2025 and beyond. We are very excited by another step forward. Our products are now being utilized outside of North America. Our client is a renowned global media and tech company reaching nearly 1 billion people worldwide is now using Intellicheck in the U.K. to validate people. We believe that we will see more multinational clients that need to validate people in North America turn to Intellicheck for their international needs. We are also continuing to expand in the automotive space both directly and with resellers. The reseller that is working with one of the largest auto manufacturers reached a deal with them to fully roll out to all 2,600 locations with expected minimum annual volumes of approximately 750,000 transactions. We anticipate that full rollout should occur in Q2. Between Q4 of '23 and Q1 of this year, we have either signed or are in the process of signing an additional four resellers in the automotive space. Title insurance is another market vertical where we continue to see expansion, again, either through direct sales to inbound needs or through resellers. Between Q4 and Q1 of this year, we signed four of the largest title companies. We have also signed one of the largest providers of software that small title companies use to run their businesses. We are fully incorporated into their platform now, and they are looking to expand the rollout in Q2. We believe that being an integral part of a larger platform creates an incremental growth opportunity in the real estate transaction space that is seeing a significant pickup in fraud. Our growth in the age-restricted space in both unattended and in-person use cases continues to grow. During the fourth quarter, we signed an additional two vending machine companies. Also in Q4, we signed a company that provides access to unattended liquor distribution and loyalty lounges at hotels. They're going live with a proof of concept with a very large hotel chain in Q2 of this year. A deal that we closed a long time ago but will finally be going live is True Age, which was developed by the National Association of Convenience Stores and Conexus to provide a simple way for convenience stores to stop sales to the underaged. Intellicheck will be used to authenticate the user before they are given access to the app. They expect to begin nationwide deployment in Q2 of this year, starting slowly and ramping up throughout the year. We continue to expand in new markets. In Q4, we signed two crypto wallet companies. The use case will be to validate people as they open an account for the wallet. We believe that cryptocurrency could be another meaningful market vertical for Intellicheck. In Q4, we also signed a wire transfer payments company. They see so much fraud that they are going to make validation mandatory on all transfers. Integration is underway, and they will be working to be live by the end of Q2. I am happy to say that our pipeline of pilots all are going extremely well, which I believe bodes well for future quarters. In closing, with the current wins going live over the next two quarters as well as the robust pipeline that the sales team has created, we see significant growth throughout the rest of the year and look forward to keeping you updated as clients go live and we report our Q1 results in May. With that, I'll turn it over to Jeff, who will provide more details on the financials.

Thank you, Bryan. I'm pleased with the continued progress we have been making across all levels of organization as we continue our efforts to recalibrate our spend and redistribute investment into the areas that will fuel our growth and profitability. Our fourth quarter revenues were 13.7% higher versus the prior year. We continue to report a higher average price per scan versus the prior year. And we now have achieved our committed goal of adjusted EBITDA-neutral results for the year, where we finished the year with a gain of $377,000 or $0.02 per share on an adjusted basis. As Bryan mentioned earlier, we are also pleased to see the continued trailing 12-month growth progression in SaaS revenues each month, which has been achieved consecutively for the last four years. Continuing to cast a critical eye to the metrics of our SaaS revenue, it's encouraging to see a 16% increase in our average price per scan versus the prior year as we have continued rightsizing the price of our legacy accounts and enforce internal disciplines on CPI increases. This is especially encouraging as it continues to speak to the testament of the value realized by our customers. We are also continuing to maintain our focus on our operating expenses to ensure that we achieve the expected return on our investments in this area. Within the Q4 period, we started to realize the benefits of our midyear restructuring efforts and the subsequent increase in our adjusted EBITDA. I will share more details after the summary of our fourth quarter results. We have also successfully launched our channel program, which I also will provide more details on later in the remarks. We expect this program to have a noticeable impact on our 2024 pipeline growth and bookings, and to be an important driver of our sales going forward. We believe that this combination of efforts will provide the necessary support for the sales team to drive increases in customer engagement, bookings, and revenues in 2024. Turning now to our fourth quarter results. Revenue for the fourth quarter of 2023 increased 13.7% to a record $5,176,000 compared to $4,551,000 in the same period of 2022. Our SaaS revenue for the fourth quarter of 2023 grew 13.2% to $5,069,000 from $4,479,000 during the same period of 2022 and represented 98% of our fourth quarter revenue. Gross profit as a percentage of revenues was 94.9% for the fourth quarter of 2023 compared to 94.8% for the same period of 2022. The nominal increase reflected a credit receipt from our cloud service provider, which also occurred in the same period of 2022. We are considering these credits to be nonrecurring as we continue our migration to a cloud-agnostic structure to minimize any downtime and ensuring service availability for our customers. As we discussed during the last few quarters, we've been modeling gross margin performance in a range of 90% to 91% as we continue to improve our cloud cost infrastructure. But as the product team has shown, we've been able to maintain reoccurring margins of 92% as the re-architecture progresses. We will continue to scrutinize our cost structure with the goal to maintain that level. Operating expenses, which consist of selling, general and administrative, marketing and research and development expenses, decreased $763,000 or 15.1% to $4,291,000 for the fourth quarter of 2023 compared to $5,054,000 for the same period of 2022. Included within operating expenses for the fourth quarter of 2023 and 2022 were $249,000 and $687,000, respectively, of noncash equity compensation expense. While we realized the benefits of our restructuring efforts in the period, there were two notable increases for the fourth quarter. First, in support of our re-architecture efforts, we are capitalizing $407,000 in costs tied to this project. We anticipate that we will see similar levels of capitalization in Q1, and we'd like to see the amount decreasing in the Q2 period. Second, while we have historically invoiced for and limited sales taxes on required transactions, it was determined that sales taxes for certain customers were not being collected for the periods of 2018 through 2023. The company initiated and finalized the voluntary disclosure agreement with the primary state in question and has recorded the necessary liability of $227,000 within the Q4 period as well as $308,000 for the Q4 2022 period. While the amounts are not material to any 1 year, it was necessary to record the tax liabilities for the entire amount within the fourth quarter periods. Adjusted for these two entries, our operating expenses would have decreased by 5.8% on a constant basis. The most notable reduction is in stock-based compensation expense, which decreased $438,000 versus the same period of 2022. As discussed in our last call, we expect our total noncash expenses will continue to decrease and comprise approximately 10% of our operating expenses with stock-based compensation comprising 90% of that figure. This compares to our prior historical trend of 13% to 15%. Turning to net income and adjusted EBITDA. The company reported a gain of $757,000 for the fourth quarter of 2023 compared to a net loss of $869,000 for the same period of 2022. Net gain per diluted share for the fourth quarter of 2023 was a gain of $0.04 compared to a net loss per diluted share of $0.05 for the same period of 2022. As noted above, the Q4 periods reflect the adjustments of the sales tax liability entries. The weighted average diluted common shares were 19.3 million for the fourth quarter of 2023 compared to 18.9 million for the same period of 2022. We also continue to ensure we are properly managing our cash reserves, which generated $83,000 in interest income versus $5,000 in the same period of 2022. Adjusted EBITDA for the fourth quarter of 2023 increased $780,000 or 201%, resulting in a gain of $1,169,000 compared to a gain of $389,000 for the same period of 2022. Now turning to our full year 2023 results. Revenue for the full year of 2023 increased $2,940,000 or 18.4% to $18,906,000 compared to $15,966,000 in the same period of 2022. Excluding equipment, our SaaS revenue for the full year for 2023 grew $2,867,000 or 18.2% to $18,595,000 from $15,728,000 for the same period of 2022. Gross profit as a percentage of revenues was 92.7% for the full year 2023 compared to 92.0% for the full year of 2022. The increase in gross margin profit percentage was primarily driven by our concentration of SaaS-based revenues. The credit we received from our cloud service providers had a negligible impact on our full year gross margin results. Operating expenses, which consist of selling, general and administrative, marketing and research and development expenses, increased $1,086,000 or 5.8% to $19,807,000 for the full year of 2023 compared to $18,721,000 for the full year of 2022. This increase was primarily driven by higher general and administrative costs, specifically severance-related expenses of $984,000. Included within operating expenses for the full years of 2023 and 2022 were $1,596,000 and $2,455,000, respectively, of noncash equity compensation expense. As mentioned earlier and included in the full year results were the two notable entries for the fourth quarter, which included the product optimization entry of $407,000 and the sales tax liability entries of $227,000 and $308,000 for the fiscal year '23 and fiscal year '22 periods. Adjusting for these two entries, our operating expenses would have increased by only 8.5% on a constant basis compared to our revenue growth of 18.4%. The most noticeable reduction was in stock-based compensation expense, which decreased $859,000 versus 2022. The company reported an improved net loss of $1,980,000 for the full year of 2023 compared to a net loss of $4,159,000 for the same period of 2022. The net loss per diluted share for the full year of 2023 improved to $0.10 compared to the net loss per diluted share of $0.22 for the full year 2022. The impact of these two noticeable entries above represented $0.01 within our net loss per diluted share as a result. The weighted average diluted common shares were 19.3 million for the full year of 2023 compared to 18.8 million for the same period of 2022. Adjusted EBITDA for the full year of 2023 improved to a gain of $377,000 versus a loss of $924,000 for the same period of 2022. Turning to the company's liquidity and capital resources. As of December 31, 2023, the company had cash and cash equivalents that totaled $9.0 million that's currently on deposit at Citibank and Capital One; working capital, defined as current assets minus current liabilities of $7.8 million; total assets of $23.8 million; and stockholders' equity of $17.3 million. The company recognized an adjustment to the beginning balance of stockholders' equity in 2022 of $529,000 in consideration of recognized sales tax liabilities for the years of 2018 through 2021. The company has a $2 million revolving credit facility with Citibank that is secured by collateral accounts. There are no amounts outstanding under this facility, and the facility was not utilized during the quarter. Turning now to the progress on our internal initiatives. 2023 has certainly represented a year of significant changes for Intellicheck as we executed on a number of key initiatives that we believe set us up well for further growth in 2024. During the Q2 period, we initiated a $2 million expense-savings initiative aimed at rightsizing our expense structure and securing the necessary team and talent to properly drive product, marketing, and operational efficiencies. During the Q2 period, we hired Jonathan Robbins as our VP of Engineering, who was subsequently promoted to the role of CTO in Q4. Jonathan has been recalibrating that team working with the broader team on the re-architecture of our SaaS platform, moving us towards a cloud-agnostic structure as well as bringing in additional talent to drive our data science and reporting intelligence efforts. As Bryan mentioned, in January of this year, we brought on Christine Olson as our new VP of Marketing. We believe that Christine is the right person to drive additional recognition of the Intellicheck brand and to provide the support that the sales team needs to further drive revenues and logo wins. As we executed on expense initiatives, we made significant shifts in our expense structure and moved much of our spend out of the G&A and product areas to our previously discussed investments in sales and marketing. These initiatives have already had a demonstrable impact and are reflected in our fourth quarter results, where operating expenses decreased 15.1% versus the prior year compared to a 13.7% increase in revenue, delivering on our goal of adjusted EBITDA breakeven or better. As a percentage of expenses, we are expecting to see our R&D spend continue to decrease year-over-year, while sales and marketing expenses will increase by approximately 8% to 10% to support a broad range of brands and marketing initiatives. Overall, we expect to see significant leverage increases in our OpEx spend against our growth in '24. While we are significantly increasing program spend on the sales and marketing side of the business, we believe we are profitably structured in our head count and expect a 2024 year-end head count that will be equivalent to the 52-person count we finished with in 2022. We now have significantly hired a caliber team that has the financial support to drive the growth that we expect this brand should be able to achieve. As mentioned in earlier remarks, we continue to improve our cost structure, which when adjusted for the previously noted adjustments increased to near 8.5% for the full year versus 2022, while revenue increased 18.4%. We have remained committed to the entire year to achieve an adjusted EBITDA breakeven for the year, which we have exceeded and now puts us in a position to start moving that result into a more positive position for 2024. A higher adjusted EBITDA result for 2024 will be the combined disciplines of executing on our revenue plans, ensuring consistency in our gross margins, and holding all the team accountable for their FY '24 operating budgets. During the prior quarter, we also discussed the early efforts regarding the formulation of our channel partner program, and I'm happy with the results that we are seeing. Since the launch of the program, we have rolled out our partner portal, where we will conduct our deal registration and where our sales team will start accepting registered leads from partners. We have also successfully signed our first cohort of partners. We are excited to see a group of partners that will expand our presence within the automotive, law enforcement, and government sectors. One of our top partner signings has a technology ecosystem of more than 10,000 government contractors, value-added retailers, solution providers, and system integrators. In consideration to our 2024 outlook, we expect to see continued gross margins of approximately 92%, while we continue to improve our architecture and data intelligence capabilities. We also expect to see continued leverage in our operating expenses as a result of the expense initiatives we implemented in 2023. As previously discussed, we expect the noncash component of our spend to decrease by 400 to 500 basis points versus 2023, with 90% of that being total stock-based compensation. In closing, we remain committed to the continued improvement of our corporate performance, maintaining our strong balance sheet and driving shareholder value within these new initiatives. We look forward to sharing our Q1 results with you in May. I'll now turn the call back to Bryan, who will discuss our Q1 revenue outlook.

Thanks, Jeff. As I mentioned in my prepared remarks, we have a lot of activity in the pipeline with a number of deals going live in Q2 and Q3 that we believe will drive significant revenue growth in the back half of the year. Like I've always said, larger deals take longer to close and longer for the implementation. We are on the cusp of a number of sizable revenue generators that we believe will really move the needle in the back half of the year. These include the new retailers with our long-standing bank partners, additional bank use cases, global media companies, autos, title, and now cryptocurrency, our latest vertical. As it stands today, we've seen year-over-year declines in scanning volumes in the first quarter at our retail partners that we believe is driven by some of our larger clients reducing door counts and weaker store traffic in general. Additionally, as I mentioned in my prepared remarks, we have had longer than originally anticipated implementation times to onboard larger customers, for example, the two regional banks that are now live. As it stands today, we anticipate Q1 revenues in the range of $4.3 million to $4.4 million with year-over-year growth accelerating sequentially throughout the remainder of the year. With the new hires we have in place, our pipeline, and our gross margin and expense structures, we believe that we are well positioned for accelerated growth and to be adjusted EBITDA positive in 2024. I will now turn the call over to the operator to take your questions.

Our first question comes from Mike Grondahl with Northland Securities.

Bryan, could you discuss the overall pricing situation? I recall a mention of a 16% increase in average pricing per scan. Are you experiencing any pricing pressure or do you have pricing power? I'm looking to get a better understanding of that. Additionally, could you touch on transaction trends? You mentioned a decline, but I'm curious if that primarily refers to the large retailers, like a 15% drop, or what the overall transaction trends look like across the board?

In terms of pricing, we only experience pressure when we're trying to enter the age-restricted sector. Many want to sell in that space, but not everyone requires the level of accuracy we provide. Our accuracy can impact revenue because if we're too precise, it may deter some clients. However, we maintain pricing power in areas where it's critical to prevent identity theft, which would cause significant financial harm to our clients. In our primary markets, such as title, auto, banking, and even crypto, where the stakes are high, we have strong pricing leverage. Regarding when to walk away from potential clients, some may not see value in what we offer, but ultimately they may face consequences that lead them back to us. As for transaction volumes, we're seeing an uptick in sectors outside of retail. Comparatively, when looking at this year's fourth quarter against last year's, major retailers have experienced declines in transaction volumes ranging from 15% to 25%. Reports indicate that many retailers are closing stores, and concerns about maxed-out credit cards and rising interest rates are prevalent. This situation underscores the importance of our strategy to diversify into markets that aren't reliant on transaction volumes. Essential communication needs, like reaching out via email, persist regardless of economic conditions, which is why we are aiming to penetrate more businesses in that direction.

Got it. And then, I don't know, can you call out maybe two new wins that really help you in the back half of '24? And trying to kind of understand the statement in the press release, some sizable revenue growth, some wins that will really move the needle. Trying to figure out which ones we need to track closely.

I believe these automotive partnerships are crucial for us, especially with 2,600 locations secured with guaranteed volumes. However, I think the potential could be much greater. Exploring other use cases with regional banks could lead to significant revenue, and the collaboration with True Age and MAX might contribute notably in the latter half of the year. It's a combination of various factors. Initiatives we’re pursuing with retailers could significantly enhance our performance towards the end of the year, including some pilots we’re conducting with larger organizations. The larger the project, the longer the approval process tends to take. It seems like the business teams want results immediately, which is understandable, but DevOps and InfoSec need to ensure everything is secure to avoid any hacks, causing delays beyond what we would prefer and certainly longer than what the business teams wish. Thus, it's a mix of the agreements we've established and the pilots we have running that could really take off afterward.

Got it. And then just lastly, retail customers' transactions, what percent roughly of revenue are they still?

They still make up the majority, and while Jeff might have better numbers, I believe they're still significant when it comes to financial services. It's challenging to break it down because everything is bundled into one fee, but I would estimate that financial services contribute around 95%. Additionally, a larger portion of financial services is shifting toward traditional banking transactions. This trend isn’t heavily influenced by economic conditions, though our largest retailers still generate a considerable volume of transactions. However, they are facing some challenges, which will impact us, prompting our focus on diversification.

Our next question comes from the line of Scott Buck with H.C. Wainwright.

Bryan, could you provide some insight on the pricing? Specifically, do the $0.75 million in auto transactions have similar pricing to the $0.75 million in card-not-present transactions, or do you charge a significant difference between those types of customers?

The only significant difference in pricing is between age-restricted transactions and everything else. For auto dealers doing high volume, their transactions resemble those of retailers conducting card-not-present sales. We are indeed increasing our prices; as Jeff mentioned, we saw a 16% increase overall for the year, which reflects every deal we've closed. We're constantly adjusting our pricing because we recognize the savings we're providing to our clients. When we help enough auto dealers, we realize the impact we've made, leading us to increase prices for others. That’s the approach we have taken.

Great. That's helpful. And then I wanted to ask about the balance between profitability and revenue growth. It sounds like '24, we're going to see EBITDA margins improve a little bit. But you're certainly not taking the foot off the gas here on growth, right?

No, not at all. We are fully committed to pursuing growth. At the same time, Jeff has implemented financial diligence that wasn't there before and has established the necessary systems. We now have a clearer understanding of our spending and can quickly redirect funds to areas we believe will expedite growth. This includes our marketing, branding, and channel programs, as well as ensuring we have the right sales team in place, which I truly believe we finally have. Our focus is on growth, and everyone in the company, including our newest employees, is aligned with this goal. We are dedicated to increasing revenue, while Jeff is ensuring that we are being prudent with our expenses and avoiding market disruptions.

No, I was going to say, we're definitely cognizant of how we're deploying that spend. I mean one of the things I watch is I look at our employee count, and we're looking at moving towards 52 people. I mean we've got a very high revenue per employee. And I'm cognizant of that because what we don't want to do is overheat the team either. So as Jonathan works on his re-architecture efforts, it's like don't think that your research-constrained. If you have a compelling case and you need more spend, communicate that; we will work across the entire team. As parcels out all of these marketing relations, all of the trade shows that we're going to be attending conferences. Hey, let's balance our needs on those, what's going to be effective. These are all new, but let's work as a team. So there's really not a red limiter in place, but we're making sure that we stay in the guardrails of achieving those committed EBITDA levels publicly.

That's helpful. As the business begins to generate more cash internally, how are you planning to allocate that cash? Could we expect to see a significant share repurchase with the stock?

I would say that everything is being considered. Our focus will always be on initiatives that maximize shareholder value. This could involve stock buybacks or potentially acquiring a small company with valuable technology that fits well into our portfolio. We frequently evaluate exciting start-ups and other opportunities that come our way, as they often recognize the unique potential we have. We are continuously exploring options that align with the future growth of Intellicheck and benefit our shareholders.

Great. Appreciate all the added detail in the prepared remarks today.

Great. Thanks, Scott.

Our next question comes from the line of Rudy Kessinger with D.A. Davidson.

Bryan or Jeff, if you had to estimate, regarding my cost question, of the 95% coming from financial services, how much of that is from retail? Is it about two-thirds, three-quarters, or half? Do you have any kind of estimate on that?

It's going to be a significant portion of it, 75% to 80%, probably in that range. It's going down every quarter as we add more pure banks. And then also as the banks that we have add more banking use cases. So it continues to move down.

Yes. Okay. And then as far as the margin, you mentioned a decline of 15% to 25% in Q4. What has been the trend so far this quarter? I know you mentioned it is down year-over-year in Q1, but what level of decline are you observing? Has the situation worsened as Q1 has progressed?

I think in Q1, we're observing a decline. I've been analyzing the numbers and noticed declines of up to 27%. The larger companies are experiencing decreases ranging from 18% to 27%.

Okay. So a bit worse thus far in Q1 than Q4?

I'm making a comparison to provide clarity, as we typically see a decrease in retail during the first quarter due to the post-holiday trends, where consumers tend to spend less. In comparing the first two months of this year with the same period last year, that's what the figures represent.

I want to clarify that you expect growth to speed up sequentially throughout the year. Does this indicate improved year-over-year growth in Q2 compared to Q1, in Q3 compared to Q2, and so on? Additionally, regarding some of these new wins, are they primarily six-figure annual revenue opportunities? Are the big three banks just the starting use cases? Does this suggest they could evolve into seven-figure annual customers like other large banks you work with? What level do you anticipate growth will reach by the end of the year?

Look, I think that looking at that large bank, this should be just like all of our other large banks because there's the same use cases, the same need. It's just a matter of how fast do they get up and running. And again, they're going to start with everything digital and their mobile apps and then roll everything into in branch in 2025. I think one of the things that we're doing as part of our strategy is not chasing the whales is something we're always seeing, and they take a really, really long time. But we're also through our channel partners. And also, now with the simplicity of our tools to be able to integrate them, particularly in the digital world, we're certainly making sure the sales team has gone after the singles and doubles as well. So I expect to see that we'll bring in $50,000 to $75,000 kind of deals with more frequency because they're easy to bring up, while at the same time, continuing to grow the existing clients, adding some of the folks that should be seven-figure kind of deals. So a combination of things that we're hoping for brings in a way less lumpiness to the revenue growth, and make sure that we continue to land the big giant deals that are, I think, really important and prove how good we are, and at the same time, making sure the sales guys are bringing in stuff so that they make commissions and they're happy and they stay. So that's the whole point of getting the marketing right, the messaging right, more people to know who we are because I still say it, people think that everybody is the same doing ID validation, and we're not. And when they see how different we are, things move quickly. Always from the business side, we still have to go through all the InfoSec and those types of things. But it moves quickly when people realize what we can do that really nobody else can do, in our opinion, and they want us. So I think a combination of things are going to put us all across the board this year and the size of the deals that we're bringing in. It used to be very big and sort of very small. Now we're making sure that we get that mid-range as well.

Our next question comes from the line of Jeff Van Rhee with Craig-Hallum.

Several here, maybe one to follow on Rudy there. In terms of the new signings, maybe you could just give us a swag of the ACV of contracts that are signed but not yet implemented as of Q4. Even a ballpark, put them all together, the majors that you mentioned, putting aside any churn or anything else, just the incremental value of the signs that you have in hand in ink. Can you give us a ballpark of that?

I would be cautious about providing a figure without a clearer understanding of when they will go live, as that seems to have an impact. We do plan to give our 2024 guidance on the next call, which is when we expect to finalize our year-end results. I am quite confident in the ACV I've observed, and I've noticed that my sales team tends to sell smaller packages that eventually turn into much larger ones. This leads me to believe that the actual ACV might be underestimated. I'm comfortable with what this implies for our growth this year and where consensus expectations stand. I am pleased with the contracts that have been signed and what I anticipate will be signed in the future.

Okay. I understand. Regarding the scan reductions of 15% to 25% and possibly accelerating further, how do you view 2024? What do you see happening with scan volume trends? Additionally, could you provide some insights on the situation with those retailers? While there are some exceptions, overall, they aren't contributing a 20% drop in revenue. Can you clarify how much of this is attributed to retailers closing down versus reduced economic activity or perhaps consumers finding alternatives to your solutions? Please explain this as thoroughly as you can and share your perspective on the matter.

If I look at the retailers that are struggling the most, they're the ones making headlines because they've either lost their branding appeal or are shutting down their stores. The retailers that are down mostly fall into these categories, and it seems that some have lost their direction, which we've all been hearing about for some time. Conversely, there are some smaller stores that are performing well, but their gains don’t compensate for the overall declines. Overall, when we exclude the larger retailers, most are either stable or slightly up, with performances ranging from 95% to 102% of where they were last year. It seems that some people are contemplating whether they should be spending money right now. However, a significant factor is simply the retailers that have lost their way.

Yes, yes. I mean, you're giving thought to obviously the annual guide. I mean, how do you tackle that? How do you think about retail scans for '24 at this point?

Look, I think that if this trend continues, I don't see it diving much more values. And it could be that people spend a lot of money, who knows, on Christmas this year and holidays, and they're now sitting back for a while. I don't let something really crazy happens in the economy. Everything I'm reading is saying, retail is slightly off, but they don't expect it to take a header. So I don't see it getting much worse than where we are now. And if anything, potentially improving once we get out of Q1, and maybe people start to think about spending money more.

Got it. And Jeff, the RPOs, I know it's in the Qs and Ks. I don't know if you have that handy.

I don't have that information available, Scott.

Jeff, but that's all right.

We've reached the end of our question-and-answer session. And with that, I would like to turn the floor back over to Mr. Bryan Lewis for closing comments.

Thank you, operator. In closing, 2023 was a year of change and growth for us. We appointed a new CTO, launched a new channel partner program, and brought on a new Vice President of Marketing. I'm pleased that we continue to strengthen our organization. The changes we've made are already impacting our cost productivity and new sales this year. We continually assess our performance and are unafraid to make adjustments to stimulate growth or cut costs. It's essential to focus on our bottom line and consistently raise the standards we measure ourselves against. If anyone asks if we're satisfied with our current position, I would say no, but I am realistic. I recognize that the larger deals and organizations we engage with that stand to gain from our services involve several structural channels that must be navigated before they can adopt a new process and service. While we wish there were quicker ways to streamline implementation—working closely with our clients on this—we understand it may take time. However, these partnerships are important.

Ladies and gentlemen, please stand by. Thank you, ladies and gentlemen, for standing by. Mr. Lewis, please continue.

Well, sorry about that for everybody. Got to love it when your call says, call failed. So just to end, when I say these big deals take a long time, they also have a lot of value and a lot of long-term benefits. So we feel that they're worth it, also while we changed the business model and make sure we also get every single and double out there. So again, my thanks for joining us today. We really anticipate more good news to come, and we look forward to sharing with it all with you. So have an excellent night.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.