Intellicheck, Inc. Q1 FY2026 Earnings Call

Greetings, and welcome to the Intellicheck Q1 2026 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Gar Jackson of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today for Intellicheck's First Quarter 2026 Earnings Call. Before we get started, I will take a moment to read our 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 call, words such as will, believe, expect, anticipate, encourage and similar expressions as they relate to the company or its management identify forward-looking statements. These 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 update or alter its forward-looking statements, whether resulting from new information, subsequent events or otherwise. Additional information concerning forward-looking statements is contained in the company's filings with the SEC. Throughout this call, we may reference certain financial metrics that have been rounded for ease of discussion. Statements made today are as of May 12, 2026. Management will use the financial terms adjusted EBITDA and adjusted gross margin. Please refer to our press release issued this afternoon for further definition, reconciliation and context for the use of these terms. We will begin today's call with Bryan Lewis, Intellicheck's President and Chief Executive Officer. He will be followed by Adam Sragovicz, our Chief Financial Officer. 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 it over to Bryan.

Thanks, Gar, and good afternoon to everyone, and thank you for joining us today. I'll start by doing something I always try to do, be direct about what drove the quarter, which was impacted in part by the macro environment. Then I will get to the numbers that showed significant EBITDA growth, marking our fourth quarter in a row of positive EBITDA and our third quarter in a row of positive net income. The first quarter of 2026 played out against one of the more challenging macroeconomic backdrops that we have seen in several years. The military conflict in Iran, which intensified in the first quarter, created a genuine economic ripple effect across virtually every sector of our economy. Oil prices surged, pushing gasoline prices toward $4 and above in many markets. This is one of the factors that impacted consumer confidence and consequentially affected our retail customers. Additionally, as evidenced by reporting on multiple news outlets, mortgage rates climbed to their highest levels in 7 months as financial markets absorbed the geopolitical shock. And consumer confidence, which I just noted was already trending in the wrong direction, deteriorated further. And inflation, which had appeared to be normalizing at around 2.4% early in the quarter, reaccelerated sharply to 3.2% year-over-year in March. For Intellicheck specifically, these forces created headwinds in three of our verticals. In retail, which is now approximately 30% of our revenue, consumer belt tightening continued to weigh on transaction volumes. Our retail clients scan fewer IDs when foot traffic declines, and foot traffic clearly slowed in Q1 for our customers as consumers pulled back in addition to the normal Q4 to Q1 holiday decline. In automotive, U.S. auto sales are estimated to have fallen 5% to 6% year-over-year in Q1 as high borrowing costs, record vehicle purchases and economic uncertainty kept buyers on the sidelines, impacting scanning volumes at some of our auto dealer clients. On the title insurance side, the combination of rising rates and geopolitical uncertainty slowed mortgage origination activity. Despite all of these economic factors, I am pleased to report that Intellicheck continued its growth trajectory with growth of approximately 13% year-over-year. I believe this underscores the wisdom of our decision to expand into other verticals. Our first quarter revenue was approximately $5.5 million versus $4.9 million in Q1 2025. We delivered adjusted EBITDA of $935,000, representing an EBITDA margin of approximately 17% versus our adjusted EBITDA of negative $17,000 one year ago. This marks our fourth consecutive quarter of positive adjusted EBITDA. This is a milestone that I believe speaks directly to the operating leverage we have built into this model. We had earnings per share of $0.03, marking our third quarter in a row of profitability and ended the quarter with over $10 million in cash and $0 debt. I will tell you, delivering 13% revenue growth in this macro environment with a 17% EBITDA margin is something I am generally proud of. Now let's walk through our vertical performance. Banking and lending remain our core growth engine and represented over 50% of our quarterly revenue, growing strongly in Q1. This mix shift has fundamentally changed the resilience of this business. Our largest regional banking client with a three-year contract valued in the very high seven figures is now fully implemented throughout all their bank branches. Their team is not just ramping volumes. They are in active conversations with us about expanding the use of Intellicheck's technology in additional use cases and departments. The ROI and fraud prevention at these banks is not subtle. Account takeover losses average approximately $2,300 per incident. Some clients tell us they experienced monthly fraud losses north of $40,000 before they implemented Intellicheck. The payback on our technology is often measured in days, not months. And in addition to stopping fraud, we also help them onboard good customers faster, a significant and valuable attribute that I believe is frequently overlooked. Beyond our major bank relationships, our new desktop delivery method is opening meaningful new doors with smaller banks and credit unions. This delivery service requires no integration with the bank's core platform and implementation is immediate. You may recall that credit unions and smaller banks have historically been hampered by long technology integration queues with their core technology providers. I am pleased to report that we are seeing strong inbound interest for our desktop product that is designed to address this issue. We believe this product has the potential to materially expand our addressable market without requiring a third party to facilitate the growth. Implementing this desktop technology, we have signed three new clients with several others in review. While these are smaller deals, they can get up and running quickly. That being said, bank platform partnerships are also very important. I'm also excited to share that our new partnership with Alloy is starting to generate early traction. Our partnership here is a valuable one given it is one of the leading identity and fraud prevention platforms in the banking and fintech space. Their customer network is substantial. We believe being embedded in their platform significantly reduces buying friction for institutions already operating within the Alloy ecosystem. These kinds of strategic partnerships are an important element in how we grow this component of the banking vertical from here. Retail represented approximately 30% of 2025 revenues, and as I discussed earlier, was certainly challenging during the first quarter. We saw year-over-year declines in scanning volumes that were similar to the sequential period last year, and we believe that it is entirely consistent with the consumer confidence and macro headwinds I described. Through our active diversification efforts, we are no longer dependent on retail for growth. If consumer sentiment improves as the macro picture settles, any recovery in retail volumes will be an incremental upside for us. Also, as I previously discussed, our title insurance vertical was impacted in Q1 by the mortgage rate environment. However, I want to call out a milestone that I am genuinely excited about. First American Title successfully launched their digital e-commerce identity verification capability in Q1. You may remember, we told you this was coming on the last quarter's call. This is a meaningful expansion of how our technology is embedded in their platform. It is exactly the kind of deepening of the relationship that drives long-term value. When rates normalize and real estate volumes recover, we believe this vertical has substantial upside potential. We're also seeing growth in our other verticals. Our age-related and background check verticals continue to grow steadily. The nationwide rollout with our food manufacturer client addressing cargo freight fraud is showing good progress as well. That account is now running in the low six-figure annual contract value range. Additionally, our foreign auto manufacturer clients and their supplier networks continue to expand. In the stadium concessions market vertical, we added a few additional clients, although these are starting at very low volumes. While this remains a long-term opportunity, we are building the foundation for further growth. On the product and technology front, our team continues to execute at a high level. As I shared with you, our desktop application is gaining solid traction. We are also seeing progress with our mobile SDK, hub reporting console and portal delivery method. As a reminder, our customers like our hardware-free solutions that are quick and easy to implement. And here's the thing I keep coming back to. Our core differentiation is unique and durable. We can verify the authenticity of a government-issued ID in less than a second with 99% decisioning. We do this by checking against the exact bar code specification embedded by each state DMV at the time of issuance. Keep in mind that no competitor has access to these specifications. This is because we continue to be the trusted test lab for state DMV systems, a relationship we've had for more years than I can count. This exclusivity is key as we see threats continue to evolve at an extraordinary pace. AI-generated fakes are becoming more sophisticated every quarter, which I believe will become an increased problem for our competitors. Synthetic identity fraud skyrocketed 300% in just the first quarter. Deepfake-driven fraud was up over 1,000%. Visual template checks, which is what most of our competitors rely on, cannot stop these fakes. We can. That is not going to change, and it gets more valuable every year. Our marketing initiatives are continuing to make a difference as they continue generating lead activity. The agency we brought on board is sharpening our messaging and building brand awareness. Our IDN threat report has been an effective thought leadership piece across banking, title, automotive and the cargo freight audiences. This original data documenting the fraud trends we observed in 2025 positions us as a credible source of industry data and intelligence. Our podcast content, white papers and industry conference presence continue to build Intellicheck's brand as the definitive authority in real-world ID verification. In closing, I'm continuing to be mindful as to how 2026 is unfolding. Clearly, the macro environment remains uncertain. The Iran conflict, elevated interest rates and consumer caution are real factors that will continue to influence some of our verticals in the near term. We are watching that carefully every day. But here's what gives me added confidence. Our banking and lending vertical is driven by fraud prevention. This is mission-critical, nondiscretionary spending for every bank and credit union we work with. This category does not soften in a difficult economy. If anything, it becomes more urgent. Keep in mind, this is now more than half of our business. We believe that we have opportunities to continue growth with our existing clients in addition to signing new clients. We believe that we are at the inflection point in our business model to profitability. At our current run rate, virtually every incremental revenue dollar flows meaningfully to the bottom line. We have over $10 million in cash, no debt and a product that we believe genuinely cannot be replicated. Without providing formal guidance, we believe EBITDA margins will remain positive, and we see potential acceleration in the back half of the year. Looking forward, we believe that we are well positioned to deliver positive net income for the full year 2026. This would be a significant milestone for this company. We also continue to advance our Investor Relations initiatives and expect to participate in a number of upcoming investor conferences, including the Sidoti Microcap Virtual Conference next week. In June, we will be participating in the RBC Financial Technology Conference in New York, the D.A. Davidson Conference in Nashville and the Planet MicroCap Showcase in Las Vegas. These events provide valuable opportunities to further expand awareness of Intellicheck and communicate our strategic priorities and long-term growth objectives. In addition, they provide valuable platforms to keep you, our shareholders, informed while at the same time engaging with the broader investment community. The headwinds we faced in Q1 are real, but so is the trajectory we are on to maintain and expand profitability. We are a fundamentally different company than we were 24 months ago, and I am confident in where the business is going. Now I will turn it over to Adam.

Thank you, Bryan. We are off to a strong start in 2026, and I want to take a moment to put that in context. Bryan described the macro backdrop and against that backdrop, I'm genuinely pleased with what we've delivered. Total revenue for the first quarter of 2026 increased $630,000 or 13% to $5.524 million compared to $4.894 million in the first quarter of 2025. SaaS revenue grew $646,000 or 13% to $5.514 million from $4.868 million in the same period of 2025. The growth was driven especially by financial services and banking, where identity fraud pressures remain elevated and customers continue to deepen the use of our platform. Gross profit as a percentage of revenues was 91% in the first quarter of 2026 compared to 89.7% in the first quarter of 2025, a 130-basis point improvement. On an adjusted basis, excluding noncash amortization of capitalized software costs, adjusted gross profit margin was 93.4% compared to 91.8% in the prior year period, representing a 160-basis point improvement. Both measures reflect the continued operating efficiency we have achieved with our cloud infrastructure. Our cost of revenue, excluding amortization, was $362,000 in Q1 of 2026, down from $399,000 in Q1 of 2025, even as revenue grew 13%. Noncash amortization allocated to cost of revenues was $137,000 in Q1 of 2026 compared to $103,000 in Q1 of 2025 as previously capitalized software development costs continue to amortize through the income statement. As we noted on our last call, our capitalization of new software costs has declined to near zero levels, which means this amortization headwind will diminish over the next several years as earlier vintage capitalized assets roll off. Operating expenses decreased $257,000 or 5% to $4.483 million in the first quarter of 2026 compared to $4.740 million in the first quarter of 2025. In three of the past five quarters, including the last two, operating expenses have declined year-over-year, while revenue grew at double-digit rates. SG&A expenses decreased $211,000 or 6% to $3.242 million compared to $3.453 million in Q1 of 2025. The reduction reflects continued discipline across personnel costs, marketing spend and professional fees. R&D expenses decreased $46,000 or 4% to $1.241 million from $1.287 million in Q1 of 2025. I would note that R&D costs are now almost entirely cash expenses given the near elimination of software capitalization. The GAAP number and the cash number are effectively the same, which makes our R&D line more straightforward to interpret than in prior years. As a result of these dynamics, we reported operating income of $542,000 in the first quarter of 2026 compared to an operating loss of $348,000 in the first quarter of 2025, an $890,000 year-over-year improvement at the operating line. Other income was $94,000, primarily consisting of interest earned on our cash balances compared to $30,000 in the prior year period. The increase reflects both the higher average cash balance we carried and favorable short-term rate positioning. Net income for the first quarter of 2026 was $636,000 or $0.03 per diluted share compared to a net loss of $318,000 or $0.02 per diluted share in the first quarter of 2025, a swing of nearly $1 million year-over-year. This marks our third consecutive quarter of positive net income. The weighted average diluted share count was 20.9 million for Q1 of 2026 compared to 19.8 million for Q1 of 2025. Adjusted EBITDA for the first quarter of 2026 was $935,000 compared to a loss of $17,000 in the first quarter of 2025, representing a year-over-year growth of $952,000. This is our fourth consecutive quarter of positive adjusted EBITDA. And I want to remind everyone that Q1 is seasonally our softest quarter given the absence of a certain holiday retail uplift we see in Q4. To put that in perspective, one year ago, we were essentially at breakeven on an adjusted EBITDA basis in Q1. This quarter, we generated nearly $1 million and delivered an adjusted EBITDA margin of approximately 17%. Depreciation and amortization was $193,000 and stock-based comp was $200,000 in Q1 of 2026, consistent with recent trends. For the first quarter of 2026, we recognized no income tax provision. We continue to carry a full valuation allowance against our net deferred tax assets of approximately $6.7 million, which GAAP requires as long as our three-year cumulative taxable income position remains negative. As I mentioned on our last call, the prior year's losses keep that cumulative test negative for now, but the window is improving as each profitable quarter is added and loss periods roll off. At March 31, 2026, the company had cash and cash equivalents totaling $10.062 million, an increase of $412,000 from $9.650 million at December 31, 2025. The first quarter is typically a period of cash usage given the seasonality of our business, so generating operating cash flow of $444,000 in Q1 is a strong result. We have no outstanding debt, which means our balance sheet is entirely equity and business financed. Working capital at March 31, 2026, was $11.119 million. Total assets were $27.109 million and stockholders' equity was $21.533 million. Accounts receivable grew to $5.740 million at March 31 compared to $3.365 million at December 31. This increase is largely a timing artifact of our Q1 billings pattern. Annual contracts that renew in the first quarter generate substantial invoicing in the first weeks of the year with collections sometimes completing in Q2. Our allowance for credit losses remained stable at $157,000. Our capital requirements remain modest. Capital expenditures were only $33,000 in Q1 of 2026. Our product improvements are expensed as incurred rather than capitalized and our infrastructure runs on major cloud platforms rather than owned hardware. We are encouraged by how the year has started. The combination of consistent revenue growth, improving margins and the first profitable Q1 in company history tells us that the operating model changes we've made are working. Looking ahead, we expect gross margin profile to remain in the 90% to 91% GAAP range with adjusted gross margins continuing to run in the 92% to 93% range. The noncash amortization of capitalized software costs will remain a small headwind in the near term, but will diminish over time. On the expense side, we remain committed to growing operating expenses at a rate below our revenue growth rate. That discipline is what drives the operating leverage we are seeing. Finally, I want to briefly address capital allocation. Our cash position gives us flexibility. We are investing in the business, especially in marketing and sales capacity, customer success and in product at a level we believe is appropriate given our growth targets. We will continue to regularly evaluate how to deploy that capital in ways that create long-term value for shareholders. I'll now turn the call over to the operator for questions.

The first question comes from Mike Grondahl of Northland Securities.

For the retail vertical, do you have what revenue was in 1Q '25 and 1Q '26?

Good question, Mike. I didn't run those numbers, but it roughly runs in line with transactional volume, which was seasonal: we typically drop at least 10% from Q4 to Q1 due to the holidays. We still have two of our major clients who contribute significantly to retail who are not on a straight-line revenue model yet. They saw the usual seasonality, and we also saw another 5% to 10% drop, which was probably an economic factor.

Got it. Got it. And then any trends you're seeing on pricing or transaction volume overall?

Pricing continues to see upticks and it is also dependent on the market. Our largest clients renewed last year on three-year contracts with CPI adjustments annually. In new markets, we are demonstrating pricing power; new sales show higher prices. We're also setting minimums to play in some segments. For example, some suppliers to automotive companies cannot be supported without paying a certain minimum; that pushes price per transaction higher to reflect support costs. Overall, customers are understanding that we are a differentiated product that deserves a premium. Most competitors rely on a visual template approach—take a picture and compare to a template—but they do not have the authoritative barcode data we have, and that warrants a premium.

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

So with the kind of headwinds to the scan volumes in a few of your verticals, if we operate under the assumption that those persist in Q2 and likely throughout the second half of the year, how should we think about your potential growth profile throughout the rest of the year?

We still grew 13% year-over-year, which I attribute to the other verticals we're bringing in. The desktop delivery method is opening new markets beyond banking; it's working in background checks and cargo because those organizations often don't have big IT staffs and they appreciate centralized reporting and instant implementation. Our expansion into new markets and delivery methods should allow continued growth throughout the year. Also, when markets improve, we see tailwinds from those markets. Our customers continue to expand and bring on new retailers. Until consumer confidence improves and interest rates decline, we may see continued pressure—for instance, some of our credit card customers are seeing rates up around 35% to 39%, which suppresses consumer activity. However, the pipeline, sales progress and inbound activity are strong, so combined with any macro improvement, I'm optimistic about continued growth.

Okay. Got it. And then talk to me about the pipeline. What does that look like both from a new logo standpoint? And also, do you have any of your large financial customers that are set to renew this year? If so, any expectations for expansion on those contracts?

The majority of our large customers renew on our contracts. One client is expanding as they bring on new retailers. Part of the way they win business away from competitors for credit card programs is by offering better rates if merchants implement Intellicheck, which lowers their rates and speeds customer onboarding. That client has been bringing on more customers, and their spend with us has expanded. Generally, larger clients buy a bucket they think will last the year and it never does; they expand. From the pipeline standpoint, I'm very pleased with what our marketing team is producing—good leads and new RFPs we probably wouldn't have seen before. Through banking relationships we're getting introduced to new prospects. So overall, good pipeline, strong prospects and very good customers.

The next question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group.

A couple for me. First, maybe just in terms of the quarter, how did they play out monthly? It feels sort of normal—January, February fell off, March, it got ugly. Just kind of curious, I mean, obviously, we're out into May, now you're well into Q2. Just curious how each of those months have strung together. Have we hit a bottom? You've got pretty good visibility through the scan volumes. Any commentary there on a more of a real-time month-by-month basis?

Banking was growing; retail, particularly consumer credit, was lower than in previous quarters. Consumer confidence deteriorated as the Iran conflict intensified and oil prices rose, which impacted spending. We offset some of that by bringing on new customers and expanding usage with existing banking clients. I don't see consumers being more positive in May than in March or April.

Should we think then—if I look at the last three years, the average Q1 to Q2 sequential growth is about 5%. But from what you're saying, should we be thinking more like flattish? I know you don't give guidance, but we need to get at least in the ballpark. Are we closer to flat than your typical 5% sequential growth? And then, you mentioned being happy with the pipeline. Any particularly large needle-moving deals? Or is it a lot of onesie-twosies? A bit more color on the pipeline would be helpful.

There are a few dynamics to consider. There's a shortage of scanners that some banks need, especially for customers who want passport capability in addition to driver's licenses. The time frame to get those scanners can determine how fast revenue grows and in which quarter. Several signed customers want to move but are waiting on scanner delivery, which is out of our control. The customers are signed and ready to go. Regarding the pipeline, we always have potential large customers, but they take a long time and are often stop-and-start. The desktop strategy targets smaller, nimble banks and credit unions—these deals may be $100,000 to $250,000 but can be implemented quickly in three months with no integration cost. Ten of those smaller deals can be as valuable as a single large one. We also have significant opportunities in cargo: the average loss of a tractor trailer is $300,000, and cargo fraud is a big sector for us. We've had large manufacturers recommending us to peers. So while we pursue large whales, we are also focusing on many smaller, faster deals.

Last for me then, just in terms of actual signings in the quarter, the bookings of new business versus expectations, how did you fare?

For Q1, we signed everybody we expected, with one signing shortly after the quarter ended due to timing on legal review.

The next question comes from the line of Scott Buck with Titan Partners.

Bryan, if I look at the year-over-year revenue growth, what of that in software—of the roughly $600,000—$1,000,000 increase is coming from new logos versus expansion with existing or legacy customers?

For this quarter, the majority of the growth was expansion of existing clients, which is typical for our Q1. Many customers don't want to touch their systems in Q4 because they don't want downtime that could impact their core systems, so implementations and go-lives often occur later. That tends to concentrate expansion in Q1.

Okay. Perfect. That's helpful. And then my second question, I just wanted to ask about title insurance. How many partners in that space do you have? If you were to put a percentage on the market you touch or have access to, what does that look like today?

The last time I ran numbers on direct clients in title, that represented about 43% of the title market. If you do a quick search on who controls the title market, sources will give you percentages of the market for each major name that add up to roughly that figure. We have a who's-who client list in title and we're in discussions with a few of the large firms we don't yet have.

The next question comes from the line of Logan Hennen with Northland Securities.

This is Logan jumping back in for Mike. You touched on a bit already, but could you give some additional color on the pipeline opportunity with new and existing customers in the banking and lending vertical?

For existing customers, there's ongoing expansion—clients are always discussing new use cases and where else they can deploy us. Sandra, our Chief Commercial Officer, and I have meetings with two of our super regional clients this week and next to deepen partnerships at their request. Through the Alloy partnership and the marketing inbound flow, we're seeing strong interest from smaller banks and credit unions that are quick to implement with desktop and are typically in the $100,000 to $250,000 range. Those smaller institutions experience fraud at similar rates as larger banks, and it impacts them proportionally more because they have fewer assets, so the need is acute. That's where a lot of inbound interest is coming from.

This concludes the question-and-answer session. And I'd like to turn the call back to Bryan Lewis for closing remarks.

So first of all, thank you all for your time today. In closing, I'm very focused on the macro environment, which is challenging right now. But I want to leave you with this: we are a fraud prevention company that also speeds up the acquisition of great customers. In a world where fraud is exploding, we believe we have the best technology in this space, the right customers and the financial foundation to execute on our multiyear growth trajectory. I want to reiterate $10 million in the bank, no debt. That frees us up to be able to do, I believe, some good things. We look forward to updating you on our progress when we report on our Q2 results. Thank you all, and have a great evening.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.