Intellicheck (IDN) Q2 2025 Earnings Call Transcript

Executive Summary

Record Q2 revenue of $5.123M (+10% y/y) with SaaS at $5.080M (+10% y/y); gross margin 89.8% and Adjusted EBITDA turned positive at $0.075M, while GAAP EPS was ($0.01).
Revenue modestly beat Wall Street consensus ($5.123M vs $5.008M estimate), while EPS missed GAAP vs consensus (($0.01) vs ($0.005) estimate); Q1 also beat revenue and missed EPS vs consensus (context in Estimates section). Values retrieved from S&P Global.
Mix shift continues: banking/lending ~38% of Q2 revenue, retail ~25% (retail volumes down y/y), with ongoing expansion in title insurance, auto, notary, and background checks; AWS migration ~95% complete with >$300K expected annual savings. Retail down y/y was more than offset by strong banking growth; management highlighted multi‑year expansions at major financials and a new three‑year regional bank contract with invoicing that began in July (impacting Q3).
Key catalysts: (1) Regional bank contract step-up active for full Q3; (2) social media client fix/embedding scan tech could unlock large volume ramp once integration issue is resolved; (3) AWS savings and channel partnerships/credit union platform access underpin margin and pipeline execution.

What Went Well and What Went Wrong

What Went Well
- Multi‑year upsells/renewals with marquee financials: large regional bank signed a three‑year deal (year one “low seven figures,” ramps in years 2–3; invoicing began July), and a large bank/card issuer moved to a new three‑year tiered contract pacing mid‑seven‑figure ACV.
- Pricing power and vertical diversification improved resilience: continued focus on higher price-per-scan verticals (title insurance, auto, notary, background checks); CFO noted strong pricing and mix benefits.
- Infrastructure and cost efficiency: ~95% of clients migrated to AWS with expected savings >$300K annually; migration also improves onboarding, data feeds, and platform agility.
What Went Wrong
- Social media client integration issue: a code change on the client side caused failure to process “nearly all” documents; engineering teams are working to embed Intellicheck scanning earlier in the workflow to restore volumes.
- Retail softness persisted: retail volumes down 2% q/q and ~20% y/y in Q2; banking growth offset, but retail remains a headwind.
- GAAP profitability still negative: net loss of ($0.251M) and diluted EPS ($0.01), though adjusted EBITDA turned positive; R&D capitalization largely complete, implying more R&D expense will hit P&L beginning Q3.

Transcript

Speaker 3

you and welcome to the Intellicheck Q2 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gar Jackson, Investor Relations. Thank you. You may begin.

Speaker 5

Thank you, operator. Good afternoon, and thank you for joining us today for the Intellicheck second quarter 2025 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 to relate to the company's 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 heading of Safe Harbor Statement and risk factors listed from time to time in the company's filings with the Securities and Exchange Commission. Statements on today's call are as of today, August 12, 2025. Management will use the financial terms adjusted EBITDA and adjusted gross margin on today's call. Please refer to the company's press release issued this afternoon for further definition, reconciliation, and context for the use of these terms.

We'll begin today's call with Bryan Lewis, Intellicheck Chief Executive Officer, and then Adam Sragovicz, Intellicheck Chief Financial Officer, who will discuss the second quarter financial results. Following their prepared remarks, we will take questions from our analysts and institutional investors. Today's call will be limited to one hour, and I will now turn the call over to Bryan. Thanks, Gar, and thank you all for joining us for today's earnings call. Our second quarter's total revenue grew to $5.1 million from $4.7 million in the prior year period, with an adjusted EBITDA of $75,000 for the quarter, which is a $145,000 improvement versus a year ago period. Additionally, we ended the quarter with $8.6 million in cash at quarter end, an increase of $3.5 million versus a $5.1 million balance at the end of the first quarter.

During the second quarter, we had some significant achievements that I will recap for you. Among the highlights we will be discussing are the multi-year expansions of our relationships with some of our major banks and credit card issuer clients, including the significant upsell we accomplished with the leading regional banks headquartered in the Southeastern U.S. We will also be sharing with you the results of our efforts on contract renewals, where we are demonstrating continued strength, as well as some new wins. We will discuss organizational moves that we've made within our sales staff and some metrics that show that our marketing spend, while lower than last year, is showing significant gains. Additionally, we've made major progress on our AWS customer migration project that was undertaken for a multitude of reasons. During the second quarter, we announced some very exciting news on that regional bank front.

We completed the extensive contract negotiations with the large regional banks, as well as all of the integration work. They began their rollout, and we began invoicing that bank in July. As a reminder, this three-year contract has year-one revenues in the low seven-figure range and ramps in year two and three to have a total contract value in the very high seven figures over the contract duration. I'm also pleased to report that the large bank and credit card issuer that is using our technology in branch, online, in their call center, in their auto loan group, for the issuance of new white label credit cards and for account lookup that has been buying buckets, has now signed to a new three-year tiered contract that is pacing at an annual contract value in the mid-seven-figure range.

We believe this is yet another demonstration of the value add that Intellicheck's technology provides for our customers and their clients across multiple market verticals. We believe that there is great promise for further expansion of our relationships with our largest clients across all sectors. With the addition of our SVP of Customer Experience and Account Management, Sandra Bauer, and the changes she has made to the customer success team, many new initiatives are starting with large clients. The two three-year agreements previously discussed are examples of those changes working. In another example of doing more with existing clients, one of our top three clients added a 50-location department store retailer that went live late in the quarter. In addition to credit cards, this client also has a significant buy now, pay later business.

They have begun using our authentication at their retailers for that side of the business as well. While retail may be off, it is good to see clients continuing to add retailers and new ways to finance with Intellicheck as the first step. We believe that there is still significant opportunity for growth with both in-mall and off-mall retailers who are dealing with fraud issues. We also believe that what some view as a headwind now will eventually become a tailwind. The more retailers and use cases our clients have using Intellicheck, the stronger that tailwind will be. It is important to note that we continue to see pricing power that shows both our average price per scan and new business price per scan, which were up 25% and 36% respectively versus the prior year.

Part of this is being driven by a shift in the market vertical mix, as we have put more focus on a new and expanding number of verticals that include title insurance, automotive, notary services, and background checks, where we charge a much higher price per scan. The volumes for these clients are lower than large retail chains. At the same time, we have reduced our focus and emphasis on individual bars and restaurants that were both high maintenance and low revenues per venue. This is a perfect example of a market where a channel partner makes sense. Lots of target clients of low revenue per client, so we are now shifting that individual bar and restaurant business to one of our channel partners. Turning now to our social media client. What we were waiting for finally happens.

The volume of ID verification transactions we were expecting finally started coming in. Unfortunately, it appears that this client has recently changed some code on their end, and as a result, we are currently unable to process nearly all of the documents that they are sending. Rest assured, we are working on the situation, and our engineers are in contact with this client's engineering team to find a solution. It was agreed that we would hold a comprehensive in-person meeting to discuss the solution, as well as look at the entire suite of Intellicheck technology offerings to see how we might help them. We believe that the most effective solution is to embed our scanning technology as the first step in their workflow, and that will be one of the topics of discussion.

We are pleased that this has reached the very top of the identity verification management organization there, and both our SVP of Sales, Tim Fluent, and I have spoken with them. I look forward to the engineers finding a solution. I stand by what we shared with you before regarding the crucial role we can play as a partner to this social media giant with our industry-leading technology. The top issue they said they are facing is account takeover and all the issues that come with that for them: reputational ruin, crime, and underage access. Given what we do for all of our financial institutions and our email clients, they understand we can do it for them. We'll keep you posted as new developments occur. On the sales front, I am optimistic about the changes Tim Fluent has made since coming on board in April.

He has revitalized the sales staff with new sales executives who are all seasoned strategic account representatives focused on targeting major accounts. He's also hired a dedicated channel manager to strengthen our coverage in strategic verticals and provide consistent new revenue streams. Although we've had channel partners in place previously, we need to have a substantive focus on driving revenues through these accounts and onboarding new strategic partners. Our new channel manager will have a dual role of both signing up existing partners and driving revenue through our existing partner base. To that point, on previous calls, I've spoken about our commitment to finding companies that provide the backbone software for generally smaller banks and credit unions that want to outsource that function. These software providers are really the only way to reach this potential client base. I am pleased to say that we've signed our first.

We will be going live in November through their platform with a $20 billion credit union and have other credit unions on this platform interested in our solutions. Our channel partner manager is working with their partner manager to build out the launch plan, and you'll see press releases and a lot of marketing around that as we get closer to launch. Our marketing programs have really helped us gain ground in promoting our business value, making our outreach more effective. The more people that know who Intellicheck is and how we stop fraud differently than the rest of our competitors who simply come with the fundamental license, the easier it is for our sales team to get meetings. Looking at some of the stats, it's clear that the new marketing efforts are working.

A few examples of the progress we are making include new inbound prospects are up 30% over Q1. Interest from banking and stimulus users is up 79% on Google Analytics over Q1. LinkedIn impressions are up 300% over Q1. Video views are up 19% over Q1. We also launched the Intellicheck podcast series in Q2 and released five episodes, and we published seven blog posts during the quarter. Both the blog posts and the podcast can be found under the resources tab on our website. My goal here was and remains thought leadership and brand awareness, and we believe the stats and the inbound leads show we are achieving that. In fact, this is a good time to share with you a little color on our revenue breakdown per vertical. Now, keep in mind that there's a fair bit of volatility to these figures for a number of reasons.

For example, we believe the branch banking business will remain fairly consistent. If one of our banks springs on board, or for that matter, loses a retail client, the mix between banking and retail can shift dramatically. In addition, as we have repeatedly said, there is significant seasonality to retail volume. Retail is also volatile because of consumer confidence, tariff concerns, and pricing impacts, and other things that impact retail sales in general. That being said, this is where we believe our Q2 revenue breakdown by vertical stands. Banking and lending contributed approximately 38%. Retail was approximately 25%. Age restrictive was approximately 7%. Audit was approximately 5%. Title insurance was approximately 2%. On the IT product front, we have spoken about the AWS migration from the Azure platform, and I'm pleased to say that we now have approximately 95% of our clients migrated onto the AWS platform.

We expect our savings to be in excess of $300,000 annually going forward. These savings are of particular benefit because we believe they will more than offset the additional GTU spending for AI that is becoming ever more important in what our data science team is doing for future product offerings for our clients and to bolster our current offering. It's important to point out that this migration wasn't solely focused on cost savings. It was also designed to make it easier for our developers to write and release code, and for our Sales Engineers and Customer Success teams to onboard new customers faster and more easily. It also provided standard data feeds that allow for additional risk analytics to inform our clients' decision process. The backend rewrite that makes a move to AWS also made the code base much simpler and platform agnostic.

We can now easily move between cloud providers based on client needs and additional savings. Although we don't anticipate any additional platform migrations at this time, we believe it is good to be in a portable position if necessary. As part of our efforts to raise visibility with both investors and prospects, we are continuing to attend and speak at key conferences. We will be presenting at the Stability MicroCap Conference on August 20, as well as hosting one-on-one meetings. For more information and to schedule meetings, please visit the Stability website at stability.com/events. It isn't necessary to be a Stability client to schedule a meeting or listen to the presentation. On the trade show front, we are looking forward to Finovate Fall, where I will be speaking on September 9. We will also be presenting at MoneyLIVE in Chicago, September 15.

Several of our major banking clients will be attending, and we are looking forward to seeing them and meeting with additional prospects. Finally, we will be participating at the ACAMS, the Association of Certified Anti-Money Laundering Specialists conference, which is scheduled for September 16 to 18 in Las Vegas. I will be speaking there on the 16. I will now turn the call over to Adam, who will go into more details about our financial results.

Speaker 4

Thank you, Bryan. In addition to Gar's forward-looking statements, please note we occasionally use rounding during this call. For more detailed and authoritative financial information, please refer to our press release and to our quarterly report filed earlier today on Form 10-Q with the SEC. It's great to share more details around the numbers of the second quarter of 2025. As Bryan mentioned, our second quarter revenues were 10% higher versus the same period in the prior year. We also saw continued strong pricing up 10% for new business versus the first quarter of 2025. You can see the strategy paying off, pursuing verticals such as auto and title insurance with higher costs per scan. Adjusted EBITDA also improved by $145,000 versus 2024, with a gain of $75,000 for the quarter.

Revenue for the second quarter of 2025 increased 10% to a first-quarter record of $5.1 million compared to $4.7 million in the same period of 2024. Our sales revenue for the second quarter of 2025 was also up 10% to $5.08 million from $4.6 million during the same period of 2024 and represented over 99% of our second quarter revenue. Gross profit as a percentage of revenues was 89.8% for the quarter, which included about 260 basis points of amortization expense related to the software development projects previously discussed. This compares to 90.5% that included about 60 basis points of amortization expense in the second quarter of 2024. Our adjusted gross margin, which you may remember as a new metric we introduced in the first quarter of 2025, improved to 92.2% in Q2 of 2025 compared to 91% in Q2 of 2024.

We capitalized $47,000 this quarter and don't expect to see any more capitalization next quarter. It has been a remarkable journey of modernization for Intellicheck, where Q2 of 2024 cost $781,000 of capitalization expense. This was mostly driven by the software that we have been developing for deployments on AWS that, as Bryan mentioned, is now in production. Operating expenses, which consist of selling, general administrative, marketing, and research and development expenses, increased $455,000 or 10% to $4.9 million for the second quarter of 2025 compared to $4.4 million for the same period of 2024. On an accounting basis, R&D expenses were $528,000 higher in Q2 of 2025. As I just mentioned, we capitalized $781,000 of R&D expenses in Q2 of 2024 and only $47,000 in Q2 of this year. Beginning in Q3, we expect that R&D costs will hit the P&L in their entirety for our current offering.

Yeah, that's 20% down in the combination of, you know, there are a significant amount of our customer clients in retail who went out of business last year, and then, you know, obviously, you know, the consumer isn't doing as much in some areas as they were before.

Speaker 0

That's great. Building on that, what are some of the smaller verticals you guys are most excited about going forward in terms of do you see taking a bigger piece of the total revenue?

Speaker 5

I would say, it's funny because I was talking to the sales team and helping them with some stuff today. I think my personal belief is background checks is going to be really, in my mind, exciting or smaller for us right now. I'm hearing anywhere from no cuts to four cuts in the interest rate, you know, the Fed rates between now and the end of the year. To me, that could unleash a ton of refinancing. That means a lot of new title insurance needs to be looked at. I think that will be good for us if that happens. In addition to, I think it'll really be helping, just recently, since we looked at it and spending and all that kind of stuff, it would be nice to see that going into the holiday season.

Certainly, we're looking at a lot of things in the gig economy and what's going on, which, in effect, is another type of background check because you read about what's going on with drivers and other things like that. I think consumers are demanding, and I think the providers of those services are realizing that they've got to make sure that they hire who they thought they were hiring. Not only that, the person behind the wheel is the person that they hired because there is a large business out there selling to drivers apps just like renting out an old taxi medallion in New York City. That's where we're looking at more and more, is the person you're hiring who they say they are, especially in a remote world.

Just another story came out the other day about a nurse, supposed pretend nurse, who treated, I think, 4,000 patients just got busted. People have to make sure that they are hiring the right person. I'm kind of excited about that space.

Speaker 0

Got it. One more from us. Anything to call out on the sales pipeline and performance of the sales team now under the leadership of Tim? Thanks.

Speaker 5

I think, pipeline, I think a combination of having, you know, some really good senior guys who know how to really run with the deal, and then also what we're seeing, the leads coming in from the marketing. I mean, it's night and day from what we had when, you know, with the last marketing going on. I love the fact that it's probably less than half the cost, and we're getting probably three times the results. The pipeline is really full. I think, you know, very interesting, you know, not only are these new pipelines, but if you just think about, you know, the company we signed with that provides the backbone software for, you know, these banks, we already have one, and we've got at least five more that are interested, and we haven't even really launched yet.

I think that a lot of these are very much me too. Once you sign one of the players in this space, the others get very interested in you because they know this will work.

Speaker 0

Got it. Thank you, guys. Congrats on the quarter.

Speaker 5

Thank you.

Speaker 3

The next question is from Jeffrey Van Rhee from Craig-Hallum Capital Group LLC. Please go ahead.

Speaker 1

Great, thanks. I'll add my congrats. A few from me. The large bank credit card issue where you're in branch, online, auto loans, etc., you referenced they moved from your ACB mid-seven-figure range. What was that customer running prior?

Speaker 5

They're slightly lower than that, but they've been expanding drastically. It's funny, we were having a quarterly business review with the risk people, and they basically were saying that their credit card folks are signing on new customers so fast, they don't even know it half the time. They expect to continue to be expanding. I like the predictability of it because they're doing what everybody else was, and saying, "Hey, we're going to commit to this this year." Next year, we've got tiers, and they can up it as they see that they're bringing in more. As opposed to, we kind of knew what they were going to be doing, but they buy a bucket, and they expect it to last maybe a year and maybe lasting nine months, and then we have to redo it.

This is simpler for all of us and allows me to have more predictability or visibility into what I expect out of them in a year.

Speaker 1

On the retail down 20%, how's that feeling so far this quarter?

Thanks, sir.

Speaker 3

There are no further questions at this time. I would like to turn the floor over to Bryan for closing comments.

Speaker 5

Thanks, operator. In closing, I think this quarter demonstrated that we're delivering on a commitment to grow by making changes, aligning our resources to where we get bigger bang for the buck, and continuing to evolve our market presence and getting branding and other things out there. Hopefully, that continues to deliver value for you, our clients, and their clients and the customers they serve. I also just want to remind everybody, I think it's very telling that four of our four largest clients have committed to and signed multi-year renewal agreements. I think that's a real validation of our technology. I'd like to pass it as it adds additional predictability for our business. We are going to continue to expand our market penetration in our existing verticals.

As you have seen, we're doing a pretty good job with that, and we are definitely landing and expanding our presence in new ones. We look forward to sharing more new developments with you guys on our next call in November. With that, I'd like to thank you for joining with us today.

Speaker 3

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

Intellicheck - Earnings Call - Q2 2025

Executive Summary

What Went Well and What Went Wrong

Transcript

Speaker 3

Speaker 5

Speaker 4

Speaker 3

Speaker 2

Speaker 5

Speaker 2

Speaker 5

Speaker 2

Speaker 5

Speaker 2

Speaker 5

Speaker 2

Speaker 5

Speaker 3

Speaker 0

Speaker 5

Speaker 0

Speaker 5

Speaker 0

Speaker 5

Speaker 0

Speaker 5

Speaker 0

Speaker 5

Speaker 0

Speaker 5

Speaker 3

Speaker 1

Speaker 5

Speaker 1

Speaker 5

Speaker 1

Speaker 5

Speaker 1

Speaker 5

Speaker 1

Speaker 5

Speaker 3

Speaker 5

Speaker 3