authID (AUID) - 2023 Q4 - Annual Results

Executive Summary & Business Overview authID Inc. achieved significant RPO and bARR growth in FY2023, strengthening its financial foundation and leadership for biometric identity verification Company Overview and Key Achievements authID Inc. reported strong momentum for the fiscal year ended December 31, 2023, with a significant increase in signed contract RPO value and accelerated achievement of its bARR target, positioning the company for growth in biometric identity verification and authentication - Signed contract RPO value reached $4 million, marking a 4,800% increase over 2022[1] - Accelerated the realization of the Company's original June 2024 signed contracts bARR target of $3 million by 6 months[1] CEO's Strategic Outlook CEO Rhon Daguro highlighted authID's strengthened financial foundation, new talent, and sales discipline as drivers for growth in biometric identity verification. He emphasized the company's patented platform's ability to combat rampant authentication fraud, including AI-driven phishing and deepfakes, and set an ambitious 2024 bARR target of $9 million - Positioned for growth in biometric identity verification and authentication through strengthened financial foundation, new talent, and proven sales discipline[2] - Patented identity life-cycle platform provides fast, accurate, and user-friendly solutions against authentication fraud, delivering identity verification in 700 milliseconds[2] - Multi-layered authentication platform defends against generative AI-driven phishing schemes, deepfakes, and fraud attacks[3] - Set a 2024 bARR target of $9 million, a triple increase over 2023[3] Financial Performance Highlights authID reported decreased revenue but significantly reduced operating expenses in FY2023, improving net loss and strengthening its cash position through financing Full Year 2023 Financial Results authID reported a total revenue of $0.2 million for FY2023, a decrease from $0.5 million in 2022, primarily due to the discontinuation of a legacy product. Operating expenses significantly declined by 52% to $10.9 million due to cost-saving measures. The company improved its loss from continuing operations and net loss per share, while cash and cash equivalents stood at $10.2 million Financial Performance Summary | Metric | FY2023 | FY2022 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total Revenue | $0.2 million | $0.5 million | -60% | | Operating Expenses | $10.9 million | $22.8 million | -52% | | Loss from continuing operations | $(19.6) million | $(23.7) million | Improved | | Net loss per share (continuing operations) | $(3.19) | $(7.72) | Improved | - Cash and cash equivalents as of December 31, 2023, were $10.2 million[6] - Bolstered financial position by securing $17.6 million in gross proceeds from financing rounds and a debt-to-equity conversion of almost $9 million in 2023[7] - Regained compliance with Nasdaq listing rules and provided capital for critical identity-domain experts and product innovation[7] Non-GAAP Financial Measures The company reported an improved Adjusted EBITDA loss of $8.7 million for FY2023, down from $11.4 million in 2022. Booked Annual Recurring Revenue (bARR) saw a substantial increase to $2.94 million in 2023 from $0.23 million in 2022, and Remaining Performance Obligation (RPO) grew to $4.03 million, a 4,800% increase Non-GAAP Metrics | Metric | FY2023 | FY2022 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Adjusted EBITDA loss (Non-GAAP) | $(8.7) million | $(11.4) million | Improved | | Booked Annual Recurring Revenue (bARR) | $2.94 million | $0.23 million | +1178% | | Remaining Performance Obligation (RPO) | $4.03 million | $0.08 million | +4800% | - RPO represents contractual commitments of signed customer contracts, anticipated to be recognized as revenue over the next 3 years[6] Operational Achievements and Strategic Initiatives authID strengthened its management, secured new customer contracts, and advanced its identity platform, earning industry recognition for its biometric solutions Management and Team Strengthening authID strengthened its leadership team with key appointments, including Rhon Daguro as CEO and Ed Sellitto as CFO, and reconstituted its Corporate Board. The company also expanded its sales, customer success, and engineering teams with new identity domain talent to drive market position and growth - Strengthened management expertise with the appointment of Rhon Daguro as CEO and Ed Sellitto as CFO[8] - Reconstituted its Corporate Board of Directors[8] - Added new identity domain talent, including new Sales leaders in July 2023 and additional expertise in sales, customer success, and engineering in January 2024[9] Customer Wins and Market Expansion authID secured new customer contracts totaling $3 million in bARR, demonstrating strong market demand across financial services, healthcare, and the digital economy. Notable wins include ABM Industries (Fortune 500) for workforce solutions and various financial services and digital technology companies for fraud prevention and authentication - Signed new customer contracts valued in the aggregate at $3 million in bARR[9] - Secured ABM Industries, a Fortune 500 company, to deploy biometric services for over 100,000 employees[9] - Partnered with various financial services companies (international digital wallet, multi-national money remittance, digital bank) to stop identity fraud and account takeover[10] - Engaged with an international recruitment platform, a healthcare services provider, and leading digital technology companies to enhance identity assurance and prevent fraud[10] Product Innovation and Industry Recognition authID enhanced its life-cycle identity platform with investments in document-based identity verification and streamlined onboarding workflows. The company received industry recognition, being named 'Best ID Management Platform' for the second consecutive year by FinTech Breakthrough and renewing its ISO 27001:2013 Certification for information security - Advanced market positioning through investment in its life-cycle identity platform, fortifying document-based identity verification and streamlining onboarding workflows[12] - Selected for the second straight year as 'Best ID Management Platform' by FinTech Breakthrough[12] - Renewed ISO 27001:2013 Certification for Information Security Management Systems (ISMS), validating adherence to rigorous security standards[12] Investor Information This section provides details on authID's webcast, company overview, forward-looking statements, and investor relations contact for stakeholders Webcast Details authID hosted a webcast on March 20, 2024, to discuss financial results and provide a corporate update, with a replay and presentation available for 90 days on its Investor Relations webpage - Company hosted a webcast on March 20, 2024, at 5:30 p.m. EDT to discuss financial results and provide a corporate update[13] - A replay of the event and a copy of the presentation are available for 90 days via authID's Investor Relations news and events web page[13] About authID Inc. authID Inc. provides innovative biometric identity verification and authentication solutions, enabling enterprises to 'Know Who's Behind the Device'. Its patented platform offers fast (700ms), accurate, and user-friendly digital onboarding, FIDO2 login, and biometric authentication to prevent fraud, eliminate password risks, and enhance user experience - authID provides biometric identity verification and authentication solutions to ensure enterprises 'Know Who's Behind the Device'[14] - Its easy-to-integrate, patented platform combines digital onboarding, FIDO2 login, and biometric authentication, delivering identity verification in 700ms[14] - Aims to stop fraud at onboarding, eliminate password risks and costs, and provide a faster, frictionless, and more accurate user identity experience[14] Forward-Looking Statements This section contains forward-looking statements regarding authID's future operations, growth, sales, bARR, ARR, cash flow, and financial position. These statements are based on assumptions and are subject to various risk factors, including customer retention, competition, regulatory changes, and economic conditions, and should not be solely relied upon as a guide to future performance - Statements regarding future results of operations, growth, sales, bARR, ARR, cash flow, cash position, financial position, business strategy, plans, and objectives are forward-looking[15] - Actual results may vary materially due to risk factors such as the Company's ability to attract and retain customers, successful implementation of services, competition, changes in laws/regulations, and economic/political conditions[15] - authID expressly disclaims any obligation to disseminate updates or revisions to any forward-looking statements[15] Investor Relations Contact Contact information for investor relations is provided, with Ed Sellitto serving as the Chief Financial Officer - Investor Relations Contact: Ed Sellitto, Chief Financial Officer[16] - Email: investor-relations@authID.ai[16] Non-GAAP Financial Information Details authID provides non-GAAP measures like Adjusted EBITDA, bARR, and ARR to offer additional insights into financial performance and future growth trends Non-GAAP Measures Explanation authID provides non-GAAP financial measures, including Adjusted EBITDA, bARR, and ARR, to offer additional insights into its period-over-period results and future growth trends. These measures are intended to supplement, not replace, GAAP financial measures and are used by management to assess operating performance - Non-GAAP financial measures, including Adjusted EBITDA, bARR, and ARR, are provided to offer useful information about period-over-period results and future growth trends[17][21] - Adjusted EBITDA is defined as GAAP net loss adjusted to exclude interest expense/income, income taxes, depreciation/amortization, stock-based compensation, and certain other items affecting comparability[18] Reconciliation of Net Loss to Adjusted EBITDA The company provided a reconciliation of its GAAP loss from continuing operations to Adjusted EBITDA for 2023 and 2022. Key adjustments in 2023 included significant addbacks for conversion expense and severance costs, leading to an improved Adjusted EBITDA loss of $(8.7) million Reconciliation of Net Loss to Adjusted EBITDA ($) | Metric | 2023 | 2022 | | :--------------------------------------- | :---------------- | :---------------- | | Loss from continuing operations | $(19,617,969) | $(23,675,310) | | Addback: | | | | Interest expense | 1,108,458 | 1,359,954 | | Other expense (income) | (98,230) | 37,221 | | Conversion expense | 7,476,000 | - | | Loss on debt extinguishment | 380,741 | - | | Severance cost | 855,279 | 150,000 | | Depreciation and amortization | 255,858 | 749,900 | | Non-cash recruiting fees | 438,000 | - | | Impairment losses | - | 1,101,867 | | Taxes | 2,864 | 7,670 | | Stock compensation | 487,398 | 8,870,168 | | Adjusted EBITDA continuing operations (Non-GAAP) | $(8,711,601) | $(11,398,530) | - Significant addbacks in 2023 included $7.5 million for conversion expense and $0.9 million for severance cost[19] Booked Annual Recurring Revenue (bARR) and Annual Recurring Revenue (ARR) Definitions bARR is defined as the estimated annual recurring revenue from contracted orders, projected 18 months out, with net bARR accounting for attrition. ARR is the annualized recurring revenue from Verified products over the last three months. Both are forward-looking indicators of revenue trends but are not predictors of future GAAP revenues and have specific limitations, such as excluding non-recurring revenues - Booked Annual Recurring Revenue (bARR) is the estimated annual recurring revenue from contracted orders, looking 18 months from the signing date, with net bARR reflecting attrition[21] - Annual Recurring Revenue (ARR) is the recurring revenue from Verified products during the last three months of the period, multiplied by four[22] - bARR and ARR are considered forward-looking indicators of revenue trends, not predictors of future GAAP revenues, and have limitations, including only revenues from Verified and Proof products and excluding non-recurring revenues[23][24] Condensed Consolidated Financial Statements authID's financial statements show an improved net loss in 2023, reduced operating expenses, and a strengthened balance sheet with increased cash and equity Condensed Consolidated Statements of Operations authID's condensed consolidated statements of operations show a net loss of $(19.4) million for 2023, an improvement from $(24.2) million in 2022. Total revenues decreased to $190,289 in 2023, primarily due to the discontinuation of legacy authentication services, while operating expenses were significantly reduced across general & administrative and R&D categories Condensed Consolidated Statements of Operations ($) | Metric | 2023 | 2022 | | :-------------------------------------- | :---------------- | :---------------- | | Revenues: | | | | Verified software license | $186,171 | $156,646 | | Legacy authentication services | $4,118 | $370,769 | | Total revenues, net | $190,289 | $527,415 | | Operating Expenses: | | | | General and administrative | $7,882,194 | $14,676,938 | | Research and development | $2,800,373 | $6,269,175 | | Depreciation and amortization | $255,858 | $749,900 | | Impairment losses | - | $1,101,867 | | Total operating expenses | $10,938,425 | $22,797,880 | | Loss from continuing operations | $(10,748,136) | $(22,270,465) | | Other (Expense) Income, net | $(8,866,969) | $(1,397,175) | | Loss from continuing operations before income taxes | $(19,615,105) | $(23,667,640) | | Income tax expense | $(2,864) | $(7,670) | | Loss from continuing operations | $(19,617,969) | $(23,675,310) | | Total gain (loss) from discontinued operations | $217,593 | $(554,910) | | Net loss | $(19,400,376) | $(24,230,220) | | Net Loss Per Share - Basic and Diluted | | | | Continuing operations | $(3.19) | $(7.72) | | Discontinued operations | $0.04 | $(0.18) | | Weighted Average Shares Outstanding - Basic and Diluted | 6,153,881 | 3,065,365 | - Revenue from legacy authentication services decreased significantly from $370,769 in 2022 to $4,118 in 2023[25] - General and administrative expenses decreased by 46% and research and development expenses decreased by 55% year-over-year[25] Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show a significant increase in total assets to $15.4 million as of December 31, 2023, from $9.4 million in 2022, primarily driven by a substantial increase in cash. Total liabilities decreased significantly due to a reduction in convertible debt, while total stockholders' equity saw a substantial increase Condensed Consolidated Balance Sheets ($) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--------------------------------------- | :---------------- | :---------------- | | ASSETS | | | | Cash | $10,177,099 | $3,237,106 | | Total current assets | $10,901,680 | $4,346,716 | | Total assets | $15,411,913 | $9,374,185 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $1,664,743 | $1,249,149 | | Convertible debt, net | $224,424 | $7,841,500 | | Total liabilities | $2,214,167 | $9,090,649 | | Total stockholders' equity | $13,197,746 | $283,536 | - Cash increased by over 214% year-over-year, from $3.2 million to $10.2 million[26] - Convertible debt, net, decreased by over 97%, from $7.8 million to $0.2 million, indicating significant debt-to-equity conversion[26] - Total stockholders' equity increased by over 4500%, from $283,536 to $13,197,746[26]