authID Inc. (AUID) Earnings Call Transcript & Summary

Hi, everyone. I'm Gary Brode from Deep knowledge Investing. We work with hedge funds, family offices, registered investment advisers and individuals like you to help you get better returns in the stock market. I'm here with the management team of authID, ticker AUID, one of the best companies in the biometric security space. Starting us off is CEO, Rhon Daguro. Rhon, how are you today?

Doing great. Thank you for having us.

Thanks for doing this with us. So just take a minute or so and walk people through your background. I'd love for them to hear about some of the things you've done in the cybersecurity and biometric security space before.

So my background is deeply rooted in engineering and technology. So actually, for the last 25 years, I've been in the identity space. Going back to the very first companies who did single sign on and actually coding, identity directories with LDAP. So that's kind of dating myself, but maybe that's to my advantage here in that regard. But -- so ever since then, we've been building identity management practices, services -- professional services, software, technology and actually, over the years, some of the professional services firms that I've worked with, we've actually built the core identity technology for startups as well as big companies like Microsoft and Oracle. We've gone so far to even take some of the innovations that USAA had created in the past around identity and introduced the very first orchestration of strong authentication, multifactor authentication and then introducing biometrics, again, through the USAA patent. So that is a very long history in identity that I've had in the past. And what's kind of really exciting about authID is it's coming full circle now where all those things that we've been doing over the last 25 years have been tried to -- they've been created to try to address all the identity problems. And authID finally has all those things that I've been wishing for over the last 20 years. So that's a little bit of my background.

All right. Terrific. So Rhon, I've described authID as a public venture capital company, which I think is pretty accurate. So let me ask you the most basic venture capital question of all time, what's the total addressable market here and how does authID fit into the verification landscape? Also, Kunal, if you want to activate your video, yes, great. We'd love to have you on. We'll let you introduce yourself in a minute. But Rhon, you want to take a first crack at that?

Well, it's kind of in more basic terms. Any technology application, any software, any hardware device you ever can think of has some sort of security and has some sort of identity. So just then that microcosm, that is every single thing on the planet that has technology or software in it, can use authID or should be using authID. Then you kind of up level that to every single company regardless of health care, financial services, travel, entertainment, any businesses that are using software technology is also a part of our marketplace. And then you think about the global aspect of it, United States, North America, South America, Europe, Asia, all these businesses that operate around the globe, again, all part of that total addressable market. So what you're seeing or what you're going to be seeing if you actually did the statistical look up, you'll actually see that the market for security and cybersecurity and identity is growing. It's growing at a rapid pace. I think from a number perspective, it's targeted to hit $100 billion here in 2027, and it's -- it was just $48 billion in 2023. So it's growing rather large.

The one thing I'd add to that is I know authID is, in many cases, very focused on internal security, ensuring that the employees who have access to the back end of a company, access to the data are the people who are authenticated to access it. But I think there's also the consumer side of it. Somebody once asked me what the market was, and I said, look at your cell phone, and count up every app you pay $1 a year to secure. And, yes, in my case, it was at least 10 or 12 different apps. So there's a consumer aspect to this as well.

Absolutely. And it's kind of overwhelming to have people project the numbers. And that's why it's growing. $43 billion to over $100 billion, I mean that's a massive leap in just over a 3-year period. And I think more use cases are coming. And hopefully, we'll get a chance to talk about that today. But as new things like Gen AI and adversarial AI, and again just AI, in general, it's going to introduce a whole new slew of additional use cases into the marketplace that just never existed before. So it's going to continue to get bigger.

Terrific. Kunal, new Board member partner at Bain Capital, would you mind introducing yourself talking a little bit about your background as well.

Sure. Thanks, Gary, and hello to all your great listeners here. My name is Kunal Mehta. I spent most of my career in actually revenue-generating roles, and that could range anything from ops to running marketing to being a GM at a software company that was acquired by Vista Equity. Spent some time there as well as moved over with a handful of those companies to TCV, which is another private equity firm based out of Menlo Park, California, which is actually where I met Rhon originally, was a client of Bain at the time, ended up joining them as well and was really happy to see Rhon elevate into this role at authID. But yes, my role here is like really -- my role overall, in most recent times, is working with roughly 60 different companies between Bain, TCV and Vista on value -- on go-to-market value creation.

All right. Terrific. So I have 2 questions for you on this. One, why did you join the Board of authID? I mean, you have this incredible background. Obviously, something that doesn't work out isn't risk you need to take. You must have seen something. And then I'd love -- once you've explained that, I'd love your comments on the total addressable market as well. I know you're a really good big picture guy.

Yes, sure. So when I -- again, I got to know Rhon at TCV. We diligenced just a number of outstanding companies in this space, including where Rhon was prior, and we can -- I continued that work into my work at Bain & Company as well. But when Rhon joined authID, on our very first conversation, he was talking about these expansion of use cases. And it really -- he was talking about this customer service use case that was really cool because I had just gotten off on a customer service call where they were asking me what my least favorite vegetable was to authenticate in. And it's like all of this, like trivia, not -- that's about myself, I found it actually hard to really recall it. And I remember the use case he was talking about was like, hey, what if you could just use your face to authenticate in. And that sounded really, really interesting to me. I know that's probably a lot of listeners like hate obscure trivia about themselves to try to authenticate in. But what I really liked about where Rhon was going is they had -- this space got took off because they were covering really regulated industries that really required a lot of authentication and had a lot of rules around it. But as you talk to Rhon and others and even the Bain work will show, there's that, there's ROI use cases like the one Rhon talked about with customer service, and then there's even just how do you elevate the whole experience overall. But I joined authID really for 3 reasons. authID is fast. I mean, in 1 second, I can authenticate from my phone. They built all the infrastructure. It's like incredibly accurate. If you smoke test it against the others, it was the most accurate versus getting a lot of false positives. So that was one. I think when I think about just the team overall, they think way bigger. We have -- we're in a digital economy. Companies are globalizing. That's one large -- I think, one large catalyst that will continue. But you have a variety of use cases that we talked about from financial services to crypto, to gaming, to hospitality, to health care, to government, to retail. And I think that's what's really growing the TAM as well. And the second one -- the second big catalyst is there's a huge increase in the number of attacks overall. With -- and generative AI and deep fakes are certainly adding -- significantly adding to the number of attacks. And a lot of companies don't do a great job at these liveness checks, which is an area that I think is the center of gravity for authID. So I saw these things, I knew Rhon before, and I just said, hey, I think this company has real great technology. We actually looked at it when I was at TCV as well, and we liked the technology then. We just -- we disagreed, I would say, on the direction of the company at that time. But when Rhon stepped in here, we just felt like we had a really powerful person who is bringing a great team to execute against a great set of products.

All right. Other than the speed and the accuracy, and I can imagine there's a lot more than that, any other competitive advantages or something in the competitive landscape you want to mention?

Look, I think it's like -- when I look at this, I think of like old TV versus like streaming, right? I want to be able to get like -- if every -- when I talked about TAM to your earlier question, I was reading a report that says banking losses from identity theft in 2023 was actually measured in the hundreds of billions of dollars. So they are highly motivated. They're highly regulated, and there's high ROI to buy a lot of different identity management tools, but how do they all play together? They're going to need something to verify, they're going to need something to check docs. They're going to need a worldwide tool to -- if the person is coming in from a different country. But ultimately, what authID actually does is make all of those use cases better because they provide the speed and the accuracy and they extend the use cases to core platform providers as well. So again, I think when you look at TAM, there's a lot of it. It continues to grow as you add more use cases overall. But the tailwinds of just the number of attacks that are going on are also driving the TAM.

All right. Thanks, Kunal. Appreciate you joining us today. Let's bring in Chief Technology Officer, Tom Szoke. Hey, Tom.

Hey. How's it going Gary?

Good. So as the Chief Technology Officer, I'd love to get your view on what authID does better than anybody else?

Great. Well, let me start with the most simplest point. We do better than anybody else, giving you the guarantee you know who's behind a device and behind a transaction. It all starts there because identity is knowing who you're interacting with. And as Kunal has mentioned, as Rhon has mentioned, all those use cases require one thing, who are you transacting with in the digital world? How do you protect against fraud? How do you protect against deep fakes? How do you protect against false matches, data breaches. All that is things that are going on in the fraud side, we do better than anyone else to protect against. And we deliver that in sub-second processing and one second experience. So that's the core of what authID does different than everyone else. And that's where Kunal was reflecting in his comments.

All right. sounds good. Thank you. I appreciate it. So let me, Rhon, go back to you. Let's talk about the use cases for a minute. There will be people who have said there's really no use case for this. I disagree, but I'd love to get your view. What do you think the top use cases are for biometrics?

If I may, I do want to make a comment about biometrics. So we just came back from a conference, Identiverse, last week. It's the largest identity specific conference on the planet. And they have record-breaking attendance and the show continues to get bigger and bigger every year. But the headline for the show is biometrics. And the opening keynote by Andre Durand had 2 deep fakes talking to each other who were both him, and he was prompting each deep fake to have that conversation. What's really, really special about this though, is people don't know how to protect against it, but yet the awareness and the education level on biometrics, deep fakes, all these things that are very, very good at tricking identity, it's now at the forefront of the identity community in the marketplace. So every vendor, every consumer was basically asking about these questions, how do we learn, how do we educate, how do we protect? And for us, at authID, when we were in attendance, really, we were in both modes, how do we educate and then how do we protect? So from that perspective, if you think about biometrics, and a lot of the listeners maybe agree or disagree, but they can kind of just look around in their everyday life, if people think biometrics is coming, they're already wrong. It's already here. Biometrics is already here. And if you think about biometric in 3 buckets, there's biometrics for one-to-one matching, that is, is Gary really Gary or is it Rhon pretending to be Gary, so can we match on Gary's face? There is one to, what I call, small end matching, so one to many, but a small many, which is do we know who's on the airplane? Do we know who's at the concert? Do we know who's attending, who's in the building because they want to make sure that, one, they have proper safety with the right people on board. They have a good idea of making sure that there's nobody on board or nobody that's in the building that shouldn't be in the building. So that's a kind of like a small population. And then there is biometrics that's like one to N, which is one to many in terms of, hey, do we need a search for somebody that's missing or search for somebody that's dangerous or search for somebody? And so biometrics today are actually being used in all 3 of those use cases and are very widespread. Some of the viewers will know that these biometric matching at TSA, at the airport, at Clear, in those type of use cases, but they also know that there's cameras on property that's looking at people. And so if you think about or if you actually look and do some research, the government now is saying, holy cow, there is biometrics being used everywhere, how do we get this under control? So now you have BIPA, you have state-by-state regulation saying, how do we use people's biometrics? How should we govern it? How should we protect privacy? How should we protect confidentiality? So if you think about these questions of how, how, how, then you automatically know biometrics is really here. And the whole entire world is using it, some are using it for good, some are using for evil, some are using adversarial AI and Gen AI to cause more fraud. But I just want to everybody know, it's already here. There's no question that there's a use case for it, it's already here, and it's being used in that regard. So -- and from a business perspective, now I'm going to go back to your original question. From a business perspective, on the use case side, there's 3 key areas that we help businesses try to answer these particular questions in terms of how do they know who they're speaking to or, like Tom said, who's behind the device. The first use case is onboarding. So when we first bring in a person into our company, into our network, onto the DKI investing community, how do we know that, that person is who they say they are, so that we can properly manage the security and privacy of that person. Second, when that person returns to do business with us, come back into the building, come back into the app, come back into the banking application or come back into the health care system, how do we make sure that, that person is still who they say they are and they weren't -- there was no account takeover or they're being defrauded or they're being impersonated. And then last piece is because we have passwords in this world, people forget them. Because we know passwords are absolutely vulnerable, we have to do stronger authentication through a onetime password or a text code because we know authentication can be breached, there's got to be a mechanism to recover. And so for fraudsters, the best way, the best way to break into a system is to just -- is initiate a password reset and be able to break the password reset system. That's what happened at MGM where they made a phone call to a call center. This is the use case that Kunal was referring to earlier, where you can just easily find a high-value target within an enterprise organization, call the call center initiate a password reset, now you have the account -- now we call it account takeover and now you can go and do malicious things. And people like to hope that this stuff doesn't happen, but just read the headlines from last week, read the headlines from 2 weeks ago, read the headlines from 3 weeks ago, you will find every piece of evidence that passwords are being breached all the time, and they actually come through the call center. So onboarding, authentication and account recovery, those are the 3 core, what I call, technical use cases. And then you can go into the actual business function. What are those affecting? Wire transfers, big one, big one, Chase, Bank of America, headlines right now, where there's wire transfer scams for romance scams. People are sending money to people who they actually don't know who's on the receiving end. You think about Uber drivers. Uber is trying to address the fact that instead of me driving the car, and I have the Uber license, and I'm under the Uber insurance, but I'm going to hand it off to my brother, who's an ex-con or a convict or someone that shouldn't be driving people around and giving him my ID so that he can go and drive people around. These are the, what I call, the business use cases that could be applied to this particular authentication, making sure who you say you are, or onboarding, making sure you're not onboarding the wrong person, or again, using the, what I call, account recovery mechanism to break into systems.

Yes, those are great points. That MGM hack, the reason I think it's really important is because I think there's a perception in the world that when these hacks happen, it's guys halfway around the world in a basement somewhere and they're just incredible hackers and they work their way through the back door. They're sort of replaying that old movie WarGames in their head. But the fact is, when these hacks happen, it's almost always somebody who has proper -- they're authenticated for use and somebody takes control of their account. So it's not the back door. The system is letting the wrong people in thinking that they're the right people. And even on a personal level, I hear at Deep Knowledge Investing, we use strong passwords, all the right things we're supposed to do, capital letters, lower case letters, long passwords, numbers, symbols, all of that, well, guess what? My Investor Relations e-mail has been hacked twice in the last year. We have two-factor authentication. And so what we're going to do -- in this case, the damage was my subscribers got solicitation e-mails for a nonsense they shouldn't have gotten. Some of them got understandably angry. But what we're going to do is we're going to start requiring biometric authentication in order for people to access the Deep Knowledge Investing back end to access the website, any of that data. The other thing is, I know people like two-factor authentication, but if somebody has your phone, right? So they've got the phone. And first of all, besides the fact that everybody already stores their passwords, right? What happens? I click password reset, they said, okay, we're going to authenticate. We sent you an e-mail. Well, guess what, if someone has my phone, they have my e-mail. Say, okay, we'll send you a text message. Great. Also on my phone, right? We use Microsoft Authenticator. We'll send you a onetime use code, terrific, guess what, also on my phone. So I think this two-factor authentication is better than nothing, but it's not as effective as 0.7 second biometric check where you can confirm, is this the person who should have access or not?

And I think that's the real innovation that has happened over the last, let's say, 5 years. I mean authID has been kind of under the wraps because they just really been focusing on building the technology. Back in the day, if you did a biometric authentication, it would take 5 seconds, 9 seconds, it would take a good amount of time. And that's why you can't use it in payments. That's why Mastercard, Visa won't do anything in payments because you got to be sub-second and to be more specific, you got to be under 200 milliseconds. So that's how fast those transactions are. So now we've reached to the point where authID has really perfected or even dramatically did a leapfrog in terms of performance. Under 700 milliseconds is market shattering, groundbreaking, however you want to call it, but nobody can touch it. And Tom and their team said if we had just a little bit more investment, we can even go faster to get into that 200 to 400 most like a subrange to get to the transaction level. We're not there yet, but that is absolutely promising in the sense that we can still go faster. We still have a lot to do, but the fact that we could bring biometrics to operate as fast as a passive fraud check is actually game-changing for us and for the marketplace.

All right. Terrific, Rhon. So I want to get to what for me is a really important question because when I was doing research on authID, on the biometric space, this question was -- it kept coming up. And it was really important to me. It took me a long time to understand it. And then in the Deep Knowledge Investing community, one of our smartest investors, a guy named David who's on here, has asked a lot of questions on this topic, and I think they're really smart questions. And I think this is a place where we want to get some really clear answers. So people are already used to using their Face ID to unlock their phones, whether it's Apple Face ID or Google's Onboard. I have a Samsung device, I can use Face ID or whatever they call that to get on. Why can't Google and Apple just do this, right? You already have biometrics on your device, and why can't you guys just -- why can't we just use what we already have? How is authID different from unlocking your cell phone with Face ID?

Well, in a way, and I expect the reason why there's a lot of confusion is, in a way, they sort of are already using it, right? So Bank of America is going to trust the Face ID, Bank of America -- from Apple. The Bank of America is going to trust the FaceLock from Google. And again, that's what Samsung is using as well. So basically, they're using the FaceLock technology and the Face ID technology. So they're assuming and they're going to use those biometrics. The problem with that fundamentally is that it's based on an assumption. And Gary, you know that the phone that you have right now, you can load your biometric. I could be sitting right next to you and say, hey, Gary, load my biometric for your phone, too. And let's say, you're out with a friend, and you're saying, hey, watch this, I can load your biometrics on my phone, too. So the governance of loading the biometric on the device, there's 0, there's none, but yet the bank trusts that.

I think the key issue is that it's verifying that you're somebody who's authenticated on the device not that you should be authenticated to access a specific account.

That's right. And Tom, if you want to go ahead and expand on this because I know this is...

Yes, I was just going to add to that. Yes, exactly, Gary, as you mentioned, I mean the key to the -- what the difference is, is those biometric technologies offered by Google and Apple protect the device and allow the owner of the device to self-enroll. So the trust is between you and your device, and that is left at that level. What authID does, it uses trusted enrollment to bind you to a government-issued credential to know who you are and then establish you as a gatekeeper to ensure that you're the only one accessing the accounts that you belong to or you own. That's the difference. We protect the account. Those technologies protect the device. There's no assumption because there, the connection is -- the assumption is the device owner is the same person as the account owner. As Rhon just mentioned, that's not necessarily the case. And that assumption can be used for, obviously, financial losses and fraud. So that's the key. We protect the account and not the device.

Got it. Makes a lot of sense. Great question here from Rob on how much friction is there between authID and customer setup and implementation?

Okay. So our process is very streamlined. So we have very simplistic integration points. We're pre-integrated into multiple platforms for orchestration and identity providers that allow the single sign-on technologies. So we make it nearly a no-code, low-code integration. So it's a very, very quick and easy process, and we manage the process with our clients through phased rollouts so that we can build their growth and volume together and get the user adoption that they're looking for. Our user interface makes it very easy for end users, both workforce and consumers, to adopt to the technology because it is nearly transparent. It is like that Face ID experience.

On that a follow-up, and this was something that came out of my conversations with that. I think the ramp-up for that is about 3 months. So if a customer signs a contract with authID, a large customer, it's typically about 3 months to get them up and running and for you guys to be collecting revenue and providing service and value to your customers. Is that about right?

Yes, absolutely. The process that we have is actually kind of threefold, maybe that falls into 3 months. But basically, the first thing that we do with our customers and clients is we help them implement with best practices, two then we certify their environment or certify their integration, just like what Tom was talking about so that when they actually do go live, they can go live at full volume. And then kind of like the third phase is typical customers will do like a rollout of a subset of the population. So they'll do maybe 1/3 of the population within the first 2 weeks, and then they'll do another within the next 2 weeks after that. And then the final full volume would happen in the 2 weeks after that. So that duration is typically in 3 months.

Got it. okay.

We've had customers that have gone live in a month, though because they are seeing problems and they are getting breached and they need to put a stop to it right now. So technically, from a technical perspective, it can be implemented in an afternoon. But usually, you have to follow some governance and process to do that.

Makes sense. Okay. Let's bring in CFO, Ed Sellitto, because I want to talk about how you guys track sales bookings. Hey Ed, how are you?

Hey Gary, All right.

All right. So everyone, this is Ed Sellitto, the CFO of authID. Ed, one of the things you and I have talked about a lot are sales bookings and the metric that you've used in the past called bARR, booked annual recurring revenue, which now is being broken out into its component parts. I think that's much better, much more clear disclosure for your investors, but would love to have you walk people through, tying through the old presentation of bARR to the new presentation showing how you're giving better, more clear disclosure and arriving at the same numbers that you haven't changed the estimates in any way, you're just providing more detail.

Yes, absolutely. I would love to share that. I think I actually did provide a slide in case we were to discuss this that came from our earnings call. If we could flip that up, that I think would help folks follow along to the explanation. But -- so as you get that up, as you said, Gary, we have used booked annual recurring revenue as our booking metric for sales. We did recognize that, that does include a combination of both committed and estimated elements when we define -- how we define bARR. And so we wanted to do just break that out into its 2 main components so that folks can understand, not only what's committed and what we think is going to be additional usage, but also explain how that rolls out over a 3-year period into -- converting into revenue. So if we look at the slide here, we've broken out bARR into these 2 main components, one of which is called committed annual recurring revenue, or cARR, and the other is usage above commitment, or UAC. So on the left side, so the cARR is shown in the dark purple and that represents the total annual customer contractual commitment through terms like fixed licensees and minimum usage commitments, and these commitments are recognized directly as revenue in each contract year after the customer goes live with the service. So in this case, you can see that's consistent $1.4 million out of the $3 million. It also represents about half of our bARR, it comes from the cARR component. And then the usage above commitment is shown in light blue on the right-hand side of the chart. And so that's an estimate of annual customer usage that will exceed the commitment. So a customer says, I'm going to -- I think I'm going to do $500,000 in volume every year, but I'm not going to commit to that, right? I'd be more comfortable committing to, say, $250,000 and then I'd like the balance of that to be -- I believe we have the usage to get there, and so we'll see that when it comes. And that's where the UAC comes in. So on the right side of the chart, we estimate that a customer, by month 18 of its contract, the cARR would be about half of our revenue and the other half would be usage above the commitment, or UAC. So you could see that getting to in the second year, we start to see the usage above the commitment. So in -- and then by the third year, we have a full year of usage above commitment. And now this $3 million of bARR is fully realized with $1.4 million in committed annual recurring revenue and another $1.6 million in that estimated usage above the commitment. And we will -- we believe that we can even exceed that and there's upside to that over time as customers add more use cases or the customer grows their own business.

Right. So for the people seeing this for the first time, I'll just to recap what Ed's saying, these numbers here on the left, the dark purple ones, this $1.4 million for each of 3 years, that is what the customer has committed to spending. That's their contractual obligation. And then authID is assuming that 18 months in, that customer starts to ramp up usage and start to use the product more above what they've committed to and by the time they're in year 3, roughly half of the revenue is coming from the commitment and half of the revenue is coming from additional payments, and that's how they would get to, in this case, $3 million of booked annual recurring revenue for this one customer. And it scales up over time, $1.4 million, $2.2 million and then $3 million in year 3. Is that right, Ed?

Absolutely.

All right. Should we go on to the next slide?

We can. The next slide talks about our targets and guidance, which -- of which bARR is one of them. So I'm happy to walk through this as well. It's another slide, by the way, that we shared in our Q1 2024 earnings call. So there are -- this just talks about our targets for the year. There's 3 primary metrics that we set targets on for 2024. The first is our bookings growth, our bARR number. And we stated previously and we've reiterated in Q1 that we're targeting $9 million in bARR for the year in bookings, which would represent a 3x growth year-over-year. The -- and if we were to achieve that $9 million, depending on the level of our customer commitments, the length of terms of the contracts, we also expect to grow our remaining performance obligation, which is the measure of the minimum revenue expected to be recognized from our signed contracts as committed by customers. So we achieved our $9 million in bookings. That RPO is going to grow along with that, and we expect that to grow from the $4 million that we reported on in Q1 up to about $12 million to $13 million by the end of the year. And that would be recognized over approximately a 3-year period, which is how our contracts are strategically structured. And then lastly, the GAAP revenue that we reported in our financials. Our Q1 revenue was approximately $160,000, which started to approach what we achieved in all of 2023. We look to continue to build on that for the rest of the year. By the end of 2024, we expect revenue in the range of $1.4 million to $1.6 million as our go-lives for our existing signed contracts continue to go live, start to recognize revenue and accumulate those revenue over the balance of the year.

Also worth pointing out, first quarter revenue was almost equivalent to the revenue for all of 2023. And if you take the midpoint of your $1.4 million to $1.6 million, that assumes that your average revenue for the rest of the year will be more than double the first quarter number for each quarter, right?

That's correct.

So first quarter was roughly equal to all of 2023. And these projections at the midpoint assume that the quarterly revenue run rate more than doubles from here.

That's right. And the driver of that is that -- well, 2 drivers. One is that we have some customers that have gone live, but they went live during the quarter, some towards the later part of the quarter, right? So we only recognized a portion of the quarter in our revenue for those customers. We'll start to see those turn into full quarters of recognized revenue going into Q2. And then also, as we go live with some of the additional customers that are planned to go live within Q2, we'll start to see additional buildup of revenue from that source.

All right. Terrific Ed. Thank you so much. I'm going to stop with screen sharing and bring back everybody here. Ed, thank you, much appreciated. So Rhon, Ed was just talking about the projections. Let's talk a little bit about expectations for signing new customers this year. Because the truth is, look, we all know you're a smart technology guy, but you were brought in more than anything because of your expertise as a sales guy, somebody who trains and develops a systematic sales team. So what do you need to do to sign new customers for the rest of this year to make Ed's numbers, his projections correct?

Well, fundamentally, the source of everything starts with our -- building our qualified pipeline. And so even in 2023, when I first joined, the #1 criteria for us to even hit numbers over a 12-year -- 12-month period was to make sure that we fill the pipeline. Luckily, we filled the pipeline and we closed the opportunities and actually we did it in 6 months as opposed to 12. So looking to where we are right now, we're sitting at roughly around $22 million in pipeline in our sales pipeline today. So we're at the half point of the year, basically, $21 million. That means in order for us to do $9 million or roughly $9 million, we have to be at a close rate of close to 50%, let's just say. And in 2023, our close ratio over that 6-month period was 90%. We started the year off at probably roughly 20-ish percent. And so we have to be able to hit 50% close ratio. And right now, I feel pretty darn good that we'll hit 50% on that pipeline. And so that's existing pipeline today, not new pipeline that we'll generate again by the end of this quarter and next quarter and in Q4 and then closing those opportunities. So we have plenty of pipeline to close for the end of the year. And again, our close ratio needs to be around 50%, which historically, for us, as a sales organization, we've been able to do that. So that's one is to make sure we even have enough pipeline to do it. Second piece of that is the execution and the team actually go and execute and do those -- close those opportunities. And then the way we look at the opportunities is it's kind of like 3 categories. One is what we call the Fast 100, the deal that we just have to -- we're able to close, we meet the use cases and really it's just making sure we have a fit. The second category is what we call the FAT 100, which are the bigger strategic accounts, our larger enterprise value, larger amounts of employees, larger amounts of consumers. And then the third category are the Faster 100, which is basically our channel deals where we're working with partners -- our OEM partners and our reseller partners to be able to make our technology available to their existing customer base. We just spent all '23 on Fast 100. We started building the FAT 100 opportunities toward the end of '23 and now -- and then we just started building the channel opportunities end of '23 and now. And so those are the particular accounts that we -- that are filling up our pipeline today. And that's how we've been focusing on building the business. There's -- again, we're at Identiverse last week. And the names that we were speaking to at that conference were very large household names. So we're very excited to continue to open those opportunities to fulfill our FAT 100 strategy.

Got it. And for these FAT 100 customers -- for a median FAT 100 customer, how much revenue are you looking at?

FAT 100 will fall anywhere between $1 million to $3 million.

Got it. And so -- but by the time you're -- it's going to be more than that. That's $1 million to $3 million a year, right?

That's correct.

Okay. So basically, to make these kinds of projections, you're really looking at this year trying to sign one big customer a quarter and then next year, a big customer every month or 2.

Correct. Combination of small and big, but yes, the anchor would be one big customer a quarter.

Got it. Okay. And do you guys want to talk about -- Ed was just talking about 2024 growth targets. Do you want to talk about 2025 growth targets? Happy to bring Ed back if he wants to, or if you want to field the question, good either way.

Well, we're -- we don't have any guidance around 2025. The only thing that we can share is that, obviously, we've been on a triple, triple, triple, double, double growth pattern. So that's the typical, kind of going back to what you early said, that's a typical VC-backed unicorn path. It's the triple, triple, triple, so the first 3 years of tripling and the next 2 years doubling to get yourself to $1 billion valuation. So we're certainly on that pursuit. And we've done the first triple. We're doing the second triple, and so the intention here we'll to try and do another triple and then get back on to that path. Again, we're very, very excited about what's going to happen to the marketplace in terms of the TAM because it is exploding in a particular use case that we're very good at, which is the deep fakes and the adversarial AI. But that's as much as I can comment on 2025.

Okay. Makes sense. Let's talk about a typical customer interaction where -- I know there's one great example you've talked about with me where you started with a very small number of authentications, built trust, executed, did better and kept growing with them. Do you want to talk about that? Or should we have Tom back to discuss it? What -- how do you want to talk about that?

Tom, why don't you start and I'll add to it.

Perfect. Yes. So yes, Gary. So the model we did with that customer is really how do you build, how do you go live on time or a bit early? How do you ensure that the services they are requiring meet the expectations of themselves, the business as well as their consumers or workforce? So in the case we looked at we rolled out in a controlled environment a set of users so that they could adopt to the technology, get familiarized with its use. The customer becomes more familiar. The end users become more familiar and then they start growing within that capacity. So they start scaling up. So it's building that trust that the first set is successful, and we had stellar results. So they were extremely pleased throughout the growth of this, and it was a very good process for them because they're adopting biometrics, right? And they're getting it into the mainstream processing of their business. And then what they're looking at, obviously, is once they're comfortable within that use case, they start looking at horizontally expanding into other use cases. So that's how this all grows built on that trust. I don't know, Rhon, if you want to add any more to that?

I like specifics. So obviously, when we're going live and we're rolling out to a smaller set of population as we grow bigger and bigger, they want to see authID perform. Again, think about this, we're replacing an incumbent or replacing a legacy technology with pretty much biometrics. And like everybody says, as much as it's still a new technology where maybe people are familiar with it, the operational version of rolling that out, making sure that they can handle customer calls or training within the organization, those things start to be exposed and they have to be addressed as they're operationalizing it as well, we're helping that organization do that. But what's really exciting then is they get to see authID's performance in that subset. So the first 1,000 that was rolled out to, they are like, holy smokes, this thing is performing, then they roll it out to the next 2,000 or next 3,000. And then all of a sudden, the people that were [ in place ] were saying, "Wait a minute, I think we're blocking too many people." And the traditional fraud analyst or fraud titled person in the company would say, "Hey, I think I'm blocking too many people." Then they dig deep and look into the technology and look into the data and say, "No, authID is now catching people that we would typically let through in a typical fraud stack, holy smokes, authID has been performing even better." And so as we continue to uncover these things with our customers and clients, they're coming back with performance numbers. And so, I mean, Tom, I don't know if you want to share it. [indiscernible] sharing the customer name, you can share some of the performance. But our performance in some of these results are just bigger than what we've been advertising to the public market.

Yes. So yes, I mean the results Rhon's referring to, I mean we're getting completion rates of over 99% where they were concerned that we're moving away from device authentication to a cloud-based solution. They were hoping to achieve 95%. We nearly reached 100%, it was like 99.6%. So they were astonished that the usability factor biometrics was there through biometrics. And I think that was one key question they needed to answer. The other one is, when they onboarded, the conversion rates and the completion rates, our rates were above 95% to 98%. And for use -- a base of users that were -- they had already gone through a check, we were catching things they let through within that. And like Rhon said, we thought it was actually a -- it was a false hit, but actually, we were turning fraud. We were showing them fraud.

And I think one of the key things that came up in the research that I did is the buyers of services like yours, the thing they care about more than anything else is a good user interface and very, very little friction. That essentially -- nobody likes fraud, but they'd rather take a small amount of fraud than start to have customers or vendors or business partners walk away because they find the user interface to be slow, frustrating, won't authenticate them. That just -- I think people often misunderstand how important that user interface, that speed, that accuracy is.

Well, our goal is that we deliver both. So we're trying to -- we catch that fraud, and we deliver it to you in sub-seconds. So that was the fundamental premise of how we built this platform because I think you're absolutely right that without user adoption, it doesn't matter how good you catch things. But if you get users to adopt and you catch things at the highest possible accuracy, it's a win-win.

Right. So we've got a short slide and video to show people how the system works. Give me one second. I'm going to share my screen again. And you guys can -- Rhon, you can talk people through it. Here we go. Okay. You see my screen?

Yes.

All right. So here we go. Step 1 right here, fraudster buys stolen IDs from the dark web, creates deep fake IDs. And then here we go, why don't you narrate from here?

So what's really, really exciting about our trip last week to Identiverse is that when we were doing the education piece, one, people didn't realize how easy it is now to either steal a fake or to create a deep fake ID. So on the left-hand side right now, these are IDs that can either be stolen or created, but how easy it is to create these things is so simple and actually feel -- I got to be careful because we don't want to teach fraudsters or teach the world to create a bigger population of fraudsters. But these are the tools that are out there right now that are allowing people to create deep fake IDs. Now what do we do with these? We take the picture, create the deep fake ID and then we actually move it into a video. And you can see in the middle, this person is looking up, smiling moving their head. And so we're creating the motion out of this static 2-dimensional picture, and we create a deep fake video to actually simulate something that would be used to do an authentication or to do a selfie match on an application to, let's say, a service or a phone. And Gary, you talked about this earlier like how the phone and the device could be taken over, well, we could do things, we can open up accounts on people's behalf without them knowing. So if you actually play the video on the right, this would be a demonstration of us applying now for a credit card or may be applying for a service, and we can use our deep fake ID right there that we used, and we can control the camera and take over the camera to take a picture of this ID. We can then use -- take over the camera to the -- place it over what I would call the deep fake video. So we capture the front and back of the ID in the traditional fashion. We then use the tool to take that emotive picture that we created of you, of the deep fake, and then we go ahead and we try to spoof the system by using the deep fake to log in and to authenticate here or basically do a match to the document. And very simplistically, obviously, authID blocks this, but this is a super big deal because people can't do this today. This is very difficult to do in the marketplace. And when we're at Identiverse, people saying they can do this, but they can't do this. And so that's why, for us, it's very exciting that we have this very strong capability and very unique capability in the marketplace. And we just have to be very, very good at putting ourselves out there in the marketplace and making sure it's differentiated, that really we could stop these and others can't.

Yes. And I think the key thing on all of this is people are understandably and correctly concerned about AI deep fakes and saying, wait a minute, it's getting really hard. You can't tell if it somebody's voice. It's getting very hard to tell with video. And there's sort of this pessimistic view that, oh, no, how are we going to have any kind of security. People can spoof our appearance, our emotions, our voice, our voice patterns, our language patterns. But the answer in this case is that authID isn't necessarily checking that? It's that authID is figuring out that it's an insertion attack that the source isn't the right source?

You got it. You got it. And we're really just focused on making sure that we can detect when something is biologically, unnaturally being used. And so ultimately, when it comes down to identification in the digital world, we do have to go back to the liveness, the biological liveness, proof of life that it is really you behind the device. And that's why ultimately, the buck stops at authID in terms of the biometrics. The buck stops at biometrics, which is why the world has already adopted it, and they're trying to figure out how to use it and trying to figure out how to regulate it and trying to figure out how to bring it into their businesses. It's already here because all the other digital authentication patterns have been broken and broken very easily and really now it boils down to, is it you actually holding the device and are you alive and breathing, and it's you and not a deep fake or you're not. And we answer that question very simplistically. Is it you or is it not you? And is it you holding the device? So that's why we've always had simplified our message, which is who's behind the device.

Yes. And I think the key thing is it doesn't matter how good the fake is, what you're detecting in that situation is that it's coming from the wrong source, that it's a fake source not is this a good photo or is this a good video or how closely does it match the person, it's -- the whole thing is wrong. It doesn't matter how good they are, it's rejected because it's not right.

That's right. And that's where my precision -- our precision kind of piece that we've been obsessed with, we have to get it right. I mean if you think about the places that could get it wrong, if the government gets it wrong, then they're denying a mother with kids that they can't feed their children with aid, like nobody wants to get it wrong. And so we have to be absolutely precise in this fashion and we're obsessed with it. So I think that's where authID matters to the world is because we're just making sure that you are who you say you are, and then like you said, we're delivering it with such a great user experience that you don't even know it's there.

Got it. Okay. So on your last conference call, you guys spoke about financing expectations for later in the year. Are you comfortable discussing that topic again?

Let me have Ed come in and answer that, and I'll add on to that.

Sure. Hi Ed. So what are -- you guys obviously need -- anybody who looks at the cash flow statement in the balance sheet will figure out you guys need financing later this year. What do you need? What are your expectations for that? And at what point do you think the company become self-financing?

Yes. So what I could say, as you mentioned, our balance sheet was pretty strong in Q1. We had over $7 million in cash. But given our current expense run rate, we do fully expect we'll need to raise money sometime this year. We're confident in -- as we've been continually stating, confident in our business model, our ability to hit our targets. We also have strong relationships with fundraising resources to raise that money. While nothing is set in stone right now, based on the conversations we've had, we are highly confident that we'll be able to raise the funds we need to onboard the large customers that we're in discussions with now as Rhon alluded to. So I can't -- nothing is set in stone speak to specifics about that, but we do have a lot of confidence based on what I described.

Got it. Okay.

I mean in terms of becoming self-financing as well, we -- right now, we're really hyper-focused on building our sustainable revenue generating profitable business. As we achieve our targets along that path, we will get more insight into additional milestones, including the time in which we'd become self-funding.

Got it. All right. Let's sort of look to the future for a little bit. What do you guys think the future direction of biometrics as an industry is? Because right now, it's just starting to be used. Where does this business end up in a couple of years?

Well, the opportunity that we're excited about is because it's already here and because they're trying to figure out how to do regulation. So one of the biggest -- regulation and governance and how to just get this thing under control. And there's going to be a big market around just the governance of biometrics that has not been created today, and they're starting to think about that and trying to think about how to put that in place. And authID has already thought about that, and we've been building technologies and building the right things to address stuff like this. For example, like I said, one state already has these regulations or rules around how you store biometrics, all the other states are thinking about this. Companies are thinking about this, hey, how do we store biometrics without getting out of compliance? There's regulation coming down or the laws are going to be written around compliance and storage of biometrics. What if we were able to deliver the precision of biometrics, deliver the user experience of biometrics, but we don't actually store the biometrics to eliminate that complete concern. And so in an industry where biometric is now being introduced at mass, the feature of it will now become more widespread, more governance, more controls, and authID has already been on the forefront of thinking about those solutions, and you'll start to see some announcements coming out soon. We're addressing the ability to do such things.

That's a great question. Where are the -- where are the images stored, the authentication, the key stuff, where is that stored if you have a customer?

Absolutely. So they -- so when we take the biometric initially on onboarding, we encrypt that biometric into a template so that it can't be used in any other fashion, and then an encrypted template is then stored on a public cloud so that you can authenticate on any device, any computer regardless if it's yours or not, any account and be able to recover and do those things by matching to the biometric template in the public cloud.

Got it. Okay.

Gary, I was just going to add 1 point to what Rhon said. On the regulated use cases, like -- so LexisNexis has something called The True Cost of Fraud study. It roughly says 2,000 financial services firm, they're attacked monthly, right, and over 40% of those attacks are successful. I think a shocking kind of takeaways that for every dollar of fraud, there's $4 that the bank has to spend in addition to that because of investigation, legal, recovery expenses, infrastructure. I think there is a lot of motivation for these regulated companies to like make investments. And if you look at this study, the leading -- the laggard banks are like -- I should say, the leading technology banks experience 90% less fraud than the laggards, but there's a lot of laggards out there. So I think on the regulated side, there's just a lot of energy to get the fraud under control. And then on the high ROI use cases and the experience use cases, those are more emerging, but I think they will continue to proliferate.

Got it.

And you made comments, Kunal, I mean you've been helping me with this, but you had some insight on the investments that are happening in the biometric space.

Yes. I mean, overall, like we -- if we look at the last 5 years, roughly $10 billion has gone into -- has been invested by private capital into 7 areas. One is verification, which is basically who is this, and I think the interesting takeaway and this is more from the Bain research is the average buyer has at least 2 solutions in place to optimize risk and create some level of redundancy. And that's just -- there's more -- usually it's more than that. But the other area is credentials, which you might -- might also be called KYC or KYB checks. The other area is risk. Should I even engage with this person at all? Authentication, which we've talked a lot about here, is this the same person? Is it a deep fake? Authorization is, probably the fifth area of fraud management, the sixth. And then I think the area that's also really interesting is you got to harmonize and orchestrate across a huge infrastructure of technology investments. And I think there's no reason why authID can't be integrated into that orchestration software as well. But seven big areas, I would say, have taken in roughly $10 billion in investment over the last 5 years.

Got it. And Kunal, for the big -- the FAT 100 customers, how much revenue is one of them marked? I know you've done a lot of work on the big market questions.

Yes. So this is a really interesting question. There's probably like 100 big companies in the world that could spend in excess of $20 million on these things because they have -- I mean think about Airbnb as an example, right? They have to -- you have to -- how many verification tools do they have to have in place? They got to check the dock if you're in the U.S. as you make a reservation. If you're international, they've got to do an API check. So that means they have -- someone has to have relationships with every country in the world. Then when the person shows up, are they who they are? There's a -- and then they're buying multiple tools. I mean that's just one, but there's like whether it's marketplaces or finance or crypto or others, you can easily see customers. The FAT customers as Rhon calls them will be in excess of like $20 million. They're really big -- they move the needle on the valuation of the company significantly.

Got it. Okay. What about for innovations? What's the next thing in your product road map? What should we look forward to from authID in the next year or 2?

Sure. So yes, Gary. So as Rhon started to allude to, as regulation is starting to be developed around biometrics, it's here, how do you manage it? How do you adopt to the different global and state and local and federal laws if they're trying to roll out to manage the use of it? The key element has been, as we -- you asked earlier, where do you store biometrics? Where is that data? Is there now a new honeypot to attack, right? That's been always the question asked. AuthID is building out the technology where that honeypot doesn't exist. And it doesn't exist because we're looking at transforming what is a biometric verification, authentication into a cryptographic one. What this means is there is no longer that discussion of biometrics and now becomes a cryptographic session built out of biometrics. And on top of that, because it's in the cryptographic space, it even broadens the use cases further where it can be applied. As the new technologies based on cryptography, our Web 3, mobile drivers licenses, electronic IDs, all those are basically within that same foundational technology stack. So that's where we're heading, and it's coming soon, as Rhon said, and you'll see some very cool product announcements here.

Sounds good. Thanks, Tom. All right. Rhon, last question for you, and if Kunal wants to come back, that's fine, too. What are the areas for improvement? Where can authID get better?

From a business perspective -- lets go back on the technology side. So on the technology side, I think we have that nailed. I mean the company has done really well in terms of creating the best technology out there. Tom alluded to some of the new innovations coming down the road, which I think will be a game changer. The second thing that we had to kind of make sure that was in place was that we had a great sales commercial organization to be able to execute and build the business and get the message out to the customers. I think the third area for us that we're really excited about, and hopefully, we can improve upon rather quickly is we've got to be able to get the information out there to the marketplace faster. We have to be able to kind of deploy a one-to-many solution, communication solution or strategy as opposed to the way we were doing it now. Luckily for us, we've been in this space for a very long time. We're only going after 300 accounts in a very targeted fashion. A lot of those are warm leads, people we've known in the past, we've sold to in the past that we have tremendous relationships with, which is why we're able to execute so quickly. But we want to be able to grow faster, reach more people than 300. So I think our ability to communicate out to the public markets as well as public customers and just public use cases like somehow get out there faster, and we've not built that muscle. We done 0 investment in marketing. And I think that's going to be the next area of improvement for our business to be able to get that message out there faster.

Yes. Gary, I was just -- I mean, Rhon, just to add a little bit, like if I look at the pillars of success, there -- authID is commercially very competitive, right? I think like areas that would be really interesting are just forming strategic partnerships overall with key players. I think that would be something that would be super interesting for authID to look at. I also think because of the quality of the team, they're almost a Swiss army knife. They actually don't tell that story very well of how well they fit in to other infrastructures. And then there's also a lot of just competency on the team in terms of training like where are the risk? What is the attack surface area? And how is it getting bigger? The team has a lot of just inside -- almost insider knowledge on how this is done and how you can prevent that. And I would say the third area is like -- and what I love about authID is like they are pushing the envelope on leading use cases. And I think continuing to do that would be 3 areas that I'd love to see them just see growth in.

All right. Sounds good thank you Kunal. Rhon, I think we're pretty much a wrap here on the time. Any last thoughts, any last ideas you want to share before we close down for the day?

Well, I just want to say thank you because this is a great opportunity for us. Like I said, we don't do well in communicating out to the public markets on what we're doing and what we're achieving. There's a lot of great things and exciting things happening at authID and obviously, we're limited to the earnings calls. So this was a great opportunity for us to be able to expand a little bit about this in a more dialogued fashion. So I really appreciate that. And I'm really, really excited that everybody was able to contribute here, and hopefully, your audience was able to get what they needed.

Terrific. Thank you. So a couple of disclosures here. I'm Gary Brode from Deep knowledge Investing. I personally own authID stock. Neither I nor Deep Knowledge Investing was paid to do this webinar. We have not received compensation from anybody to do this. Basically, when I first got to know the company, my first call was with Rhon and Ed and Tom, and then I had the chance to speak with Kunal later. And the thing that really struck me is how straightforward, open, honest, likable and knowledgeable they were. They just gave me great straightforward answers to everything. And I wanted the rest of you to have the opportunity to see the same kind of thing. I wanted everyone else to have the opportunity to see what this management team is like in person, and I'm glad you had the opportunity to do that today. We are live streaming right now on to X, formerly known as Twitter, LinkedIn Live. This video is being recorded. We will have it up on YouTube later today. And I want to -- we had 3 digits, well over 100 people participating on all the streams and on this live. Everyone, thank you so much for your time, for being interested in authID for participating. Thank you for all the great questions to Rob and David. I want to thank [ Andrew Brown ], intern from the University of Tennessee, who's done a great job with the videos. He will also be publishing a whole bunch of shorts. So for people who don't want to see the whole hour-long video, you'll have the chance to get the clips. And then we also want to thank Rhon Daguro, CEO of authID; Ed Sellitto, the CFO; Tom Szoke, the Chief Technology Officer; Kunal Mehta, new Board member from -- and partner from Bain, and also Grace de Fries and Graham Arad who were instrumental in helping us plan all of this and get all of this done, a great team effort. Thanks so much for everybody -- to everybody for participating and being part of this. I really appreciate it.