Intellicheck, Inc. Common Stock 2026 Q2 Earnings Call

Thank you, operator. Good afternoon, everyone, and thank you for joining us today for Intellicheck's second quarter 2026 earnings call. Before we get started, I will take a moment to read our forward-looking statement. Certain statements on this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. When used in this call, words such as will, believe, expect, anticipate, encourage, and similar expressions as they relate to the company or its management identify forward-looking statements. This includes statements regarding the customer transition we will discuss today, the pace, extent, and duration of the resulting volume reductions, whether any volumes are retained or restored, and the economics of any retained or restored business, our expectations regarding future revenue, profitability and adjusted EBITDA, and our ability to recover or replace affected revenue.

These statements are based on management's current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and the company undertakes no obligation to update or alter its forward-looking statements, whether resulting from new information, subsequent events, or otherwise. Additional information concerning forward-looking statements is contained in the company's filings with the SEC. Throughout this call, we may reference certain financial metrics that have been rounded for ease of discussion. Statements made today are as of August 13, 2026. Management will use the financial terms adjusted EBITDA and adjusted gross margin. Please refer to our press release issued this afternoon for further definition, reconciliation, and context for the use of these terms. We will begin today's call with Bryan Lewis, Intellicheck's President and Chief Executive Officer, and he will be followed by Adam Sragovicz, Chief Financial Officer.

Following their prepared remarks, we will take questions. I will now turn it over to Bryan.

Hey, thanks, Keaton, and good afternoon, everyone. I will say this, for the first time, we are doing this call live. I do not know how many people know that you can actually pre-record these things and make yourself sound pretty smart because you do not mess up. So if I stumble, I hope you all will understand why I like just talking. A couple of things. Our diversification strategy, now in its second-plus year of execution, continues to produce results in the second quarter. The operating discipline behind that strategy has generated four consecutive quarters of profitability. Revenue for the second quarter was up 7% versus last year and up 16% year-over-year. Gross margin came in at 91%, and adjusted EBITDA was positive for the fifth consecutive quarter.

These results were generated despite the same macro challenges we described last quarter, persisting through the second quarter and continuing to weigh on our retail, automotive, and title insurance verticals. Let me start with the hard things, and then I can move on to the great things. As you all know from our historical filings, we often talk about customer concentration. A question I get all the time. A customer that represents about 29% of our revenue in the first half of the year recently informed us that as part of a broader vendor review, looking across all vendors, departments, and use cases, not just IDV, so they can evaluate redundancy, ensure there is no single point of failure internally. As a result, they are currently evaluating a multi-vendor IDV approach that is expected to negatively affect our transaction levels with this customer. I want to emphasize the word evaluation.

That is their word, not mine. As of today, I can say that the traffic shift is nowhere near the extent they said it would be. Additionally, to use the client's own words, this is being driven by not being single-threaded to any one vendor. This is their words, this is what they told me. Not driven by a flaw in our system and not a sentence on how we perform. I can also say they recently signed another purchase order. They have also indicated intention to transition to our newest API, which will give them access to many more of our risk signals to detect fraud. But we believe this reflects recognition of the broader capabilities we can provide and the opportunity to further expand our support of their needs in the longer term.

Again, we believe if you add all the things we do in the digital world to what I believe is the gold standard in document verification, great things happen. I want to be direct, and I remember my very first earnings call as a CEO when I was direct and reset expectations. I got a lot of angry calls. But one of my favorite quotes from the Bible is "The truth shall set you free." The truth is this is an evaluation. In their words, an evaluation. A new purchase order has been signed. Volumes have not been down to the level they indicated. Sometimes corporate strategies call for an evaluation. I look forward to this evaluation. I want to frame this correctly. This reflects a change in the customer's strategy, not a verdict on the accuracy of our results. Intellicheck remains the gold standard in identity verification.

Sub-second, 99% barcode-level decisioning that no competitor can replicate because of our exclusive long-standing DMV relationships. Some customers may choose evaluation or adopt other products based on their own goals. That is their prerogative. It does not change the accuracy gap between our platform and any alternative. Let us move on to what I would call great. Q2 revenues grew by 7% sequentially, and we expect that underlying growth to continue, thanks to the consistent and deliberate customer diversification we have built and our strengthened balance sheet with $11.8 million in cash and no debt. Let me now walk through progress that we are seeing across each one of our verticals. The banking and lending vertical remains one of our core focus areas, particularly with medium and smaller organizations. They are far easier to integrate and get running than large organizations.

I am very happy with the delivery mechanism of our platform that we call Intellicheck Desktop. It is a no integration required method. We have signed three new clients and are in discussion with several others. It is our belief that this will add significant growth at a faster pace than landing the whales. I will also point out that we continue to whale hunt. I also believe there was some confusion about hardware during the Q&A on our last call. If our clients choose to upgrade their scanners, they may have a sourcing problem, not us. I will say we have helped our clients find sources for scanners and have sped up the acquisition for them. Retail remained about 26% of Q2 revenue. This quarter, retail revenues were down approximately 2% compared to the same period last year.

Any improvement here is consumer sentiment, as it stabilizes, will be an incremental upside for us. In the title market, our direct client relationships still represent an estimated 43% of the market. Mortgage loan origination in Q2 were up 14% year-over-year, and we benefited from this trend. When interest rates will, and I hope we all agree, eventually fall, this market should become, in our belief, a significant tailwind. Momentum has continued across our emerging and adjacent verticals as well. In cargo and freight, our nationwide rollout with our food manufacturer client, already in low six-figure annual contract value, is expected to grow. The roughly $300,000 average loss per truck stolen proves this is a good market for us. I am also excited this client continues to introduce us to other manufacturing and shipping companies.

In manufacturing, we continue to see major clients who use us to keep their assembly lines rolling. In stadium and venue concessions, we see somewhat increased revenue over the same period last year. Most of that, again, is in college and university stadiums. Our age verification verticals and our background check verticals saw some volatility on their smaller bases of revenue. In automotive, scanning volumes at our dealer clients and via our channel partners have been trending lower, but we anticipate that trend reversing. Car sales figures for the quarter overall were roughly flat nationwide. One consistent question I get a lot relates to the social media vertical and the activity of a large global customer within that vertical. Again, in the interest of full disclosure, I will tell you they are back.

They have fixed their image capture issues, and we can process from the data we are seeing, over 99% of the data they are sending us. They are actively engaged, and I will be meeting with them in person in the coming weeks. What this means in terms of volumes, I cannot forecast. But the recent discussions, even the ones I was having over this weekend, have me excited. I will reiterate that we have no revenue from them in our current forecast. As I learn more, and I hope you will all understand my honesty, I will keep you informed. Before I hand the call over to Adam, I want to emphasize that rising fraud activity makes our differentiation more valuable, not less.

Synthetic identity fraud overall is up 300%, and deepfake-driven fraud is up over 1,000%, according to multiple studies, and it shows no sign of slowing down. Fraud prevention is not optional spending for any industry, which is why I like where the company sits. We are seeing new markets come to us as fraudsters increasingly target new channels, creating additional opportunities for us to address. What many companies rely on, a visual review of a license or a template check, which is what our competitors offer, does not adequately address these sophisticated fakes. That is where our technology stands apart. We want to assure our employees, customers, shareholders, and all stakeholders that Intellicheck is dedicated to exceeding expectations and expanding our leadership position in the rapidly evolving industry of fraud prevention.