Intellicheck, Inc. (IDN) Earnings

Management highlights

- Overall Financial Performance * Total Q1 2026 revenue was $5.524 million, a 13% year-over-year increase from $4.894 million in Q1 2025. * Adjusted EBITDA was $935,000 (17% margin), up from a negative $17,000 a year ago, marking the fourth consecutive quarter of positive adjusted EBITDA. * Net income was $636,000, or $0.03 per diluted share, compared to a net loss of $318,000 (negative $0.02 per share) in Q1 2025, marking the third consecutive quarter of positive net income. * The firm ended the quarter with $10.062 million in cash and no outstanding debt, with positive operating cash flow of $444,000 despite Q1 typically being a seasonally cash-heavy quarter. * Gross profit margin improved 130 basis points year-over-year to 91%, and adjusted gross profit margin improved 160 basis points to 93.4%, driven by cloud infrastructure efficiency gains; operating expenses decreased 5% year-over-year even as revenue grew 13%, demonstrating strong operating leverage. - Product and Technology Progress * The new hardware-free desktop delivery product gained strong traction with smaller banks and credit unions, requiring no core platform integration and enabling immediate implementation, materially expanding the firm's addressable market. Three new small clients were signed this quarter, with additional deals in review. * Development progress continues on the mobile SDK, cloud reporting console, and portal delivery methods, all aligned with customer demand for fast, easy-to-implement solutions. * The firm maintains a durable, exclusive competitive advantage: it verifies IDs against official DMV-issued FAR code specifications, a capability no competitor has due to the firm's long-standing unique relationship as a leading test lab for state DMV systems. This advantage grows as AI-generated and deepfake fraud becomes increasingly sophisticated, since competitor template-based checking cannot stop these advanced fakes. - Go-to-Market and Partnership Updates * A new strategic partnership with Alloy, a leading identity and fraud prevention platform for banking and fintech, is already generating early traction. The partnership embeds IntelliCheck's technology in Alloy's ecosystem, reducing buying friction for existing Alloy clients and opening access to Alloy's large customer network. * New marketing initiatives led by an outside agency have sharpened brand messaging and improved lead generation. Thought leadership content including the 2025 IEM fraud threat report, podcast content, white papers, and industry conference appearances have established IntelliCheck as a leading authority in ID verification, driving strong inbound lead flow. * The firm will participate in multiple upcoming investor conferences to expand shareholder and investment community awareness.

Guidance

- Management did not provide formal full-year or quarterly guidance, but stated that adjusted EBITDA margins are expected to remain positive throughout 2026, with potential margin and profitability acceleration in the second half of the year. * Gross margins are expected to remain in the 90% to 91% range for GAAP, and 92% to 93% for adjusted gross margins. The small non-cash headwind from capitalized software amortization will gradually diminish over the next several years as older capitalized assets roll off. * Management reaffirmed the commitment to grow operating expenses at a rate below revenue growth, to maintain operating leverage. * Management expects the full year 2026 to deliver positive net income, which would be a significant company milestone.

Segment performance

1. Banking and Lending: This is the firm's core growth engine, contributing over 50% of Q1 2026 total revenue. It grew strongly year-over-year, driven by rising demand for fraud prevention and deepening client usage of the platform. The full implementation of a large seven-figure three-year regional banking client contract was completed this quarter, and the client is exploring expanded use cases for IntelliCheck's technology. 2. Retail: Contributed approximately 30% of Q1 2026 total revenue. It experienced year-over-year revenue and scanning volume declines of 5% to 10% beyond normal seasonal Q4 to Q1 drops, directly impacted by weak consumer confidence and macroeconomic headwinds. The segment is no longer the primary driver of the firm's overall growth, so any future recovery will act as incremental upside. 3. Title Insurance: The segment was negatively impacted by elevated mortgage rates and slowing mortgage origination activity from geopolitical uncertainty. However, it achieved a key milestone with the successful launch of First American Title's digital e-commerce identity verification capability, deepening the client relationship and leaving the segment well-positioned for upside when mortgage rates and real estate volumes normalize. The firm already serves 43% of the total title insurance market via direct major client relationships. 4. Other Verticals (age/background checks, cargo fraud prevention, automotive supplier verification, stadium concessions): This group contributed the remaining ~20% of Q1 2026 revenue. A nationwide cargo fraud prevention contract with a major food manufacturer reached a low six-figure annual contract value and is progressing well, foreign auto manufacturer and supplier network clients continue to expand, and several new small-volume stadium concession clients were added this quarter.

Risks & headwinds

- Challenging macroeconomic conditions, including the intensifying military conflict in Iran, surging oil prices, reaccelerating inflation, elevated mortgage and interest rates, and weakened consumer confidence, are creating ongoing headwinds for the retail, automotive, and title insurance verticals, and may persist through the near term. * Growth from some signed banking clients is dependent on external delivery of scanning hardware, which is currently experiencing supply chain shortages that are completely outside the firm's control, creating uncertainty around the timing of revenue recognition for these signed contracts. * Forward-looking statements about future performance are inherently uncertain and dependent on future changes in macroeconomic and market conditions that cannot be predicted, and the firm undertakes no obligation to update forward-looking statements after this call. * The firm still maintains a valuation allowance on its net deferred tax assets due to prior cumulative losses, so no income tax benefit is recognized in the current period, though this position will improve as profitable quarters accumulate and loss periods roll off.

Analyst Q&A

• Q: What was retail vertical revenue in Q1 2025 and Q1 2026, and what trends are you seeing in pricing and overall transaction volume? /

  A: Management did not have exact split revenue numbers on hand, but confirmed retail revenue tracks transaction volumes. In addition to the normal 10% seasonal Q4-to-Q1 drop, the segment saw an extra 5% to 10% volume decline from macroeconomic factors. Pricing continues to rise: existing large contracts have annual CPI adjustments, and new deals command premium pricing because of the firm's unique, differentiated technology that competitors cannot replicate. Management notes the market increasingly recognizes this value, justifying the premium price point.

• Q: If current macro headwinds persist through Q2 and the second half of 2026, how should investors think about the firm's growth profile, and what is the status of the sales pipeline for new logos and renewing large financial clients? /

  A: Even with headwinds in three verticals, the firm still delivered 13% year-over-year overall growth driven by the banking vertical and new market expansion. The desktop delivery product is opening new opportunities across multiple segments, and these smaller deals can close and launch quickly, supporting continued growth. Most large financial clients are up for renewal this year, and most are expanding their contracts; the sales pipeline has stronger high-quality lead flow from new marketing efforts, with new introductions from existing banking partners.

• Q: Can you give monthly volume trends for Q1 and an outlook for Q2 sequential growth, and any color on large needle-moving deals in the pipeline? /

  A: Banking volumes grew steadily through the quarter, but retail volumes weakened as the Iranian conflict intensified and oil prices rose. Consumer sentiment has not improved through May, so Q2 sequential growth is expected to be flattish rather than the historical 5% average. While large "whale" deals are always in the long-term pipeline, most near-term growth is coming from a steady flow of smaller desktop deals that close quickly; several large signed deals are held up by hardware supply chain delays outside the firm's control. The firm met all new client signing expectations for Q1, with one deal closing shortly after quarter-end.

• Q: What share of the 13% year-over-year revenue growth comes from new logos versus existing client expansion, and what market share does the firm hold in title insurance? /

  A: Q1 2026 growth was driven primarily by expansion of existing clients, which is typical seasonal pattern for the first quarter, as most clients avoid system changes in Q4 ahead of the holiday season. IntelliCheck currently serves 43% of the total title insurance market through direct relationships with major industry players, and is in conversations with the remaining large players it does not yet count as clients.