For Intellicheck, the hallmarks of the second quarter are that retail verticals and customers are pressured — but diversification efforts are paying off, and will pay off, over the longer term.
On Thursday (Aug. 8), the company posted its latest earnings results that showed total revenues were down 0.9% to $4.7 million. Drilling down into the data, software-as-a-service (SaaS) revenue declined 0.8% and totaled $4.6 million. Net loss improved to $127,000, where it had been $853,000 a year ago.
Investors sent the shares down 13% in after-hours trading.
Customers in the key retail segment, management noted on the conference call with analysts, are pulling back on spending, particularly on their cards, which is having an impact on transaction volumes and by extension, ID verification, on a “per scan” basis. During the call, management noted that retail bankruptcies and store closings among some of its clients led to 16% volume declines in the quarter, where that decline had been 10% in the first quarter. Within retail, there’s been a bit of bifurcation, with volume gains seen in sporting goods and electronics, but with other retail categories losing ground.
But as Bryan Lewis, CEO, said on the call, identity fraud “is not going away” and breaches have been growing by leaps and bounds, with tens of billions of dollars in losses. In a recent interview with Karen Webster, Lewis said that the proverbial raw material to steal an identity is startlingly cheap, he said — for $30 to $40, enterprising criminals and even crime rings can buy names, addresses, Social Security numbers and emails. Challenge questions and answers have been hacked, too, so knowledge-based security protocols are not as robust as they once were.
And as he and CFO Jeff Ishmael noted on the call, the company continues to make inroads in verticals beyond retail. One in particular was the pact, announced this week, wherein Intellicheck is partnering with Doma Title Insurance to offer Doma’s independent title agents and approved attorneys a tool to detect seller impersonation amid a nationwide surge in real estate scams and impersonation fraud. As detailed in the release announcing the partnership, fraudsters leverage the property owner’s Social Security and driver’s license numbers in the transaction.
“In many cases, fraudsters use email and text messages to communicate with the title agent, allowing them to mask their true identities and commit crime from a remote location,” the companies said this week.
Management noted on the call that the company’s new business lines have seen an 11% average price increase per transaction compared to its older business lines, including retail.
“Diversification is an important strategy,” Lewis said, “and it is working.”
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