Trust Stamp (Nasdaq: IDAI), the Privacy-First Identity Company™
providing AI-powered trust and identity services used globally
across multiple sectors, announced financial results and provided a
business update for the quarter and period ended September 30, 2023
(“Q3 2023”).
Trust Stamp's Chief Executive Officer, Gareth N.
Genner, commented, “I am very pleased to report the progress made
during this quarter and year to date. You will see that we have
continued to execute effectively across all of our objectives and
despite investing in our new salesforce, we have reduced selling,
general, and administrative expenses by $3.11 million, or 34.54%,
for nine months ended September 30, 2023 ("YTD 2023"), compared to
nine months ended September 30, 2022 ("YTD 2022") and $1.23
million, or 37.42%, for Q3 2023, compared to Q3 2022. Not all of
our cost rationalizations fully impacted the first three quarters,
and we are continuing to implement efficiencies during fiscal 2023.
Our balance sheet was further strengthened in Q3 by an investor
exercising warrants yielding an additional $621 thousand in equity
capital.”
“Additional financial institutions integrated
with the Orchestration Layer via our channel partnership, bringing
the total through that channel as at the date of our 10-Q filing to
35 financial institutions representing a fivefold increase in our
financial institution customer base in the first nine months of
2023. We are delighted by this level of engagement, and based upon
projections from our channel partner our internal target is a total
of 45-50 financial institutions onboarded by year-end. As we have
previously indicated, we are forecasting nominal revenue from these
new customers in 2023 as the financial institutions integrate and
roll-out both internally and with their end-users and we anticipate
significant monthly recurring revenue starting in 2024. In addition
to the 35 customers enrolled through the channel partnership, an
existing S&P500 bank customer has also integrated with the
platform and our first Orchestration Layer user (obtained through a
direct sale) is already in full production and generating monthly
recurring revenue with gross margins in excess of 84%."
“We have continued our investment in the
creation of a direct sales force for our Orchestration Layer
platform and we have directed a portion of the expense savings that
we have achieved to that end. As of the date of this filing, Trust
Stamp has staffed five Orchestration Layer account executives. In
parallel, Trust Stamp recruited three sales development
representatives to support the account executives, and has
internally recruited to fill positions for marketing and technical
sales representative roles to support the product's rollout. Trust
Stamp continues recruitment of account executives and other related
roles, and anticipates steady growth of the direct sales team
throughout the balance of 2023 and in 2024. Each of these
executives comes to us with substantial experience in the identity
industry, a track record of personally generating sales, and in
most cases, building and managing sales teams. We anticipate a
substantial ROI from the sales executives onboarded. The speed of
growth in the sales team is primarily constrained by cash
management as we are budgeting a nine to twelve month carry period
for the salaries and support costs of each executive before those
ongoing costs are covered by banked revenue from their sales. We
have already seen a meaningful increase in our sales pipeline from
the new sales leaders onboarded and we anticipate contracted
revenue in 2023 with significant banked revenue in 2024.”
Mr. Genner went on to comment, “We have invested
heavily in research and development resulting in a strong and
cutting-edge patent portfolio and an AI-powered technology stack.
Although sales and marketing are becoming a larger percentage of
our expenditure, we are continuing with targeted research and
development where we believe it to be timely. We now have 17
patents issued, and an additional 16 patents pending including two
patents approved but not yet issued, and we believe that our patent
portfolio is a significant asset.”
Financial Performance Overview
Net revenue
During Q3 2023, Net revenue increased to $3.07
million, or 127.35% from Net revenue of $1.35 million for Q3 2022.
During Q3 2023, the $3.07 million in Net revenue consisted of $2.51
million from IGS, $243 thousand from Mastercard, $186 thousand from
an S&P 500 bank, and $127 thousand from various other
customers. The majority of the increase in the Net revenue for the
comparative periods relates to the termination of the September 15,
2022 Master Services Agreement with IGS ("IGS Contract") discussed
in Liquidity and Capital Resources subsection below, which resulted
in $2.51 million in Net revenue during Q3 2023, and the release
from future contractual obligations for maintenance and upgrades.
The Company is optimistic about future growth in the government
sector and is actively engaged with potential strategic partners
and identified opportunities.
During Q3 2023, the Company generated $139
thousand total revenue from customers using the Orchestration Layer
including implementing the platform for 7 new enterprise customers
onboarded through FIS. Since its launch in the third quarter of
2022, there have been 38 enterprise customers on the Orchestration
Layer platform, including 35 financial institutions, as of
September 30, 2023. Orchestration Layer's first enterprise
customer is in full production and generating monthly recurring
revenue with gross margins in excess of 84%. Finally, the Company's
S&P 500 bank customer continued its transition to an augmented
version of the SaaS platform during Q3 2023.
The Orchestration Layer is designed to be a
one-stop-shop for Trust Stamp services and provides for easy
integration to our products; chargeable on a per-use basis and is
accelerating the Company’s evolution from being exclusively a
custom solutions provider to also offering a modular and highly
scalable SaaS model with low-code implementation.
The increases in Net revenue during Q3 2023 were
offset by the September 23, 2021 U.S. Immigration and Customs
Enforcement contract (“ICE Contract”) which produced
$844 thousand in Net revenue during Q3 2022 and was
subsequently terminated during fiscal year 2022.
Cost of services
Cost of services (“COS”) decreased by $290
thousand or 54.76% for Q3 2023, compared to Q3 2022. The decrease
over the comparison periods was primarily driven by the costs
related to servicing requirements from the ICE Contract. ICE
Contract-related COS for Q3 2022, were $269 thousand, including
vendor and other miscellaneous costs as well as direct labor costs,
versus $0 during Q3 2023 (as a result of the ICE Contract being
terminated in 2022).
After adjusting the COS for ICE Contract, COS
was reduced by $21 thousand despite onboarding 29 new enterprise
customers during the YTD 2023 and is a result of the lower marginal
costs that are inherent in SaaS platforms such as the Orchestration
Layer.
Research and development
Research and development (“R&D”) expenses
decreased by $173 thousand, or 22.19% for Q3 2023, compared to Q3
2022. The decrease in R&D expense during Q3 2023 was driven by
a decrease in the Company’s R&D team which reduced from 64
full-time equivalents ("FTE") for Q3 2022 to 50 FTE for Q3
2023.
In addition, R&D costs decreased for Q3 2023
due to a reduction in outsourced software development as the
Company continued to transition this work internally.
Selling, general, and administrative expenses
Selling, general, and administrative expense
(“SG&A”) decreased by $1.23 million, or 37.42%, for Q3 2023,
compared to Q3 2022. The decrease in SG&A expense was driven
mostly by the reductions in global headcount and associated
overhead as result of the company's cost cutting initiatives.
Headcount reductions were 14.00%, from 100 FTE for Q3 2022 compared
to 86 FTE for Q3 2023. In effect, salaries, bonus and stock-based
compensation, related payroll costs, and sales commissions reduced
by $738 thousand for Q3 2023 compared to Q3 2022.
Other notable reductions in SG&A for Q3 2023
included a $681 thousand combined reduction due to decreases in
costs related to carrying mobile hardware assets, corporate travel,
management consulting and training, rent expense, marketing
expense, and subscription fees as direct result of the company's
recent non-personnel cost cutting initiative, offset by various
increases including $180 thousand for legal and professional
services.
Operating loss
The Company’s Operating loss decreased by $3.42
million or 99.36% for Q3 2023, compared to Q3 2022. The increase in
Net revenue of $1.72 million or 127.35% was chiefly due to the
recognition of IGS nonrefundable license revenue. Additionally,
there was a $1.70 million or 35.56% reduction in operating expenses
as a result of various cost cutting measures initiated during
fiscal years 2022 and 2023 that have outpaced the reduction in Net
revenue, thereby producing desirable margin growth and greater
company efficiency.
Net loss
Net loss decreased by $3.40 million to $35
thousand, or $(0.00) per basic and diluted share, for Q3 2023,
compared to a net loss of $3.44 million, or $0.75 per basic and
diluted share, for Q3 2022.
Liquidity and capital resources
As of September 30, 2023, and
December 31, 2022, the Company had approximately $3.18 million
and $1.25 million cash in its banking accounts, respectively. Total
stockholders’ equity was $4.23 million as of September 30,
2023, compared to $625 thousand as of December 31, 2022. As
previously announced, the Company completed a registered direct
offering in April 2023 and June 2023 for combined gross proceeds of
$7.47 million. Additionally, On August 18, 2023, the
institutional investor exercised warrants for 270,000 shares of
Class A Common Stock for total proceeds of $621 thousand.
The majority of the increase in the Net revenue
for the comparative periods relates to the termination of the IGS
Contract which resulted in $2.51 million in Net revenue during Q3
2023 and the release from future contractual obligations for
maintenance and upgrades as a result of the termination of the IGS
Contract.
A copy of the Company’s year-end report on Form
10-Q for the nine months ended September 30, 2023, has been filed
with the Securities and Exchange Commission and posted on the
Company’s website at
https://investors.truststamp.ai/sec-filings/.
About Trust Stamp
Trust Stamp, the Privacy-First Identity Company
™, is a global provider of AI-powered identity services for use in
multiple sectors, including banking and finance, regulatory
compliance, government, real estate, communications, and
humanitarian services. Its technology empowers organizations with
advanced biometric identity solutions that reduce fraud, protect
personal data privacy, increase operational efficiency, and reach a
broader base of users worldwide through its unique data
transformation and comparison capabilities.
Located in seven countries across North America, Europe, Asia,
and Africa, Trust Stamp trades on the Nasdaq Capital Market
(Nasdaq: IDAI). The Company was founded in 2016 by Gareth Genner
and Andrew Gowasack.
Safe Harbor Statement: Caution Concerning Forward-Looking
Remarks
All statements in this release that are not
based on historical fact are “forward-looking statements,”
including within the meaning of the Private Securities Litigation
Reform Act of 1995 and the provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The information in
this announcement may contain forward-looking statements and
information related to, among other things, the Company, its
business plan and strategy, and its industry. These statements
reflect management’s current views with respect to future
events-based information currently available and are subject to
risks and uncertainties that could cause the Company’s actual
results to differ materially from those contained in the
forward-looking statements. Investors are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. The Company does not
undertake any obligation to revise or update these forward-looking
statements to reflect events or circumstances after such date or to
reflect the occurrence of unanticipated events.
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