10-Q: Trust Stamp Reports Q1 2024 Results: Revenue Up 25% Amidst Ongoing Losses

Trust Stamp saw a 25% increase in revenue in Q1 2024 compared to Q1 2023, but continues to operate at a loss.

Summary

• Trust Stamp's Q1 2024 net revenue increased by 25.08% to $573,676, up from $458,633 in Q1 2023.
• The company's operating loss widened to $2,849,258 in Q1 2024, compared to $2,579,750 in Q1 2023.
• Net loss attributable to T Stamp Inc. was $2,678,569, or $0.26 per share, compared to a net loss of $2,547,450, or $0.50 per share, in the same period last year.
• The company's adjusted EBITDA loss increased to $2.37 million from $2.28 million year-over-year.
• Trust Stamp had $816,692 in cash and cash equivalents as of March 31, 2024.
• The company raised $1.7 million in net proceeds from a share and warrant sale in April 2024.
• Trust Stamp is still operating as a going concern with an accumulated deficit of $53.53 million as of March 31, 2024.

Sentiment

Score: 4

Explanation: The document shows positive revenue growth and strategic shifts, but the ongoing losses, cash burn, and going concern issues raise significant concerns. The sentiment is cautiously negative due to the financial risks.

Positives

• The company experienced a significant increase in revenue, driven by the adoption of its Orchestration Layer.
• The transition to internal software development has led to a reduction in research and development expenses.
• The company is expanding its customer base through its partnership with FIS and direct sales efforts.
• The company continues to innovate, securing three new patents during the quarter.
• The company successfully raised additional capital in April 2024.

Negatives

• The company's operating loss and net loss have increased compared to the same period last year.
• The company's cash position has decreased significantly.
• The company's ability to continue as a going concern is dependent on its ability to generate revenue and raise capital.
• Selling, general, and administrative expenses have increased significantly due to increased headcount and stock-based compensation.

Risks

• The company's ability to continue as a going concern is uncertain due to ongoing losses and negative cash flow.
• The company is dependent on a small number of key customers for a significant portion of its revenue.
• The company may not be successful in its capital raising efforts.
• The company's expansion into direct sales is a work-in-progress and may not be successful.
• The company's technology is subject to rapid changes and may become obsolete.

Future Outlook

The company anticipates user-based revenue from Mastercard starting in 2024 and growing year-on-year thereafter. The company also expects significant revenue from new FIS customers in late 2024. The company plans to generate revenue and raise capital as needed to satisfy its capital needs.

Management Comments

• Management believes that the strategic pivot to a SaaS model will substantially increase potential revenue in 2024 and thereafter.
• Management is focused on expanding its direct sales force to offer the Orchestration Layer to non-FIS institutions.
• Management has evaluated the company's conditions and plans to generate revenue and raise capital as needed to satisfy its capital needs.

Industry Context

The company operates in the growing markets of biometric authentication, data security, and financial inclusion. The company's technology addresses the increasing need for secure and privacy-preserving identity solutions. The company's focus on tokenization and irreversible data transformation aligns with the industry's move towards enhanced data protection.

Comparison to Industry Standards

• The company's revenue growth of 25% is a positive sign, but its continued losses are a concern compared to more established players in the identity verification space such as Okta, Ping Identity, and ForgeRock, which have achieved profitability or are on a clear path to profitability.
• The company's focus on biometric authentication and tokenization is in line with industry trends, but its technology is still relatively new compared to established biometric solutions providers such as Thales, Idemia, and NEC.
• The company's partnership with Mastercard is a significant advantage, but its reliance on a few key customers is a risk compared to companies with a more diversified customer base.
• The company's adjusted EBITDA loss of $2.37 million is a concern compared to industry benchmarks, which typically show a path to profitability for companies in this sector.

Corporate Governance

Legal Proceedings

• The Company is not currently involved with and does not know of any pending or threatening litigation against the Company or any of its officers or directors in connection with its business.

Related Party Transactions

• Related party payables of $96 thousand and $82 thousand as of March 31, 2024 and December 31, 2023, respectively, primarily relate to amounts owed to 10Clouds, the Company's contractor for software development and investor in the Company.
• The company has a Mutual Channel Agreement with Vital4Data, Inc., a company at which one of the company's Directors serves as Chief Executive Officer.

Stakeholder Impact

• Shareholders are impacted by the company's ongoing losses and the need for additional capital.
• Employees are impacted by the company's cost-cutting initiatives and the potential for future changes.
• Customers are impacted by the company's focus on the Orchestration Layer and its expansion into new markets.
• Suppliers are impacted by the company's financial situation and its ability to pay its obligations.
• Creditors are impacted by the company's going concern status and its ability to repay its debts.

Next Steps

• The company plans to generate revenue and raise capital as needed to satisfy its capital needs.
• The company will continue to expand its direct sales force to offer the Orchestration Layer to non-FIS institutions.
• The company will continue to develop and commercialize its technology, including its age-estimation software.

Key Dates

Keywords

identity authentication, biometrics, SaaS, Orchestration Layer, financial inclusion, AI, machine learning, data security, fraud detection, KYC/AML, IT2, digital identity