Intellicheck, Inc. (IDN) Q4 2019 Earnings Report, Transcript and Summary

Greetings and welcome to the Q4 Yearend 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host Gar Jackson. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us today for the Intellicheck Fourth Quarter 2019 Earnings Call. Before we get started, I will take a few minutes to read the forward-looking statement. Certain statements in 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 conference call, words such as will, believe, expect, anticipate, encourage and similar expressions as they relate to the company or its management as well as assumptions made by and information currently available to the company's management, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs about future events as of any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances and the company undertakes no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements, whether resulting from such changes, new information, subsequent events or otherwise. Additional information concerning forward-looking statements is contained under the headings of Safe Harbor Statement and Risk Factors listed from time to time in the company's filings with the Securities and Exchange Commission, statements made on today's call are as of today, March 11, 2020. Management will use the financial term adjusted EBITDA in today's call. Please refer to the company's press release issued this afternoon for further definition, reconciliation and context for the use of this term. We will begin today's call with Bryan Lewis, Intellicheck's Chief Executive Officer; and then Bill White, Intellicheck's Chief Financial Officer, who will discuss the Q4 financial results. Following their prepared remarks, we will take questions from our analysts and institutional investors. Today's call will be limited to one hour, and I will now turn the call over to Bryan.

Thank you, Gar, and welcome everyone to the Q4 and fiscal year 2019 earnings call. I think I've started each one of these calls by saying how excited I am to be hosting it, but for this call I would have to say that I am ecstatic. I'm delighted to announce that this is the first EBITDA positive quarter the company has had since Q3 2014. We set quite the challenge for ourselves this year and that was to drive sales and accelerate implementations with a focus on achieving profitability. Through dedication, focus and a lot of hard work, together we rose to that challenge and I am very pleased to report to you that Intellicheck achieved positive adjusted EBITDA in Q4 2019 of over $216,000. We'll begin by highlighting some of the numbers for the quarter and the year. Total revenue for Q4 was up over 50% versus Q3 2019 and up over 118% over Q4 2018. More importantly, sequential SaaS revenue was up 64% versus Q3 2019 and 209% over Q4 2018. Total revenues in 2019 grew 73% over 2018 and total SaaS revenues up 126% over 2018. We ended the quarter with $3.35 million in cash versus $2.8 million in Q3. In addition to the positive earnings, the company had some shareholders exercise warrants that were issued in 2016 that help strengthen our cash position. The change in our pricing to a per scan model with monthly minimums from a per store pricing model certainly propelled much of the revenue growth during the fourth quarter. As I said, total 2019 revenues were up 73% over 2018 while total scan volumes were up 46%. Isolating Q4 revenues demonstrates this even more acutely. Revenue was up approximately 209% over Q4 of 2018 with Q4 2019 scan volumes up just 98% less than half the revenue growth. An interesting milestone to note is that Black Friday was the largest scan day of the year with over 620,000 scans in one day a 125% increase over 2018. The data also suggest that a lot of people waited until the last minute to shop during the recent shortened holiday shopping season, Christmas Eve was the second highest day with 430,000 scans. If you recall Q4 had traditionally been a flat quarter revenue-wise for Intellicheck under the per store pricing model. Retailers do not want to touch the point-of-sale system or introduce new processes during their busiest season. The per scan model allowed us to take advantage of the seasonality of scans. We've seen that historically 21% of all scans came in during Q1, 23% in Q2 and Q3 and 33% in Q4. So we expect an approximate 10% lift in scanning activity in Q4 over Q2 and Q3 and we are modeling accordingly. By the same token we would expect SaaS revenues to be dampened in Q1 2020 over Q4 2019 by this seasonality affect. Before looking at some of the highlights for Q4 and some things we've already accomplished in Q1, I want to bring to your attention a change I'm making in how I refer to our banks and credit card issuer clients. A few quarters ago, I started naming these clients as bank one, two, three etcetera in order to bring clarity to the growth story. Now that approach has become a bit confusing as some of these clients aren't really banks as much as they are financial services companies. So going forward it will be financial services company one, two, three etcetera. As we look at our progress with financial service companies, I'm happy to share with you that the financial services company number one continues to add to the roster of retailers where you can apply for credit directly from the retailer's website and Intellicheck authenticates the ID. They added 10 retailers in Q4 but this is not a high volume of scans, it underscores their commitment to Intellicheck's authentication technology. A similar story from financial services company number two. They continue to add to the list of their retailers they are looking to bring live. We are very pleased with the growth in this relationship since contract renewal and the implementation of our pay per scan model. I'm excited to say that it is been quite the turnaround. Financial services company number three completed the rollout of their large electronics retailer in Q4 for the account lookup use case. This is a very high scan client. On Black Friday alone, they were our second-highest scan client. This quarter financial services company number three placed the scanner hardware order through us for $220,000 to perform ID authentication in their bank branches. This is currently scheduled for rollout beginning in April while I see this as a very positive sign, I will also caution that this project is already a year late due to delays on number three side. So I view the state as green and trending to yellow. Financial services company number four completed their rollout through their bank branches in Q4. This current quarter they rolled out our web-based authentication product to their auto loan center. In addition, in April they will begin rollout of the web product for several interesting used cases whenever they feel the need to challenge someone's identity both internally and externally. Here are a few examples they shared with us. One of definite employee needs to log into a very sensitive system, they will need to authenticate. Another used case involves if someone is going online or calling in to change details of their account, this would require that the individual authenticate who they are to proceed with the sensitive changes. We continue to be excited about the number of ways number four is finding to use Intellicheck. I am very happy to say that we have also signed a financial services company number seven. This is not a pilot, they are going straight to production. Number seven in a global financial services company providing innovative payment, travel and expense management solutions for individuals and businesses of all sizes and is one of the largest credit card issuers. They will be deploying Intellicheck's authentication technology in their US call centers for new account openings as well as for inbound calls on account queries and changes. They're also planning to expand use of this solution into their Canadian call centers in Q2. We've signed financial services company number eight to a pilot. This will be our first Canadian lender. They are a sales financing company that has become a leading provider of point-of-sale financing and payment solutions for businesses across Canada and are in 5,000 retail locations. This will be a four-month paid pilot. I've spoken about the fact that 10 banks plus Amex and Discover account for probably 98% to 99% of the credit cards issued. We now have five of these 12 issuers as clients and now our first Canadian lender. I believe this is a strong validation of our service. The good news is that we have all these financial institutions as clients. Now we are focusing on bringing live their retailers as fast as we and they can as well as minding all the possible used cases within each company we can. This is what brings in the revenue. I believe we have tremendous growth ahead of us with these five issues alone over not stopping there. As contracts come up for renewal, our solutions are proving so valuable we are able to assert pricing power. Many of our existing contracts were below what I would consider current market value in the value proposition to the clients compared with our pricing model were not aligned. While clients and customers are not happy with price increases, they understand the value we bring to the table and the level of losses they would be sustaining without our services. As an example, we have a retail big-box client we've been working with since 2013 with over 1100 locations whose contract renewed in February. Driven by the effectiveness of our services, we were able to increase these 56% and renewal. This client is also now on our per scan platform with monthly minimums and additional outside during the peak holiday shopping season. On the last call I spoke about another important development in the retail sector. I shared with you that we brought a 580 store retail chain live in pilot right before the holiday season. I'm delighted to say that on the week after Black Friday they caught us up ecstatic to tell us we had basically eliminated their fraud problem related to card not present account look up. They are now autopilot, in production and are working on expanding the used cases for Intellicheck. This major retailer in now our reference client speaking to prospects and industry analysts about our ability to stop fraud and identity theft. As we look forward, our implementation pipeline remains robust with 33 projects in various stages of implementation ranging from active implementation to early planning stages. Our sales into the age restricted markets remain strong and we are continually adding new clients and even more importantly law enforcement clients using age ID. In Q4, we added three new law-enforcement agencies. The fact that over 60 agencies use our products gives us a level of credibility that our competitors simply don't have. The pace of data breaches and the data that has been harvested makes it clear that identity theft is not going away. The estimate for the number of records breached in 2019 is around 8 billion. Financial firms are hacked for highly sensitive data of over 1 billion records alone. Now healthcare related firms are being targeted, both Quest Diagnostics and Labcorp we're have exposing names, addresses Social Security numbers and medical records. Every day more data is out there and available for a criminal to learn so much about your life that can easily steal your identity and pass any knowledge-based authentication challenges. I've mentioned at 14.3 Americans had identities stolen in 2018. It's a big number, but I didn't realize how big until I did the math. That's an identity stolen every two seconds and readers from experience suggests that almost a third of all data breach victims have their identity stolen. This underscore the fact that this problem isn't going away for banks, retailers and consumers and in fact it's getting worse. It's a week shy the two-year anniversary of my first earnings call as CEO of Intellicheck and what an amazing two years it has been. I've said for a long time that I believe the market was coming our way and I think the evidence proves that out. I'm very proud to be part of the Intellicheck team and I want to thank everyone for their hard work and dedication. That effort in our invigorated strategic approach is what had turned our story around. With all that we've accomplished and all that I see to come, I look forward to a very exciting 2020. BEFORE passing the call over to Bill I have two final items, like all of you we are watching the reports on the Corona Virus. At this time we've seen no impact on our business. We believe it will have no impact on our daily operations because everyone can work remotely at Intellicheck. We will continue to monitor the situation as it evolves. I also wanted to know today's Board of Directors announcement regarding two new board additions, Dylan Glenn and myself Dylan is the CEO of KBBO Americas LP. KBBO Americas is a US-based investment vehicle for the KBBO group, a diversified investment company headquartered in the United Arab Emirates. Prior to joining the KBBO group he was Senior Managing Director of Guggenheim Partners where he joined in 2005. He currently serves as the Chairman of Guggenheim KBBO Partners. Additionally, he led Guggenheim's government relations efforts in Washington and was a member of the Guggenheim Partners Public Affairs Committee. Prior to joining Guggenheim he served as the Deputy Chief of Staff to Governor Sonny Perdue of Georgia and served in the White House in Washington DC as Special Assistant for President George W. Bush for economic policy where he was a member of the National Economic Council team advising the President on various economic issues. We are very excited to have Dylan on board and I look forward to working with him in at Intellicheck. With that, I will turn it over to Bill to discuss the financials.

Thank you, Brian and a good day to our shareholders, guests and listeners. I'd like to discuss some of the financial information that was contained in our press release for the fourth quarter and fiscal year ending December 31, 2019, which we released this afternoon. I'll begin with our fourth-quarter results; revenue for the fourth quarter ended December 31, 2019 grew 118% to $2,897,000 versus $1,330,000 for the same period last year. Our software as a service revenue was approximately $2,557,000 for Q4 2019, a 209% increase from $826,000 and Q4 2018 and with a 64% sequential increase versus approximately $1,564,000 in Q3 2019. Gross profit as a percentage of revenue was 88.8% for the quarter ended December 31, 2019 compared to 93.1% for the quarter ended December 31, 2018. Operating expenses which consists of selling, G&A and research and development expenses increased by 28% or $547,000 to approximately $2.5 million versus $1,953,000 in the prior year. The increase was primarily driven by an increase in sales commissions due to increased sales development personnel to support our growth and new annual incentive bonus plan, which is contended to bond achieving certain goals established by the Board of Directors and Compensation Committee. The company posted net income of $106,000 for the three months ending December 31, 2019 compared to a net loss of $664,000 for the quarter ending December 31, 2018. The net income per diluted share was $0.01 versus a net loss per diluted share of $0.04 in the prior year. Adjusted EBITDA for the quarter ended December 31, 2019 was $216,000 compared to a negative $633,000 in the quarter ended December 31, 2018. Now turning to our full year 2019 results; revenue for the full year ended December 31, 2018 was up 73% to $7.67 million compared to $4.43 million for the prior year. Our SaaS revenue for the calendar year 2019 was $6.1 million an increase of 126% as compared to $2.66 million in the prior year. Driven by growth in our SaaS business, gross profit as a percentage of revenue was 87% for the year ended December 31, 2019 compared to 91.3% for the prior year. Operating expenses were $9.3 million for the year ended December 31, 2019 from $8.1 million for the year ended December 31, 2018. Selling, general and administrative expense increased 8% to $5.7 million for the year ended December 31, 2019 from $5.2 million for the prior year, primarily as a result of increased stock-based compensation expense, sales commissions and a new annual incentive bonus program which is contingent upon certain goals being achieved as set by the Board of Directors and Compensation Committee. research and development expenses increased 26% to $3.7 million for the year ended December 31, 2019 from $2.9 million for the year ended December 31, 2018 driven by increased development personnel and the new annual incentive bonus plan as previously mentioned, offset by decreases in outside research and development efforts. The company had a net loss of $2.5 million for the year ended December 31, 2019 as compared to $4 million for the calendar year 2018. The net loss per diluted share was $0.16 versus $0.26 in the prior year period. Weighted average share count were $15.7 million and $15.5 million respectively. Adjusted EBITDA was a negative $1.8 million for 2019 an improvement of approximately $1.9 million as compared to adjusted EBITDA of a negative $3.7 million for 2018. Interest and other income was $99,000 for the year ended December 31, 2019 compared to $130,000 during the year end December 31, 2018. I'd like to now focus on the company's liquidity and capital resources. As of December 31, 2019, the company had cash of $3.4 million, working capital to fund its current assets minus current liabilities of $3.2 million, total assets of $14 million and stockholders' equity of $11.7 million. During the year ending December 31, 2019 the company's net cash of approximately $1 million compared to net cash used of $3.6 million during the year ended December 31, 2018. Net cash used in operating activities was $1.8 million for the year ended December 31, 2019 compared to $4.2 million for the same period in 2018. Net cash provided by investing activities was $22,000 for the year compared to a net cash used by investing activities of $100,000 for the year ended December 31, 2018 and we generated cash of $794,000 from financing activities in 2019 compared to generating net cash of $688,000 from financing activities in 2018. On February 06, 2018 the company entered into a revolving credit facility with Citibank. This agreement allows for maximum borrowings of $2 million secured by collateral accountant and bears interest at Citibank space rate of minus 2%. As of today there are no amounts outstanding under this facility. We currently anticipate that our available cash as well as expected cash from operations and available under the revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. As of December 31, 2019 the company had net operating loss carry forwards of approximately $17 million. I'll now turn the call back over to the operator to take your questions, operator?

Thank you. We will now be conducting a question-and-answer session. [Operator instructions] Our first question comes from Mike Grondahl with Northland Securities. Please go ahead.

Thank you and congrats on the quarter and the progress guys. Really, really great to see. Brian is there any update on financial services company number five or number six?

Yes number five as I kind of consistently said, they are the online bank. I don't expect a lot of scan volume out of them and number six just continues to roll it out to their different subprime loan location. So it's just there is a usual rolling out, rolling out, rolling out to their stores. Number five more from my standpoint or not was a proof of concept that show that we can do onboarding and authentication for person not present to prove who they are.

Got it and with the two new wins, seven and eight and I understand eight's a pilot, when do you think we'll begin to see scan? How do we think about layering those two new ones in.

Number eight is in production now. They're going to begin rolling it out, they do a lot of things tablets in their stores. I am not expecting a massive flood of scans to begin with from them. Number seven, it's a matter of how fast they train their call center folks. They are definitely one of the largest credit card providers out there. They just weren't really able to give us a really good idea of what they thought scan volumes are going to be, But given that it's new accounts and then account queries I'm expecting it to be a decent client, but I can't give any right now I don't have enough clarity to say here is going to be the ramp volume from them. They are just too new and this is a brand-new process for them.

Got it, but it will be in the US call centers soon and in Canadian call centers in 2Q.

Yes that is plan correct.

Got it, and then did you say that you did 33 implementations in 2019 or that there's 43 in the backlog now.

It's 33 in the backlog now and 36 implementations I think 36 implementation in all of 2019. We've got 33 currently in queue.

Got it, and then maybe just last question, when you talk I think you were talking about financial services company three, you said something about a 200,000 220,000 hardware order, could you just maybe go over that again and explain what's going on there and was that in the fourth quarter?

Yes so a couple of things, so that order in Q1 those are scanners that they need for their retail teller workstations that will be used to we cannot dedicate drivers licenses and passports on that particular scanner. So it is reason that they place it throughout sometimes it's easier for these banks to buy it through us because they already have a Master Services agreement with us and it's quicker than going out and trying to get an MSA with the vendor to purchase the hardware through. So we do have more of an accommodation to help out our clients and certainly not my intent to get in the hardware business. So this was just made it a lot easier for the client to get the order placed and the scanners delivered.

Okay and did they expand some service. I think you may be said at first it was account look up and then it also includes something else, maybe just finish that thought and I'll be done.

No I think what you're talking about is that 580 store retailer that we brought live right before the main part of the holiday season. They were doing it purely for account look up and now they are looking to expand into new credit issuance and non-receded returns the other main used cases for our retailer.

Okay. Got it thanks a lot and congratulations.

Our next question comes from Scott Buck with B. Riley. Please go ahead.

Good afternoon, guys and thanks for taking my question. I'm curious if you've seen any kind of hesitation from any of your eight customer now or probably more specifically their retailers in regards to setting up implementations or anything like that given some of the broad Corona virus fears that are out there.

I think the good thing is the implementations don't require anybody to be face-to-face or in the stores or any of that kind of stuff because it's all done in the -- we're in the cloud, delighted guys are also in the cloud. It's just they are calling our APIs to plug into their point of sale system. So no need to worry about slowing anything down because the Corona virus. So definitely not any education on implementation, implementation schedules, getting anything going in life.

Okay. That's great. Second in terms of percentage of staff's revenue what is generated any store at the checkout counter versus some of these newer online customers that you signed?

I would say the vast majority of it is currently in-store. I think that over the course of time, things will become more of a mobile environment but I will definitely say that account look ups and new account in store is the majority of the revenue stream.

Okay Great and last one in terms of your new financial services company number eight any difference in pricing or margin profile and in Canada versus the States that we should be thinking about?

No.

Next question comes from Amy Norflus with Neuberger Berman. Please go ahead.

I have two questions, number one, can you give me an idea of how big the Board will get. Number two, new people coming on the board, does anybody leave or how are you thinking about the board size?

Well I just got on and I have my first Board Meeting today as a member I can't say much, there is a mass of nine that are allowed on the board, this was a net to add, there were no nobody left the Board.

Okay. And then can you explain if there's less retail traffic to understand to the product question where the implementation doesn't need anyone to be face-to-face, but what happens if people aren't coming into the stores if they're buying online and then you know I think the financial company number seven I think, how are you validating IDs online if somebody is trying to do an online purchase.

So like I said let's go backward, so to validate a license online two ways that, that happens; one is if I'm on some website and I decide that I want to get credit. As part of the credit application online it asked for a mobile phone number a text is sent to that mobile phone. You click on the text that it ask if you can your camera. It opens up the scanning technology sort of one time use stuff that it instructs them how to scan the back of their drivers license the barcode and then from that we authenticate the license and if it's good, we also populate the applications. So we make it much easier for customers to get online. If it is say a call center and I call in and I want a credit card, the call center employee again asks for my mobile phone number, same text is sent and we authenticate and send the data back. Go ahead Amy.

How are you matching up that the mobile phone number is the correct number.

The person is giving us their phone number. We're not matching it up, what we're matching is that the license that they and the identity associated with that license the license is real. That's what we're telling. For some of the more financial services client number five, we also will then take they want to go a few steps further than the average retailer or somebody issuing a credit card and they will then also ask for a photo of the front of the license and then a selfie with liveliness to make sure that the plastic is real, it's a real drivers license and I am still in control of my license because my face matches what's printed on the front of the license.

Okay. And so this is just being rolled out right now, so whoever wants to get a credit card, this is the process that they would have to go through.

For which client.

I get confused I'm sorry five I think. I am just trying to understand the scalability of this how it really works. I don’t really care if it's client number one, six or five, it's just more -- its just a new norm and then what happens when the fraudster says I couldn’t get a credit card too hypothetically beginning J.P. Morgan and when I try Wells Fargo, are you seeing the same card names coming up, are you seeing like what else are you able to tell from all of the fraud data that you have.

They need a PII, so the only thing is that we know after an account comes in because the data comes into us. We authenticate it and if it's good parse the data, send the data back to our client for whatever purpose they're using it for and then we immediately scrub that PII from our system. What we track is data scan, location of scan, if our client and we're having them all do it now programs in the used case, new credit account lookup etcetera jurisdiction of the license, so we know location of scan, jurisdiction of the license what state it's from province and then what happened. It was good, it was expired, it was a bad license. That's what we keep because there is no PII associated with that. As far as the call centers we've got banks number four has been doing that for quite a while now. I think next month will be the one year anniversary of them going live on the system. So we're in multiple call centers with clients financial services company number seven is just starting using it in call centers. Financial services company number one has now I think about 14 retailers that if you go to their website and you want to get credit, that's that you enter in your own cell phone number and we send you the text for authentication. So I wouldn't call it new technology, it's been around for quite a while.

Okay and this will be the norm going forward for all new applications I guess.

We're working with clients to deliver it in whatever way works best for them. Do they want it just purely on a mobile device do they want to integrated into the point of sale system, do they want it immediately implement with no integration, fine, use our web-based tools. So it's really we can deliver the product multiple ways to fit whatever the used case and the hardware is that the client have. A good example is bank number four we rolled out to their retail bank branches, we just integrated with the same scanner they had on their desks to read checks and on an aggregated check in due to check deposit, due to supply configuration change and that worked to read the barcode. So were very flexible on how we can install this at our client.

And each thing that they pay you more money for each scan and what integrated you mentioned four items, each one of those with an incremental higher revenue to the company.

I'm not sure I followed the question. To me it scans a scan if we're doing things like facial recognition is obviously enough charge for that.

I'll jump out of queue let somebody else come back in. Thank you.

Next question comes from Roger Liddell with Clear Harbor. Please go ahead.

Brian I would like to follow up with you on the whole call center I had trouble describing exactly what they are and the leverage or lack of leverage in them. So certainly financial services entities one on four are right in there. Is there an enterprise wide call center with all private label business following in or are there call centers for each private label, so we get not just organic growth but bringing additional call centers on within the same financial institution.

I guess sort of two different things there, call centers the very first call center that we had was bank number four and then now also financial services company number four and financial services company number seven our work for their own branded cards not the white label cards, so if you saw the commercial on TV, decided you want that credit card and you call them to apply for a card that's when they would authenticate you. They are moving to their call centers that deal with any account query, so certainly financial services number four is they're looking to authenticate as much as they can because they realize it's stopping so much of the fraud. So if you call out for account query and they feel they need to have to challenge you, they will authenticate. Number seven their plan is to all their card all their own card inquiries and all their card applications. That answer the question Roger.

Yes but let me try to get a little more inside, is there always a wave -- is there a large number of call centers which are available with rollout going forward. So we have step functions as one after another call center comes online.

What I would say is we're talking to all of our banking and financial services clients about their call centers and enrolling into them which is why we announced. For the most part there is one call-center group. They might have multiple locations for numbers seven they have a couple of locations that are in the US are all scheduled to go live at the same time and then I believe they only one location in Canada, might be two but I am not sure, but again scheduled to go live at once. Not like it's a rollout.

Okay. Auto dealership opportunity from the fourth press release was useful, but didn't have as much texture as I would've preferred. Can you put some more texture around what in terms of the applicability of this could rollout across significant sectors of the dealership world.

The folks at dealers solution seem to be right excited about it. They were out at the Auto Dealers Association convention in Vegas and came back with quite a few leads, people that were they're existing customers but really like the combined package. It seems to me that that is a lot larger in this space than I thought. It also seems to be very important in the used-car business because if you have too many of these cars log off your lot you banks won't give you financing anymore. So I think it's going to be probably larger than I thought I thought it's going to be sort of a side business, but dealer safeguard solution has about 500 dealer families as clients now. It's a different pricing model because there's far fewer scans, so we're charging a per store model certainly significantly higher than we're doing per stores in the past because we know one car that drives off the lot and you don't get it back or you get it back trashed pays for a lot of scan. So we're making sure we're getting our fair value for it. I think it's still early days but again our partner is very excited about the opportunity that they are seeing.

Finally on the data for each is the something like one year 18 month lag time for breach to where that -- those data start showing up on the campus. Is that lag time still relevant or is the cycle time decreasing just with the pace of everything.

I haven't seen any studies that have come out and talked about it but what anecdotally I would say is there is so much of it out there that you could be a [indiscernible] it seems in the same year. So the guys are packaging it up and they're selling it and we're not seeing any slowdown in our fraud rates. They certainly go up with I think the holiday season, brokerage up and I don't have the exact numbers in front of me, but I think the fact that there is so much data out there and the one thing I'll say the experience studied saying that a third of us who have our data breach will become victims of identity theft. It seems to be far and few in between people who have not been part of a breach nowadays. So again I continue to think it's going to get worse.

Our next question comes from Jim Kennedy with Marathon Capital. Please go ahead.

I want to drill down a little bit more granularity on the online business, what percentage of your retail customers have elected to use your online services or business?

The retailers I think now I think we got about well again let's just talk about online few ways. There is the online which is I'm applying for something to a call center and there is online where I as a consumer and on our website for retailer and I want to get credit.

Talk just about the retail not the call center.

It's probably about 10% of the revenue.

Okay. Well so it is fair to say what percentage of your retailers not revenue actually avail themselves of your online services?

About 14 of them right now.

Okay. So the question becomes if this virus continues in passage going and there are shutdowns, there are conventions being stopped etcetera, I suspect there's going to be a lot more online retail business done over the next 90 days and we've seen how long time. How quickly are you able to spin up that service for an existing retail client that comes back to you or you approach them and say you know you really need this online service tomorrow. How quickly can you get that up and running or someone you already have a relationship with?

Most of the work is on our partner side. We just give them here is code you need to embed in your website to make this work on the link. From our end of it very, very simple.

So have you seen that service started in a week or is it typically take a month or three months?

It's like any of the development cycles we have with the retailers so it depends on how motivated they are. That 580 store retailer I think was two, two and half weeks to go live in terms of the time we gave him stuff and they were testing and saying all right we're ready to go. So again from our end of it, no problem. That team is standing by ready to do it and they know what they are doing. It matters on how, what resources the retailer wants to put on and if they want, they make it a priority, they can do it very quickly in matter of weeks.

Okay, I suspect you're going to get a lot more interest in that very quickly. So again congratulations on the numbers guys.

Thank you very much Jim.

Our next question comes from Yi Fu Lee with Oppenheimer. Please go ahead.

Thanks for taking my questions. Congrats on the strong finish to 2019. Two quick questions for Brian and one quick one for Bill. So on the Corona virus you mentioned obviously there is no disruption to your internal operations. Was wondering due to the Corona virus, the media we seem like families stocking up for goods. Has there been any pickups on the per scan from your retailer and how is that affecting your Q1 business, if you can give us some color on that front.

I am not seeing coronavirus pick up. I think we're seeing scans where we thought they would be in line with the guidance that we've given on the seasonality of scans. So I wouldn't say that nobody is taking up credit to buy toilet paper kind of thing. So that seems to be where the run has been on everything. So that being said, so far we've not seen any impact on the scanning but we're watching it.

Okay. And then the next ones that example you gave on the 1100 retail location on your prepared remarks you're able to get a nice mark up I think over 50% on the fee. Can you give us some of a magnitude like on the other relationship the current relationships within your pipes that are in that process within – whether it be this year or the next year. And would the magnitude be like similar to this or lower or more.

You mean like do I think that I can get that level of pricing power?

Yes and what's on the pipe, Brian.

I don't know that we have any other major renewals this year just given the cycle of when these guys signed and how long the contracts were. Do you think that most of the big deals we signed were in the past year. This was just a very long-term client that had much lower rates. What I would say is we know the value of what we're providing. So going into new deals now are certainly not pricing the way that we were in the past.

And my final one for Bill and into 2009 and very upbeat now they’ve been up 180% top row and net income as well as EBITDA. Bill, can you give us a little guidance on like how should we think of 2020 this year as we approach our model in terms of inspecting positive fee based upon the results you're seeing with the momentum we're seeing closing in 2019?

Q4 was a solid quarter for us and we began 2020 with great momentum. But given the evolving coronavirus situation we're not going to give guidance in 2020 at this point. What is true is there coronavirus is not going to stop fraud, that's for sure.

Okay. thanks for that thanks Bryan and Bill and congrats again on the quarter.

Next question comes from Claflin Hall with RBC. Please go ahead.

Nice numbers guys, congratulations. A couple of questions a little while back you had mentioned that you did 36 implementations in '19 and there is 33 in the backlog. How long do you expect that it'll take you to clear out that backlog and how fast is it getting refilled.

I'd say that our financial services clients who deal with retailers are -- there goal is to get all of their retailers on the system. So they bring people retailers to us all the time that they want us to work with. I would anticipate that this backlog will [be concealing] some of these guys go into next year. It's just a matter of how they are looking to schedule them. The way that we look at the backlog and who we look and put into that number are retailers who have committed to doing the work with some days to get it done and I think sometimes it speeds up, sometimes it slows down. The mix happens in there, but these are all retailers who have scheduled a date when they are going to get the implementation done.

Thanks, one follow-up, when you go talk to financial services organization, you're up to what? Nine now or eight?

Eight.

Eight. So when you go talk to 9, 10, 11 and 12, do you ever lose?

Knock wood, to date we haven't. I think one of the good things is I am able to go out there and say here's how effective we are and they say yeah everybody says that and I have a spreadsheet with me of retailers and financial institutions, financial services companies who are my references and I said just do me a favor, you don’t have to ask when you hand this out. Just shoot me an email, so I know to expect the call and from whom because I'll be happy to get on the phone with you and tell them why you're the best solution out there. These guys all look at it as they're working together to fight fraud. So I'm very happy to say that if I've got financial services company number 10 who is like are you really that good well here they'll talk to financial services company number four and financial services company number one. That's just going to tell you and one, two, actually all of them are references for us. So it's a really good position to be in.

Do you -- does your business plan at least your internal one how many institutions do you -- do you hope to get in front of the during 2020.

Well it might go and I've said many times it not 10 banks plus Amex and Discover who are the main providers of credit cards either their own branded credit cards or private label cards. That's the one in target market that I really want to own we're certainly on a nice trajectory to do that and they all talk which is a very good thing. We're certainly in discussions with almost all of them now. It's just a matter of what they're doing, what their time frames are, their IT we're hard-pressed to find somebody who doesn't see the benefit of what we provide.

Thanks again and congrats.

Thank you. I would like to turn the floor over to Bryan Lewis for closing comments.

Thank you all for attending the call today. Again so far my favorite call that we've had in the past two years and hopefully did many more. So stay healthy and keep shopping. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.