Intellicheck Inc (IDN) 2019 Q4 法說會逐字稿

Greetings, and welcome to the Q4 year-end 2019 earnings call. (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 cost 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 with 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 1 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. I'm 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 to 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 helps 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 date of the year with over 620,000 scans in 1 day, a 125% increase over 2018. The data also suggests 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 their 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 have 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 effect.

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 the 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 1, 2, 3, et cetera, 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 a Financial Services company, 1, 2, 3, et cetera. 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 a credit directly from the retailer's website and Intellicheck authenticates the ID. They added 10 retailers in Q4. While this is not a high-volume of scans, it underscores their commitment to Intellicheck's authentication technology. A similar story for 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 has been quite the turnaround.

Financial services company number three completed the rollout of their large electronics' retailer in Q4 for the account look-up 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 3 side. So I view this date as green and trending to yellow.

Financial service company number four completed their rollout to 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 use 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 is, if an employee needs to log into a very sensitive system, they will need to authenticate. Another use case involves if someone who's going online or calling in to change details of their account. This would require that the individual authenticate who they are to proceed with these 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're going straight to production. Number seven is 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 U.S. call centers for new account openings as well as for inbound calls on account queries and changes. They are also planning to expand use of this solution into their Canadian call centers in Q2.

We have 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 4-month paid pilot. I have 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 5 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 the retailers as fast as we, and they can as well as mining all the possible use cases within each company we can. This is what brings in the revenue. I believe we have tremendous growth ahead of us with these 5 issuers alone, but we're 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. Meaning 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 who we've been working with since 2013 with over 1,100 locations whose contract renewed in February.

Driven by the effectiveness of our services, we were able to increase fees 56% at renewal. This client is also now on our per scan platform. With monthly minimums and additional upside during the peak holiday shopping seasons.

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, that called us up ecstatic to tell us we had basically eliminated their fraud problem related to card-not-present account lookup. They are now out of pilot, in production and are working on expanding the use cases for Intellicheck. This major retailer is 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 3 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 were hacked for highly sensitive data of over 1 billion records alone. Now health care-related firms are being targeted, both Quest Diagnostics and LabCorp, were hacked 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, they can easily steal your identity and pass any knowledge-based authentication challenges. I've mentioned that 14.3 Americans had their identity 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 2 seconds. And research from experience suggests that almost 1/3 of all data-breach victims have their identity stolen. This underscores the fact that this problem isn't going away for banks, retailers and consumers. In fact, it's getting worse.

It's a week shy of the 2-year anniversary of my first earnings call as CEO of Intellicheck and what an amazing 2 years it has been. I have 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 it's turned our story around. With all that we have accomplished and all that we see to come, I look forward to a very exciting 2020.

Before passing the call over to Bill, I have 2 final items. Like all of you, we are watching the reports on the coronavirus. At this time, we have 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 note today's Board of Directors announcement regarding 2 new board additions, Dylan Glenn and myself. Dylan is the CEO of KBBO Americas LP. KBBO Americas is a U.S.-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 a Deputy Chief of Staff to Governor Sonny Perdue, Georgia and served in the White House in Washington, D.C. 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 Intellicheck.

With that, I will turn it over to Bill to discuss the financials.

Thank you, Bryan, 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 in Q4 2018 and was 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 contingent to fund achieving certain goals established by the Board of Directors and Compensation Committee.

The company posted net income of $106,000 for the 3 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. Revenues for the full year ended December 31, 2019, 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-end 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-end 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, defined as current assets minus its 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 used net cash of approximately $1 million compared to a net cash used of $3.6 million during the year-end December 31, 2018. Net cash used in operating activities was $1.8 million for the year-end 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-end December 31, 2018. And we generated cash of $794,000 from financing activities in 2019 compared to generating net cash of $688,000 for financing activities in 2018.

On February 6, 2019, the company entered into a revolving credit facility with Citibank. This agreement allows for maximum borrowings of $2 million secured by collateral accounts and bears interest at Citibank's base rate minus 2%. As of today, there are no amounts under -- 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 carryforwards of approximately $17 million.

I'll now turn the call back over to the operator to take your questions. Operator?

(Operator Instructions) Our first question comes from Mike Grondahl with Northland Securities.

Congrats on the quarter and the progress, guys. Really, really great to see. Bryan, is there any update on financial services company number 5 or number 6?

Yes. Number 5, as I kind of consistently said, they're 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 locations.

So it's just -- there, business as usual, rolling out, rolling out, rolling out to their stores. Number 5, more from my standpoint on that 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 2 new wins, 7 and 8. Now I understand 8 is a pilot. When do you think we'll begin to see scans? How do we think about layering those 2 new ones in?

Number 8 is in production now. They're going to begin rolling it out. They do a lot of things in tablets in the stores. I'm not expecting a massive flood of scans to begin with from them. Number 7, 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 were 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. It's -- they're just too new, and this is a brand-new process for them.

Got it. But it will be in U.S. call centers soon and in Canadian call centers in 2Q?

Yes, that's the plan, correct.

Got it. And then did you say that you did 33 implementation in 2019? Or that there's 33 in the backlog now?

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

Got it. And then maybe just last question. When you talked -- I think you were talking about Financial Services company three. You said something about $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 -- they placed that order in Q1. Those are scanners that they need for their retail teller workstations that will be used to -- we can authenticate driver's licenses and passports on that particular scanner. So the reason that they placed it through us. 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 been going out and trying to get an MSA with a vendor to purchase the hardware through. So we do it 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 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 was going to include something else. Maybe just finish that thought, and then 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, non-receipted returns, the other main use cases for a retailer. So I think, they might have used the 2.

Got it. And congratulations.

Thanks, Mike.

Our next question comes from Scott Buck with B. Riley.

I'm curious if you've seen any kind of hesitation from any of your 8 customers now were probably more specifically they're retailers in regards to setting up implementations or anything like that given some of the broad coronavirus 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, a lot of these guys are also in the cloud. It's just our -- they're calling our APIs to plug into their point-of-sale system. So no need to worry about slowing anything down because of coronavirus. So definitely not any hesitation on implementation, implementation schedules, getting anything going in line.

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

I'd 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 up 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 8, any difference in pricing or margin profile in Canada versus the States that we should be thinking about?

No.

Next question comes from Amy Norflus with Neuberger Berman.

I have 2 questions. Number one, can you give me an idea of how big the Board will get? Or does -- with 2 new people coming on the Board? Does anybody leave? Or how are you thinking about the Board size?

I just got on and have my first Board meeting today, as a member, I can't say much. There is a max of 9 that are allowed on the Board. This was a net to add. There are no -- nobody left the Board.

Okay. And then can you explain if there's less retail traffic? So I understand your answer to the prior question where the implementation doesn't need anyone to be face-to-face, but what happens if people aren't coming to the stores, if they're buying online? And then I think the financial company number 7, I think, how are you validating IDs online if somebody's trying to do an online purchase?

So I guess, we'll go backwards. So to validate a license online, 2 ways that that happens. One is if I'm on somebody's website, and I decide that I want to get credit as part of the credit application online, it asks for a mobile phone number. A text to send to that mobile phone. You click on the text, it asks if it can use your camera. It opens up scanning technology, sort of onetime use stuff. That instructs them, how to scan the back of their driver's license, the bar code. And then from that, we authenticate the license. And if it's good, we also populate the application. So we make it much easier for good 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, asked for my mobile phone number, same test is sent and authenticate and send the data back. As far as -- yes, go ahead, sorry.

And 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 them. For some of the more -- for Financial Services in client number 5, we also will then take -- they want to go a few steps further than your average retailer or somebody issuing a credit card, and they will then also ask for a photo on the front of the license and then a selfie with liveliness to make sure that the plastic is real. It's a real driver's 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 don't know. It's just I get confused, I'm sorry, 5, I think.

No problem.

You tell me -- I mean, like I'm just trying to understand the scalability of this, how it really works. I mean, I don't really care if it's a client number 1, 6 or 5, it's just more of -- is this the new norm? I mean, it's like -- and then what happens when the [forsters] says, "Oh-O, I couldn't get a credit card through, hypothetically, pick a name, JP Morgan. I'm going to try Wells Fargo. I mean, are you seeing the same card names coming up? Are you seeing -- I mean, like what else are you able to tell from all of the -- for the data that you have?

Well, we don't save any of the PII. So the only things that we know after an attempt 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 clients 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 use case, new credit account look up, et cetera. Jurisdiction of the license. So we know location is scanned, jurisdiction of the license, what State it’s from or 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 bank number 4 has been doing that for quite a while now. I think next month will be the 1-year anniversary of them going live on the system. So we're in multiple call centers with clients. The Financial Services company number 7 is just starting using it in call centers. Financial Services company number 1 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?

Well, we're working with clients to deliver it in whatever way works best with them. Do they want it just purely on a mobile device? Do they want to integrate it into their point-of-sale system? Do they want to immediately implement it with no integration? Fine, use our web-based tools. So it's really -- we can deliver the product multiple ways to fit whatever the use case and the hardware is that the clients have. A good example is the bank number 4, we rolled out to their retail bank branches. We just integrated with the same scanner they had on their desk to read checks and automatically there's a checking -- do the check deposit. There's just slight configuration change in that work to read a barcode. So we're very flexible on how we can install this at a client.

And each thing -- they pay you more money for each scan and what's integrated? So you mentioned 4 items. Each one of those is an incremental higher revenue to the company?

I'm not sure I follow the question. To me, it's scans at scan. If we're doing things like facial recognition is obviously an upcharge for that.

Next question comes from Roger Liddell with Clear Harbor.

Yes. Bryan, I'd like to follow-up with you on the whole call center. I have trouble describing exactly what they are and the leverage or lack of leverage in them. So certainly, Financial Services entities, 1 in 4 are right in there. Is there an enterprise-wide call center with all private label business funneling 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 2 different things there. Call centers, the very first call centers that we had with bank number 4 and then now -- sorry, financial services company number 4 and financial service company number 7 or for their own branded cards, not the white label cards. So if you saw the commercial on TV and decided you want that credit card and you call them up to apply for a card, that's when they would authenticate you. They are moving to their call centers that deal with almost any account query. So certainly financial services number 4 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 up for account queries, and they feel they need to have a need to challenge you, they will authenticate. Number 7, 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 insight. Is there a wave? Is there a large number of call centers, which are available with rollout going forward? So we have stepped functions as one after another call center comes online.

What I would say is, we're talking to all of our bank and financial services clients about their call centers and rolling into them, which is why we announced them. For the most part, there's sort of -- there's one call center group. It might have multiple locations for number 7. They have a couple of locations that are in the U.S. that are all scheduled to go live at the same time. And then I believe they only have one location in Canada, might be too, but I'm not sure. But again, scheduled to go live at once. It's not like it's a rollout.

Okay. Auto dealership opportunity that sub-fourth press release was useful but didn't have as much texture as I would have preferred. Can you put some more texture on to it in terms of the applicability of this? Could it roll out across significant sectors of the dealership world?

Here's what I'd say is, the folks at Dealer Safeguard Solutions seem to be very excited about it. They were out at the Auto Dealers Association convention in Vegas and came back with quite a few leads of people that weren't -- they're existing customers, but really liked the combined package. It seems to be that theft 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 walk off your lot, your banks won't give you financing anymore. So I think it's going to be probably larger than I thought. I didn't -- I thought it was just going to be sort of a side business, but Dealer Safeguard Solutions 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 were 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 scans. 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 opportunities that they are seeing.

Okay. Finally, on the data breach. Is the, something like 1 year, 18-month lag time from breach to where that -- those data start showing up on attempted theft. 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 I've -- what anecdotally, I would say is there is so much of it out there that you could be in multiple breaches 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, fraud rates were up. 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 is the experience study saying that 1/3 of us who have our data breached will become victims of identity theft, it seems to be its 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.

Congratulations on a great year. I wanted 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?

As the retailers, like right now, I think we've got them about -- well, again, let's just talk about online 2A, right? There is the online, which is I'm applying for something through a call center, and there's online where I as a consumer am on a website for a retailer, and I want to get credit.

It's not just about -- let's just -- talk just about the retailer, not the call center.

It's probably about 10% of the revenue.

Okay. Well, so is it 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 the path it's going and there are shutdowns or conventions being stopped, et cetera, I suspect there's going to be a lot more online retail business done over the next 90 days than we've seen in a 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, "Hey, you really need this online service tomorrow?" How quickly can you get that up and running for someone who already have a relationship with?

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

So have you seen that service started in a week? Or does it typically take a month or 3 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 it was 2, 2.5 weeks to go live, in terms of -- from the time we gave them stuff and they were testing and saying, all right, we're ready to go.

So from -- again, from our end of it, no problem. Bill's team is standing by, ready to do it, and they know what they're doing. It matters on how, what resources the retailer wants to put on it. And if they want to -- if they make it the priority, they can do it very quickly, a matter of weeks.

Our next question comes from Yi Fu Lee with Oppenheimer.

Congrats on the strong finish to 2019. Two quick questions for Bryan and one quick one for Bill. So Bryan, on the Coronavirus, you mentioned, obviously, there's no disruption to your internal operations. I was wondering, due to the Coronavirus, the media, we seen like family stocking up for goods. Has there been any pickups on a per scan from your retailer? And how's that affecting your Q1 business? If you could give us some color on that front?

Yes, I'm not seeing a 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 -- and I would bet if nobody's taking out credit to buy toilet paper kind of thing. So that seems to be where run has been on everything. So that being said, so far, we have not seen any impact on the scanning but we're watching it.

Okay. And then the next one is the example you gave on the 1,100 retail location on your prepared remarks where you're able to get a nice markup I think we were 50% on the fee. Can you give us some of the magnitude, like on the other relationships, the current relationships within your pipes that are in that process within the -- whether it be this year or the next year?

We've got a...

And with the magnitude part. Sorry, 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. Bryan?

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? If you think about it, most of the big deals we signed were in the past year. This was just a very long-term client at much lower rates. What I'd say is we know the value of what we're providing. So going into new deals now, we're certainly not pricing the way that we were in the past.

Got it. That make sense. And my final one is for Bill. And on -- ended 2009 in a very upbeat note, revenue up 118%, possible net income as well as EBITDA. Can -- 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 inflecting positively based upon the results we've seen with the momentum we've seen 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.

Well, one thing that's true is that the coronavirus is not going to stop fraud. That's for sure.

Congrats again on the quarter.

Thank you.

Next question comes from Claflin Hall with RBC.

Nice numbers, guys. Congratulations. A couple of questions. A little while back, you mentioned that you did 36 implementations in '19. And there's a -- there's 33 in the backlog. How long do you expect that it will 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 -- their 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 -- you can see, 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 date to get it done. And I'd say, 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.

One follow-up. When you go talk to financial services organization, you're up to what, 9 now or 8?

8.

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

I'm not going to knock wood. To date, we haven't. I think one of the good things is I'm able to go out there and say, "Here's how effective we are", and they say, "Yes, everybody says that". And I have a spreadsheet with me of retailers and financial institutions, Financial Services companies who are my references and it said, just give me a favor, you don't have to ask when you hand this out, just shoot me an e-mail. 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 a Financial Services company number 10, who is like, are you really that good. Well here, go talk to Financial Services company number 4 in Financial Services company number 1 that's going to tell you. And yes, 1, 2 -- actually, all of them need to be 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 hope to get in front of, let's say, during '20?

Well, my goal, as I've said many times, is that 10 banks plus Amex and Discover, who are the main providers of credit cards, their own branded credit cards or private label cards. That's the one 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. And 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.

Congrats.

Thank you.

I'd like to turn the floor over to Bryan Lewis for closing comments.

Well, thank you all for attending the call today. And again, so far, my favorite call that we've had in the past 2 years, and hopefully there's many more. So everybody 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.