CoreCard Corporation
Q4 2020 Earnings Call Transcript

Published: 11 Feb 2021

[Operator:]

Greetings and welcome to the Intelligent Systems Corporation Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Leland Strange, President and CEO of Intelligent Systems Corporation. Thank you, Leland. You may begin.

[Leland Strange:]

Good morning, everyone. Welcome to our call. I need to remind you in the beginning that whatever Matt and I said during this call is a forward-looking statement within the meaning of the federal securities laws, unless, of course, we're stating a historical fact. We will be offering opinions, comments and analysis that we believe at this time, given what we know or believe today, so that's the -- I'm trying to make the thing that's normally just repeat interesting, as I scratch my head with that.

[Matt White:]

Thanks, Leland, and good morning, everyone. As we noted in our press releases, our fourth quarter results were in line with our expectations while we anticipated 2020 to be a building period relative to a very strong 2019, we did not anticipate the impact that COVID-19 would have on our planned workforce expansion and development efforts. We are very pleased with what we accomplished in 2020. And despite unforeseen headwinds, we completed crucial investments in our infrastructure that laid the foundation for 2021 and beyond. Revenue for the fourth quarter of 2020 was $9.623 million, a 7% decrease relative to the fourth quarter of 2019. However, revenue for the fiscal year 2020 came in at $35.873 million, an increase of 5% relative to fiscal 2019. The components of our revenue for the fourth quarter consisted of license revenue of $2 million. Professional services revenue of $4.783 million. Processing and maintenance revenue of $2.412 million and third-party revenues of $428,000. As we previously disclosed, we recognized $2 million of license revenue in the fourth quarter which was sooner than we initially expected. However, as a reminder, because we recognized license revenue in the fourth quarter, we do not expect to recognize license revenue in the first quarter of 2021. And I'll talk a little bit more about the license revenue later. As we indicated during our call last quarter, we saw the impact of revenue declines from Wirecard and the government stimulus program that did not occur in the fourth quarter. We do not expect any additional revenues from Wirecard going forward and have only recognized to date amounts that have been paid or are probable of being paid. While we do expect additional revenue in the first quarter of 2021 from new government stimulus programs, it is too early to quantify the impact that these programs will have on subsequent quarters of the upcoming year. Similarly, we have started processing loans for American Express. But it is still too early for us to determine the degree that this customer will impact 2021 revenues.

[Leland Strange:]

Okay. Thanks, Matt. I'm going to make some short comments and then opening it up for questions, which you can do on the phone. But another way you can do it is to send us an e-mail at questions at intelsys.com. I have my computer open, and I see them as they come in. We're not going to be able to answer all of them, but we'll go until about 11

[Matt White:]

Do you want to take a question from the

[Leland Strange:]

Sure.

[Matt White:]

Operator, is there anyone waiting to ask a question?

[Operator:]

Yes, we have two participants,. One moment. Our first question comes from Mark Palmer with BTIG. Please proceed with your question.

[Mark Palmer:]

Just wanted to get your perspective on the guidance for 2021. The range you provided is fairly wide, 15% to 25%. And if you can just give us a little bit of color on what would cause the result to be to the higher end of that range or the lower end?

[Leland Strange:]

Do you want to take a shot at that one?

[Matt White:]

Sure. Yes. So it's the -- some of the unknowns that we talked about, if those come in more positive than maybe we were planning for. That's some of the upside. We've talked about the new offices in Dubai and some of the revenues that we could get there. If that comes in quicker than expected, we'll be at the higher end, similar for American Express.

[Leland Strange:]

We're trying to kind of take a middle range there. If we don't know what the American Express program will frame. We don't know what the PPP program will frame. We don't know how much additional revenue will get in the Middle East, although we expect to have some. And I would say those are the -- well, there's actually some other unknowns, and I'll add some other color here. People, you want to know about customers. We're signing new customers, but they're typically small ones. There's a test project that we just signed yesterday for a -- one of the neo-banks that has a pretty big name that would know kind of around the world, Europe and U.S., but it's a test project. Now if -- and they're paying us for it. If it were to work out well, they could end up doing a lot of business this year. They could decide after 6 to 8 weeks of test, that they want to make some changes. So it defers for three or four months as they make changes, and they look again. So it kept going to next year. So it's just those unknowns mark, is why we have to try to be careful. We believe 25% is the upside cap. We are pretty sure 15% is the lower side cap. So we're kind of picking that wide range because that's all we know now. Do we have any other questions on the phone before

[Operator:]

Our next question comes from Anja Soderstrom from Sidoti. Please proceed with your question.

[Anja Soderstrom:]

So I just wanted to get a little bit better understanding of the headwinds in terms of the growth. You mentioned some difficulties hiring in India and that might hamper your growth. How would that -- would you be able to achieve the 25% upside even if you're not able to hire anymore in India? Or how do you see that affecting your growth targets?

[Leland Strange:]

No, we believe that we will have the resources to achieve the 25%. If these programs grow to that degree. So we have different kinds of customers. Some require resources to the level of, I'm going to say, 50% of revenue we need resources for that. Some -- there's a lot of scale to it. We need 20% in costs for 100% revenue. So the kinds of things that we're talking about, they hit the upside. That's for the scale side. But we believe that -- we believe, we're certainly have coverage to be able to go to the 25% if these customers achieve anywhere close to their goals. But we have to look a lot further route in terms of training. And I'm going to give you another example here. So we have -- I'm not going to even call them a potential customer. We have someone, a major bank that we've been working with in terms of showing them what we do. And I'm going to guess that they've got 200 man hours into just looking in demos. And that means they may have 25 people on an hour or hour and a half demo, several times. But yet, just in the last couple of days, I got something more specific from them, and they said something about, all right, it's great to learn about your great architecture, by which one of their top executives, and he said, I’m reading, our credit aspirations are really big, but our road map is not fast. We are approximately three years away from actioning any change if we were to make a change. But we look forward to continuing to learn more about your capabilities. So hopefully, again, you hear me talk about the long-term and the long cycle here. Hopefully, that will help you. That's a very specific example that's happened this week. Now it's not our first contact with them this week. We've been having it. But we're heavy at the highest level, along with 25 or more people at other levels. So these are huge strategic decision for these people. And they -- before they would go with us, they would expect that we have a really good brain to group to go with them because the reason they go with us are things like our people. That's one of the main reason. Second is our architecture. And third is our ability to move fast. So we're training -- we're hoping to be training this year for 2023 in terms of the way we look at it. This is a long-term vision to compete with the biggest people out there. And so hopefully, that will give you a little more perspective because that's a real life example. I've got the e-mail up right now, but I just read out to you. And we'll stay in dialogue, and they expect, as I said, I said I look forward to learning more. They are going to continue over the next couple of years to still work with us to see what we have compared to other people. And then they do an RFP at some point. Do we have any more phone questions?

[Operator:]

No. There are no further questions at this time. I would like to turn the floor back over to management for any closing comments.

[Leland Strange:]

All right. Well, thank you. We appreciate everyone's interest on -- for the company, and we know there's been a lot of volatility lately. Have no idea where that's coming from, but hopefully, you're satisfied with some of the pricing. And again, we're building for the long term. So we're not concerned with where it is now, but we believe that what we have in place, and we believe the conversations that we have, and we believe that where we're headed. We're at a good place. Again, thank you all for your time, and we look forward to the next call.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.