Pareteum Corporation
Q3 2014 Earnings Call Transcript

Published: 18 Nov 2014

[Operator:]

Good day everyone and welcome to the Elephant Talk Communications Corporation Third Quarter 2014 Conference Call. Today’s conference is being recorded. At this time I’d like to turn the conference over to Thomas Walsh of Capital Markets Group. Please go ahead sir.

[Thomas Walsh:]

Thank you. Good morning to everyone in the United States and good afternoon to our European listeners. And thank you for joining us for the Elephant Talk Communications shareholder update conference call. On our call today will be Steven van der Velden, CEO of Elephant Talk; Mark Nije, CFO of Elephant Talk; and Paul Burmester, CEO of ValidSoft. Following management’s discussion, there will be a Q&A session open to all participants on the call as the operator has already mentioned. Now before we get started, I’m going to review the Company’s Safe Harbor statement. Remarks made on this call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. All forward-looking statements are inherently uncertain as they’re based on current expectations and assumptions concerning future events or future performance of the Company. Listeners are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only of the date hereof. In evaluating such statements, perspective investors should review carefully various risks and uncertainties identified in this conference call in the manner stated in the Company’s SEC filings. These risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements. With that out of the way, I’d like to turn the call over to Steven van der Velden, Chairman and CEO.

[Steven van der Velden:]

Thank you, Thomas, and thanks to everyone for joining us today for our shareholder update call. The third quarter of 2014, once again so strong, sequential growth in our mobile and security services revenue, which now marks our 13th consecutive quarter of growth. One of the many important achievements during this quarter is the fact that we have positive cash flows from operations, which was approximately $1.7 million. Additionally, we’re pleased that we now also achieved full positive EBITDA of $200,000. These are major milestones as they validate the scalability of our mostly monthly recurring revenue mobile platform level. Revenue for the third quarter increased 40% to $7.3 million compared to $5.2 million for the same quarter of 2013. Our adjusted EBITDA increased to approximately $1,085,000 for the quarter versus a negative $85,000 a year-ago, and it has almost doubled sequentially from $553,000 reported in the second quarter of this year. We believe these trends will increase throughout the remainder of the year as we continue to further migrate subscribers from Iusacell and benefit from additional growth from Vodafone and the start of the hopefully soon to be licensed MVNO partner Axiom on the Zain mobile network along with other co-branded services that will run over the Elephant Talk platform. Outside the financial results, we’re pleased with the progress of our global sales collaboration agreement with HP. Since announcing this relationship, we’ve submitted many requests both for qualification as well as proposals together with HP. In regards to our Elephant Talk Software DNA 2.0 platform, we now have over 3.5 million total subscribers' provision on our various platforms from our customers. On the Iusacell front, we’re continuously working to migrate the in-subscribers to our platform. Although there has been some modest delays as we continue to diligently transition the old data from the legacy platform, our platform is performing well and Iusacell and their clientele are pleased with the increased capabilities that we’re providing. We continue to work closely with the teams of Iusacell to streamline this process and to ensure that future migrations continue to take place seamlessly. Our contract with Zain in Saudi Arabia is progressing. As you know Zain announced its brand Matrix that is hosted on the Elephant Talk Platform. Zain is provisioning additional subscribers on the platform and the expectation is for further marketing of the Matrix brand in the coming month. Throughout the next several quarters, we expect the number of subscribers being hosted on our platform to grow rapidly. Even though the Saudi market has been limited as SIM limited activity to date, we have been able through a mix of hosting and development fees to begin generating significant billings in this market, which should continue to grow. Our relationship with Vodafone continues the strength. We continually receive monthly payments from Vodafone for our increased scope of work. For many years now, we’ve been hosting a growing base of satisfied customers on behalf of Vodafone, and I can only repeat that we’re very well positioned to service a rapidly growing number of Vodafone customers in the future via our platform. We expect that based upon contracted development work that we’re currently implementing, our growing number of managed SIMs for Vodafone to further increase over the next 18 months. In the United States, Elephant Talk North America currently has three smaller virtual operators under contract and is working with another two that are expected to sign by the end of the first quarter next year. Elephant Talk North America is there by working with various GSM and CDMA carriers. The primary focus of Elephant Talk North America is to recruit, enable virtual operators by offering a turnkey empowerment solution that offers multi carrier access combined with the sophisticated IT platform licensed from the third-party supported by third-party diverse logistics and device financing options allowing the virtual operators to focus their efforts on the important tasks of sales and marketing. Elephant Talk North America also brings opportunities for our group to present its full mobile platform capabilities to appropriate mobile operators and a large scale virtual operators in the United States. In terms of our platform solution, early this year we upgraded one of our platform successfully to be able to fully handle all types of 4G LTE [indiscernible]. We are currently upgrading one of our other platforms to also be fully 4G LTE capable later this year, including a substantial capacity expansion. These developments will be welcoming additional business starting next year. In one of these markets we’re currently expanding our existing system to be fully geographically redundant thereby preparing the platform for increased performance, while handling a growing amount of customers continuously carrier grade service levels. In 2015, we expect to also launch new brands of two major mobile operators in two of our existing locations. Through our continuing work with Vodafone, Zain, Iusacell and HP, we’re confident that our platform possesses the key features to lead us to multiple new global contracts in the coming years. Over to our security business now. I will turn the call over to Paul to discuss ValidSoft in further depth. Paul?

[Paul Burmester:]

Thank you, Steven. As you’re aware the initial focus of ValidSoft was with a suite of products that we now call Device Trust comprising of SIM swap detection, call divert detection and international location correlation. However, GSM mobile network operators restricting access to this data, it is proven not to be a globally scalable business at this point in time. ValidSoft is working with the mobile operators governing body, the GSM Association to educate the mobile operators on this problem and the opportunity with the objective of changing the industry standards in order to make the required data available. Nonetheless ValidSoft has been very successful in securing access to the required data from the mobile operators within the U.K. market and is now growing this business in terms of both customers and volumes. In addition to this, I’m pleased to announce that we’ve recently received two further patent awards relating to our Device Trust products, applicable within the Russian Federation. ValidSoft applied for these patents, utilizing the patent cooperation treaty and although there was no guarantee that the U.S Patents and Trademark Office or the European Patent Office will follow the Russian decision, in practice this is a good indication when granting such patents each patents office whether Russian, American or European, will conduct a worldwide search for conflicting patents, so the fact that the Russian Patent Office has not found our inventions to be covered by any other prior patents is a very strong indication that the invention is unique. The first patent Card false-positive prevention system, covers our International Location Correlation process and the second patent, Card present security system, anonymously correlates the location of the card present transaction with a mobile cell location. In support of our continued efforts to refine our commercialization and go-to-market strategy, it’s becoming apparent the biometrics is the hot topic in the world of security and authentication right now. Having spoken of both the Money2020 and FICA [ph] World Conferences this month, I can attest to the fact that the use of biometrics to authenticate users transactions and access control was the most popular topic being debated and this is supported by the number of announcements from major financial services companies all committing to the used biometrics over the coming years. After a successful period of development in productization, we believe that with the superior functionality and application of our own voice biometric engine as part of our multi-factor authentication solution we’re very well placed to address this fast developing market opportunity. Market reaction to these developments has been very positive and we now have a number of large proof-of-concept trials underway both direct and in conjunction with new and existing channel partners in the financial services and enterprise market sectors. Finally, in support of the more focused go-to-market approach in commercialization strategy for ValidSoft, we’ve recently appointed our first senior sales person in North America whose wealth of experience in the voice biometrics market should help develop and accelerate our channel partner end pipeline building program for our voice biometric technology in this region. And we very much look forward to sharing developments on this front with you. I’ll now handover to Mark, to discuss our financial data. Mark?

[Mark Nije:]

Thanks, Paul. I’ll provide the financial highlights for the third quarter of 2014. In addition to Steven’s comments on the financials of this quarter, such as positive cash flow from operations of $1.7 million, positive EBITDA of $200,000 and further increase of revenues in adjusted EBITDA I’d like to provide some additional comparisons primarily relating to the nine months of this and last year. Despite a decrease by $3.3 million in landline services, which by the way are now fully fringed [ph] out, overall revenue for the nine months this year increased to almost $4 million to $20.7 million, an increase of 23%. While excluding the landline services, the mobile and security revenues increased from $13.3 million last year by $7.2 million to $20.5 million this year, an increase of 54%. Despite the continued investments in growing our organization, we were able to offset part of those increased costs with the increase in revenues. As a result, adjusted EBITDA improved by $4.4 million from a negative $2.5 million for the nine months 2013 to a positive $1.9 million in 2014. EBITDA itself followed suits and improved by US$6.5 million from a negative $8.1 million last year to a negative of $1.6 million this year. When taking into account also depreciation and amortization whereby we’ve to realize that amortization is a substantial portion of that, we arrive at loss from operations having improved by $5.3 million compared to last year. We also continue to invest in our technological capabilities which meant that investments increased from $4.2 million in 2013 to $5.6 million in 2014. In 2013, however, we needed to also invest in operations for a total of $3.5 million whereas in 2014 operations actually generated cash of $1.3 million. The result was the cash flow from operations and investment activities were negative $4.3 million compared to $7.7 million the previous year, an improvement therefore of $3.3 million. This quarter in particular, we were able to fund the investments we made with the cash generated by operations. Lastly, we manage to remove certain liabilities from the financial statements, being around $600,000 related to a joint venture loan that was forgiven in this quarter and the part repayment in consideration of the $6 million outstanding convertible notes that we partly repaid and converted subsequent to the third quarter. This concludes our financial summary. I’d like now to turn the call back to Steven, for his closing remarks. Steven?

[Steven van der Velden:]

Thank you, Mark. Based on the success of our existing contracts, we continue to be well positioned for both near-term growth and long-term financial success. As we’ve demonstrated, it’s a great testament to our platform that we’re able to keep our marginal cost down and improve our operational results. This has allowed us to finally become full EBITDA positive for the very first time and further our [ph] investments with cash flow from operations in the quarter as already stated by Mark. We are working to accelerate the migration of provisioning plans with Iusacell and Zain, as we’ve now achieved an inflection point in our operations and has seen the number of subscribers more than doubled on our platform. Increasing number of subscribers hosted on our platforms is placing us in a position to reach profitability in the very near future. Yesterday we closed $12 million debt deal with minimal dilution. This loan will provide us with substantial capital to operate the Company for the foreseeable future. Based on our improved financial results, and the closing of this facility, we were able to remove the going concern from our 10-Q filing. Based on us achieving cash flow positive status and the closing of this facility with net proceeds of approximately $9 million, after the repayment of $3.1 million in convertible debt, we’re working with the New York Stock Exchange to regain compliance with the listing standards. We expect to resolve the listing issue over the next couple of days and our management team believes we will have a positive outcome. In summary, I believe our platform, our contracts and our pipeline has never been stronger. We believe our strategic relationships and industry knowledge have continued to provide us with excellent global contract opportunities. We are now achieving financial success working diligently to continue to drive our results and create value for our loyal shareholders. This concludes management update portion of the call. I’d now like to open the floor for any questions that you might have.

[Operator:]

[Operator Instructions] Our first question comes from Stan Bernstein with Sidoti & Company.

[Stan Berenshteyn:]

Thanks for taking my call. Steven, let’s start by looking at the delays in new system migration. Can you give us some more color as to why these delays are happening and maybe what’s the guidance going forward?

[Steven van der Velden:]

Thanks, Stan. Well, let’s start with the fact that there is no problem with any of our platforms whatsoever. On the contrary, our platforms performed very well consistently, provides service levels above the so-called contractually agreed upon SLAs, service level agreements that determine the minimum performance levels we have to adhere to. Actually, we usually perform substantially better than the service levels and our platforms are therefore clearly marked as being the carrier grade. And even though we have tried to be transparent in the past, the constraints to our confidential agreements with our customers are stated -- in general, both our mobile operators as well as our virtual operator customers more and more tend to become less open about disclosing specific assets of individual contracts and their customer base actually not only for competitive, but also increasingly for regulatory reasons. As it is fully understandable, we’re trying to minimize the use and disclosure of any such specific piece of information and in the Iusacell case this is clearly the case. Over that as a consequence of (indiscernible) of a situation as a result of the transaction with AT&T acquiring Iusacell, we hope that everyone understands that we will be a little bit hesitant in detailing more of the current deployments with Iusacell. The only remark I’d like to make is that we’re still on course of successfully migrating additional buckets of customers away from Iusacell’s legacy system for mobile platform and thereby ultimately substantially growing the hosted customer base of our platforms.

[Stan Berenshteyn:]

Okay. Yes, I was actually going to follow-up with AT&T. Can you maybe give us some more details as to what the implications of this buyout would be? Is there any change happening in regards to a risk that AT&T will take Iusacell off the platform once it migrates or conversely maybe give you additional business?

[Steven van der Velden:]

Very good question, of course, and very irrelevant at the moment. However, I mean, the announcement of the transaction has been pretty short ago and at this moment there is no reason whatsoever to assume that this transaction will endanger our position with Iusacell. On the contrary, actually there is a growing feeling that with AT&T looking to many more countries outside the United States, but actually the fact that they’re acquiring Iusacell could turn into a great opportunity for the company. But in all honestly it’s just too short, it’s just too new to make any reasonable guidance to this respect, but I would certainly not expect anything to change in the very near future.

[Stan Berenshteyn:]

Okay. And as per Vodafone, you said that you have an opportunity to grow this organically; can you maybe give us an idea on a percentage basis perhaps of what’s the opportunity size to grow Vodafone from its current subscriber base?

[Steven van der Velden:]

Yes, that’s little difficult, because of course being a business to business supplier, we’re dependent on the success of our customers in marketing services, attracting customers, retaining customers to avoid churn etcetera. And I think to give exact numbers on what we’re expecting in this space would just be not realistic, but based upon the additional work Vodafone has provided to us, the expansion of platforms, the additional features that we’re building in, we can only expect that business to grow substantially over the next few years. And as you know the current base is around 1.4 million, 1.5 million customer and we certainly expect that possibly even to double over the next few years. But the real trend in how that will pick up is difficult to foresee.

[Stan Berenshteyn:]

Okay. Do you have any clarity on the -- on Axiom getting the licensing for Saudi Arabia market?

[Steven van der Velden:]

No, we have not and we’re eagerly awaiting the formal approval of the license by the regulators in Saudi Arabia, but we’re not insider there and again here also we’re a B2B supplier and we assume that Axiom will down the road get the license, what the timeframe will be, we don’t know and if for whatever reason its not going to be Axiom that will get the license, then there will always be another operator that will be hosted on the Zain platform and thus hosted on the Elephant Talk platform. So its not that on the long run the opportunity is not there, there is just some delays in allowing one of the virtual operators to start business on the same network.

[Stan Berenshteyn:]

Got it. Got it. Can you maybe address the client pipeline a bit? I know you mentioned the partnership with Hewlett Packard. Can you give us some idea as to where in the process, potential clients are on discussion maybe securing additional contracts with these potential clients?

[Steven van der Velden:]

Yes. That’s of course also a very good question. But as you know from earlier sessions, its very difficult to answer not only because there is a whole range of different opportunities where some opportunities are just simply easier for a potential customer to absorb other opportunities are just more, let’s say, impacting such organizations so that the timeline to come to any meaningful conclusion may simply takes longer. And I think again -- I think it’s too tricky to really focus on any specific timeline. There are many, many opportunities and definitely in comparison to last quarter, a couple of them have progressed substantially, but at the end of the day it’s all about signed contracts that are turned into revenue generating opportunities. And I still think that at this phase it would not be correct to give too much guidance as we simply don’t know which of those opportunities will come first and which will ultimately indeed turn into an active contract with revenue generating capacity. But if you look at the pipeline, I think the quality is improving, the speed that we can address certain opportunity is improving, and yes, I mean, bottom line is that I would be extremely disappointed it was in the next 12 to 18 months not at least one major contract would be signed and executed, and be implemented shortly thereafter.

[Stan Berenshteyn:]

Okay. And as for Elephant?

[Steven van der Velden:]

Yes, from an overall platform business. Correct.

[Operator:]

Our next question comes from Robert Scarff, Private Investor.

[Robert Scarff:]

Hi, Steven, thanks for the update. It sounds like our existing customer base brings us close to 10 million SIMs once they are fully migrated to the level that they’ve committed to. And if you look at the new customers coming onboard even the small ones aren’t that small. It seems like we’re well on our way to 15 to 20 million SIMs. How is ETAK going to handle the installation of these new customers?

[Steven van der Velden:]

Yes, that’s of course one of the challenges of management to prepare the organization for future growth. As you well have seen from our reporting, the organization has grown substantially over the last couple of years even though we were cash flow negative we still felt that expanding the organizational capabilities is key, because having sales cycles of a year or longer it would be really a pity that once you win a contract you would not deliver very good services. So we have been expanding our organization. We have been able to attract very, very good top-notch talent around the world. And I feel that currently we are definitely able to not only service our current customers pretty well, but we are also able to expand the business and the scope in which we are servicing our customers. So, in that anticipation we have indeed grown the organization to be able to service a few more customers down the road. And actually over the years we should become a very stable business with these teams that can implement and provision new customers, being freed up after those installation processes and moving on to new territories. And ultimately we believe that we should be able to handle at least a couple of these contracts every year, and that’s what we try to achieve with expanding the organization.

[Robert Scarff:]

For the U.S. market, are they people who are brand new in the business? Or they’re established like a LycaMobile?

[Steven van der Velden:]

No. I think that it’s a mix of existing businesses expanding into mobile as well as existing mobile businesses that look for a change of operating environment, and therefore are looking to work with us in the United States. Ultimately the real target group we’re focusing up on is the group of more sophisticated operators that run to start now on a more of an IT platform as we described, but can ultimately migrate to our full MVNO platform that is directly linked to mobile operators and will bring the capabilities of bringing unbundled services that need to be packaged and bundled by a virtual operator itself into the market place. And we see this as a stepping stone from the current IT environment which is kind of a limited light MVNO platform that those customers will ultimately be interested to step up their act and to move over to our full capability platform.

[Robert Scarff:]

Okay. Thank you.

[Operator:]

Our next question comes from John Nobile with Taglich Partners.

[John Nobile:]

Hi. Good morning. I’d like to know with the Iusacell contract, I know last call you mentioned there were about 1.75 million subscribers. What are the numbers as we speak at this point? I mean how much has that increased from the 1.75?

[Steven van der Velden:]

As I stated before, we took the position as of today based upon the request from our customers to not disclose too many individual numbers and situations per contract. And as you can imagine that with the sensitive situation of AT&T acquiring that business now, we think we certainly should adhere to the requests from Iusacell management to not go into too many details at this moment.

[John Nobile:]

Okay. But could you say that there was an increase in the subscriber base?

[Steven van der Velden:]

Yes. There was an increase, absolutely.

[John Nobile:]

Okay. And you said you’re still on course, so at least from what you said publicly at the last call we could take it to be that what you had said last call you’re kind of on course for doing that?

[Steven van der Velden:]

Yes. We are still on course and we are still planning to migrate larger pockets of Iusacell customers. Of course some of the priorities may have changed, but we believe at the end of the day it’s still the target for Iusacell’s management to get all of their subscribers on to our platform, and we are diligently working to achieve that in the very near future.

[John Nobile:]

Could you talk a little about, you had in the press release it’s a three new MVNO contracts. Could you talk a little bit about that? And what can we expect revenue wise from that in 2015?

[Steven van der Velden:]

Yes. As stated there was a three mobile virtual operator contracts in North America, in the United States. As we indicated we should only expect modest revenues from those customers not because [Technical Difficulty].

[John Nobile:]

Hello - hello.

[Operator:]

It appears we maybe experiencing technical difficulties at this time. One moment please.

[John Nobile:]

Okay. Am I still on? Hello.

[Mark Nije:]

Yes, sir, you are still on. At least we can hear you.

[John Nobile:]

I hope you heard that. I couldn’t hear anything for the comments you made in response to my last question. But actually, another question, if you could quantify the number of subscribers that you currently have with Zain, I imagine that might be -- you don’t put it out there, but if it’s a small base right now using your technology, and how much growth you perceive with Zain in the coming quarters?

[Mark Nije:]

Sorry, sir to interrupt you. This is Mark Nije, CEO of the company. Steven apparently dropped off the line. And I have the idea that a number of other participants in the call dropped off as well. So we’re experiencing some technical difficulties. So, if you could bear with us for a minute it would be appreciated.

[Steven van der Velden:]

No, I’m back here Mark, sorry. Apparently the line dropped for a minute.

[John Nobile:]

Okay.

[Steven van der Velden:]

Could you repeat the last question please?

[John Nobile:]

Okay. The question was, could you quantify the number of subscribers Zain currently has using your technology? And how much growth do you perceive with Zain in the coming quarters?

[Steven van der Velden:]

Yes. Thank you. Well the current number of Zain which is pretty limited, and in line with my earlier remarks we will not disclose individual numbers. But again it’s pretty limited. However we would expect those platforms to be pretty successful. And we believe that Zain has contracted with a couple of substantial grounds that may really expand the business and ultimately it could very well be that the Saudi platform will be one of more successful platforms.

[John Nobile:]

Thank you.

[Operator:]

Our next question comes from [indiscernible] with Private Investor.

[Unidentified Analyst:]

Yes. Hi, Steve. Very good quarter, I’m very happy to hear about the numbers and some of the progressions that you guys made on the business side. Just to follow-up on the last caller’s question regarding that North America three MNOs that you guys have contracted. Can you shed more light into that? I know you said you don’t want to disclose exact number of SIMs. But is there -- first of all, are those three within the United States or North America in terms of United States and Canada? And secondly, if there is a roundabout number of some kind of a picture that you could produce for us in size or scope of this kind of a, the three new contracts that would be grateful?

[Steven van der Velden:]

Yes. Thank you, and good question. Yes, all these three [Technical Difficulty].

[Unidentified Analyst:]

Oh my God. Hello. Hello.

[Operator:]

It appears we’re facing technical difficulties. One moment please. Mr. van der Velden, we cannot hear you at this time.

[Steven van der Velden:]

Our expectations in that domain.

[Unidentified Analyst:]

Steve, I’m not sure if you hear me, but we didn’t hear anything you said at least I didn’t. I’m not sure what's going on.

[Steven van der Velden:]

Can you hear me now? Hello.

[Unidentified Analyst:]

I can hear you. Anybody else on the call can hear us?

[Steven van der Velden:]

Okay. As I stated before the three MVNOs in North America are indeed within the United States focusing on specific segments in the North American market. Each of them could easily have the potential to grow to a 60 to 100,000 customer base. However let’s not be too optimistic about what they might be achieving. Easily one of them could grow into a lot much larger operation, but I think for the time being its better to be a little bit modest in those expectations.

[Unidentified Analyst:]

Thank you.

[Operator:]

Our next question comes from Ed Woo, Ascendiant Capital.

[Edward Woo:]

Yes. Thanks for taking my question. Do you see any impact from foreign currency in this quarter and what are you seeing out there in some of the economies of the world, I mean is that impacting any of your contracts?

[Steven van der Velden:]

Yes. That’s a good question, Ed. Yes actually …

[Mark Nije:]

Steve, you want me to take that?

[Steven van der Velden:]

Yes, please, if you would like to do that Mark. Yes.

[Mark Nije:]

Yes. This is Mark Nije, CFO of the company. We have from a reporting point of view we have certainly an impact on, resulting from exchange rate difference. For instance this particular quarter the euro lost considerable amount of value as compared to the U.S. dollar. And since most of our assets, but also SG&A is euro based, it meant that on a reporting level which is in U.S. dollars substantial changes take place. If you look at the other loss -- other comprehensive loss, you will actually see substantial amounts. It has to be clear that those amounts do not have any cash impact. They’re only reporting numbers and changes. If you look at the business perspective of our company, still a lot of our revenues are also in euros, so its tied out with the -- and tied in with the SG&A that we have as a company with the result that we have a natural hedge there in the currencies. With increase of U.S. dollar revenues at this point in time the U.S. dollars nicely cover the SG&A that we have in U.S. dollars. So, on an actual level of exchange rate effects that affect our cash flows it’s very limited. However from a reporting level you will see a lot of variations in valuations following the discrepancy between the euro based company as we are, versus the reporting that we need to do in U.S. dollars.

[Edward Woo:]

Great. And then I had a slightly different question on ValidSoft. You mentioned that it looked like maybe the opportunities look different now because of some information that the carries cannot provide. What should we think about in terms of opportunity and whether we will start to see increasing revenue from ValidSoft over the next couple of quarters?

[Steven van der Velden:]

Paul, I suppose you take that question.

[Paul Burmester:]

Yes. Thank you, Steven. You’re quite right, it is something of the, a change, but actually it’s an exciting opportunity for us. The original products which were somewhat restricted by access to the mobile operators data presented a challenge on a country-by-country, mobile operator-by-mobile operator basis, and that’s a real scalability challenge for us. In terms of the Voice Biometric engine that we have, that’s something which obviously is going to be applied globally and across multiple markets not just financial services but enterprise, mobile operators et cetera. As it happens that particular topic has become very hot over the last year. We’ve heard some of the major security breaches, and we’ve heard major banks and credit card issuing companies make commitments to releasing biometric usage for their customers over the next year or two. So we think we’re very well placed to address that. And as I mentioned earlier, we are actually in a couple of -- proof of concept for us now both in the financial services sector and also in the enterprise sector which is a very exciting sort of new market opportunity for us.

[Edward Woo:]

Great. Thank you and good luck.

[Paul Burmester:]

Thank you very much.

[Operator:]

Our next question comes from Joe Peters, private investor.

[Joe Peters:]

Steven, thank you for taking the call. I appreciate it. I’ve got a question in regards to the Iusacell and the SIM migrations. Based upon the 10Q from yesterday, it states that the two major customers ETAK being about 45% and a 40% revenue. I just want to ask, strategically going forward you say there is going to be limited transparency regarding that since making the announcements to the shareholders. With just some recollection, previously we have been told that there was a migration scheduled 2.5 million since first and foremost in the 60 to 90 day range, and then subsequently a four to six week range. Can we kind of assume that these migrations have not taken place in these two timeframes? And subsequently do you think that maybe was a mistake to have put those numbers out there with the timelines in the past?

[Steven van der Velden:]

All right. Thank you. Well, first of all regarding the concentration disclosures. Yes, of course we will keep disclosures in our Qs and our Ks if that’s a requirement and the percentages of around 40% of the two main markets is probably going to be like that although we expect those two countries to become over time less dominant in our revenue mix, but definitely we hope that those countries will stay around as being a very important contributor to our overall revenues. With respect to the migrations as Isuacell has stated before, we are definitely on track to reach the levels that we have communicated earlier. It’s just driven by being very prudent to watch our customers about the customer’s needs and the quality that can be provided to their end users. And with that respect migrations are complex of many moving elements, and we believe that what is most important is that on the long run those customers will be on our platforms and today there is no reason whatsoever to assume that that would not be the case. So as stated before we are on track and we are working diligently to migrate all these customers and we will for sure communicate levels of total subscribers on our platforms in the near future. But as indicated we will do that on a more of an aggregated basis next to the concentration numbers in our Qs and Ks.

[Joe Peters:]

Okay. And just as a follow-up and I guess, what point in time with the AT&T and Isuacell -- will ETAK stay in this for hypothetically? I understand you probably can’t deal it in hypothetical, but I got to ask anyways, if AT&T were to come in and say 18 months from now decide to choose a separate platform other than ETAK. What is ETAK’s contract wise? What's our protection for something like that happening? Is there still payments that are going to be made to ETAK from say AT&T for the remaining three and half years or whatever maybe left of the initial contract?

[Steven van der Velden:]

Yes. Of course a relevant question, but in line with what I said earlier it think it’s not very prudent to go into those details. As you indicated yourself, that is pure speculative. And the organization is working closely with Iusacell and we also have contracts with AT&T to see how we can serve them in the future. And I suggest that we leave these questions for the future. We believe we have a solid contract, so from that perspective legally we are in a good position. However at the end of the day a customer should be happy to be serviced by you to have long-term value for all parties involved. And I think lets give it some time to discuss these matters with the relevant parties and then hopefully in the future we can draw conclusions in that. But as I said before we are very optimistic that we provide very good service, and especially in light of the fact that for example, through the acquisitions, [indiscernible] acquisitions of AT&T. AT&T is also more focused on other countries and Latin American, and actually it may help an upgrade opportunity for AT&T working with us in Mexico to expand our base to other countries. So, yes you should always keep your eyes opened for any scenario, but for the time being I would put my bets on an expansion scenario instead of a limitation scenario.

[Joe Peters:]

Great. Thank you.

[Operator:]

Our next question comes from Stan Berenshteyn with Sidoti & Company.

[Stan Berenshteyn:]

Yes. I just wanted to do a quick follow-up with Mark regarding the debt refinancing. Can you maybe give us an idea of what kind of interest expense can we expect going forward?

[Mark Nije:]

Yes, sure. Thanks for asking. Yes, as we disclosed in the 10Q it’s a 10% interest rate with an added LIBOR amount. And the way that the deal is structured is that, the amortizations will start to kick in, in 2016 and will be increased and stepped up in 2017 up till the, 1 of January, 2016 we will be paying months interest amounts.

[Stan Berenshteyn:]

Okay. Thank you.

[Operator:]

Our next question comes from Greg Harrison, Private Investor.

[Greg Harrison:]

Yes, Steve, thank you for all the work you do. The question I have, you’re getting $12 million from the loan and I’m wondering can that be, or would you all use that to pay off any other small debt and consolidate so that it would be possible for the company to say that, the debt is in fact the $12 million loan. I think there’s a three plus million dollar loan with your company from some source. Could that money be used to pay them off and then you had a real standalone debt, $12 million.

[Steven van der Velden:]

Yes. Thanks for the question. Maybe Mark you can just answer that. But in general I need to say that, we have outside the current $12 million loan hardly any other debts on the balance sheet. As Mark pointed out we extinguished an around $600,000 debt in Q3, and mostly we are completely refinanced by this $12 million. But Mark maybe you can add some color to this?

[Greg Harrison:]

Mark that answers the question for me. But go ahead.

[Mark Nije:]

Well if it’s answered.

[Greg Harrison:]

That pays off. Now perhaps …

[Mark Nije:]

I can just confirm, maybe to just give you a brief number is that, the gross proceeds were $12 million of debt facility and we had an outstanding convertible of around $6 million in our books, half of that is going to be converted in the remainder part around $3 million is going to repaid out of the $12 million which means that including the extinguishment of the debt Steve talked about that really the only debt amount in the balance sheet will remain the $12 million.

[Greg Harrison:]

Okay. I like that. It’s real clean to look at. And then the last question is this, I appreciate the confidentiality on SIM card loadings per customer. But from time to time with the company let inform the shareholders that we now have about $4 million SIMs et cetera in the future without identifying who migrated.

[Steven van der Velden:]

Yes, I mean again as we stated, we will report aggregate numbers of SIMs in the future. On top of that we will have the concentration paragraph in our Qs and Ks identifying from which customers or the market which percentage of revenue came. And as it was pointed out earlier, some 85% did come from two customers. So that can already give you quite some guidance what kind of revenue levels are being achieved in Mexico as well next to Spain and in future hopefully we believe that as I said before that the percentage of such will get lower in the total revenue mix but that we will still see increasing revenue numbers on a per country basis. And due to the effect of the overall increased revenues of course the percentages may go down.

[Greg Harrison:]

All right. Thank you.

[Steven van der Velden:]

You are welcome.

[Operator:]

Our next question comes from Robert Scarff, Private Investor.

[Robert Scarff:]

Hi, Steven. A follow up on the whole concentration question that you graciously answered. Our existing customers should substantially increase in SIM count and revenue base, so if our concentration is to go down that means there’s massive customers that are somewhere in the pipeline, and I know you can't give names. But the only way for concentration to go down based on the growth of the Iusacell and maybe Vodafone this was some really big customers to be coming in and I know you wouldn’t be Zain concentration is going down unless you have confidence. Can you speak to that a little bit?

[Steven van der Velden:]

Yes, surely, I mean, as I stated we of course our revenue base to go up, and the whole mathematics is simply that we expect our overall revenue base to increase faster than the individual pockets of these concentrated customers. If you take into account a country like Saudi Arabia, the opportunities in North America that we just referred to. The opportunity – the additional opportunities for ValidSoft, additional business in the Netherlands, we definitely expect that our overall revenue base will grow somewhat faster than the revenue increases in both Mexico and Spain and thereby ultimately reducing the concentration percentage but at the same time improving the absolute numbers in revenues.

[Robert Scarff:]

Right. But Mexico and Spain combined are going to double in the foreseeable future?

[Steven van der Velden:]

Yes, but possibly other businesses are growing as well and at the end of the day as we discussed earlier I think in a conference call a couple of sessions ago then of course the more customers you serve in a particular geography the sliding skill that determines which monies [ph] you will get per additional customer will go down. So the average revenues will go down even though the absolute numbers will go up. And if we can start drilling in newer countries where we are still earlier in this sliding skill of pricing will have a positive effect on those percentages going up.

[Robert Scarff:]

Okay. But its still -- the math still points to revenues tripling now in the next 12 to 18 months for concentration to go down?

[Steven van der Velden:]

Let’s wait and see how revenues will develop. But I think tripling is kind of aggressive in that timeframe, but we certainly feel comfortable that the revenue base will substantially grow.

[Robert Scarff:]

Okay. Thank you.

[Steven van der Velden:]

You are welcome.

[Operator:]

It appears we have no further questions in the queue at this time. I’d like to turn the conference back over to Mr. van der Velden for any additional or closing remarks.

[Steven van der Velden:]

Thank you. Again on behalf of everyone at Elephant Talk Communications and ValidSoft, I would like to thank everyone for joining us on today’s call, and thank you to all of our long-term shareholders for their patience and commitment to the company. We look forward to providing additional updates on future developments in the very near future. Thank you and have a great day.

[Operator:]

That does conclude today's conference. Thank you for your participation.