Intellicheck, Inc.

Greetings and welcome to the IntelliJack Q2 2021 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the form and presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Gar Jackson, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and thank you for joining us today for the IntelliCheck second quarter 2021 earnings call. Before we get started, I will take a few minutes to read the forward-looking statement. Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. When used in this conference call, words such as will, believe, expect, anticipate, encourage, and similar expressions as they relate to the company or its management, as well as assumptions made by and information currently available to the company's management, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs about future events. As 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 of the securities and and Exchange Commission. Statements made on today's call are as of today, August 3rd, 2021. Management will use the financial term adjusted EBITDA on 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'll begin today's call with Brian Lewis, IntelliCheck's Chief Executive Officer, and then Bill White, IntelliCheck's Chief Financial Officer, who will discuss the Q2 financial results. Following their prepared remarks, we will take questions from our analysts and institutional investors. Today's call will be limited to one hour, and I will now turn the call over to Brian.

Thank you, Gar, and I welcome everyone to the 2021 second quarter IntelliCheck earnings call. As you saw in the press release, it was a productive quarter driven by reopening and new client onboarding. Contributing to our progress are the steps we have taken towards increasing the size of the sales team, raising awareness of the company, thereby increasing inbound leads, and the advancements we have achieved in rounding out the IntelliCheck platform to provide many more risk insights for our clients. In addition, we are in the process of revamping our pricing model to increase prices upon renewals. I will touch on these things during my prepared remarks, but first I'll highlight some of the key financials from the press release. Total revenues for the quarter were just shy of $4.8 million. SAS revenue was just over $3.2 million. That was a SAS increase of 16% over Q1 and a 93% increase year over year. We delivered half of the hardware order that we discussed on our last call for the Teller Workstations for financial services company number three during the second quarter. We had a net loss for the quarter of $738,000 and adjusted EBITDA of negative $46,000. The loss is primarily due to our investment in headcount for sales and development teams, in addition to marketing spend to drive our growth initiatives. Same store volumes continue to improve, but while they are on the rise, they are still not up to pre-pandemic levels. As I said on the last call, in April, we were down 10% to 15% from April of 2019, depending on the retailer. For the second quarter, that improved to down 10% overall for the full quarter versus 2019, with improvements each month. I am pleased to say that the digital side of our business continues to increase each month with an increase in digital transaction volumes of 484% over the past 12 months. This is probably undercounting as some of our clients use our API for both physical and digital transactions, and they look the same to us. So currently, on a conservative basis, digital transactions represent about 6% of all non-age-regulated transactions. Turning to a few of the major financial services clients and what they added during the quarter, we're seeing continued growth in our partnerships. Financial services company number one has an extensive client base of merchants they provide credit cards for. Many are small chains or single stores that sell expensive merchandise like jewelry. These are bank-branded cards, and the retailer is not the one on the hook for fraud. So our no-integration solutions on a handheld device or a web portal are the perfect and economical ways to stop the retailer's fraud losses both quickly and efficiently. This network is over 14,000 merchants nationwide, and we've begun joint marketing efforts with Number One to introduce our solution to each of these merchants. Financial services company number three completed the rollout of phase one for a national home improvement chain that is initially implementing us at the self-checkout point-of-sale system. They are continuing to work to bring live the other POS systems, the assisted checkout, customer service, and commercial checkout. As mentioned, they also took delivery of the first half of the hardware order for the teleworkstation scanners. You may recall that they put these scanners in place so that we can validate passports in addition to driver's licenses and state IDs. We anticipate that the second half of the order will be equally split between Q3 and Q4. Installation is currently underway, and they anticipate a Q4 rollout. Financial services company number four has completed the in-store rollout of the Midwest Home Improvement Chain and is expecting to go live with the digital channel for that and two other retailers this quarter. They continue to find new use cases for authentication. In order to prevent account takeover, if on the web or in their app you change PII or privacy settings, they will ask you to validate yourself. Financial services company number eight completed the rollout of our services into their online applications process and are continuing to build into their mobile app with expected delivery in early Q4. Outside of our core financial institutions, we brought a Baltimore-based credit union live in June. They wanted to stop fraud immediately, so they're using two of our no-integration products to validate IDs for new account openings and all new loan applications. They are now looking at our APIs to work on integration to their core teller system to use our platform for all teller line transactions. We're also pleased with the execution of another element of our strategic plan. We signed deals with several interesting software providers to enable them to use our technology inside their applications as resellers. The first is a provider of loan origination and servicing software. They have already identified their first client and are expecting to take them live near the end of the quarter. The second provides software to help customers apply for credit online or at in-store kiosks for multiple credit providers. Development is ongoing with this reseller. While I'm not certain of the transaction volumes either of these resellers may deliver, it shows that we are making good on our plan to extend the reach of the sales force through channel partners. As you can see, we've been pretty busy and we believe we will continue this pace. Our optimism is based on what I touched on earlier, our commitment to take the critical steps that are key to continuing this trajectory. Our investment in the sales team is paying off and we continue to expand the team with the addition of another senior salesperson during the quarter, with more hiring in the pipeline. As I have said before, given the amount of opportunities we see, we will continue to hire salespeople as fast as Bruce feels he can effectively train them. Given what I'm seeing from the growth of a very realistic pipeline, the hiring is working and I want Bruce to keep it up. Marketing is also having an impact on a number of qualified sales leads that have increased six-fold over Q1. While many of these leads are in the age-regulated space, the rest show that the awareness of IntelliCheck is increasing, and some are from potentially large clients as well as significant channel partners. The nice thing about the age-regulated clients is they are quick to close and are highly profitable, especially under our new pricing model. In the age-regulated space, it accounts for approximately 6% of our SaaS revenue. Under the new price model, we are earning an average five times as much. So I like this type of client with a low cost of acquisition. I would say that as impressive as the marketing initiative has been so far, we believe it is only in second gear. I mentioned the new pricing model, and we view this as another important element in our continued success. Clients generally have an idea of how many transactions they will do in a year, and they certainly do at renewal time. For new contracts and renewals, clients commit to a set number of transactions per year. The more they commit to, the lower the cost. The farther in advance they prepay will also lower their cost per transaction. If they lowball the transactions and run out, they can continue to pay at the higher price and commit to a new contract at a higher transaction volume. This has been well received by our clients even as we raise fees at renewal. So far, all renewals have been at higher rates, which again we believe shows the value our clients place in the certainty our platform provides. We continue to expand the capabilities of our platform. This allows us to expand into the much larger identity market to provide KYC tools to financial services and fintechs. We are working to bundle the products to help the growing number of fintech companies, several who are clients, perform their KYC functions more easily and quickly. We are improving our internal technology so that we can be agnostic when it comes to the services that our clients want us to bundle for them. We plan on working with multiple partners for different services so that our clients can pick the service they think is best, knowing that they are starting with our ID validation tools, which provide the most certainty. We continue to build on our channel partner strategy, including discussions with companies that are often considered competitors, but actually do things entirely different than we do. We feel we can become the best first step for their clients as well. I was recently speaking with a market research analyst, and he said something that really put it in context for me. He said in speaking with a bank client his firm consults with, the client told him that OCR was 60% effective and followed up with, with that, I might as well flip a coin. Through our investment in sales and marketing, people are beginning to understand we are different and that we bring certainty to the transaction as opposed to a coin toss. We believe that our investment in expanding the platform will help us bring that certainty to more markets. I'm excited for Intellitech's future. For that, I will turn it over to Bill to discuss the financials in more detail.

Thank you, Brian, and a good day to our shareholders, guests, and listeners. I'd like to discuss some of the financial information that was contained in our press release for the second quarter ending June 30, 2021. I'll begin with our second quarter results. Quarter-over-quarter SAS revenue grew 93% to $3,234,000 versus $1,671,000 in the prior year. Total revenue for the second quarter ended June 2021 increased 160% to $4,797,000 compared to $1,842,000 in the prior year comparable period. Gross profit as a percentage of revenue was 69.4% for the quarter ended June 30, 2021 compared to 88.6% for the quarter ended June 30, 2020. During the quarter, we sold scanning equipment to a bank that is continuing to roll out our software to their bank branches, which are normally sold at lower margins. Excluding the sales of hardware in both periods on a pro forma basis, gross profit as a percentage of revenue was 93.3% for the quarter ended June 30, 2021, as compared to 89.8% for the quarter ended June 30, 2020. Operating expenses consist of selling G&A and research and development expenses increased by 69%, or $1,665,000 to $4,067,000 for the quarter ended June 30, 2021, versus $2,402,000 for the same quarter in 2020. The increase is primarily due to higher stock-based compensation costs, increased headcount, and expanded research and development efforts. The company posted a net loss of $738,000 for the three months ended June 30, 2021, compared to a net loss of $760,000 for the quarter ended June 30, 2020. The net loss per diluted share was $0.04 versus a net loss per diluted share of $0.05 in the prior year period. Adjusted EBITDA for the quarter ended June 30, 2021 was negative $46,000 compared to a negative EBITDA of $619,000 in the June 30, 2020 quarter. Interest and other income were negligible for the quarter ended June 30, 2021 and 2020. I'd now like to focus on the company's liquidity and capital resources. As of June 30, 2021, the company had net cash of $11.9 million, working capital defined as current assets minus current liabilities of $13.3 million, total assets of $25.4 million, and stockholders' equity of $22.1 million. During the six-month ended June 30, 2021, the company used net cash of $1.2 million compared to net cash provided of $11.2 million during the six-month period June 30, 2020. Net cash used in operating activities was $1,076,000 for the six-month period ended June 30, 2021, compared to $262,000 for the same period in 2020. Net cash used in investing activities was $182,000 for the six-month period six months of 2021 compared to net cash use of $110,000 for the six-month period ended June 30, 2020. And we generated $77,000 from financing activities for the six-month period ended June 30, 2021 compared to $11.6 million for the same period in 2020. The company has a $2 million revolving credit facility with Citibank that is secured by collateral accounts. There are no amounts outstanding under this facility. We currently anticipate that our available cash, as well as expected cash from operations, will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. As of December 31, 2020, the company had net operating loss carry-forwards of $17 million. I'll now turn the call over to the operator to take your questions. Operator?

At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before asking your question. One moment while we poll for questions. Your first question comes from Mike Gondal with Northland Securities. Please state your question.

Hey, Brian and Bill, congrats on the quarter, and especially the 93% SaaS growth year over year. Is there any way you can at least roughly break that down between maybe new accounts, existing accounts, and price increases, just to kind of give us a flavor of the drivers?

I'm going to say the majority is going to be from new usage at existing and adding in new clients because our larger contracts are coming up for renewal now. The two main ones with number four and number three are now and at the end of the year. I'd say that a small but significant portion, I guess as a percentage of what it was in the age-restricted space, but it's still a small portion of the revenues. So I'm going to say that most of it, a good chunk of it, are the firms that we have brought on over the course of the pandemic that weren't really producing at the level of a normal world. And then, you know, the rest is going to be new clients. But off the top of my head, I don't have the specific breakdown of that.

Got it. Got it. And implementations, did they bounce back in 2Q? And kind of what does the backlog look like for new implementation?

Sure, Bill. You just looked up those numbers since you were just talking about it right before the call.

Yeah, implementations completed through the end of July were 19, and there's about 40 in backlog.

Got it. And, Bill, would you expect those 40 to get implemented this year still?

We're hoping. You know, some of the – some of the holdup would be, you know, on the, on the customer side, Mike, and how, how fast they can move from an IT perspective. But, you know, we're moving in that direction. We're doing everything we can to get it implemented.

Right. And some of them are retailers and other things like that. So it's, you know, then they've got to get out and get it to their clients and things. But, you know, generally, you know, again, retailers, they'll tend to lock down anything in Q4 and, in terms of touching their point of sale system. You know, they don't go much past mid-October. But the good thing is in the sort of the expanded world we're selling to, and particularly with retailers, and then also banks doing for their own sort of teller workstations and other things, they don't have the same restrictions or fears about touching their point of sale system during the holiday season.

Got it. Great. Well, hey, nice to see the SaaS growth again. Thanks, guys.

Thank you. Thanks.

Your next question is from Jeff Vandry with Craig Hallam. Please go ahead.

Great. Thanks for taking my questions, guys. Just a couple for me. On the pipeline question, I might have missed it or the comment in the prepared script. I think you said leads were up 6x, and you were commenting a little bit on the pipeline. Just to be clear, was that the quantity of leads or the overall value of the leads? And then just maybe a little more while you're on pipeline, talk about exactly how the makeup of that pipeline is morphing here.

Yeah, so that was overall leads coming in, you know, so SQLs. And, you know, I wanted to be clear, and just if it wasn't, the majority of them are coming from age-restricted product sales, which we have dramatically increased the pricing of. And we find that, you know, very, very profitable business because the transaction costs are pretty high. And I like it because it's quick business, turns over quickly, you know, cost of sale isn't that expensive. We did also, and what I'm happy to see is we're seeing a lot more, you know, potential resellers and large clients finding us. And in the past they couldn't. So there's some very interesting prospects we're talking to right now to talk, you know, to put our product in their stuff for either age verification or, you know, AML KYC stuff for, loan origination and those types of things. So predominantly lower revenue, but quick sales, and then some really good large ones. So I'd say the marketing is working.

Yeah, great. And then on the leadership front, obviously you added Garrett and Bruce, and you've been broadening things out. But specifically with Bruce, since his arrival, maybe spend a minute on the sales front. You know, just where are you in terms of headcount additions? I think you referenced one additional in the quarter, but just goals for the end of the year and maybe a little more color about what's changing in the sales org sales structure.

Yeah, so we're up to 10 people in the sales organization. I think that, you know, there are a number of things that have changed. You know, we've got, you know, proper CRM in. I think Bruce is doing a great job of training the people. He brought a lot of identity knowledge to the table. One of the other things about the pandemic is it's easy for us to now hire anywhere. Long Island's a great spot, but where we were at made it difficult to hire people. Now we're getting talent from anywhere. I think the big change is probably Bruce's management and training style. I've got a super motivated team. The compensation plan, if they bring in the revenue we expect them to, given the margins that we have, they can He's very well compensated for it. So we've got a really good, competitive, hungry team out there with what I think is really good sales leadership.

And one last for me, if I could, that on the distribution front, I think you talked about and some new avenues that you're going down. Are there any explicit goals you've established in terms of what you want these partnerships or new partnerships to represent as a percent of revenue? Or just give us a sense of the magnitude of what you're working on there.

Well, I think that it could represent a significant portion of revenue. You know, you look at a lot of our OCR competition, a lot of them are basically Intel insides. And we can and should be doing the same thing. I think it's a wonderful way to expand the sales force because there are a lot of products out there that have authentication tools built into them. We never spend a lot of time talking to those folks because nobody had ever heard of us. But now that we're being mentioned more in trade research journals and some of the papers put out by the likes of ITE and Gartner and Javelin and other things, We're getting to be known. And as soon as we get talking to somebody and we talk about certainty and we talk about the fact that we're way better than a coin flip, they begin to get why we're different and know they need to take a look at us. So given how accurate we are and how much easier we are for the end consumer, because you don't have to take a photo of a shiny license to make it work, these resellers seem rather interested in it. So Bruce's team, they all have hard targets on particular resellers we want them going after, and they're going to be monitored very carefully on how well we're reaching those goals. But I do think it could become a significant portion of revenue. Because if you think about it, in effect, the banks are resellers because they're the ones really selling the retailers. So we know the model works. We just need to expand the resellers that we're talking to.

Yeah, yeah, it's definitely worked. Bill, one last one on the model, just expense growth. I think you had talked about 25 to 30. Just any updates there on how to think about expense growth?

Yeah, I think it was 25 to 35, and obviously we're outpacing that. I think if we're, you know, modeling out through the end of the year, you know, taking a four to four and a half million a quarter OPEX is probably more accurate.

Okay, fair enough. Thanks so much, guys. Thank you.

Your next question is from Scott Fox with B-Rally. Please state your question.

Hey, good afternoon, guys. On the gross margin on the SAS at 93.3, Brian, how much of that is, you know, maybe some of those pricing changes that you guys have implemented versus just, you know, higher volumes in the quarter, obviously, versus a year ago? I think the majority right now would be the volumes. Volumes. Okay, that's helpful. And then I'm curious, with some of the new hires you've made on the sales side, what's kind of the typical ramp-up period for those folks to really get their feet under them and start to make a meaningful contribution?

I think a good salesperson is going to get a little bit of luck and a little bit of skill over time. We've had Some of our new people have already closed some smaller deals. You know, the bigger deals take a little bit more time. And to really fully understand it, I would say, you know, three to four months. If you're not seeing productivity out of a salesperson, then maybe they're not right for the fit for that particular type of sale. So I think that's pretty much what we're kind of looking at. But so far, I would say that they're all coming up to speed. a lot quicker than I anticipated. They really spent a lot of time working with each other to bring each other up to speed. So it's a really, really tight team that knows they all succeed when they each succeed. So the help is amazing that they're giving each other.

Okay, that's good color. And last one for me, you guys talked a little bit about increasing investment on the R&D side. Is there anything that you could be doing inorganically, you know, make sense to go out and acquire the technology rather than try to build it yourself?

Well, for a lot of things we do. I'm not a fan of reinventing the wheel. But, you know, part of what we're doing is a lot of it we're sort of redoing the back end, if you will, so it's easier for us to plug and play with, you know, maybe other providers of services that people want us to bundle in. And then on the other side, make it easier for our clients to plug and play into us and pick which one of those service providers they want so that they can build their own in their mind, best of breed, you know, authentication service. So it's really a lot of retooling where it looks like something that it's going to be just a project with a beginning, a middle and an end. We're certainly using outsource for that so that when that project is done, We don't have that headcount that was better used one-off. So we're being pretty smart about how we do it. And, again, if it's something we can get or buy, we do it. It's the same way that I've said this for a long time. In the whole facial recognition world, I first thought, okay, maybe we need to build that. And then there's so many of them selling it, why bother? It's better to do that through partnerships. And that's how we look at everything in the whole development stock and queue.

Great. Makes sense, guys. I appreciate the time. Thank you. Thank you.

Your next question comes from Rudy Kessinger with DA Davidson. Please state your question.

Hey, guys. Great. Thanks for taking my questions. I want to sort of back to the pricing. I think you had said with the age-restricted stuff, I think the new pricing model I think you said it was a five-fold increase. Correct me if I'm wrong there. But, you know, with respect to financial services customers, three and four, I think you said three. One of them is coming up, I think, this quarter, the other one end of the year. Just can you help us put any bounds around the kind of expected price increase you see with those two?

We haven't begun really on four, so I can't tell you that. I mean, and I will say that everything is going up. And, you know, And with number three, we're down now to just some minor legal nits is the way I would look at it. But they're prepared to sign a multi-year deal, three-year deal, guaranteeing a significant amount of transactions a year and prepaying for that full year. And then they also are anticipating that probably their volumes will go up. That's that whole model of prepay, commit, and we're still getting price increases. They're going to vary across the board given where they started. Again, the older the contract, in my opinion, the less value we were getting for it. Some of these much older contracts were at rates I wouldn't even thought of signing deals. Over time, we've been increasing it. The later the contract was signed, the more close to what I'd say, you know, real market pricing it is. So it's the much older contracts where we're going to see probably significant increases in pricing.

Got it. And then last quarter, you had talked about the 25 NDAs you had signed through the end of April. I'm curious if that's, you know, are you able to share how many NDAs you signed this quarter? And then You know, on those 25 you signed, you know, what's the typical duration from NDA signing to contract signing? And obviously they aren't all going to go through, but, and then maybe, you know, is there anything you can share with how many of those have actually turned into signed contracts to date?

I'd say that a lot of the ones that were for some of the, like the resellers that I talked about, those were examples. um there are some that you know we're in in contract negotiation with now i don't know the single one uh that has not that has said no it's not working out uh some of them might be timing issues of when we can get around to maybe doing some development we need to connect to them all of them i think are still active or closed or in contract negotiation and

bill you probably have an idea of how many we signed this quarter because i know you're busy busy doing them yeah well actually we signed uh 22 in july uh alone brian yeah oh uh wow uh got it um and then just lastly um you know i certainly the partners resellers sounds like you're making decent early early progress there i'm curious with with you know, some of these companies who people would traditionally think of as competitors, have you seen any awareness from them or maybe any changes in behavior? I guess maybe one of two aspects, either in them being more open to potentially partner with you guys in the awareness front or maybe them seeing you as more of a competitor than they have in the past and maybe changing their stance or trying to change how they're doing things.

I'd say at this point in time, it's more how do we partner. They understand we do something very, very different that could be beneficial to their clients. So we haven't seen anything that's become more competitive. Because, again, to consider them competitors, we do something so different. At the end, we're all trying to figure out, you know, is the person really real? But we go about it in such a completely different manner that it's hard to say that it's competition.

I got it. It's very helpful. That's it for me. Thanks, Jess. Thank you.

Thanks, Rudy.

Your next question comes from Roger Liddell with Clear Harbor Asset Management. Please state your question.

Thank you, operator and Brian and Bill. Good afternoon. Great report. Thank you. I wanted to get a little texture on the age-restricted. Is the acceleration you're seeing here a function of cannabis? And if so, hold our hands a little bit on the sustainability of that, or maybe it's ready to blow right through the ceiling. Or are we really speaking of the tobacco and alcohol, the conventional stuff?

I'd say right now the majority of it is alcohol. So alcohol, alcohol delivery. We certainly see cannabis business. We've got a pretty good business already. I think the better way for us to get into cannabis is, you know, some of the some of the resellers and partners that we're talking to are, you know, providers of the inventory and point of sale systems for cannabis stores. But what we're seeing, because there's certainly some interesting laws about advertising to cannabis people. You've got to be careful how you go about that on social media. So it's much easier for us to target the traditional alcohol and tobacco. And tobacco has by far been the largest amounts of lead in the age-regulated space.

Is vaping significant in any way?

You know, it was for a while, in a way, pre-COVID when there was so much in the press about it, but it really has died down so much. I'm not quite sure that there's a lot of enforcement happening in that area, but there certainly is a lot of enforcement in the alcohol space. And, you know, one of our things is certainly having so many law enforcement agencies that, you know, use our product to go out and do enforcement, they're probably some of our best salespeople because the first thing the bar owner asks is, like, what are you using? And we know in some places if they'll give them a warning, some of our law enforcement clients tell us they give them a warning if they put in our product because then they know that they're going to be actively checking and keeping kids out. So it's almost like an incentive for them to do it. So it's, you know, I think a combination of a lot of factors there, but certainly alcohol gets more enforcement, I think, than anything else.

Okay. Just a little clarification from Bill. You mentioned the, was it 22 implementations you signed in? July alone? Is that a spike or could this be a run rate indicator?

Those were NDAs, Roger.

Fully executed NDAs in July. Okay. Conversion rates from NVA, I think it's NDA. It's almost a one-for-one, but tell me.

Sorry, go ahead, Bill. Oh, I was just going to say we have a high conversion rate, Roger. I don't know that we've ever said publicly what the percentage of conversion rate is. Brian, have we?

No. I mean, it's a good thing. We can start tracking it and talking about it. But like I said, of any of the NDAs so far that we've signed this year, I can't off the top of my head, you know, maybe there's a couple where we just decided there wasn't a fit. But off the top of my head, I can't recall any where they said, no, this doesn't work for us. You know, some have signed and some are, you know, in technical discussions because, okay, how do we now connect to you? Those types of things. So I'm pleased with it for sure.

Final question is, and I hope you can give some texture because I think it's important for us to understand It's on the policies and practices of sharing the fraud losses or one side or the other being the bag holder on fraud losses. Are the old practices of banks and financial service institutions continuing in this fraud challenged era and what about incentives like if you install idn's suite then we will eat a proportionally the financial service uh eat a proportionately larger amount of the fraud losses and working the other way also yeah i'd say um it is for the most part still staying that kind of traditional model where the bank is the one that eats the fraud

but there's oftentimes a split maybe on account lookups or other things like that. So the retailer always has incentive to want to help with the fraud. And then the other thing too is even the retailers that eat none of it, a lot of them are very happy to do it because they know they're going to get more credit cards because it speeds the process up. It's seamless to the end user. And again, they've told us multiple times that, You shop about four times more often in a store where you've got a card with reward points and all that other stuff. So in talking to some of the retailers, they tell us that they have targets every year for the number of credit cards they want on board. So they like the speed and simplicity of our process for it. Now, again, the smaller retailers, they're more at the mercy. And that's why, number one, you know, they'll, they'll let them get instant credit in the store, but it's a branded number one card and the retailer eats all the loss. Now they started slowly introducing us to some of those clients and they snap us up because, you know, you lose a couple of Rolexes a year, you know, a couple of things are going to happen. One, oftentimes the bank will stop working with them because it's just, you know, they don't want to be part of all that kind of fraud. And, and two, it adds up for that retailer. So they're happy to pay for our solution. It's not high volume, but there's a lot of them to sell to. So I think it could add up very quickly. So then I'll also say a third point on that in terms of color. Even though the banks eat the loss, we certainly know that number four, they've taken credit card programs away from other retail i mean other banks because they give them an incentive they'll give them a better program right because number four knows that they're this is going to be a much more profitable account because the fraud goes away so and we've been on sales calls with them you know talking about how easy it is to implement and what they're going to do so that you know number four gets the client so i think some of the smarter guys are realizing that they can use fraud prevention as a sales tool to gain more programs. Okay.

Extremely helpful. Thank you. Yep.

Ladies and gentlemen, we have reached the end of the question and answer session. And I would now like to turn the call back to Mr. Brian Lewis for closing remarks.

Hi. So, I just want to thank everybody for attending the call. I was excited to talk about the quarter. As I said, I'm very excited about the future. And I look forward to the Q3 earnings call and speaking to you all again. So thank you and have a good evening.

That does conclude our conference. Thank you for your participation. You may now disconnect.