Leland Strange - Chairman, CEO & President.

Sam Rebotsky - Analyst.

Ladies and gentlemen, my name is Lance, and I will be your operator for today's conference. At this time, I would like to welcome everyone to the earnings release and investor's conference call. [Operator Instruction] I would like to turn the call over to Leland Strange. You may begin your conference..

First, maintenance and support. Yes, this is recurring and goes on as long as they are in business and they use our software. The second thing they pay for is professional services. We call these PSAs, which stands for professional service agreements. There are no long-term contracts in this.

This revenue is usually higher initially for a licensing customer, and a large part of our current revenue, talk about this quarter and even in the last couple of quarters, is coming from a newly licensed customer. This is likely to go down from a new customer, but the revenue is likely to be replaced by another customer.

So virtually, all licensed customers end up utilizing our resources for customizing or helping them to solve their needs or their customer needs. Remember, our customers are usually processing for their customers.

And after a year or so, a pattern gets established and we can usually budget the amount as regularly or recurring revenue so we know – because we come to know what they're going to need on an ongoing basis. So all the recurring revenue that comes from a licensed customer comes from the utilization of our personnel.

It's nicely profitable, because we invested in the workforce and have highly skilled resources that know the financial technology business as well as know our software. We expect to actually record some revenues in the fourth quarter for the use of the software. In other words, license revenue that does not have any significant expense against it.

And if our customers do what their plans project they will do, we should get another license revenue pop another – again, that pop is not a good accounting term, but we should get another license revenue pop in the first or second quarter.

Issuer software is also used managed loans, either those that are sourced through the network – and that's Visa, Mastercard, Discover, et cetera – or what is called “closed loop,” meaning private label.

And we have licensed customers using it strictly for loans, I will say complex loans or with complex terms, and we also have our integrated collection package that goes along with it. So several third-party prepaid processors have licensed our software to offer processing to third parties. It's not just credit.

I guess, don't get me started because I could talk about using for debit, stock trading, insurance or a myriad of other ways. And you can see why and how I got the micro cap analyst confused when I tried to really explain what all it can do. But that's the issuer software that's used for licensing.

Now I'm going to break the business down for the next part and talk about "how we did in it?" The other main leg of the business is hosting processing, using the same kind of products I just described. This would be what is traditionally called “processing,” similar to what TSYS and First Data provide for their issuing business.

And don't get this confused with their acquiring business because they have acquiring business also, and that is merchant acquiring. First Data’s heavy in this and pushes it all through to merchant point of sale terminals.

Remember, we work from the issuing bank side, the one who provides the credit or card or loan or check or prepaid account, not for the merchant-acquiring side that accepts the card for purchase. The merchant sends the request for authorization to the issuing side, and our software takes care of that.

As an aside, we could do the acquiring also with our software, the way it’s architected, but is not really our current strength, so we're not pursuing that. So processing is recurring revenue in the traditional sense, and processing customers made up about 33% of our revenue.

And when I say made it up, that also included some professional service revenue, along with the actual per-transaction revenue that we get from processing. Also, there's actually some passive, ghosts or phantom revenue in this – and by the way, those are not accounting terms either.

But in revenue guidance requires us to include pass-through and interchange fees in our revenue. So I'm guessing that of our, let's say, $19 million to $20 million in revenue this year, maybe as much as $1 million will be of this type that we’re required to keep up in – at the top line as revenue.

So that's the two sides of the business, licensing and as I said, that represented 64% of the revenue for the current quarter and processing, which represented about 33% in the third quarter. And I guess, that still leaves two things that are unexplained from that earlier mentioned call with the microcap analyst.

And that is why do customers choose us? Well, you have got to ask your customers to say why they choose us and asking them generally, they say it’s the overall power and flexibility of the software. There is no one thing or one feature. And then, secondly, our team is very, very good and impressive. And then third comes up, we can move fast.

So tends to be what customer tells me is why they ended up choosing us. Again, the power of the software – power and flexibility; the team that knows what they're doing, both in terms of the business as well as the software; and finally, the speed at which we can move.

And then, the last question they asked was, is it sustainable? I think I can say about that is I think so. And I believe that we can continue to grow for a very long time. Can't prove it, but the future looks bright. So I think I'm going to stop there given that I've done the 20 minutes I usually talk and open it up for questions.

Operator, if you can see if anybody has any questions?.

[Operator Instructions]. Your first question comes from the line of Abbie Fisher..

Hi, thank you for those details..

Sure..

Why now? Why are you suddenly growing now?.

You've got – we ended up with, one, a very large customer that helped. We’d be growing without that large customer, but the significant growth took place because we ended up with a large customer. I think if you read the q, you'll find when we talk what percentage of our revenue is pretty high for the quarter..

You’ve been at this for a long time. And it’s as if you are now the outsourced arm to a lending organization as their card issuer processing system..

What's your question?.

It just seems like you are now their outsourced arm in their card issuer processing system. It's quite amazing..

No. We’ve licensed them our software to be a processor. We’ve licensed them our software, so they can become a processor..

Thank you, that’s all for me..

Your next question comes from the line of Sam Rebotsky..

Good morning, Leland. The presentation was unbelievable. Your explanation if anybody didn't understand what you are doing, they clearly, having listened to you should understand now. And the – you've indicated in the q this new customer that you got in October of 2018.

Do you have more than one new launch customer, the size of your customers that you would consider now?.

Well, I'm going to say, one has been very large. And we have other large customers standing in the wings. In fact, we’ve had to postpone some work for some other folks in order to satisfy the requirements for this particular large customer. And some of them are not real happy right now.

But you'll note that I’ve said several times that I suspect the revenue will go down from the largest customers but it will be replaced by someone else, that's because we do have other people are lined up, which is what gives me a lot of confidence on our next year. And there is really no reason that shouldn’t continue over time.

As with a lot of companies, you have to kind of get through certain levels to get the confidence of the next – next level sized customer. And we have been doing that and frankly, it was an intentional plan.

We, normally – you've heard me say, we normally would not take on a customer that we felt it was too big, because we wanted to do this brick-by-brick, step-by-step. And, there was presented to us an opportunity that we had to do a lot of soul searching to determine whether we’d be able to successfully implement for this customer, given their demands.

And we did that and we decided that we could do it and we are doing it. We're executing well. But – so I guess, to answer to your question, yes, there is one that's been fairly dominant, but there’s others too that are – they’re big companies, and they can be big customers..

And also it seemed positive that you – that Matt White has joined you with CoreCard to sort of handle this further, and expand this operation.

Could you sort of indicate what his background was prior to joining CoreCard?.

Yes, yes. I can. I probably don't – I don't have his resume in front of me, but the key component is that he was with Deloitte [Deloitte, right?] for about six years. So, in their audit practice. And, so had a lot of experience with a variety of sized companies there.

He has worked with Humana, has most recently worked with Equifax for a good number of years, both in the SEC and in the accounting side. So we certainly need to again, given the growth, we need to continue to do things here on the accounting and financial front..

And then your stock has been strong even though it backed off.

Is there any thoughts – have people come to you to tell you story more? You sort of explained it very well in your 20 minutes, but do you have any time or any thoughts of getting more exposure to the investment community?.

We're not going to actively seek to do that in the next two, three months. And again, you have been a shareholder for a good while, and I always say let your numbers do your talking, rather than just talk. So we want to get our year behind us and even show a good first quarter and then maybe we’ll do that.

But perhaps, those that just find us should be the lucky ones, rather than the ones we go out to find. Stock prices for us, is just something that happens eventually. We’re just going to run the business and run it right, and everything else takes care of itself..

It’s wonderful, Leland. Thank you, and keep doing what you’re doing..

Okay, thanks..

[Operator Instructions]. There are no question at the moment. Presenter, please continue..

All right. Well, I just thank you for taking the time to join the call. I'll remind you to read the [Q] that we filed this morning to learn more about risk and get more information about us. And, also that our website should include a transcript of this call by tomorrow. So again, thanks everyone and have a good day..

Thank you for joining. This concludes today's conference call. You may now disconnect..