Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - IMAGEWARE SYSTEMS INC | iwsy8k_nov142018.htm |
Exhibit 99.1
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
C O R P O R A T E P A R T I C I P A N T S
Wayne Wetherell, Chief
Financial Officer
Jim Miller, Chairman &
Chief Executive Officer
C O N F E R E N C E C A L L P A R T I C I P A N T S WHO ASKED
QUESTIONS
Gregg, Northland
Securities
Harvey Cone, HRK Strategic
Advisory
Jeffrey Link, Invemed
P R E S E N T A T I O N
Operator:
Thank
you and good afternoon everyone. Thank you for participating in
ImageWare Systems Third Quarter Financial Results and Corporate
Update Call to highlight the Company's progress since its last
quarterly update in August.
Joining
us today are ImageWare Systems Chairman and CEO, Jim Miller and the
Company's CFO, Wayne Wetherell. Following their remarks, we'll open
the call for questions.
Any
statements made on this call that are not historical facts are
forward-looking statements as defined in the U.S. Private
Securities Litigation Reform Act of 1995. Words such as anticipate,
believe, estimate, expect, forecast, intend, make, plan, project,
predict, if, should, and will, and similar expressions as they
relate to ImageWare Systems Incorporated are intended to identify
such forward-looking statements. ImageWare may from time-to-time
publicly update these forward-looking statements, but it is not
obligated to do so. Any projections of future results of operations
should not be construed in any manner as a guarantee that such
results will in fact occur. These projections are subject to change
and could differ materially from final reported
results.
For a
discussion of such risks and uncertainties, please see Risk Factors
in the ImageWare's annual report on form 10-K for the Fiscal Year
ended December 31st, 2017, its quarterly report on form 10-Q for
the quarter ended September 30th, 2018, and other reports filed
with the Securities and Exchange Commission under the Securities
Three Exchange Act of 1934 as amended. Readers are cautioned not to
place undue reliance on these forward-looking statements which
speak only as of today, on which they are made.
I would
like to remind everyone that this call will be available for replay
starting at 7:30 p.m. Eastern time tonight. A webcast replay will
be available for 90 days on the Company's website at iwsinc.com.
Any redistribution, retransmission, or rebroadcast of this call in
any way without the expressed written consent of ImageWare's
Systems Incorporated is strictly prohibited.
Now I
will turn the call over to Wayne Wetherell, CFO. Please go
ahead.
-1-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
Wayne Wetherell:
Thank
you, Operator and welcome to those of you joining our call
today.
Our
quarterly financial results are available in the recently published
news release and on the form 10-Q. For context on today's call,
I'll provide a brief summary of those results.
Revenue
for the third quarter of 2018 totaled $736,000. That's down 32%
from $1.1 million for the same quarter of 2017. The decrease was
attributable to lower identification of project related revenue of
approximately $271,000 and lower royalty revenue of approximately
$63,000. As we've stated in the past, our government revenue is
subject to significant swings due to the nature of the government
project business.
Gross
profit for the quarter was $576,000 as compared to $853,000 in the
same quarter of 2017. Gross margins decreased to 78% in the third
quarter compared to 79% in 2017.
The
third quarter net loss was $3.5 million compared to $2.4 million
for the same quarter in 2017. Net loss per share for the quarter
was $0.04 compared to $0.03 in 2017. We ended the quarter with cash
of $9.1 million.
This
concludes my financial review. I'll now turn the call over to Jim
for the progress update on our business strategy.
Jim Miller:
Thanks,
Wayne. Good afternoon to everybody and I appreciate the opportunity
to speak with you all today and provide you an update on our
marketing and sales efforts as well as those of our
partners.
But
first, for those of you who would like to know more about our
biometric technology and learn about what our game-changing
patented multi-factor, multimodal technology does, and how it's
different from and superior to other competing technologies and why
it's needed, I invite you to either visit our website at iwsinc.com
or contact our IR team directly to discuss.
I'll
begin with an update on projects previously discussed before I
address new opportunities that have come to us since our last call.
It's important to keep in mind that updates and expectations
regarding our partner projects come to you by way of what
information and expectations our partners provide to us. Our
partners tell us what they expect at any given time in the life of
a project, and in the interest of transparency, we share that
information where we can with our shareholders. Unfortunately in
some cases, they've been off on their timing. Much of that is
understandable as there are numerous moving parts and several
layers of management in any purchasing decision particularly one
involving new technology. Regrettably when they are off, that
leaves the IWS management team looking bad as well as if we missed
the mark. That said, we continue to believe in the partner model as
given our size and number of employees, it's the best way to
approach global markets.
On our
August conference call we discussed the award granted by the
Veterans Administration to our partner Four Points for a $3.6
million multi-year order for services and licenses in connection
with the biometric authentication system deployed by the VA. We
continue our service to the VA, one of our largest and longest
customers while we discussed their needs for additional licenses
and growth of the system. By way of our partnership with Fujitsu,
we received an order from a Canadian financial institution for our
GoVerifyID product. Since the completion of the agreement, we have
begun the install process which will lead to the enrollment of
Identities in the biometric authentic system in
December.
Updating
you on the pending Fujitsu ServiceNow helpdesk product, as
mentioned before we are comfortable for this is an extremely large
piece of business with the base in the hundreds of millions of
potential customers. In order to ready the Fujitsu branded
ServiceNow product for the market, the product must be tested and
certified. Now this is a rigorous process that runs the new product
through its paces and certifies that it meets standards for sale
and will be interoperable with a large number of other software
products used by the customers. When that work is satisfactorily
completed and retested, there will be a product announcement and
Fujitsu will begin offering services with our embedded GoVerifyID
technology, thus offering a smoother and more secure user-help desk
experience at a meaningfully discounted price to the customer. We
were advised that this sales effort will start in this
quarter.
-2-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
Our
partner CVW tells us it expects to complete several new GoVerifyID
additional sales in this quarter as well.
Our
work continues with one of IBM's largest ICM customers. Last
quarter we told you that we had advanced to the procurement
discussion stage and for the moment, that is where that discussion
remains.
More
recently, ForgeRock, a leader in identity and access management and
ImageWare announced the partnership that involved the integration
of our GoVerifyID product, which allows for both two and three
factor authentication into the ForgeRock identity management
platform. At a major industry event, Identity Live just two weeks
ago in London, ForgeRock debuted our product fully integrated into
their identity management platform which allows their customers to
quickly and easily obtain the security advantages of additional
authentication. We and ForgeRock are now working together to follow
up on the significant interest from that event, as well as target
specific ForgeRock customers with two and three factor
authentication needs.
Now
some of you have wondered why it is that a long-time pioneer in
Biometrics is now offering the frankly lesser security of two
factor authentication. Simple reasons.
First,
we've always offered two factor authentication on our products, so
why not make sure all of our customers know this.
Second,
some customers are hesitant to jump right into Biometrics. After
all it's a big change from over 50 years of passwords and pins. So
two factor authentication offers an easy first step into the
journey toward more secure authentication of your identity, and
with the IWS platform, we can start a customer on two factor
authentication or 2FA as we call it and graduate them to full
Biometric authentication in one very easy step in all on the same
platform.
Finally
and bluntly, we all saw the $2 billion plus valuation given to a
two-factor company in a recent acquisition by Cisco. We, however,
can take our customer on this authentication journey by supplying
first step with the ability to seamlessly and effortlessly upgrade
to full Biometric authentication. Because we have all these
capabilities on the IWS platform, a customer can move from
two-factor to full Biometrics with the literal flip of the switch,
a capability not provided by anyone else in the market. And, two or
three-factor, the customer gets the same highly-scalable
authentication enjoyed for a number of years by our government
customers such as the state of Arizona, the Canadian TSA, and the
VA.
Turning
to the burgeoning healthcare market, which is expected to support a
higher per person per month price point. At the end of our
first-quarter, Fujitsu announced that it has expanded our sales and
marketing agreement and was bringing their MedClick Platform into
the market. MedClick is an OEM version of our FDA approved
pillphone product, for biometrically secured patient engagement,
medical adherence and authentication of e-prescription ordering and
clinical trial. In Q2, we told you that we and Fujitsu had
successfully integrated MedClick into the Epic Electronic
healthcare applications. The Epic electronic records solutions for
healthcare provides records for over 200 million patients. So,
we're very excited about the ability to market MedClick into this
space.
In Q2,
we also told you that Fujitsu had just commenced its marketing and
sales activities to add resellers who will target the chronic
disease management markets with the product. The Q3 update is that
we are told that MedClick is being well-received. Fujitsu is
working on securing a reference customer for the product and is
having discussions with senior management types and various
companies to secure that vital reference account, which can then be
used to drive additional sales.
Turning
to our partners at Contactable, we have executed a five-year
license agreement with them and tomorrow you will see an
announcement about our new product for on-boarding which is based
on our agreement with them. This not only fills a hole in our
product offerings but opens up a very lucrative market segment for
our product, as many companies desire identity verification prior
to enrolling an identity into a consumer or enterprise database.
Now with this new product, we can offer confident assurance that
the individual who enters our customer's database has their
identity validated against the government issued ID. We can also
offer customers the service of a digital vault to biometrically
protect important documents and to facilitate digital transaction,
all of this seamlessly integrated into our GoVerifyID
product.
-3-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
More
importantly, we can create for all users, a secured digital
identity that is compliant with the new GDPR requirements,
compliant with new banking requirements, and allows the individual
who created that fully vetted identity to use it in a federated
fashion. That is with other merchants, governments or service
providers, or, and this is really important, remove that identity
from use altogether by revoking its use. This identity can be
created face-to-face in a brick-and-mortar location or done mobily
via use of a smart device.
We are
already engaged in several exciting discussions about its use and
you will be hearing a lot more from us about this exciting new
product.
In our
last call, we also talked about a new market, the Internet of
Things, defined as a group of standalone devices controlled or
monitored from a remote location, which market is larger than any
of the individual markets we have been selling into. We are at work
with several companies in this space, ForgeRock among them, and
here we are also completing an exciting new product that will work
to add Biometric and device authentication in the IoT space. You'll
be seeing a lot more from us on that in the coming
weeks.
As
you saw from our public announcements, we were awarded a $2.7
million agreement from IBM Canada for software that will be used
for building the next generation identity management system for the
Canadian government. Work has started on that project and there
will be revenues in this quarter.
We are
also pleased that IBM has asked us to consider other opportunities
where we can sell and market other IWS products alongside them as
well.
Some of
you may have seen recently an announcement from Fujitsu and
Microsoft regarding their agreement that Microsoft will resell
Fujitsu software as a service product on the Azure Cloud platform.
Going forward, the plan is to include Biometrics as a service in
that group. Microsoft has not historically offered a cloud-based
Biometric authentication product or service, so it's very promising
that they plan to be selling Fujitsu's software as a service
solution.
We
continue to create new technology and improve our existing
technologies. As we do, we continue to file new patents around our
new innovations. Most recently, we have created new and exciting
advances in two-factor authentication, which we will be introducing
early next year and for which we have patent applications in the
works. As you know, we have altered our marketing approach to the
market by more graphically showing potential customers how we can
supply both two or three-factor authentication seamlessly on the
same platform. So, when a customer wants an upgrade, they can go
from two to three-factor with absolute ease. Many of you've seen
the recent Duo sale for $2.3 billion to Cisco based solely on a
two-factor business model. So, we think our strategy (inaudible)
sense.
For the
Fujitsu Forum event held last week in Munich, Germany, Fujitsu
integrated our Biometric technology into their blockchain product.
Our R&D folks have come up with a great new way to more
efficiently use Biometrics in the blockchain arena and we filed a
new patent on this new technology. We also demonstrated the use of
our technology in a smart car application at that show, so you can
see how Biometrics can operate to supply security in that
space.
Finally,
we're pleased to tell you that the State of Arizona has recently
awarded ImageWare, a multiyear indefinite delivery, indefinite
quantity contract for the supply of Biometric authentication
capability to all of the state's agencies. As many of you know,
Arizona was our initial customer many years ago and we're very
proud to be able to offer our products and services to additional
agencies over and above our traditional focus in public safety
agencies. Our list of active potential customers continues to grow,
and the list of potential significant transactions is also growing,
but as I'm sure you all recognize, the entire process is not as
simple as flipping on a light switch and, as we've all seen, the
process takes time.
-4-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
Every
project that we have been and will work on progresses at its own
pace, but it is progressing. In fact, things are significantly
different in the last nine months. Prior to that time, we were
attempting to make inroads in sales to three major customers
ourselves. We recognized several years ago that attempting to sell
directly was not meeting with any success. So, we changed direction
to instead attract some major companies to be our partners in
salesforce space and after several years of effort, that was
successful with Fujitsu, IBM, CDW, now ForgeRock, and others. For
about the past nine months, these companies have been our sales
front and we are now seeing a totally different reaction at a
higher level by potential customers. Our partners have had some
early successes, they and we see major successes developing.
Significant strides have been made to establish a pipeline that
they believe will in fact bring home major revenue for them and for
us.
I've
said before, it's important for me to remind all of you that the
process we take with each and every partner is unique to that
specific partner. Each partner has its own set of objectives,
market forces, and processes that need to be navigated internally
prior to ever going to market. Sometimes, these processes,
especially those that involve very large companies, move at a
glacial pace, but I remind you, they are all in fact moving and
moving towards very large markets.
I would
also like to note that throughout the year to date, we've increased
our sales with partners. At the end of the last few months, we've
closed 11 new deals for our GoVerifyID product in addition to
significant new orders for Cloud ID and law enforcement products.
In fact, at the end of nine months, we've closed a total of 12 new
deals for GoVerify and four for Cloud ID in the Biometric engine.
For perspective, you may recall that GoVerifyID orders were zero
starting in Q1, so progress is being made. In fact, over 60% of all
of our orders for the first three quarters are new business
deals.
Now,
I'd like to turn our call over to our Operator to begin the
question-and-answer session
Operator:
Thank
you. We will now begin the question and answer session. To join the
question queue, you may press star then one on your telephone
keypad. You will hear a tone acknowledging your request. If you're
using a speakerphone, please pick up your handset before pressing
any keys. To withdraw your question, please press star then two.
Once again, to join the question queue, please press star then one.
We will pause for a moment as callers join the queue.
Our
first question comes from Paul Penney of Northland
Securities.
Gregg:
Good
afternoon. This is Gregg on for Paul, thanks for taking my
questions. First, could you just provide some color on the 4.5
million in orders that you were seeing on maybe like the cadence on
when that will be recognized as revenue.
Jim Miller:
Yes. Hi
Gregg. Thanks for the question. Yes, we were obviously pleased that
it was a number like $4.5 million. That's a good quarter for order
intake for us. Some of those things were mixed. They were licenses
for immediate delivery, so you can recognize revenue at the time
that those products are delivered. Others were longer term
government contracts where we had actually initially thought that
we might see some immediate license revenue, and those in the final
negotiations of the contract got moved to a more extended
development process, our delivery process, I mean to say. So, we
have revenue that on those moved in from the third quarter because
in the case of the Canada TSA, the deal was signed late in the
quarter which moved the revenue to be starting to recognize in
Q4.
-5-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
The
other were various GoVerifyID projects that we have out. As I said
in my remarks, we have 12 GoVerifyIDs deals that we have done, so
we're out selling the product. It moves at various stages. Folks
move to implement differently. Good example is the Canadian
financial institution I mentioned. That deal was signed a few
months back but they just now green lighted the
implementation.
So, the
revenue expectations on our side slip because the customer is
saying, "Hey, we have an agreement." In some of these cases,
they've even paid in advance for the licenses, but the fact is we
haven't made the delivery yet because the customer is not ready to
accept, and that's as I said, hence my comment, "Every one of these
is a little bit different in the way that the customer and we have
to navigate", and sometimes when a customer is not ready to take
delivery, even though we're very ready to deliver, you can't do
anything but obviously accede to their wishes in terms of the
delivery schedule. So, it's a mix of government orders from more
traditional products, and happily, in that mix is also a number of
GoVerifyID and newer product orders as well.
Gregg:
Great,
(inaudible) color. I guess secondarily, can you provide an update
on Mexico opportunities as you’re seeing given the OnDeck
Biometrics (inaudible)?
Jim Miller:
Yes,
there's a number of activities that are ongoing currently in
Mexico. You were referring, for all the rest of our listeners, to a
federal law in Mexico that is mandating additional security and
privacy protections, and one of the ways that you can attain
compliance with that law is by using technology such as biometrics.
So, we and particularly through our partners at Fujitsu, have a
number of banks located in Mexico and opportunities in that country
that we're rapidly trying to get to closure. There is a need for
the product, negotiations are never easy, of any kind. A lot of
paperwork involved in dealing with institutions like financial
institutions. But, there is I think some reason for optimism that
there will be some deals there. A lot of the Mexican banks had
available fingerprint technology that they could utilize as an
initial step toward getting compliance with this law, but there
were also a handful of them of decent sized good banks in terms of
size that had not availed themselves of that. So, that's
really—the opportunity there is to be able to offer those
folks the ability to come into compliance in time for the end of
February 2019 deadline. So as I said, we're hot on the trail.
They're right in the middle of those discussions.
Gregg:
Got it.
Then, it was great to see the addition of a sales office in Japan
back in July I believe. Well, can you maybe give us an update on
progress with Fujitsu following those personnel changes and the
addition there?
Jim Miller:
Yes. It
has been I think a tremendous thing to have representation in
Japan, the gentleman that handles that for us, a veteran Japanese,
fluid Japanese speaking, sales executive with a lot of experience
in Asia-Pacific in particularly in the Japan market. So, we not
only have someone that has spent their careers selling in that
market successfully, but also a fluent native speaker which is a
tremendous help. Not just in Japan in day-to-day sales activities,
but as we meet, as we have periodically with Fujitsu executives
from Japan. It's always very helpful to be able to speak in
someone's native language and be understood. So, that has been
terrific. Part of his responsibility is to shepherd this global
agreement that we've had under discussion with Fujitsu for some
time, and we continue to make progress on that although it's been
slow, Fujitsu's had a few reorganizations, they've had one very
recently. So sometimes, that causes you, as I said in my remarks,
it's a process and you just have to navigate it no matter how
frustrating it might be, and believe me some days it is, but new
people come in and they need to get up to speed, that's just part
of all of our lives, things change and we need to adapt. But it's
going very well.
-6-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
In
addition to that though, not just in terms of Fujitsu we're making
I think really good progress with our new partner at two-five
(phon) who we also announced in going into some additional
opportunities with companies like Hitachi for example, which is an
existing customer of two-five. So, it's still little bit early in
the process, but really happy with the progress that we're seeing
there, and there's just some really exciting opportunities as we
start to move out to add companies and get them acquainted with our
abilities and capabilities in addition to Fujitsu, larger companies
as well who have access to that market. So, pretty happy with
actually where it is and think that we'll be seeing some dividends
in terms of revenues here pretty soon on that.
Gregg:
Yes,
that's really good to hear. I guess one last one from me, and maybe
it is a little early still but regarding the new IBM win in Canada,
do you think you’ll see opportunity for more expansion with
IBM following the recent help you gave them on the government
contract link?
Jim Miller:
Yes, I
do. I'm optimistic I think we all are optimistic. The history of
our involvement on the Canadian project was through another
contractor. Originally years ago when we built that system for the
government, and ImageWare did build the system from scratch for the
government there, the integrator was Unisys, and when the
government switched integrators, we came to work with IBM in
Canada. But we had never started a project together, and so when
this one went to rebid, it was just a fabulous opportunity, frankly
for us, to not only get better acquainted with them because people
have changed chairs over the years, as you would imagine, but also
a great opportunity I think for us and for them to get better
acquainted with what we do. There's a tendency I think when you're
just working on one project to think maybe that's all the other
person actually can do, and I think we were able to show that we've
got a pretty wide variety of products that would be applicable in
other use cases in the IBM world. So, we have started those
conversations about ways that the companies can work together, and
leverage each other's strengths, IBMs of course are considerable,
and yes, I do, and I'm optimistic that we'll see some results from
that. There's interest on both sides, so that's a great place to
start.
Gregg:
Okay,
great. Thank you.
Operator:
Our
next question comes from Harvey Cone of HRK Strategic
Advisory.
Harvey:
Hello
Jim. Hello Wayne.
Jim Miller:
Hi
Harvey.
Harvey Cone:
Couple
of my questions have already been answered. Just as a general
comment before I even go on. It's pretty clear from the first
quarter of this year that we've made tremendous progress in
expanding our pipeline of both partners and actual end users which
I think something we've all been waiting for because this is the
first time that these customers will act as a major base—a
major reference point for expanding in multiples going forward. So
it looks like we're right as the inclination point of major sales
rep for that. Congratulations.
Having
said that, I wonder if, two things, I wonder if you could comment
on the departure of Jason Bradley, if that's something you could
talk about? Secondly, if you would go back over, what sounds to me
like a huge opportunity, the new ID…
-7-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
Jim Miller:
Yes.
Yes, yes. Absolutely.
Harvey Cone:
…ID
product that you have? So, done.
Jim Miller:
Okay.
Thank you. Two good questions. Jason Bradley was the Senior
Executive at Fujitsu in the group that we worked with here in the
Americas. He has decided to end his service at Fujitsu and take up
with a new exciting company in the IoT space. That announcement has
been made at Fujitsu, so that's out there and that transition has
now concluded. There is no denying that we'll miss Jason's
advocacy. He was a savvy executive who was in a hurry. He was a
true visionary who believed in the future of Biometrics sold as a
service for authentication in both the enterprise and consumer
markets, and he believed in the ImageWare approach to that as
having been groundbreaking, and mind you, he sort of inherited our
portfolio. He was not the original executive who we did the deal
with in the Americas. That said, we will miss him, of course, for
lots of reasons. But Fujitsu did not get to be a $45 billion, $50
billion global powerhouse of a company with only one person to rely
on.
So,
like all good companies who have been in business for 50, 60, 70
years and prospered, there's a deep bench. We are in the process of
moving to a new group whose purpose will be to specifically sell
cloud service products, which we think is terrific, and we're
excited by that. So, always tough to lose a valued partner and a
very smart guy, but life will go on and so will we. I do not think
that our partnership with Fujitsu will suffer, I think that in
fact, we'll be now seeing the expansion of it as we do some
new—for example, putting in blockchain, putting our
Biometrics into the Fujitsu blockchain product.
A good
segue to what you asked secondarily and that's our new product, we
are as a world going through an amazing digital transformation, and
so tomorrow we will announce the new product that will be indeed
aptly called, the digital identity transformation platform. That's
a mouthful really, it will just integrate with GoVerifyID. But the
whole idea is here, that we're finding that as you go along, and
you present your Biometric product, people want to know before they
put your Biometrics in the system, that you're really you. Because
think about it, if we get the wrong person, if we get a fraudster
in the system pretending to be someone else and therefore the
Biometrics go in, you have kind of poisoned the system at the
get-go. So, there has arisen a need to be able to take precautions
at the outset.
By the
way, this is applicable for enterprise or consumer in very big
ways, and that person against the government ID. There are a couple
of products out there who have done similar things, but this one is
different, because in addition to just vetting your government ID
prior to entering the database, there are additional features to
this product such as digital vaults, which will allow you to
facilitate digital transactions. So I can sign documents, store
them in the vault, authenticate my identity biometrically for
access to those documents or proof that I'm actually the person
signing. This is a major step toward this digital revolution that's
going on that can create a secure identity and have that identity
be used.
We've
talked in the past about federated identity, it's the ability to
use that identity across multiple different tenants or vendors.
This is the key first step to creating a valid identity that you
can rely on. If I'm going to use my identity in a variety of
different places, then it sure as heck better be validated and
vetted upfront. Then more importantly, I think the other thing that
product does is it allows you, by the way, it's compliant with
GDPR, which is the European privacy regulations.
For
those of you on the call, I think that you may probably already
appreciate that while GDPR is a European regulation, it applies to
anybody doing business or touching any business that's done or
transacted in the European Union country. So that virtually ends up
being all of us because it's a global world.
-8-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
The
ability to create an identity and give the person whose identity it
is actually controlled. So there is a mechanism where you can
revoke the right-to-use your digital identity, and that's a big
deal by itself, because I think that we've all seen our information
and our identities are used without our permission way too much
mostly for fraudulent purposes.
So,
there has been a lot of excitement around this product. Our
partners at Contactable already have had success in their markets
with it. We are really excited to have it, and as I said, I think
you'll be hearing some really good things about this in the next
few weeks. It fills the hole in the portfolio, it's the front end
to enrolling people in the database. So it's great to have it and I
think when you see it out and about, we'll have it on the website,
you can take a look at how it works. It's a truly exciting product
to have, and again, seamlessly integrated with the rest of our
Biometric authentication on the GoVerifyID platform. So, it's a big
step for us and I think it is going to have a lot of play in the
marketplace.
Harvey Cone:
Sounds
exciting. Thank you.
Jim Miller:
You
bet.
Operator:
Our
next question comes from Jeffrey Link of Invemed.
Jeffrey Link:
Yes.
Hi.
Jim Miller:
Hi.
Jeffrey Link:
I
wanted to, I don't know if you can clarify or not, I think you
said, you have now 12 GoVerifyID deals in the works at various
stages?
Jim Miller:
Yes.
Jeffrey Link:
How
many of those deals are in the $4.5 million? So, you have 12 or
four of them, eight, 10, how many are in the $4.5 million that you
say is in the pipeline now?
Jim Miller:
I think
between in the last quarter, there was one new deal added. I
believe the number was 11 through Q2, it's 12 through Q3 and we
anticipate several more here in this fourth quarter.
Jeffrey Link:
I guess
what I'm trying to understand is, are they all part of the $4.5
million?
-9-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
Jim Miller:
No. The
$4.5 million were the orders that were received in the third
quarter.
Jeffrey Link:
I
see.
Jim Miller:
So
those are as I said, to the first questioner, that’s a
various mix of products, some for government products, some for
GoVerifyID related products, other services and things that we do.
But these were all orders we received in the third
quarter.
Jeffrey Link:
So
then, the 12 deals that you have or the customers where the various
stages that it's at, what kind of expectation can one look for in
terms of revenue over the next 12 months from these
deals?
Jim Miller:
Well,
it's a little bit difficult to be precise on that because what
happens is, that various different buyers of the product take it on
and they take it onto, frankly, try it out. So they might be a
small enterprise with a couple hundred employees, and they will
take 20 or 40 or 50 to try it. If they like it, they'll expand it.
We've seen one instance where here in the fourth quarter that a
prior order was supplemented by an additional order. So, that's
just—it’s building blocks, you start, that's why I
point out that every one of these people are different. It's new
technology, so we, they don't have a really good roadmap to tell
you how it's going to roll out, what's the timeframe, how it's
going to end up. But the first step is of course, is to get them to
purchase it. Then, we're confident that as you use the product,
you'll like it and you'll add your employees. As you add your
employees, you will then think about moving it to your customers,
which of course is the bigger number that we're after here. But
that's the way that this thing sort of starts out.
Jeffrey Link:
All
right. I wanted to also ask, if you would, since I'm a little newer
to the story, on the ServiceNow deal that's been talked about on
and off, what exactly is the status right now in terms of whether
the software is ready to go? What, where are you at in this whole
process?
Jim Miller:
We
actually, of course, are in a secondary role, to be honest with
you, because the product is a white-label of the ServiceNow product
that is sold by Fujitsu. So, it is Fujitsu that drives this
process, they have advised us that they're in the final stages of
receiving that certification, and that they anticipate having all
of that concluded and moving ahead to their sales effort in this
quarter. So, that's what have reported to us.
Jeffrey Link:
When we
talk about hundreds of millions of potential users, can you
elaborate a little bit on what that exactly means if ServiceNow is
servicing 100 accounts that is hundreds of millions of users, is
Fujitsu now needing to go and sell it to each of these accounts or
is ServiceNow simply going to begin to roll out the software to
these accounts and automatically going to get upgraded to the
white-label software that Fujitsu has? I guess I'm just trying to
understand the actual process here, once I guess the certification
is completed.
-10-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
Jim Miller:
Fujitsu
has its own customer base. Fujitsu, lots of folks don't appreciate,
operates a lot of call center or a lot of support work. So, they
have an existing book of business in the support services arena
already. The plan is to offer the product that would allow folks to
use a Biometric authentication to get directly to a help desk
professional who can bring their record up on the screen because we
vetted you, we know it's you. We can dispense with the qualifying
questions, mother's maiden name, social security number, all those
things we all go through when we call a help desk and get right to
why it is you called. That ability to do that, time is money, in
that business simply put, and the ability to do that saves a lot of
time and therefore saves a lot of money. That's the value
proposition. So, the plan is that once the product is certified, it
will then go out for sale to Fujitsu's existing customers. So, to
answer your question in the Fujitsu case, no, they don't have to go
knock on doors and cold-call, they already have a book of business.
So that's the way they will market.
Jeffrey Link:
So
these customers are currently using a Fujitsu software that may
already have the two-step process and now they would upgrade to
yours?
Jim Miller:
Well,
they would upgrade to a Fujitsu product that includes ours, yes.
That that's right. They are using the traditional software product
that we all experience when we call a help desk, that is you have
to go through a list of qualifying questions before they'll answer
why it is you call. So, we're cutting out that step, we're giving
them the assurance that it's really you that's calling, not me
pretending to be you, and that process saves, as I said a good deal
of time and money. It also increases and enhances the user
experience which is not a bad thing either.
Jeffrey Link:
If you
would, how does this service now fit in with Fujitsu and all these
call centers?
Jim Miller:
Fujitsu
has a product that is itself a private or white-labeled product of
a service now product. So, in the same way that Fujitsu rebrands
products like ours, they have a similar arrangement with the larger
company service now.
Jeffrey Link:
Okay,
and I'm going to ask you I guess a similar questioning on the Epic
win that you recently had in the incorporation of your module into
the Epic system. Where are we at in terms of that
rollout?
Jim Miller:
Let me
just clarify part of your question there. I would not say that
that's so much of a win as it is a milestone, and that is the
integration into the Epic back-end system. That's really important
because it's really difficult in any space to go in and sell a
single product that operates as a standalone. In any institutional
sale and even in our own homes, right? I mean you've got a lot of
individual applications running, you really like it when they run
on one network, and you only have one system to navigate, and you
don't have to worry about having all these different siloed systems
that you have to service, understand each one of the intricacies,
and work with that.
So,
this puts it on a platform that, not badly, is used by several
hundred million people in the North American market and the world
markets, that they get their healthcare records on. So, it's good
to be there because that makes the sale easier. We tried, believe
me, to sell it as a standalone and we were met with a lot of
resistance because people wanted to see it on one of the major
healthcare record software systems that they employ. Right now
where we're at with all that is that the larger companies
understand Fujitsu and Epic. Understand the value of a reference
account, that is a higher profile company that you can point to in
the sales process where you can say this company uses our system.
They have purchased it, they use it, they like it, and that answers
a lot of questions in your sales effort, because one of the ones
you always get is, tell me where you've done this? Maybe even, can
I call that person? Can I see how this really works? I know how you
as a salesperson tells me it works, but can I have a third-party
verification of what you told me?
-11-
ImageWare Systems,
Inc. – third Quarter 2018 Results Conference Call, November
14, 2018
So,
that is critical. There is no price you can put on that reference,
we can tell you that from our own experience and you know this it's
an obvious thing, so that's what they're trying to do at this
point. They are in that process, they've made a lot of progress but
at this point I can't report to you that they've had a success
there, although they think they are closing in on some companies
that will take it and adopt it and be that reference
account.
Jeffrey Link:
Just to
follow up on that, do you need to be involved in that process when
Epic is going out to these potentially referenceable accounts or
they, at this point, understanding enough of your software and its
capabilities that you don't need to continue to support Epic? I
guess I'm just wondering how you can stay in front of Epic to make
sure that this product is in fact constantly being marketed by the
Epic people.
Jim Miller:
Well,
recall that it's a Fujitsu product. So, it's Fujitsu not Epic that
really leads the effort here because MedClick is our pillphone
product that is white-labeled by Fujitsu and therefore they lead
the sales effort. The answer to your question is, right now in the
fairly early stages, it depends. It depends on how much technical
deep dive a company wants to get into, in which case we will
supplement our partners, sales efforts. That's not true in every
case, so, as they go along, you learn to crawl, and then you walk,
and then you can run. It's that very similar process as they get
more time with the product, they ween away from having us to be
there on every single sales call.
But in
the early going out to be quite honestly we want to be there. We
know the product, we built it better than anyone and rather than
leave a question on the table, we would err on the side of caution
and be there to answer those questions. So prospective customer
gets the full understanding of the product, and its feature set and
what it does. As time goes on, less and less, so that in some of
the cases for other products like the GoVerifyID product, sales
calls go on all the time, we're not involved. If we need to be,
we're obviously there to support whenever we need to be. So that's
pretty much how it works. It's just a question of getting them up
to speed and then to your point getting regular reports on how
they're doing and to gauge what we need to do or change to make
sure that that effort can be more successful.
Operator:
This
concludes the question-and answer-session. I would like to turn the
conference back over to Mr. Miller for any closing
remarks.
Jim Miller:
Well,
thank you operator. Let me, first of all, thank you for your
continued support even as progress seems to take forever. While
it's difficult for the team here at IWS as well, we remain
confident because we have the advantage of seeing what's going on
out there in our market with our potential customers and because we
know that we have the best technology, addressing a huge and
growing market and because we have significant partners who are
confident that they will bring home the sales.
I'll
close now with that, I'll thank you again for your attention and
your continued belief in our technology and our markets, and we
very much look forward to speaking with you on our next call. Good
afternoon to everyone.
Operator:
This
concludes today's conference call. You may disconnect your lines.
Thank you for participating and have a pleasant day.
-12-