Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Elephant Talk Communications Corp. (NYSEMKT:ETAK)

Q1 2013 Earnings Call

May 10, 2013 11:00 am ET

Executives

Peter Salkowski – Investor Relations

Steven van der Velden – Chairman and Chief Executive Officer

Pat Carroll – Chief Executive Officer of ValidSoft Limited

Mark Nije – Chief Financial Officer

Analysts

Edward Woo – Ascendiant Capital

Luis Marquez – Laidlaw & Company

Operator

Good day ladies and gentlemen, and thank you for standing by. Welcome to the Elephant Talk Communications Corporation First Quarter 2013 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) I would now like to turn the conference over to our host, Mr. Peter Salkowski. Please go ahead.

Peter Salkowski

Thank you. Good morning to everyone in the United States and good afternoon to our European listeners and thank you for joining us at Elephant Talk Communications’ first quarter 2012 shareholder update conference call.

Joining on today’s call is Steven van der Velden, Chairman and CEO of Elephant Talk; Pat Carroll, CEO of ValidSoft and Mark Nije, CFO of Elephant Talk. Following management’s remarks, we will open the call for your questions.

This morning the company issued its news release announcing its first quarter results and 2013 financial results, that news release is available on the company’s website at www.elephanttalk.com.

Before we begin, I would like to remind everyone that on the call we will discuss certain factors that are likely to influence the business going forward. Any factors discussed today that are not historical facts particularly comments regarding our long-term prospects and market opportunities should be considered forward-looking statements.

These forward-looking statements may include comments about our plans, and expectation of future performance. Forward-looking statements are subject to number of risks and uncertainties which could cause actual results to differ materially. We encourage all of our listeners to review our SEC filings including our most recent 10-K and any of our other SEC filings for a more complete description of these risks.

Statement on this call are made as of today, May 10, 2013 and the company undertakes no obligation to revise or update publicly any of the forward-looking statements contained herein whether as a result of new information, future events, changes and expectations or otherwise for any reason.

During the call today, management will discuss adjusted EBITDA in the press release issued today and in the company’s filings with the SEC each of which are posted on the company’s website and you will find additional disclosures regarding this non-GAAP financial measures and reconciliations of net loss to adjusted EBITDA. With that I would now like to turn the call over to Elephant Talk’s Chairman and CEO, Mr. Steven van der Velden. Steven?

Steven van der Velden

Thank you, Peter. Well thanks everyone who joined us today for our shareholder update call. I will begin today by providing an update on the developments that have occurred at Elephant Talk Communications in the first quarter of the fiscal year. I will then turn the call over to Pat for an update on – and then to Mark for a recap of the company’s first quarter financial results. We will conclude by opening the call for questions.

It has been six weeks have passed since our fourth quarter and full year 2012 earnings update. We plan to keep our prepared remarks relatively brief today. On today’s call, I will focus on providing updates from several key items also discussed at April. First I will discuss to continue the focus on our core mobile and security business.

Second, I will provide an update on achieving positive operational cash flow. Third I will discuss our continued progress of implementing Elephant Talk’s proprietary software DNA mobile platform was a major mobile network operator in Latin America.

Fourth, I will discuss our continued focus on mobile operator strategy as outlined in April; lastly I will provide an update on our efforts to secure funding. Turning now to our results, in the first quarter mobile and security revenue was $3.9 million, a year-over-year increase of 59% compared to the first quarter of 2012.

It was also the seventh consecutive quarter in which mobile and security revenue grew on a quarter-to-quarter basis. Mobile and security revenue comprise more than 60% of the total company revenue for the second consecutive quarter accounting now for nearly 60% of total company revenue in Q1. Margin defined as revenues less cost of service was $3.0 million, compared to margin of $1.7 million in the year ago period.

As anticipated, the majority of the company’s revenue and more importantly, the majority of the profit contribution both from our Mobile and Security operations. Mobile and Security is the core strength of our business and in such we expect this trend to continue in the future.

Second, regarding the company’s operational cash flow position and previously mentioned that company was closed to report against first month of positive operational cash flow. We estimate operational cash flow by using adjusted EBITDA, defined as earnings before derivative accounting such as warrant liabilities and conversion feature expensing, income taxes, depreciation and amortization, impairments, non-operating income, and expenses and stock-based compensation.

We view reaching an operational cash flow positive position as a milestone for the company, because it underpins the market relevance and potential with our platform and security solutions. After closing the books for the first quarter of 2013, I am pleased to report that company easily reached this milestone in March, coming within $100,000 on achieving an operational cash flow break-even position.

Our next target is achieving the first being operational cash flow positive, which could happen in the current second quarter, while it’s more likely to occur in the second half of the year, which is when that recurring revenues from the Latin America are expected contributes to our financials. This brings me ValidSoft’s deployment who is the major mobile operator in Latin America.

If the parameters on schedule and we’re going to be in successful in competing one of our required CapEx funding as it relates to equipment purchases and installation of the platform. The CapEx investment of nearly $5 million was made possible to approximately 85% then to a finance demonstrating our adverse confident in the platform as well as strong evidence of their commitment to this project.

The first test call is still expected by the end of the current quarter, which will be funneled by standard of test. We expect to begin the migration of this customer existing mobile customers to our mobile platform during the third quarter of 2013. We anticipate by the end of this year $1.5 million of this customer subscribers will be migrating to Elephant Talk platform. Everything is progress in mobile and I expect this binding MLU move to a fully executed signed contract very soon.

Turning now to our broader mobile operator and virtual operators credit. As previously discussed, deployment is our Latin American customer represents our ongoing focus to service mobile network operators and we’ll remain committed on this strategy.

With the potential of Elephant Talk’s mobile platform, we expanded to accommodate up to 20 million customers. The company has well positioned, expanded its services in many existing mobile operators and the larger virtual mobile operators.

To expand that reach, the company has signed a multiyear teaming agreement with the larger multinational wireless telecommunication platform. With the objective to pursue mobile network operator and larger virtual operator outsourcing market opportunities, specifically in North America and the Caribbean.

Increasingly, North America and Caribbean are recognized as being a diverse of a breakthrough. In CSMA which is the global trade organization will representing almost eight mobile operators, estimates that subscriber penetration, measure those connections divided by total fluctuation. We’ll continue to rise in Latin America. In 2012, regional subscriber penetration was 115% with expected to reach 155% in 2017.

The (inaudible) agreement allows the multi-national wireless product compartment. Under Elephant Talk, we’re pulling their strength from virtual and typical expertise, innovation, style of operation and strong support like NSA, it is going them sure as an example of how we will execute the company’s mobile operator and a larger Virtual Operator stage.

On the previous update call, I mentioned that in the second part of the current quarter, the Saudi is got on that, while understood we should prove for Virtual Operator license fees, one for each of the existing mobile operators. As we have been interacted with all of these mobile operators, always heretically all of the potential, Virtual Operators in Saudi Arabia, we continued to be optimistic about our prospects in this market once the regulatory decisions are relit.

Again, we believe that the composition of major customers we serve including Vodafone in Spain, Zain in Saudi Arabia and the major mobile customer in Latin America represents (inaudible) to take on other global challenges. Lastly, we continue to be evaluate several funding options, we always have to ensure (inaudible). The rest of options includes depth, trade equity, shareholder stock as well as stock in under finance, an example of which recently occurred without platform installation in a major Latin American country. We are evaluating all options very carefully, while keeping shareholder interests in mind. We are in the midst of this process, but (inaudible) is to what can be disclosed today.

With that, I’ll now turn the call over to Pat.

Pat Carroll

Thank you, Steven and good day everyone. It’s been a short period since my previous update and I intend to keep this update even focused. I mentioned in my previous update that we believe that we have some of the best transactional security technology in the industry and how important independent recognition is, not only validate our products, but also in the creation of value for ETAK and its shareholders.

ValidSoft operates in markets that pay a premium for specialist, industry leading technology, non-convinced that our layered security approach, which enables risk discrimination at an individual transaction level and introduced the concept of the confidence model, is indeed the most attenuated approach. We’ve been patiently building our intellectual property portfolio, commercializing our security solutions and establishing the relationship that we believe are essential to create maximum value for our shareholders.

Our vision of a transaction-based security model whereby our partnerships can able to access the multibillion transaction tools have taken more time than we expected. But we are confident and continue to growth throughout the year and future years. As this is crystallizing, we enter a very exciting time for the company. Our recent business trip to Latin America gives us confidence that the complementary relationships that are emerging with cement our market position.

FICO/Adeptra continues to pressing ahead with the integration of ValidSoft solutions into its client base. And as we previously mentioned, they have signed agreements with a leading UK bank for deposition of ValidSoft SIM Swap technology and VALid-POS technology. In addition, FICO/Adeptra has other key UK bank contracts in the pipeline, close to reaching a similar decision for both POS and SIM. These banks have also shown interest in call forward/inbound forensic analysis capabilities, our voice by metrics and browser manipulation detection solution.

Also as previously reported, our SIM Swap continues to run very smoothly production at FICO/Adeptra, achieving its objectives. And as of today, we processed an excess of $7.65 million transaction. Regarding our direct relationship with FICO/Adeptra, we remain on target for implementing a broader agreement to reflect the market interest and a wider portfolio by mid-2013.

As reported on my previous update, we have expected one of original key clients in Australia to increase its user base substantially. I’m delighted to confirm that this is indeed the case and the contract has been signed to enable deployment to 150,000 users in the coming month. This contract is worth and accessible $1 million over three years, the ValidSoft and is based on the traditional license fee/maintenance model. This commitment to our technology lays testament to the quality of our security solutions and our capabilities as a leader in the fight against sophisticated fraud. On that positive note, I would like to conclude and turn the call over to Mark Nije to discuss our financials. Mark over to you.

Mark Nije

Thanks Pat. I will now discuss the company’s financial results for the first quarter of 2013, I will begin with revenue results for the first quarter of 2013, revenue for the high-margin mobile and security solutions business increased 59% year-over-year to a new level of nearly $3.9 million and accounted for 59% of first quarter revenue. Mobile and security revenue accounted for only 28% of total revenue for the prior year period. Total revenue for the period was $6.6 million down 23% year-over-year when compared to total revenue of $8.6 million for the first quarter of 2012. The majority of the decrease was the result of the 56% drop in the lower margin landline revenue to $2.7 million.

Turning your attention out to first quarter reported cost of services margin defined as revenue minus cost of service. Margin for the first quarter increased 80% year-over-year to $3 million and represented approximately 46% of revenue. This compares to only $1.7 million or 20% of revenue for the first quarter of 2012. The margin improvement was driven by an increased percentage of revenue coming from the high-margin mobile securities activities. The increased percentage of high-margin revenue contributed to a $3.5 million or nearly 50% year-over-year drop in cost of services.

In line with our strategy, management expects cost of service as a percent of revenue to decline further as a greater proportion of future revenues comprised of our mobile services and security solutions which has a substantially lower cost of service in our traditional landline business.

Turning to SG&A reported SG&A of $4.5 million remained relatively flat for the first quarter compared to $4.6 million in the prior year period. Adjusted EBITDA for the first quarter was a loss of $1.4 million which compares to a loss of $2.9 million for the prior year. The year-over-year improvement in net loss for minus $5.8 million to minus $4.2 million this quarter was driven by increased revenue from the higher margin Mobile and Security business combined with lower non-cash compensation expenses.

With that, I would like now to turn the call back over to our CEO for final comments. Steven?

Steven van der Velden

Thank you, Mark. This basically conclude management update portion of the call. I would now like to open up the floor for any questions that you may have. Thank you. Operator, please go ahead.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) And our first question comes from the line of Andrew Lloyd with [Laurent Capital]. Please go ahead.

Unidentified Analyst

Yeah, two questions; based on your cash position of $500,000, can you provide a little more definitive agreement amount of financing? And then my second question is on the contract side, can you provide a little bit more info on the Santander? Today we’re only in one location and we have plan bit on the success to move to other geographical region as well as implement any additional products within them?

Steven van der Velden

Thank you. With respect to the first question as we stated, we want to be relatively neutral with respect to our totaling efforts as we are in midst of it. But as we all saw the scribe in our 10-Q that will be filed later today. The funding that we ultimately will be looking for will be somewhere in the range of $10 million, $12 million, $16 million, which is the reflection of our total requirement over the next 12 month and it could very well be that we will finish that in smaller parts to start with and as you have seen we have also been able to that order sources of funding like for example vendor and partner function. But also that we have to see what the mix will be, that will be optimum for the company and for its stakeholders. Well, with respect to the second question I think it’s best to give that question to Pat.

Pat Carroll

Yeah, thanks Steven. Thanks Andrew. Two parts of your question, the first one with respect to broader portfolio and deployment within FICO/Adeptra, and yes clearly we intend this to extent beyond SIM Swap within each entry that we would engage with FICO/Adeptra to deploy a broader range of product. But today we got SIM Swap, going forward we would expect to have VALid-POS our call – solutions inbound, outbound, browser manipulation detection and a number of other elements that we have like Voice Biometrics.

All of which we believe there is substantial interest not just inbound and outbound which is the other clients that we’re dealing with. And second part of the question was respect to the varied entities, today, our relationship in the UK is and there primarily to Adeptra, Adeptra as you recall was acquired by FICO. FICO have a relationship with over 5,000 institutions around the world and I think they process something the recent about 70% of own risk-based transaction in last year.

So we could expect that each bank that we deal with may not have a relationship with Adeptra platform but more importantly, we will have our relationship with FICO to the FICO and risk and we would fully expect it in due course that we will have an integration that direct within risk because that’s where the primary benefit comes to a fraud detection and falls positive.

What you don’t want is a situation where a card transaction gets declined and the customer realizes that i.e. visible what you want is that the solution that occurs happens within the authorization positive totally transparent. If it is both positive, customers simply get their cash, they will get their goods, and if it’s what we think is fraud and clearly the recent impact in the cost point.

And that’s why we would want the integration directly into risk (inaudible) or solid. So to answer the question in due course, we would expect 2D Falcon, FICO relationship that we’d have access to happen there entities around the world.

Unidentified Analyst

All right. Thank you.

Steven van der Velden

Thanks Andrew.

Operator

And our next question comes from the line of Ed Woo with Ascendiant Capital. Please go ahead.

Edward Woo – Ascendiant Capital

Yeah. Thank you. I had a clarifying question. Do you say that your next goal was to be breakeven on a quarterly basis which may have been disclosed but likely in the second half? Is that correct?

Steven van der Velden

Yeah. That’s correct. We anticipate, while anticipate, we of course expect to get to operational cash flow positive on a full quarter basis in the course of this year. It’s of course our ambition to achieve this already in third quarter. However, it might be more realistic to focus on the second half of the year but then the recurring revenue base from our Latin American contract will come into our financials and as we expect substantial contributions from that contract, we will then for sure be cash flow positive on a full quarter basis.

Edward Woo – Ascendiant Capital

Okay. And thank you for the update in Latin America and Middle East but is there any update on what the economic and business environment is likely in Europe and in North America?

Steven van der Velden

In Europe, the business environment is not positive in mobile; you may have read in the papers over the last couple of weeks that most of the mobile operators or laying our staff are trying to reduce our cost base. On the long run, these are all positive signs for the company as mobile operators will need to further rationalize their operational base and in that respect, the outsourcing solutions that we bring, but not only brining superior services, but also at a much lower cost level. So on the long run, we feel comfortable that we get inroads into the European market. But as companies are hailing back, it’s more and more difficult to get shorter sales cycles and shorter implementation cycles.

In North America, we are looking around, actually I had a management meeting with our North American management team yesterday and we feel comfortable that this market will bring us success as well. But from an outsourcing basis, there is a long way to go and I would foresee any short-term successes in the North American market in Canada or United States, I wasn’t talk in the near future.

Edward Woo – Ascendiant Capital

Do you think in the near-term, you would like to see new kind of the Middle East and Latin America before you see anything in North America?

Steven van der Velden

Yeah, we believe that our real focal points are currently Vodafone in Spain and extending elsewhere into Middle East all the activity surrounding Saudi Arabia and the issuance of the three virtual operator licenses that should be coming up soon and Latin America market. These are three focal markets. They also fit in our mobile operator outsourcing model, and we believe that once we have in each of those three markets, 1 million plus customers’ active on our platform. We also will have three very good used cases to cover most of the requirements of mobile operators throughout the world.

So we are really focusing now on getting these three platforms, fully up in running, fully profitable and really showing the world what our platform can bring to mobile operators operations. And we believe that once we have that good in place, we can show really the used cases, it will be a perfect reference for getting further contracts result of mobile operators and not just in those three regions, but everywhere in the world.

Edward Woo – Ascendiant Capital

Great. Well, thank you and good luck.

Steven van der Velden

Thank you.

Operator

And our next question comes from the line of George (inaudible), Private Investor. Please go ahead.

Unidentified Analyst

Hey guys, good quarter. Thank you. I have two questions. I like a little bit more color if I could on FICO in terms of the relationship and the agreement you discussed Pat that won’t be signed. Could you provide any more color at the details and when it could become public perhaps? And the second question is generally about the team engagement that was referred to at the top of this call. Could you help me with these two questions please?

Steven van der Velden

Yeah this is Steve and maybe let me then start with the second question before I hand it over back to Pat for the first question. The agreement is one of our major telecommunication vendors in the world and we are very proud to be able to share resources with them, we are not out of the States to make this all public in detail but we actually have started working together and proactively we have three serious suspects in those markets that we are currently evaluating with our human partner and hopefully in the not too distant future we can share successes from the agreement with all of you and also indicating what kind of financial offering to your P&L, for the first quarter I would draw the color.

Unidentified Analyst

Yeah thanks Steven and thanks George, so with respect to FICO what we see here is a major opportunity as I mentioned there to integrate our technology to recognize it could be FICO risk or deposit, the reason for that is that there is no customer impact if you are able to do within these specifics of the authorization process and are time constraint but you have to work to, now we know that we can achieve those time constraints, it also means that we are able to determine in real time whether we believe the transaction is genuine or process, or it’s broad event in which we can identify those system out and there is no impact in the customer that is a huge advantage over fixed ratio of the half way, which is where for the most majority of cases a legitimate customer have had a transaction deployed but not maybe extremely inconvenient to customer and happens all the time the biggest issue that they have got probably the number one customer service issue start strategy with FICO is to integrate our technologies to reconcile.

In terms of timing we have been working with FICO on this for the first quarter, we are giving some guidance to marketplace that we expect to have this cost this particular quarter to and out of that we should expect to see two things while one is a closer relationship with FICO and the second is a adoption of a broader range of technology, we have the path to be able to bring some prospect with the marketplace.

Unidentified Analyst

Very good, thank you guys, very good and Steven assuming you arrangement did signed and done and active now with large focus?

Steven van der Velden

Yes definitely otherwise we would not have announced it and say that before we already have as a result of the teaming efforts, pretty serious cost prospects in the Latin American market.

Unidentified Analyst

And when was it signed Steve?

Steven van der Velden

Recently.

Unidentified Analyst

Okay; very good. Thank you, guys. Good quarter, thank you.

Steven van der Velden

Thanks.

Operator

And our next question comes from the line of Robert (inaudible). Private Investor. Please go ahead.

Unidentified Analyst

Hi guys congratulations on the quarter and congratulations in the vendor financing that certainly sends a real message that others believe in the product. With that said, your several months of Latin American deal and I would think for vendors giving vendor financing, they probably have some empowered knowledge of that deal and the size and the number of SIM cards and what it should generate for loaded SIMs and revenue for the year. Is there anymore that you can talk to us about on that particular contract for the year and the life of the contract for that matter.

Steven van der Velden

Yes well first of all, it’s currently a binding NRU. First, the revenues has also been received, as stated earlier in the call, we expect migrations to start over the course of Q3 where we expect around 1.50 million subscribers to be active on our platform by the end of Q4. Well with respect to financials, we have not so far given any guidance except that we have always try to achieve revenue of up to a $1 per subscriber per month.

You can imagine that if you talk about serious numbers that some sliding skill will kick in, which you can calculate yourself, so that even if we would reach let’s say $0.50, $0.60 per subscriber for a month that the contract could have a serious contribution to not only our revenue base but also to our bottom line base.

And of course, our vendors have all NDAs with the company, they of course know the project and know the country and they know the customer, they know the prospects, they know the size of the platform, and this all has contributed to the sincere trust in the whole matter, their willingness to extend credit for the company, and all together we are very proud of the fact that we have been able to achieve such 85% level of vendor financing at very reasonable conditions.

Unidentified Analyst

It seems like between this material agreement that you’re going to be in the 6 million to 10 million SIM cards active in the next couple of years, which even with the price erosion substantially higher revenues, it seems like the Elephant Talk side isn’t too far away from being a $100 million in revenues just from these next few initiatives.

Pat Carroll

Well again, this is your calculation. We have indicated that we expect to have at least 1.50 million subscribers active in Europe. We will have a substantial amount of subscribers active in the Middle East, where we’ll have 1.50 million subscribers active in Latin America by the end of the year. So want to get – we are getting in the range of 3 million to 4 million subscribers by the end of the year. And of course, management expects a serious growth over the next couple of years in them but the ultimate level will be it is difficult to say as we are aiming for larger and larger customers with larger established customers basis, while ultimately the numbers could be higher.

However the pressure on price will be there because you can expect to have a lower per subscriber revenue base if you service 3 million SIM customers and if you service a 200,000 customers, so for that concern, we are very optimistic and we will certainly try to achieve the numbers as much.

Unidentified Analyst

May I ask one quick question Pat and I’ll leave you alone?

Pat Carroll

Please.

Unidentified Analyst

Pat hi it’s Rob. For the last few quarters and I understand new products take longer than expected, some of the most successful products missed by milestones of first couple of years. We’ve been also close for the last couple of quarters, few quarters and getting some major things going and it seems like the FICO Adapetra integration where it happens right beyond there is authorization processes, a major change. Is it safe to say that there is probably a number of banks that are just waiting for that step, so that they can just have it as seamless as possible?

Pat Carroll

Thanks Robert, yeah it’s a really good question. I think the real benefit that this type of technology brings these days is a paradigm shift over to capability to make a decision today. But today, the risk engines rely on historical data, there is no way of knowing contact work that will be applying come to Europe or come right to the States. If no way of knowing that that is a genuine transaction and because it is (inaudible) card, what happens is that the bank issuers fine tune the risk end deploying transactions it is very difficult which is simply deploying more transactions, the problem is, it’s like a pistol.

You pull it, it was up dramatically on the other side and that’s exactly what we’re seeing so the world runs at an average of 90% or plus rate for international transaction. But not of course, the industry, but most importantly what’s happening now is that it’s started to come counter-based in terms of how the banks are looking at the issues from the customer perspective.

Everybody is concerned about retaining the customer interest, everybody turn about the issue of how you gave with our customer going forward and this is one of the key issue for our – people are expecting to partly access them because of the universal effect of the credit cards, shop and it find or not. And it’s actually get worse, Robert. We’re now start to see blocking emerging, so for example, Belgium was the first country to nice transaction that originated in non-ENB countries. We’d not be honored by the Bank of Belgium. Subsequently, we have seen the similar situation by Netherlands. This means that the universal acceptance of credit cards are now being tested and our technology can solve that.

You don’t need to be an ENB compliant company. You simply need to have your phone to or not, and by integrating directly with the risk handling decision, this means that the customer has no impact, no knowledge whatsoever, he simply get the cash, he simply gets good, that’s the future, it’s a paradigm shift that what’s it going to happen and that why there is such an interest in this solution from Adeptra from my perspective.

Unidentified Analyst

I could see how the Australian customers, they don’t leave their country as often and when they do, they gone so long time. But so many other countries, people are bouncing around. You really almost need FICO to implement the solution so, it just seems to me that anyone who is on the fence could look at this completely, differently once the FICO integration is in place. Is that kind of how the company is looking at it?

Steven van der Velden

Yeah, absolutely and there is two things in FICO has the master presence in the marketplace worldwide, approximating over 70% of risk efficient in 2011. I think what we bring is we bring these unique solutions, we bring intellectual property associated with that but most importantly we bring credit, because there is a real risk that people think that they’re been trying, that they’re worry about this or not. What we want to be able to demonstrate totally – to the marketplace is that our solutions are totally perfectly compliant, we don’t comprise our data protection, we don’t comprise your privacy, we don’t know where you are, we don’t want to know where you are? We don’t care for you all, all we need to know is you’re in same proximity to the transaction of the party and that’s precisely what our technology does for the team.

Unidentified Analyst

Okay, thank you very much.

Steven van der Velden

Thanks Robert.

Operator

(Operator Instructions) Our next question comes from the line of Luis Marquez with Laidlaw. Please go ahead.

Luis Marquez – Laidlaw & Company

Hello gentlemen, how are you?

Steven van der Velden

Good.

Luis Marquez – Laidlaw & Company

Can you give any color to Saudi Arabia and Zain as the opportunity as big as Latin America, is that larger than Latin America?

Steven van der Velden

Well that’s difficult to say. I think the Middle East has huge opportunities although it’s so far and more closed markets in most of Latin America. But if you look at this possible income modestly countries like Saudi Arabia, countries like Egypt have huge prospects and we believe that having an operation in that region has a showcase will open up doors to many other opportunities in that same region.

All together, it’s difficult to say whether the Latin America opportunity is larger than the Middle East on one, it will be different, it will also be in a difference. We believe that more countries in Latin America will open up over the next couple of years and the Middle East might takes somewhat longer but definitely both areas are of interest to the company and we believe we can – in those areas ultimately build up very profitable operations with some of the customers that are out there.

Luis Marquez – Laidlaw & Company

Okay, and just lastly, I don’t know if I’ve missed it but where are we with regard to the mobile wallet.

Steven van der Velden

The mobile wallet is something that is being discussed a lot of amount as you may have seen, the many, many different initiatives around at the end of the day have some talk would rather able to serve us the whole group of mobile world, all initiatives, all companies and help them to perform better maybe on the mobile management space but definitely into whole cloud security space. But maybe it’s therefore so better that I give over this question to Pat.

Pat Carroll

Yeah thanks Steven. In fact it’s quite interesting that we are in (inaudible) for the third time in a row and this time we’re going to be looking at the whole issue of procuring mobile wallet, mobile application and mobile payment in general. And our view in light of these that the problem with these top devices as we don’t want to own them but we want to be able to as Steven said secure them.

The issue with mobile wallet now is that – it’s all about registration and enrollment. It’s all about making sure that the right person is authenticated and that they can download the right mobile wallet and app on the right fall. If I’m fraudster what I want to do, is I want to get your wallet and your app onto my phone, and in fact we have seen that happen but the major bank at UK whereby the enroll registration process let’s seen what is secured now and of course you could download an person mobile wallet now often there until processor is sold.

And then one around and simply take cash from the individuals that account because that had the same impact of the debit card. So what we are doing? We are providing an infrastructure that allows what we call low friction and no friction. Low friction is at the point of enrollment registration making an extremely secure model of ensuring that the right person and only the right person can access to their wallet and download.

And then no friction, when it comes to the point of transaction based on the type of security break, because we already know a lot about the phone that have wallets to the app on the phone. We can recognize device, not by the voice printing. We can create (inaudible) and put the tunnels between the wallet to the approximately directly from that point as the service provider, and that’s all called the invisible. That’s the feature (inaudible) at in San Francisco; you’re going to see it happen live because everything happened alive. There is no demonstration, no PowerPoint, open and had some excellence.

Luis Marquez – Laidlaw & Company

Thank you very much.

Steven van der Velden

Thank you.

Operator

And our next question comes from the line of (inaudible). Please go ahead.

Unidentified Analyst

Good morning. I got on the call late, but I don’t know this was possibly covered, financial aware that it was some serious problems that varies with some packing or the banks. Is your technology, do you think it can be prior to any of that, there is kind of problem since being reported?

Steven van der Velden

Hi, Lee.

Unidentified Analyst

The other question from me, so I think this is about the very high profile broad event of card, it’s been all over the headlines for the last 24 hours, 48 hours?

Martin Zuurbier

Correct.

Unidentified Analyst

We can’t prevent those events for McCurry, right, we can’t.

Steven van der Velden

Right.

Unidentified Analyst

There is nothing that we can do to bump that. However, what we can’t do is prevent the broad applications of the consequence of that type of event. So in this particular instance, we’re talking about prepaid debit cards and what we would do is we would associate that customers prepaid debit card with the individual to the proxy of their cell phone.

So at the time of 20 use those cards to clean-out the personal account. We would then try to stick to the comment that the phone isn’t approximate to transaction with McCurry, wherever that is, whether it’s online, whether it’s personal phone, whether it’s an ATM or point of sales and what we can produce that then we’re able to prevent the broad event of McCurry. So if you take it, that’s was meant to be a proximity, on Europe broad store, you don’t have my phone, I would determined about potentially frozen event that the (inaudible) that’s how we can prevent these type of lots large transaction taking place.

Unidentified Analyst

Okay. Hopefully I might going for you guys, when you go in a Middle East.

Steven van der Velden

Yeah, thanks Lee.

Unidentified Analyst

Thank you.

Steven van der Velden

Thank you.

Operator

And there are no further questions at this time.

Steven van der Velden

Thanks, and I’d like to thank everybody for being on the call today. And this concludes Elephant Talk’s first quarter earnings call. Thank you very much. Have a good day.

Operator

Ladies and gentlemen, this concludes Elephant Talk Communications Corporations first quarter 2013 earnings conference call. You may now disconnect. Thank you for using ACT conferencing.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Elephant Talk Communications' CEO Discusses Q1 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts