Q1 2021 Mitek Systems Inc Earnings Call

Okay.

[music].

Good day, everyone and welcome to today's Mitek systems first quarter fiscal 2021 financial results Conference call. Today's call is being recorded at this time I would like to turn things over to Mr. Todd Curly and KR. Please go ahead Sir.

Thank you operator, and good afternoon, and welcome to my Pet's first quarter fiscal 2021 earnings Conference call with me on today's call and Mitek, CEO, Max <unk> and CFO, Jeff Davison.

Before I turn the call over to Maxim, Jeff I'd like to cover a few quick items.

Afternoon, Mitek issued a press release announcing its first quarter fiscal 'twenty and 'twenty one financial results.

And this is available on the company's website at Mitek systems Dot Com, Inc.

Call is being broadcast live over the Internet for all interested parties and the webcast replay will be archived on the Investor Relations page of the company's website.

I'll remind everyone that on today's call management will discuss certain factors that are likely to influence the business going forward and.

Any factors discussed today that are not historical facts.

Hello, and the comments regarding our long term prospects and.

Market opportunities should be considered forward looking statements and useful.

Looking statements May include comments about the company's plans and expectations of future performance.

Forward looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially.

Encourage all of our listeners to review, our SEC filings, including our most recent 10-K for a complete description of these risks.

Our statements on this call are made as of today January 28, 'twenty and 'twenty. One other company undertakes no obligation to revise or update publicly any of the pull back and the statements contained herein, whether as a result of new information future events changes and expectations or otherwise.

Additionally throughout this call we'll be discussing certain non-GAAP financial measures today's earnings release and the related current report on form 8-K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported and it relates.

With that said and I'll turn the call over to Mitek CEO and back.

Thanks, Todd Good afternoon, everyone. Thank you for joining us today I hope all of you and your families are staying healthy and safe.

Jumping right into it and first quarter was a solid one all around from mitek with both lines of business and each geography, performing well, we delivered significant new account wins and improved impressive existing customer expansion all of which resulted in another record quarter.

First quarter revenue was a record $26 million representing growth of 18% year over year. We also generated record non-GAAP net income of $6 2 million or 14.

Cents per diluted share up 23% year over year and cash flow from operations was $8 $7 million.

We are energized by the ongoing momentum.

And the verification market and the strength of our financial results demonstrates the expanding opportunity.

Added significant new customers during the quarter, particularly and our target segments of financial services gig economy, and marketplaces, and we continue to broaden our coverage with existing customers as they deploy our technology into new use cases and increased transactional volumes for traditional use cases.

Almost all aspects of modern life now use digital channels. So the need to establish trust and the digital identities and customers citizens partners and employees is rising rapidly.

Identity verification has never been more relevant rapid advances in artificial intelligence are enabling novel form of fraud, such as synthetic media like bots and deep fakes.

And increased scale and frequency of data breaches are all at any adding heightened pressure on organizations to protect their customers' data and access.

Perpetrators and their methods of prime continued to evolve and accelerated during 2020, so even the best anti fraud programs need to be continually assessed and refined.

Organizations no longer have the luxury to simply verify access at the point of Onboarding instead, they need to continuously authenticate and know exactly who their customers are across all channels and throughout the customer lifecycle.

Consumer demand for our outstanding digital experiences is also increasing pressure on organizations cap Gemini reports and its top trends and retail banking that superior customer experience is now a must for banks and design centric technological innovations.

And widespread industry acceptance and adoption.

<unk> expect the same experiences from their banking platforms that they get from their digital lifestyle applications offered by Big Tech players.

Well executed identity verification is primed to be the bridge between these two urgent requirements.

Entity verification has moved beyond just being an enabler. It now serves as an integral element of most organizations technology stack and we believe the next decade of fraud prevention will be defined by and organizations approach for the lifecycle of continuous identity and access management capabilities.

Our customers globally represent hundreds of the world's best known brands and banks as we sharpen our identity capabilities and refine our relevance with any of these markets. Our customers are discovering new essential use cases for identity verification and its vital role in enabling digital commerce.

ABN Amro bank, one of the largest banks and the Netherlands implemented mobile verify into two new workflows for their banking members this quarter.

And both areas traditionally reserved for in person identity checks mobile verify enables digital commerce and eases consumers through digital transformation.

This progressive approach ensures they are meeting their customers customers' rising expectations for and easy to use digital interaction.

Growth in transaction volumes on traditional use cases was also up and the first quarter as customers like Airbnb expanded the use of mitek into new geographies and also experienced greater usage of their digital services.

Additionally, in Q1, we continued to add new idea and the customers and grow our global pipeline of potential new identity customers and partners. This momentum is evident in both North America and Europe.

<unk> ambition is to be and indispensable partner and fighting identity fraud for the markets and geographies. We target. Our approach is to provide advanced length and layered identity signals from initial user onboarding and documents devices and biometrics to authentication re verification and continuous identity fraud detection.

Available today mobile verify includes the new standard and I'd verification face comparison with advice and Vance liveliness detection as well as achieved the highest levels of assurance and fraud protection data confidentiality and security through our patented NFC solution.

This solution uses a three way faced comparison to validate the document image against the one contained on the E&S Ctrip and our high resolution selfie.

Our biometrics also use passive liveliness detection to provide customers with additional security against all aspects of identity fraud and can be used across any of the preferred channels. Our advanced technology determines whether it is a genuine selfie and detect synthetic media and spoof attacks such as video.

Auctions facemasks or photos of photos.

Mitek is the only enterprise class provider in the identity category and our standards of service remain unchallenged mobile verify delivers against all measurements of performance acceptance availability speed and our professional services are the best in class as such our proven track record of success continues to.

ROE as we expand our reach in this fast growing market our relentless quest for customer success is delivered through our high touch customer engagement and continuous product innovation.

As we continue to innovate we remain committed to exploring all avenues to achieve product superiority spansion, whether through partnership increased R&D innovation or acquisition.

Turning to our deposits business for banks COVID-19 has been a catalyst for digitization as widespread lockdowns and and in person and branches are no longer the preferred option for consumers and.

As a result, we continue to experience growth this quarter from our highly profitable deposits product line. Its adoption continues to increase with the rising usage of digital banking apps and with it mobile check deposits.

Cornerstone advisors just concluded its most recent mobile deposit benchmark report, which surveyed close to 2000 American consumers among consumers who use their bank's mobile deposit capabilities. This year, 42% did so for the first time in 2020.

85% intend to continued depositing checks using their mobile devices and 2021.

To this point, 70% of respondents claim that depositing a check is one of the most important mobile banking features and 2020.

As more and more customers demand and the ability to use remote check deposits. We saw several large banks and significantly increase the dollar value and it's on checks deposited through the mobile channel as.

As well as reduce the number of days required to clear that check.

Both are hugely important to consumers and we believe will drive the continued adoption of mobile deposits.

During the first quarter, we successfully released mobile deposit for about eight and global deposit to dot two both of which are mature and stable releases that will act as safe harbors for our customers and partners as they see rising demand for our solutions.

Also our deposits team is again working directly with the U S. Treasury department to ensure the smoothed processing, a physical checks issued by the IRS and subsequent rounds of economic impact payments approved by Congress.

We are proud of our mobile deposit offering and its ability to assist people and this time of need.

Now let me provide a brief update on the USAA litigation situation as most of you know the two USAA verdicts against Wells Fargo for patent infringement related to remote deposit systems are subject post trial motions that could overturn the rulings or result, and new trials.

These post trial motions are still pending either way. The two cases will be the subject of appeals in the U S Court of appeals for the Federal circuit.

Additionally, mitek continues to prosecute it's Keith.

Territory relief that our products do not infringe the patents that issue and the wells Fargo lawsuits and there are no updates and that matter.

Separately the U S patent office has exercised their discretion and declined a request for additional review of the validity of four USAA patents.

Also the patent office has concluded its review of certain challenges filed by Wells Fargo and did not and validate any USAA patents based on that revenue.

All of these decisions are subject to rehearing before the patent office and appeal to the U S Court of Appeals for the Federal Circuit, and we intend to continue to vigorously prosecute arcades and.

Mitek invented all of its core technology, and we believe our products do not infringe on any USAA patents.

Before I conclude I want to thank Jeff for his many contributions to mitek over the past three and a half years.

As Youre, probably aware and December Jeff announced that he is planning to retire and 2021, Jeff and it's been a strong business partner for me since I joined Mitek and he is definitely going to be missed.

The good news is he is he is he has agreed to remain our CFO until we find the right person for the job.

Perches underway and Mitek has retained a top national recruiting firm to help us with this process.

In closing, we're pleased with our strong results as we continue to strengthen our market position for 2021 and beyond the acceleration and demand of our identity verification solutions is laying the foundation for future expansion and our record results demonstrate how we are strengthening our market position.

And the Mitek workforce should take pride in delivering the technology products and services that our customers need and value and these unusual times.

You have demonstrated resiliency and adaptability gives me great optimism that we have the right team and culture to realize mitek full potential.

Now I'll turn the call over to Jeff to discuss the financial results in more detail. Following Jeff's remarks, we'll open up the call for questions. Jeff. Please go ahead.

Thanks, Matt and thank you everyone for joining us this afternoon.

Let's start with the Q1 revenue and operating results.

The first quarter of fiscal 2021, Mitek generated record Q1 revenue of $26 million and.

And 18% increase year over year.

Software and hardware revenue was $12 3 million and increase of 7% year over year.

Services and other revenue, which includes transactional SaaS revenue maintenance and consulting services and support.

At $10 7 million for the quarter and increase of 30% over Q1 last year.

This increase was due to the growth and transactional SaaS revenue, which increased 45% year over year to $8 9 million.

Q1 2021 <unk>.

<unk> revenue increased 7% year over year to $15 6 million.

Identity verification revenue increased 40% year over year to $10 4 million.

We delivered strong software and hardware gross margins of 90% for the court.

Gross margin on services and other revenue was 79% for the quarter.

Total gross margin for the quarter was 84% compared to 87% from Q1 last year.

Total GAAP operating expenses, including cost of revenue and $24 4 million compared to $21 8 million and Q1 last year.

This increase was due to increased cost of revenue and increased expenses due to investments to grow our business.

Sales and marketing expenses for the quarter was $7 4 million compared to $6 6 million a year ago.

R&D expenses were $6 2 million compared to $5 3 million last year.

And our G&A expenses were $5 1 million compared to $5 3 million a year ago.

GAAP net income for the quarter was $2 2 million or <unk> <unk> per diluted share.

Our diluted share count was $43 9 million shares compared to $41 8 million shares a year ago.

As a reminder, our earnings release includes a reconciliation between GAAP and non-GAAP net income.

Diluted non-GAAP net income and provides a useful measure of the company's operating results.

Excluding acquisition related costs and expenses stock comp expense and litigation expenses and the related tax impacts from these items.

Non-GAAP net income from Q1 increased to $6 2 million or <unk> 14 per diluted share compared to $5 million.12 per diluted share a year ago.

Our non-GAAP adjustments include $2 7 million of startup expense.

<unk> 7 million of acquisition related costs and expenses.

385000, and cash towards two brands, and 241000 and and litigation expenses for the quarter.

This was all offset by the income tax effect of pre tax adjustments of $1 1 million.

Turning to the balance sheet, we generated $8 7 million and cash flow from operations during the quarter.

And our total cash and investments to $72 6 million at December 31.

And it sounds receivable balance of $12 7 million.

Represents a DSO of 50 days.

In closing, we're pleased with our results for the first quarter, which included record revenue and significantly improved profitability and.

We look forward to continuing to deliver the valued services the mitek provides.

Operator that concludes our prepared remarks, please open the line for questions.

Thank you at this time I would like to ask a question you may sell off by pressing star one again that will be one for questions. We'll hear first today from I'm, sorry, with William Blair.

Hey, guys can you hear me okay.

And again <unk>.

Hey, great.

Congrats yet.

And if we're going to Miss you, but.

<unk>.

And.

And how it works with congratulation on the numbers.

And so the numbers I would love to just touch on.

I'd verification side as you think about demand and the pipeline would love to get a little color around how that's playing out.

It's really around as we think about the gig environment the airbnb customers.

How do you think it plays out and maybe not even over the last 12 months or maybe over the next.

<unk> 36 to 50 months three to five years, let's think about how you guys.

See that business line.

Yes, that's a big that's a big question move on.

Just meaning its far reaching.

Certainly the idea of being able to not just validate identities digitally.

It's a big deal. It's still you know we've talked about this being an early stage market that's growing rapidly.

It is a big category.

Where the problem hasn't fully been solved I think what we've what we've seen and of course of the last couple of quarters is.

And new use cases, and what we're referring to is the lifecycle of but and there.

And user where they're being on boarded wishes and historically the use case and we've been used the most in determining somebody when they're in their first kind of coming to your bank too.

Digitally to apply for a loan or a credit card or something.

But what we've seen and of course of the last couple of quarters as additional use cases around re verifying that same individual after they've established a relationship with you.

It could be because they changed phones or change to dress or change name got married and her name.

And need to be re authenticate and basically we verified or rebound we binding to that device and so we're seeing those use cases within both our existing customers as well as new customers I think back to your question.

For the markets, we serve the best estimates, we can come up with as you know identity verification is growing someplace between 20 and 40%.

A year and.

Gartner the experts are telling us that the penetration rates at this point or 2030% and there'll be at 75% to 80% over the course of the next three years. So.

Stick, we're going to have a lot of action and what we do today and youre going to see us continue to complement the current signals and capabilities. We have through ongoing innovation as we've demonstrated in the last 12 months and then bringing on additional signals through partnership and ultimately, perhaps even through through acquisition.

Yeah, No that's a great answer I guess and great color.

And you think about it right there's lots of ways to approach. This concept right you've seen equifax as recent acquisition.

Accounts.

And that's as much as I'll talk about a week and identify a device and give you a score on the risk of a device.

I guess the biggest question is and obviously getting apartment Duffy side.

There's this concept with like actual not just IV verification IV management.

I'd love to get a little bit of color strategically about how you guys think about I didn't management, so not just hey, yes as of passports.

Driver's license, it's valid they're valid et cetera, but the concept and actually understanding that's.

I believe on who is in Chicago and did not buy a place and Mexico, because he'd never has and members' accounts and how do you think about that longer term strategy.

Yeah. So so would you just outlined there as you know there's a lot of different approaches a lot of different not.

And that just providers, but.

Concepts and how to how to attack. This problem and you mentioned a number of folks that are either complementary or channel partners to mitek and and ultimately what you're trying to.

And we're trying to put your finger on is where does this go and how do we ultimately end up with.

And really definitive digital identity that is highly private super secure but can be used throughout our our daily existence, whether it is.

And as long as things like that.

Visa have the rails of credits like the rails of IV exactly you're actually right.

And so yes.

Yeah. So you know I think the question becomes and the way we're trying to position ourselves is who who's going to own that identity who's going to be the source of.

But the technology side, we can say blockchain and and all that but is it going to be the banks is it going to be big technology could it conceivably be the government and you have to think about this through multiple dimensions, where we're serving we're serving our customers in dozens and dozens of countries. So the idea that the government and the United States is going to figure out.

Digital identity, and Thats going to work for the folks and you know, Germany U K.

Around the World. That's just not that's just not the case so back to your question.

We have strong feelings as to what direction. This is going to go but we've positioned ourselves. So that we can participate regardless of who emerges as that kind of a controlling stake or a consortium of.

A digital identity personally my own personal view to make a prediction as you know the.

Holy and the Holy Grail, and yours self sovereign identity and that it's going to take a massive change in behavior and adoption of technology that.

It's not going to happen on the timeline that you just referred to three to five years and I think it's a much longer timelines and that.

But again, our jobs here and the strategy there.

We're taking is to position ourselves so that we can participate and be a more meaningful value add.

The two segments and the geographies that we're focused on almost regardless of what direction of price.

No and I appreciate that color night vision, and candor and neutrality.

One last one from me and I'll turn it over to queue.

Competition, you've seen a number of folks come out and say okay. So we can do IV verification like match and we argue they're cross border.

A driver's license and everything else.

And the approach to the business has risen from more than I do matching but I V verification, but management and.

And I'd love to have your color also how you think the competitive environment is evolving.

Gmail.

Gmail, thousands and some big stars like on Fido, and how do you think about it is better run and who do you see and how you win thank you.

Sure sure again, another another really big question. So I think what you're touching on is this idea of identity access management, which is a much larger category that IDB identity verification is that junk too and.

You know partners, making these predictions that those two categories are starting to couple and intersect where you've got to have really accurate customer onboarding or else youre never going to be able to authenticate and re verify and so partnering with organizations that.

Our expert in the Iam space, particularly beyond just their employee for from employees, but also for consumers and customers.

That's part of our strategy and.

And we don't view those folks as competitors today, we view them as partners and complements to what we're doing the names that you used or kind of the direct heads up competitors that we see day to day within prospective customers.

Fighting for business and the.

The Covid the last 10 months is really I think.

Change the competitive landscape, where and what we're seeing is folks like ourselves and a couple of others that have been able to go fully remote and do it successfully without any business interruption and really rising to this to the circumstance and then we've seen some kind of historical competitors that are made.

Be a little longer and the tooth using some more antiquated technology, that's not scalable or as not as effective and and they're struggling through this so I think youre starting to see a separation.

And this but it's been a relatively crowded field. So we're starting to separate the maybe the winners from losers are the weak from a shaft whatever the rate. Therefore, there is hope that helps.

No. That's very helpful. Thank you guys appreciate it and well.

And that's a gross number and I'd be resolution was great I. Appreciate it. Thank you all ex pavan.

We'll hear next from Mark Chapell with benchmark.

Hi, Good afternoon. Thank you for taking my question and nice job on the quarter.

Next starting with you and the companies as their performance has been let's just say quite good since and since the financial guidance was withdrawn early last year and I was wondering if you could just give us a little color on what it may take.

And the firm too.

Reinstate financial guidance going forward.

Sure Mark and thanks for the kind words, we withdrew the guidance along with you.

The overwhelming majority of the Russell 2000 companies back in the March April timeframe and.

And the reason we do that is that because there was just so much uncertainty not just around COVID-19, but then.

And the knock on consequences around the uncertainty of what that was going to mean and the economy.

We're now 10 months, a little bit longer into it and I. Appreciate your kind words about our performance I'm really proud of the team here.

At the same time.

You can't you can't have missed the news cycle and the last 30 days and think that you know.

The uncertainty is anything less than it was back in April so I think once once we get comfort with.

And the externalities and the things that were out of that we're not in control of.

And with the spread and not just the United States and the spread of coronavirus and new mutations to coronavirus and what that's going to mean knock on consequence to economies.

And we're happy to.

Used to be in a public company and Foleys had always had guidance out there. We just got to have confidence that the guidance. We gave you guys. We can stand behind and deliver on.

Great. Thanks, and then.

Switching gears a little bit here.

Channel network because building up your partner network has been a big initiative at the company over the last I don't know.

A year or two.

And I was wondering if you had any progress to report on that front this quarter.

Yeah, and become really cautious and these calls of using customer names or channel partner names only because it is a competitive environment and we've got.

Editors since we're the only public company, we've got a lot of competitors, who gets the benefit of listening in on these calls.

We have invested and the channel over the course of the last year year, and a half and we've had big impact from that.

And the best is still to come and those channel partners are both helping us cross sell into the segments that we have our direct relationships and our own direct activities around financial services Fintech and the marketplace economies. We've also you mentioned the others have mentioned Adobe and <unk> and the relationships we have there with your more horror.

Sakel and nature and cut across different.

Different industries different geographies and really take us into places that.

On our own we probably wouldn't be ready for today, just from an investment and direct resources or getting us to use cases that.

We're just Ah and element of a larger workflow so yeah.

Yes, we've had quite good progress there, but as I said I think the best is still to come.

And thank you that's helpful. And then just bringing you into the equation here I was wondering if you could just provide an update of where the company is with respect to our sunsetting. The other legacy on premise platforms.

Sure.

So are we.

We started that initiative two years or three years ago and.

So there was going to say it as well and get through it.

Done a great job getting sunsetting the on premise identity platforms.

The world domestic and primarily in Europe. The only thing that's left with on premise is from the products sold and the Spanish and Latin America territories, and Thats, probably two years out and for those are.

<unk>.

And so you'll still see revenue and that our hardware and software line.

The next.

Four to six quarters, probably.

So it's just a warm and software for the most part.

Yeah.

Great. Thank you that's all from me Thanks again.

We'll move on to Mike Grondahl with Northland capital markets.

Hi, Michael on for Mike. Thanks for taking my questions and congrats on the quarter. Maybe just first off was there anything specific to call out and the new deposits releases and the quarter or is that just more of a general update there.

And Mike and thanks for calling and can you just repeat the question you broke up there just as you were asking.

Oh, sorry, I thought you just mentioned there was a couple of new releases for mobile deposit.

Update from the quarter.

And specific there or just general updates for the software.

Yes, so there were some pretty.

And we get down and from the detailed some pretty important additions and capability improvements for our existing customers and both of those releases. So it was the mobile deposit for that eight and a global deposits to that too.

There were some things under the Hood that.

I think the the lame and wouldn't necessarily find all that interesting, but if you were a big horse service provider like a pfizer over and F. I asked for a Jack Henry or one of the larger banks that.

At hostess directly you would find from some big improvements there whether things just go faster run more smoothly.

Important the important message we wanted to get across is these are mature releases. These are very stable releases and he's a very scalable releases secure leases that.

As these volumes.

And at some point and the next 12 months, we're going to process, our $5 billion check right. So there's a lot of checks gone through these systems and the 7500 financial institutions that are that are taking advantage of these solutions and.

But for our partners and our customers directly the ability to rely on these things and not have to you know.

And I'll have to babysit them.

<unk>.

And I think that's a really meaningful thing and that's what we wanted to get across and and.

And the prepared remarks.

Got it that's helpful. And then just from the legacy systems, I mean, it's pretty safe to assume that most of that.

From the previous question is cleaned up and so forth.

Cost perspective operating perspective that's.

With a large and already seeing the benefit of that.

Yeah, I don't I don't know that it's a it's all behind US for sure I think Jeff did a good job of outlining where we are and that.

And that process every quarter, we have less of those legacy systems out there obviously, we're not.

And continuing to provider or sell new ones.

And.

That so as that and decline as Jeff said over the course and the next two years.

The go forward platform of mobile verify continues to grow and continues to grow because we've got more new customers coming onto it and we've got existing customers finding new use cases, and we've got customers that just have expanding volume. So I think it's this divergence of watching the legacy kind of bleed off over the course of the next two years and watching the go forward.

Platform really ramp up.

So it feels good.

Okay. That's helpful.

And again for questions that is star one at this time well move on.

And to Allen Klee with Maxim Group.

Well good afternoon, and I I'd like to hear your thoughts on mobile deposits and how do you think this might react as we get to the end of <unk>.

The lockdown and people start going back out again it strikes me that that this is a behavior that would tend to remain sticky.

But I'd like I'd like to hear.

What's your best guess about that.

Yeah sure thing Alex So first congratulations on your new gig and great to have you and the call today.

I think we referenced and that in the prepared remarks.

A report that was just released by accompanied by an organization called cornerstone that.

And did a couple of thousand consumer surveys regarding digital.

Digital banking and specifically the use of <unk>.

Remote check deposits from a mobile device and that I believe you can get that are linked to withdraw website. If not we can we can get you a copy, but it's really interesting not only to see.

And as consumers kind of got forced to adopt digital banking their feelings about gosh, how easy this is and how convenient this is and how sticky it's going to be.

And that report, which again is not our report, but we certainly we love that the information. That's in there supports the hypothesis that you just outlined consumers are saying yeah.

And I did this mobile deposits thing I did this digital banking thing and I'm going to keep doing.

Yeah that that seems to make sense and then.

The numbers on the.

One identity were are very good.

The outlook is very good how do you feel about that.

And this business has good gross margins, but it's but it's kind of and emerging business, but can you remind us of how you. How you think about what this can look like when it's more at scale.

Yeah for sure and you can just remind everybody.

And the energy business is a fast growing business and we're investing heavily and because the prices now and and balance that room and striking is being disciplined and thoughtful about those investments.

So that as it does scale as all these cloud mobile businesses do.

It turns to breakeven and then very highly profitable.

And I'll, let Jeff make some comments as to where that can go but.

We're still and that investment stage today, but every quarter and every year, we're thinking about what the right discipline and and what the right balance is.

This is this is absolutely the kind of business that as it scales.

There's a lot of leverage and it and so I don't know, Jeff if you want to.

Bracket that with anything more specific.

And is the only thing I would add is on the gross margin line.

Data will improve overtime.

And the reason that improves.

And we're delivering from a cloud and.

And cloud businesses go more and more volume and you put it in and you get more efficiency and you can leverage the pubs and it'll be a more profitable model. It's gross margin level and also if you recall, we provide agent assist services went up.

And it systems don't actually are unable to read the documents and as our systems get better and better and improve less and less agent assist our resources required require them and that will improve gross margin as well.

Alright. Thank you so much and then just I apologize, but when you were going over the patent and litigation or the litigation stuff. When you talked about the efforts that you were making.

Where you went to the patent office.

Could you just repeat kind of what did the actions were and and what your next steps are with that.

Yeah, So specifically on the PTO, we had asked the PTO to crack those whose USAA patents opened and take another look at them.

And they refused to do that on a procedural matter it had nothing to do with necessarily the validity of the patents and the challenge there and.

That's really the.

Some of that.

And that part of the prepared remarks other than that and it's really not a lot of change since the last update.

And.

And so what is what.

What are you what are you planning to do as a result of that.

Force, but right now there's not a lot for us to do.

Both the courts and the patent office, while they're still open.

Due to Covid things that are just what is normally a glacial and kind of timeline and very very slow progress has managed to sit down shift and thats something thats even slower.

Got it okay. Thank you so much.

Yes.

Once again for any further questions at a starwood and at this time.

And with that I would like to turn things back to Mr. Carley for any closing remarks.

Thank you operator, and thank you everyone for joining US today, we look forward to updating you again next quarter.

And our call has concluded have a wonderful day.

And again that concludes today's conference. Thank you all for joining us.

And.

[music].

Yeah.