Q3 2022 Mitek Systems Inc Earnings Call
Good day and welcome to the Mitek <unk> third quarter 2022 earnings Conference call all participants will be in a listen only mode.
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I'd now like to turn the conference over to Todd currently of MTR Investor Relations. Please go ahead.
Thank you operator, good afternoon, and welcome to Mitek third quarter fiscal 2022 conference call with me on today's call are Mitek, CEO , Max <unk> and CFO Frank Carl.
Before I turn the call over to Maxim Frank I'd like to cover a few quick items. This afternoon Mitek issued a press release announcing its third quarter fiscal 2022 financial result that releases available on the company's website at Mitek systems Dot Com. This call is being broadcast live over the Internet for all interested parties on the webcast will be archived on the investor.
Relations page of the company's website I want to remind everyone that on today's call management 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 the company's plans and expectations of future performance forward.
Forward looking statements are subject to a 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 10-Q for a complete description of these risks.
Our statements on this call are made as of today July 28, 2022, 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 in expectations or otherwise.
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 in the release with that said I'll now turn the call over to Mitek <unk> CEO Max.
Thanks, Todd and good afternoon, everyone and thank you for joining us today.
Once again I'm happy to report that we delivered record revenue for the quarter with revenue growth of 24% year over year. Congratulations to all my check ins for their standout work and thank you for your ongoing commitment to this important mission and our customers all over the world.
Before Frank reviews, the financials in more detail I want to focus on our significant market opportunity we are addressing.
As consumers transact more business online than ever identity verification has become essential to face digital access in 2020, one traditional identity fraud and identity fraud scams effect at 42 million consumers and cost companies a staggering $52 billion. While this is a very large number.
<unk> the number of people online today is growing rapidly and is in the billions and identity fraud and the cost of this fraud is only going to get bigger.
My texts identity solutions have been developed to address these growing challenges by providing organizations with the insight technology and solutions needed to determine if the individual accessing their digital account is verified authenticated or in fact real.
With growing digital usage verifying the identity of consumers before they can make a transaction or access or service enables organizations to prevent identity fraud keep their consumer information safe and meet the rising pressure of global regulation.
Two notable use cases, driven by increased regulation, our right to work and right to rent laws in the U K.
Both require identity verification.
The right to work law also known as workplace choice gives workers the freedom to choose whether or not to join the labor Union in the marketplace and the workplace.
This law also makes it optional for employees to you immunize workplaces to pay for Union dues or other membership fees required for union representation.
The importance of identity verification and identity authentication is critical so that unions employers and government stay in control and minimize fraud related to these activities.
Right to rent is another government policy that was introduced in the U K under the immigration Act of 2014 at.
It places restrictions on undocumented residents accessing rented accommodation in England by making all adult documents prove they are in the U K legally before being granted tendency.
This quarter, who you was granted government digital identity providers certification.
To provide I D verification services for right to work right to rent and criminal records checks, making who you want them just to identity services providers in the U K to have achieved this highly anticipated high profile government trustmark.
In addition to these new regulatory use cases, our customers are also diversifying their use of identity verification and leveraging the automation and scalability of mobile mitek mobile verify as they find creative ways to attract new consumers to their digital platforms. This quarter one of my texts large banking customers ran.
A series of televised promotional offers as part of the country wide advertising campaign there.
There was an overwhelmingly positive response, which resulted in massive sign ups and millions of identities being verified using our solution.
We're proud to be their identity partner powering this rapid surge in consumer Onboarding twice within a 30 day period.
Additionally, and interactive gaming client once the new in game feature providing its users with the ability to make micro transactions within the game to unlock specific features or game changing enhancements. This feature was hugely successful and resulted in over 1 million age verifications within the first week mobile.
Verify powered the identity verification workflow to support this and in doing so enabled the customer to generate significant additional revenue.
And one last example of mobile verify and action. This quarter was a large tech company that used our solution to verify the identities of all the attendees of its global developers network conference highlighting the remote access use case as an emerging opportunity for an identity verification solutions.
Just a few examples that demonstrate the ongoing and expanding business requirement for digital identity verification as more transactions move online our solutions are more more necessary than ever and they need to be fully inclusive.
This quarter I D R&D, our biometric subsidiary, whose products are used in over 70 countries globally announced the results of the first ever independent evaluation of a face liveliness detection product for demographic bias. The assessment was performed by Pixie labs and accredited biometric testing laboratory and the <unk>.
Results confirmed that I D. R&d's I D life based product for facial liveliness detection exhibits fairness in terms of bias for target demographic groups, including gender age and race.
Liveliness detection is considered essential and preventing spoofing attacks, where biometrics are used for digital identity verification and authentication similar to biometric matching algorithms a biased likeness algorithm can lead to an increased rate of inaccurate results for individuals in a particular demographic group.
This in turn can cause digital banking and other services to be less accessible to these customers. The outcomes of this report will be used to inform <unk> ongoing development of machine learning based products in support of responsible AI. It also reaffirms my texts commitment to providing inclusive digital access.
For all.
My text product Arsenal of identity solutions was also boosted further this quarter when we launched the mitek verified identity platform My VIP built.
Built to make digital access faster and more secure than ever my VIP gives companies comprehensive secure control over the entire customer identity journey saving them time and money My texts new platform is the culmination of our best technologies. Our most recent acquisition of who you and our ongoing commitment to putting our customers in <unk>.
Control of their consumers experiences.
As I've previously mentioned and having a single platform that easily orchestrates and can figures of Ky see or know your customer journey to manage identities minimize friction on good customers and identify bad actors is imperative for digital commerce, with who U K Y C technology at its core and the idea R&D biometric.
<unk> and mobile verify I'd verification integrated we believe that my V. I P is the most comprehensive end to end identity platform on the market today.
It's low code no code capabilities enable us to offer the platform to businesses of all sizes and quickly set them up to manage the Ky see processes without needing an army of developers. This results in a significantly larger addressable market more vertical segments more geographies and of course more use cases for our <unk>.
<unk> customers and partners.
VIP also provides organizations with a more complete view of the consumer for more accurate decisioning throughout the customer's journey, resulting in optimization of workflows and ongoing improvements to the customer experiences.
We understand that business requirements change by region and vertical segment and consumer experience is everything.
To meet these requirements, we provide flexibility with identity data signals. My VIP offers our clients orchestration capabilities that allow them to use the most relevant data signals for their business and the flexibility to change signals with east.
Identity has moved beyond just being an enabler of digital commerce. It's now an integral element of an organization's technology stack because getting it wrong means.
Wrong means billions of dollars of identity fraud theft or fines. This is definitely.
Not a solved problem, it's getting worse and much more complicated, but with my VIP, we offer the market a full end to end platform that gives them the power to fight back.
We're excited about my VIP and how it expands our offering and the addressable market and positions us for accelerated growth. The examples of the expanded use cases I mentioned earlier point, the greater adoption of digital identity verification is an essential recurring step and our customers safe digital journey.
Our mission at Mitek is to provide trust and convenience to every digital transaction, we look forward to sharing our progress with you.
All in the quarters to come with that I'm going to turn the call over to Frank to discuss the third quarter's financial results in more detail. Following Frank's remarks, we'll open the call up for questions.
Over to you. Thanks.
Thanks, Max and thank you my technician for all of your significant contributions this past quarter bridging from <unk> remarks, the consumers raise the digital channels has meant that fraud attacks continue to accelerate and the increasing complexity constant companies billions in fraud losses and significant operating costs as discussed the torrid pace of these attacks has been especially.
Difficult for organizations that lack the internal technical resources infrastructure and the expertise to respond at the speed of fraud and as such has created urgency for orchestration enable solutions like our mitek verified identity platform for my VIP during the third quarter, we fully integrated the orchestration technology from our who you acquisition and we launched my VIP.
We are also we also continued to integrate our go to market teams and are already building a sales pipeline for our new orchestration platform here in the U S.
As Max mentioned during the quarter, we saw several new use cases for our digital identification solution such as the regulatory requirements for the U K around as Mac stated right to work in right to rent initiatives verification for this new interactive gaming customer for in game purchases and also Excitingly attendee verification for important events, all of which bolster our view of the digital I don't.
The verification is an essential ongoing staff throughout our customers' digital commerce journey to that end. We are excited about the launch this quarter of our end to end at any platform my VIP, which significantly expands our addressable market and will position us to accelerate our identity revenue growth.
With that preamble, let's unpack the Q3 revenue and operating results in more detail Mitek generated three quarter results of $39 3 million or 24% increase year over year software and hardware revenue was $19 8 million up 17% year over year the.
The increase in software and hardware revenues, primarily due to the growing contribution of idea R&D continued nook continued mobile deposit reorders as well as check fraud defend your revenue.
One item to point out is that idea R&D had another very strong quarter as I mentioned contributed to the growth in our overall software and hardware line. While this revenue is transactional in nature and as part of our identity business because thats offered on premise ASC 606 requires that we put that revenue into the software line.
Services and other revenue, which includes transactional SaaS revenue maintenance and consulting services was $19 5 million for the quarter up 32% year over year, our transactional SaaS revenue increased 45% year over year to $14 7 million driving this growth in transactional SaaS revenue was increased mold verify volumes.
As well as the addition of who you SaaS revenue an important highlight here to note is that even without the addition of who use SAS revenue our transactional SaaS revenue would have increased solidly both sequentially and year over year as we move forward 90, R&D, which is an on prem solution.
To grow we will start to move away from providing transactional SaaS revenue numbers on a quarterly basis and will instead breakout deposits and identity revenue to provide a more holistic picture of each business.
For Q3, 2022, our deposit revenue increased 5% year over year to $21 9 million driven by mobile deposit Reorders and a nice contribution from our new checks broad defender product offering identity revenue increased 58% year over year to $17 4 million driven by the expanded use cases, you mentioned earlier as well as the addition of who use SaaS.
Revenue and the very strong contribution from IV R&D.
We delivered strong software and hardware gross margins of 97% for the quarter gross margins on services and other revenue was 79% for the quarter and our total gross margin for the quarter was 88% compared to 89% in Q3 of last year.
Total GAAP operating expenses, including cost of revenue were $38 1 million compared to $26 3 million in Q3 of last year and this increase is due to the investment to grow our identity business and the additional costs associated with the acquisition of <unk>, R&D and who you.
Sales and marketing expenses for the quarter were $11 2 million compared to $8 1 million a year ago R&D expenses were $9 4 million compared to $96 9 million a year ago and are inexpensive G&A expenses were $6 7 million compared to $5 6 million a year ago.
GAAP net loss for the quarter was <unk> 9 million or <unk> <unk> per diluted share reflective of the investment made to accelerate the growth of our who your business and the restructuring costs associated with realizing the acquisition synergies.
Our diluted share count was $45 1 million shares compared to $45 2 million shares a year ago now as a reminder, our earnings releases include a reconciliation between GAAP and non-GAAP net income we believe non-GAAP net income provides a useful measure of the company's operating results by excluding acquisition related costs and expenses stock comp expense litter.
<unk> expenses amortization of debt discount and issuance costs restructuring costs and the related tax impact of all these items.
non-GAAP net income for Q3 was $10 2 million or <unk> 23 cents per diluted share a decrease of 4% year over year. Our non-GAAP adjustments included $4 5 million of amortization and acquisition related costs $3 6 million of stock comp expense $2 million in cash tax differences $1 8 million of restructuring cost another one point.
8 million amortization of debt discount and issuance costs and 438000 litigation expenses for the quarter. This was all offset by the income tax effect of pre tax adjustments of $3 million.
Looking ahead, we expect sales from our new VIP platform will help us accelerate our identity revenue growth in fiscal 'twenty three.
While we are extremely excited about the opportunity with our new Mac My VIP as well as our other growth initiatives. We are cautiously optimistic about our ability to deliver similar revenues we've had in the third quarter again in the fourth quarter.
As we have mentioned our identity revenue is transactional and varies quarter to quarter based on consumer activity such as east as the expanded use cases mentioned earlier, while it's exciting to see the expanded use cases for our digital identity verification solutions. It is possible.
But our fourthquarter identity revenue could be flat or even down sequentially, despite being up year over year.
Now on the topic of profitability, we made the necessary investments in the third quarter to integrate our technology and our go to market teams as quickly as possible to magnify the opportunity of the new platform for our business. We believe this is an investment worth making given the high revenue growth and expanded addressable market and we believe the new orchestration platform that will bring to mitek as I.
And earlier, our quarterly results reflect a $1 $8 million restructuring charge as a result of the cost synergies, we were able to gain from the integration of who you into our organization as well as the realignment of our expenses as we continue to move towards profitability and our identity business. We believe our identity business will reach profitability in the second half of fiscal 'twenty for last.
We're excited to welcome our new auditors BDO, who have come on board earlier. This month and we look forward to working with them on a go forward basis. Welcome BDO in closing we are pleased with our third quarter results and we are extremely excited about the launch of my VIP and the opportunity it creates for mitek to us to accelerate our growth. We're also very pleased by the expanded use cases for <unk>.
Any verification solution and the solid performance of our other growth initiatives, including idea R&D check fraud defender and of course, our mobile check deposit business my tax position as a global leader in digital identity and digital fraud prevention is strengthening day by day as we worked to make digital access faster and more secure than ever operator that concludes our prepared.
Paired remarks, please open the line for questions.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
Our first question will come from Jacob real barriers with William Blair. Please go ahead.
Hey, guys. Thanks for taking my questions.
Congrats on the great quarter sounds like business was actually really shot him, but I think everyone knows what's out there and I was just wondering if you could actually touch a little bit on what you're seeing in the macro environment and specifically what youre seeing with customer buying behaviors have you seen any deals get pushed out when they are at the moment.
Pause it or I D verification or have you seen any customers decreased usage volumes as a result of the macro environment I know that there are likely puts and takes but I would love to just get your color get some color on how the macro has impacted your business.
Yeah, well thanks for the question Jake and I appreciate the positive comments.
Obviously theres a lot of uncertainty out there you can't read the news story or listen to radio and not come trip across it.
Yeah.
The SaaS transactional nature of of our identity business you know as we use some of the examples in the prepared remarks that fluctuates with not just the cadence of an individual business, but also kind of the.
The economic environment that their end consumers, we're working with it and the direct answer. Your question is so far we have not seen that impact.
Impact individual customers or individual use cases or individual geographies.
Period full stop related thawed.
It's illogical that it wouldnt start to show up right. So if we think about the increase in interest rates and we've got a lot of financial services customers. We've got a lot of fintech, if if youre doing mortgage origination if youre doing helocs.
Youre doing refinancing.
So as interest rates go up the number of new loan originations is likely to go down and that may not be a huge part of our business, but that would be an example that I would anticipate to start to see some headwind in transaction volumes for use case like that.
The direct answer your question is so far no.
Yeah, that's great and like I said the numbers the numbers would show that but I'm just had to ask and then just second question. So you mentioned in your prepared remarks that the <unk> platform has opened up new use cases with both customers and partners. So on that partner front now that you may actually be more competitive with some of your own.
The orchestration partners with whom you have you seen any changes to those relationships or are those kind of status quo and you're actually seeing some expansion opportunities with other partners because of the added functionality.
Yes, I think we've had some smaller partners that have felt that they view it as competitive and threatening but our larger partners in perspective.
Larger partners.
And that area of the World information service providers.
View it very much as an opportunity you have got the best in class offering and solution matched with public company with great standing a rock solid balance sheet all of the transparency that comes with.
Being being that public company and we just looked like a great partner of choice with an enterprise class offering.
Great and then just if I can sneak one more in but could you talk a little bit more about how the initial customer reception has been for my VIP I know, it's early but have you seen any changes to the typical customer profile that your platform can target as well as have you seen any increase in velocity.
In terms of what you're filling up the pipeline with as a result of adding that functionality.
Yeah, there's the nested set of questions just as a reminder for those maybe.
Arent recalling earn as close to it.
VIP is basically, but who you platform, which had been up until our acquisition of who you exclusively offered and delivered in the U K. It is that platform rebranded re labelled and then hosted here in the United States and then throughout Europe for GDP our purposes.
Integrated along with our best in class biometric, a face and voice from R&D and then our world class document identity verification solution mobile verify so that's basically what my VIP is and we announced that we launched that at the end of June and it is now available here in the United States we've been.
Demonstrating it to interested prospects, we've been engaging in sales cycles and I would say at this point, we've probably had three dozen serious engagements to be able to kind of test the hypothesis.
It's been going well.
Two and including doing demonstrations and now starting to do some lightweight proof of concepts the.
The direct answer your question as far as it does allow us to get to.
Businesses that maybe are.
More agile more nimble than the world's largest banks right. These these born digital.
Native businesses that better.
Moving very very rapidly don't have huge development teams, but do have identity compliance requirements, whether those are anti money laundering know your customer or just straight up something like age verification so well.
We're very just days early days, but we're we're quite encouraged from from what we've seen are those examples I just use their Jake we're here in North America, but we have likewise on the continent in Europe had similar engagement and similar kind of traction initial traction.
Yeah.
Great well, thanks for taking my questions and congrats again on the quarter.
Thanks Jake.
Our next question will come from Mike Grondahl with Northland Securities. Please go ahead.
Hey, guys. Thank you.
First question is just kind of on the on the revenue outperformance.
Was that primarily who you was it more legacy mobile Ids.
Where would you kind of put performance.
Yeah, Hey, Mike, It's it's Frank Great to hear from you.
You know really as I said in my prepared remarks, it's been a very interesting quarter, our mobile verify product and some of the use cases, Max discussed had a fantastic volume quarter and performed well. So I would say, it's a combination of both the contribution from Lou you, but also these new use cases, the developer conference the in game kind of purchased.
An opportunity those are all big.
My verify opportunities for us. So we had a we had the benefit of some pretty good mobile verify performance as well as the who use our performance.
Got it.
Those three use cases that were mentioned.
Won't re mention them, but were those related to the.
Who you sales force and mobile I'd legacy sales force.
And then kind of related to that.
It is a little bit different than I'll say historical customers, meaning.
I don't want to call it.
One off event, but clearly this advertising thing that the bank did and.
This gaming in game purchased those seem to have more of maybe a one.
One or two quarter Big benefit then maybe slow off until an event happens again, and especially a conference. So.
Do you think this is a.
A big new opportunity for you guys.
Going after I'll say, a customer profile that might be more I'll say event, driven or or <unk>.
A shorter term, but a lot of transaction.
Yeah. So great question I'm going to start with the latter and especially as a grand dad, who buys the kids games. Later. This year. This is a phenomenal market opportunity I think it represents a great kind of test case for us to look at that new vertical is a great way to expand.
Other companies that are providing in app purchases in game purchases new lives enhancements new features available to you you know characters and so forth so and same with the event business. I think these are great proof points for whether or not our technology is able to scale to handle the volumes that were significant and and it did well doing that so I think rather than.
Unions, one offs I think there are great entrees potentially into these markets and created a great learning experience for us to turn that into kind of an ongoing revenue opportunity as it relates to the sales force as Max mentioned in his in his comments. This was both you know the use cases, we mentioned where both the who use salesforce and the Mitek salesforce.
You're right to work in the U K rate to rent those are UK initiatives there.
That were driven by our who your teams, but also the pipeline rebuilding as Max engine, what we've mentioned what we're seeing in the U S is a is a combination of those two workforces cross Pollinating and you know kind of learning both products. So I think we've done a really good job in bringing that will want to go to market teams together fostering that that kind of cross pollination in collaboration and I think that.
Plus these interesting new opportunities events games.
The right to work all of these are interesting new use cases for us that I think have real legs in <unk>.
And fruition could be very interesting.
Related to that.
Three or four use cases.
Also help with outperformance in the quarter. It seems like a couple of them would've been big enough to drive some real dollars without a doubt.
Okay.
And then.
Just on the under my VIP or call. It the new who you if you will almost.
Are you is your is your sales force.
All set to go.
In your pipeline.
Are you is that.
Are they on the ground and running hard or is it still sort of hey, we're educating these guys in.
Florida again.
Just trying to understand how quick this pipeline can fill up.
Yeah. That's a good question, Mike So we're still investing in capacities and Salesforce and cross pollination. Some are on the ground. Some more will come so as we mentioned I think last last quarter. It's gonna be you know an exercise in getting there and and building the right kinds of skill sets necessary to sell both products. So we're not there yet we're still investing.
More to come in the coming quarters, but the.
The good news is we've seen some pretty interesting pipeline growth already and we're still not at maturity in terms of fleshing out that flushing out that workforce.
Grants, because hey, lastly.
Lastly, I'll just say it.
It sounded like mobile check deposit.
And.
Check fraud defender had 5% year over year growth.
Hum.
Those points, where check fraud defender.
We had a very strong contribution from check fraud defender that whats happening if youre following fraud, Mike it's so interesting.
Fried vector around checks and the average dollar value of fraud or fraudulent check has kind of really put us in the klieg lights. If you will on that industry. So a lot of folks are looking at it it was a strong contributor without a doubt.
Yeah, we don't break it out but it was withdrawn contributor.
Got it thank you.
Yeah for sure Thanks, Mike Thanks.
Yeah.
Our next question will come from Scott Buck with H C. Wainwright. Please go ahead.
Hi, Good afternoon, guys. Thanks for taking my questions.
A bit of a follow up on Mikes question on my VIP.
We get a little bit more color on the go to market strategy I mean are you.
Have you cast a pretty wide net at this point or are you targeting.
Certain industries certain companies within certain industries, but what's that look like.
Sure Scott Thanks for the call and thanks for the question.
First off my VIP will be sold by all Mitek salespeople. So the existing sales organization for who use the existing sales organization for mitek identity.
And the second part of your question as far as who we are segmenting and targeting if I had to just put a big label on it it really is the regulated industries.
Which is not dissimilar to what we've focused exclusively with.
Mobile verify so think Fintech financial services.
Gaming.
Utilities anything thats really regulated as a great opportunity for us.
The difference now with my VIP is it really opens the aperture on those segments. So that you don't have to be just the largest.
Tier one bank that has armies of developers to configure and build your own workflows and your own orchestration Sigma systems to integrate the various identity signals. This really allows us to get to.
Some of the faster moving very fast growing businesses that are out there that maybe are a little.
A little constrained on application developer resources, but still need to go quite quite quickly and need to get good answers need to have an effective system. So.
That's where we are so far similar to.
Frank's response to Mike It's still early days right. We basically got this thing launched it was the end of June .
Thanks to our team for all the hard work in making that a point of focus and now we're enabling our selling organization and training them and making sure that they are targeting the right organizations and we're learning right. It's a little bit of an iterative process, it's going to take some time to to figure out where the sweet spots are for us to make those course corrections, but as Frank indicated.
We've started to build those pipelines both here in North America as well as in Europe , and we will continue to report to you guys on the progress, we're making with that.
Great that's helpful and second on the uptick in sales and marketing and R&D costs, both sequentially and year over year.
Much of that is tied to the initial launch here.
My VIP versus you know is this more of the run rate going forward here.
Well Theres certainly some associated with the onetime launch, but remember you've now got the who you organization in those lines layered on and that will be ongoing right.
Held onto all of those.
Folks.
Okay, Great and then.
Last one for me can you tell us what legacy who you revenue was in the quarter.
Yeah, we're not we're not breaking that out I will I think we shared that in the last call. We gave you a sense of what the baseline was the day that we came together in the trailing 12 months.
And they continue to grow at their historic growth and very nice historic growth rate or better.
Okay Super I appreciate the time guys. Thank you.
Thanks Scott.
Again, if you have a question. Please press Star then one.
Our next question will come from Allen Klee with Maxim Group. Please go ahead.
Hi, good afternoon.
Can you just say again when you expect the identity segment to reach profitability.
Yeah, Hey, Alan good to hear from you as we have been mentioned in the past and in today's prepared remarks, we're looking for the second half of fiscal 'twenty four.
For that identity business has turned the corner.
Yeah, So I wanted to follow up on that.
Identity did around 17 million this quarter. So we're.
We're talking at annual run rate of close to $70 million and so.
I wanted the market has changed and just revenue growth with with not profitability is not being awarded the same way. It may have been a year ago.
And.
I'm trying to figure out if this is a good business or not pretty much and maybe you can help me understand why should it take so long to get.
Get the profitability do you have to do something with the tech to use more technology into automated more or is it purely just scaling up and because it seems like at a at a $70 70 million is a pretty good run rate I'm not sure I really understand why why this is going to lose money for such a long period of time.
Well, so so Alan Great question, two things, one and Max mentioned in his remarks identities and unsolved problem. This is an arms race right threat.
<unk> threat vectors changed fraud vectors change, we adapt they adapt and we kind of leapfrog each other by they I mean, the bad guys and then the providers come up with solutions. So there's a lot that goes into properly verifying identity right to to really understanding who is behind that transaction. It's an important consequence, and that's a lot of work in addition to that.
You've got the sustaining efforts, we've had and you're carrying along some of the acquisitions. We've done those kinds of things. So we think certainly profits important run of March towards profitability.
And that's a driving focus of this management team is.
Growth as well as profitability, we think as you look at what it takes to address this market get identity right.
We're laser focused on getting to that fiscal 'twenty four.
Timeframe, but it is a very difficult problem and getting there getting the right model is getting the right information getting the right data and then recognizing that everything we do today will likely change tomorrow, because some new threat vector will manifest itself that makes us a very dynamic and rich market to operate in but also a complicated markets operator.
Yes, but what I'm trying to understand is.
How much of the issue is that you have to do something with your technology to upscale versus.
Just the scale of volume too.
Turn the business profitable.
And is there anything maybe you can answer that by talking about your technology, a little bit of how you would say it compares to the competitors.
So Alan this is Max I think first.
The direct answer to your question is this is a very good business.
The second is.
We're focused here on identity, but when you zoom out and just let's recall that mitek in composite or the entire portfolio is a rule of 50 business right getting both the growth and the very nice a bitter.
Profitability I think to come to your specific question around the technology, We've got world leading technology. We've also done what we think are very important and differentiated acquisitions idea R&D in the biometric space and then obviously the most recent who you are.
With with the workflow end to end low code no code orchestration.
We are going to need some quarters to get all of these things kind of sorted out there. There is some redundant capabilities across the across the portfolio that need to be ironed out and it may take us.
Three or four quarters to make all that happen.
On the other side of it though we think this is not just a very scalable system. That's highly differentiated we think that it's also scalable from a from a profitability and a leverage perspective.
Okay. Thank you very much.
You got it thanks Alan.
This will conclude our question and answer session.
I would now like to turn the conference back over for any closing remarks.
Thank you operator, and thank you everyone for joining US today, we look forward to updating you again next quarter. Our call has concluded have a wonderful day.
Okay.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.