Q3 2023 Mitek Systems Inc Earnings Call
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Speaker 1: transcript
Speaker 1: Good afternoon and welcome to the my text fiscal 2023 third quarter earnings conference call all participants will be.
Good afternoon, and welcome to the Mitek fiscal 2023 third quarter earnings Conference call.
All participants will be in listen only mode.
Speaker 1: transcript
Speaker 2: So do you need assistance through signal constant specialists at Christmas RK followed by zero? After today's presentation, there will be an opportunity to ask questions. To ask a question, you request stars and when you're touch-killing phone to a drier question.
Should you need assistance. Please signal conference specialist a pessimist all key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May Press Star then one you touched on phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker 1: transcript
Speaker 3: I would now like to turn the cost over to Todd Curley of NPR Investor Relations. Please go ahead.
Now I'd like to turn the call over to Todd currently 10-K R. Investor Relations. Please go ahead.
Speaker 2: transcript
Speaker 4: Thank you operator, get afternoon, and welcome to my tech school, 2023 third quarter earnings conference call. With me on today's call are my tech CEO Max Karnekia and interim CFO FWAD Ahmad.
Thank you operator, good afternoon, and welcome to my tax fiscal 2023 third quarter earnings Conference call.
With me on today's call are Mitek, CEO, Max Cornacchia, and interim CFO flawed Ahmad.
Speaker 2: transcript
Before I turn the call over to Maxim flawed I'd like to cover a few quick items today Mitek issued a press release announcing its fiscal results for its third quarter and first nine months of fiscal 2023 that release is available on the company's website at Mitek systems Dotcom.
Speaker 2: transcript
Speaker 5: Today, my tech issued a press release announcing its fiscal results for its third quarter and first nine months of fiscal 2023. That release is available on the company's website at my tech systems dot com.
Speaker 2: transcript
Speaker 6: This calls being broadcast live over the internet for all interest parties and the webcast will be archived on the investor relations page of the company's website.
This call is being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the company's website.
Speaker 2: transcript
Speaker 7: 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 for looking statement.
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.
Speaker 2: transcript
Speaker 8: These four-looking statements may include comments about the company's plans and expectations of future performance.
These forward 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. 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 are statements on this call are made as of today October 26.
Speaker 2: transcript
Speaker 9: 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.
Speaker 2: transcript
Speaker 10: Our statements on this call are made as of today, October 26, 2023. And the company undertakes 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.
<unk> 2023, 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.
Speaker 2: transcript
Speaker 11: Additionally, throughout this call, we'll be discussing certain non- GAAP financial measures. Today's earnings release and the related current report on form 8K described the differences between our non-gap and gap reporting and present a reconciliation between the two for the periods reported in the release.
Additionally throughout this call, we'll be discussing discussing certain non-GAAP financial measures today.
<unk> earnings release, and the related current report on form 8-K, you describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two periods reported in the release.
Speaker 2: transcript
Speaker 12: Without that, I'll turn the call over to my tech CEO Max Tanakia. Max.
With that said I'll now turn the call over to Mitek CEO Max Cornacchia Max.
Speaker 3: transcript
Speaker 13: Thanks Todd, and good afternoon everyone. Thank you for joining us today.
Thanks, Todd and good afternoon, everyone. Thank you for joining us today.
Speaker 3: transcript
Speaker 14: We're very excited to be talking with you today, having filed our fiscal 2023 third quarter 10 queue earlier today. With this filing, we are now current with our SEC filing.
We're very excited to be talking with you today, having filed our fiscal 2023 third quarter 10-Q earlier today with.
With this filing we are now current with our SEC filings.
Speaker 3: transcript
Speaker 15: Before delving into the fiscal 2023, third quarter result.
Before delving into the fiscal 2023 third quarter results.
Speaker 3: transcript
Speaker 16: It's important to acknowledge the remarkable efforts in collaboration of our MyTech teams who have worked closely with BDO to upgrade our internal processes and bring our filings current. We extend our sincere appreciation to all members of MyTech Nation and our valued shareholders for their patience and support throughout this crucial process that was aimed at improving our business operations and instilling additional rigor.
It's important to acknowledge the remarkable efforts and collaboration of our Mitek teams, who have worked closely with BDO to upgrade our internal processes and bring our filings current.
We extend our sincere appreciation to all members of my Tech nation, and our valued shareholders for their patience and support throughout this crucial process that was aimed at improving our business operations and instilling additional rigor.
Speaker 3: transcript
Speaker 17: Now let me talk about fiscal 2023 third quarter results.
Now, let me talk about fiscal 'twenty twenty-three third quarter results.
Speaker 3: transcript
Speaker 18: It was another record revenue quarter for MindTech. We recorded third quarter revenue of $43.1 million, representing 10% growth year over year.
It was another record revenue quarter for Mitek, we recorded third quarter revenue of $43 $1 million, representing 10% growth year over year.
Speaker 3: transcript
Speaker 19: We also delivered non-GAP net income of $9.5 million and cash flow from operations of $16.6 million during the quarter.
We also delivered non-GAAP net income of $9 $5 million and cash flow from operations of $16 $6 million during the quarter.
Speaker 3: transcript
Our third quarter results put us on track to meet our full fiscal year guidance revenue guidance of 18% growth year over year, and 30% to 31% non-GAAP operating margins for the full fiscal year.
Speaker 3: transcript
Speaker 20: We expect our deposits revenue to grow over 20% year over year for the full fiscal year. While our identity revenue is on track to grow, at least 18% year over year.
We expect our deposits revenue to grow over 20% year over year for the full fiscal year, while our identity revenue is on track to grow at least 18% year over year.
Speaker 3: transcript
Speaker 21: Also, over this trailing 12 months and a June 30th, 2023, my tech net revenue retention and our RRate was over 120% which underscores the value our solutions deliver in the growing markets we serve.
Also over the trailing 12 months ended June 30th 20, twenty-three Mitek net revenue retention and our our rate.
Was over 120%, which underscores the value our solutions deliver in the growing markets we serve.
Speaker 3: transcript
Speaker 22: So let's dive a bit deeper into our two lines of business starting with the pot.
So, let's dive a bit deeper into our two lines of business starting with deposits.
Speaker 3: transcript
Speaker 23: The two major products in the deposit's line of business are mobile deposit and check fraud defender, both of which continue to yield strong revenue growth.
The two major products in the deposits line of business, our mobile deposit and check fraud defender both of which continue to yield strong revenue growth.
Speaker 3: transcript
Speaker 24: Our deposits revenue increased 13% year over year in Q3, with mobile check deposit reaching an incredible 925 million transactions during the first nine months of fiscal 2023. Mobile deposit continues to gain traction as financial institutions encourage their users to adopt it as the preferred and safest way to deposit checks.
Our deposits revenue increased 13% year over year in Q3 with mobile check deposit, reaching an incredible 925 million transactions during the first nine months of fiscal 2023.
Mobile deposit continues to gain traction as financial institutions encourage their users to adopt it as the preferred and safest way to deposit checks.
Speaker 3: transcript
Speaker 25: It's convenient and easy to use, and consumers receive an immediate electronic confirmation after making a mobile check deposit. This month, Bankrate, a financial services company that provides consumers with information and tools to help them make informed financial decisions, did a feature on the seven tips for using mobile check deposit. We are delighted to see the interest in mobile deposit continue to grow.
It's convenient and easy to use and consumers receive an immediate electronic confirmation after making a mobile check deposit.
This month Bankrate, a financial services company that provides consumers with information and tools to help them make informed financial decisions did a feature on the seven tips for using mobile check deposit we are delighted to see the interest in mobile deposit continue to grow.
Speaker 26: Additionally, our Check Fraud Defender product continues to show positive momentum as bank losses associated with check fraud skyrocket.
Additionally, our check fraud defender product continues to show positive momentum as bank losses associated with check fraud skyrocket check fraud defenders is a secure cloud based consortium that strengthens our financial institutions existing fraud prevention by using proprietary image analysis to extract data from.
Speaker 27: Check for Aud Defender is a secure cloud-based consortium that strengthens the financial institutions existing fraud prevention by using proprietary image analysis to extract data from stolen checks, account screens, and identification documents sold in criminal channels to provide alerts of potentially compromised accounts.
Stolen checks account screens and identification documents sold in criminal channels to provide alerts or potentially compromised accounts. This relevant data shared with participating banks, making it a powerful offering.
Speaker 3: transcript
Speaker 28: This relevant data is shared with participating banks, making it a powerful offering.
Speaker 3: transcript
Speaker 29: One example of the rise of check fraud is a new check fraud defender customer who was experiencing three times the anticipated check fraud losses per year compared to the estimates by the American Bankers Association, with their check fraud growing 220 percent in 2022. As this customer looked for a solution to address the significantly growing problem, a key requirement was the need for it to also have a case management solution.
One example of the rise of check fraud is a new check fraud defender customer who was experiencing three times the anticipated check fraud losses per year compared to the estimates by the American Bankers Association with their check fraud growing 220% in 2022 as this customer looked for a solution to address the signet.
<unk> growing problem a key requirement was the need for it to also have a case management solution check fraud defender is integrated with my texts my VIP to provide this functionality and deliver other feature rich elements and was a significant contributing factor to winning this multi year multimillion dollar check fraud defense.
Speaker 30: CheckFraud Defender is integrated with MyTech's MyVIP to provide this functionality and deliver other feature-rich elements and was a significant contributing factor to winning this multi-year, multi-million dollar CheckFraud Defender opportunity.
And your opportunity.
Speaker 3: transcript
Speaker 31: Now, turning our focus to the identity line of this
Now turning our focus to the identity line of business.
Speaker 3: transcript
In the era of ongoing digital transformation organizations are constantly striving to deliver seamless and secure online experiences for their customers identity.
Speaker 3: transcript
Speaker 32: Identity verification has emerged as a crucial component of every customer interaction and digital journey. It plays a pivotal role in the success rate of customer onboarding as well as detecting and preventing attempted impersonation fraud and enabling organizations to meet the rapidly changing regulatory environment.
Verification has emerged as a crucial component of every customer interaction and digital journey at.
It plays a pivotal role in the success rate of customer onboarding as well as detecting and preventing attempted impersonation fraud and enabling organizations to meet the rapidly changing regulatory environment.
Speaker 3: transcript
My tech has strategically positioned itself to meet these growing demands and pride itself on the comprehensive state of its solution.
<unk> has strategically positioned itself to meet these growing demands and prides itself on the comprehensive state of its solution.
Speaker 3: transcript
which adds value to countless digital use cases, including new customer onboarding, re-verification, and authentication for returning customers.
Which adds value to countless digital use cases, including new customer on boarding re verification and authentication for returning customers.
Speaker 3: transcript
and high-risk payments and credential resets, just to name a few.
And high risk payments and credential resets just to name a few.
Speaker 3: transcript
MyTeX verified identity platform, MyVIP, is a fully integrated identity platform that leverages our intellectual property in biometrics, image capture, computer vision, and data intelligence, and present it to the customer via a low code implementation platform.
Mitek verified identity platform. My VIP is a fully integrated identity platform that leverages, our intellectual property and biometrics image capture computer vision and data intelligence and present it to the customer be a low code implementation platform.
Speaker 3: transcript
In addition, we added MyPASS to its capabilities. MyPASS is the industry's first multimodal biometric solution for continuous identity authentication. MyPASS combines voice and face recognition using sophisticated liveness detection technology to defend against digital and deepfake attacks in real time.
In addition, we added my past two its capabilities my past is the industry's first multimodal biometric solution for continuous identity authentication my past combines voice and face recognition using sophisticated liveliness detection technology to defend against digital and deep fake attacks in real time.
Speaker 3: transcript
With the onslaught of machine-driven fraud attacks, voice and face biometrics used together with built-in live-ness checks are becoming the strongest and most effective effortless means to authenticate someone's identity online.
With the onslaught of machine driven fraud attacks voice and face biometrics used together with built in likeness checks are becoming the strongest and most effective effortless means to authenticate someone's identity online <unk>.
Speaker 3: transcript
Combining the two biometrics is a significant security improvement beyond face recognition only systems many use today. Authenticating digital identities with my past also reduces the risks associated with on-device stored biometrics, which can easily be compromised, shared between people, or overwritten with a simple path code.
Combining the two biometrics as a significant security improvement beyond face recognition only systems many used today.
Authenticating digital identities with my view and with my past also reduces the risks associated with on device stored biometrics, which can easily be compromised shared between people or overwritten with a simple pass code.
Speaker 3: transcript
Experts estimate that more than 80% of hacking breaches involve use of stolen passwords or credentials that can cost large companies millions of dollars a year. By moving to a more secure passwordless approach to digital account authentication, companies can both increase customer loyalty and reduce the risk of identity theft and account takeover attack.
Experts estimate that more than 80% of hacking breaches involve use of stolen passwords or credentials fraud that can cost large companies millions of dollars a year by moving to a more secure password list approach to digital account authentication companies can both increase customer loyalty and reduce the risk of identity.
Theft and account takeover attacks.
Speaker 3: transcript
In Gardner's most recent market guide for user authentication, it states that user authentication is a cornerstone of digital identity and identity for security. Sighting that leaders should seek tools, leaders should seek tools, tool sets to minimize account takeover risks and optimize employee and customer user experience as a part of a co-piece of cybersecurity strategy that reflects human centric design.
And gardeners most recent market guide for user authentication. It states that user authentication is a cornerstone of digital identity and identity for security, citing that leadership should can seek tools.
Leadership seek tool.
Tool sets to minimize account takeover risks and optimize employee and customer user experience as a part of a cohesive cyber security strategy that reflects human centric design.
I'm happy to say that our identity technology, including <unk> face.
Speaker 3: transcript
I'm happy to say that our identity technology, including IDFACE,
Speaker 3: transcript
which is the world's first single image passive facial-livenous detection capability was highlighted in this Gartner report. IDLive Face is the only single image solution, independently tested to be both ISO 30107-3 compliant and unbiased.
Which is the world's first single image passive facial liveliness detection capability was highlighted in this Gartner report I do like face is the only single image solution independently tested to be both ISO 30, 107 dash three compliant and unbiased it provides facial liveliness detection.
Speaker 3: transcript
It provides facial liveness detection to confirm that a biometric selfie includes the face of a real life person and not that of a machine-generated image. Today, ID life face is used to process millions of monthly transactions for customers worldwide.
<unk> to confirm that our biometric self the includes the face of a real live person and not that of a machine generated image today I D life face is used to process millions of monthly transactions for customers worldwide.
Speaker 3: transcript
Another of Obiremetric products highlighted in the Gartner report was ID voice verified, which is used to perform biometric speaker verification to detect and prevent online fraud enabled by speech synthesis, voice clones, and recorded replay.
Another of our biometric products highlighted in the Gartner report was I D voice verified, which is used to perform biometric speaker verification to detect and prevent online fraud enabled by speech synthesis voice clones and recorded replay.
Speaker 3: transcript
ID voice verified, fights biometric spoofing with advanced voice liveness detection, confirming the voice presented for identification purposes is that of a live present person. For large multinational banks.
I'd voice verified fights biometric spoofing with advanced voice liveliness detection confirming the voice presented for identification purposes is that if he lives present person.
For large multinational banks to global marketplaces, our customers use our identity verification solutions to enable effortless and safe experiences for new and returning consumers during the third quarter, we increased our identity revenue, 6% year over year, despite the difficult macro environment.
Speaker 3: transcript
Our customers use our identity verification solutions to enable effortless and safe experiences for new and returning consumers.
Speaker 3: transcript
During the third quarter, we increased our identity revenue 6% year over year, despite the difficult macro environment. And in addition to our direct sales efforts that are focused on selling our solution to key market verticals such as financial services, insurance, telco, healthcare and marketplace.
And in addition to our direct sales efforts that are focused on selling our solution to key market verticals, such as financial services insurance Telco health care and marketplaces.
Speaker 3: transcript
We have made solid progress in building our indirect business through global partnerships with Experian, DocuSign, Clear, and most recently Equifax.
We have made solid progress in building, our indirect business through global partnerships with experienced dock you sign clear and most recently equifax a market leading offerings are not only attracting new customers and partners, but are also get garnering additional industry analyst recognition and product validation a cup.
Speaker 3: transcript
Our market leading offerings are not only attracting new customers and partners, but are also garnering additional industry analysts' recognition and product validation. A couple of months ago, my tech was acknowledged by both Javilan and Limital, leading analysts covering the identity category.
A month ago Mitek was acknowledged by both javelin and luminal, leading analysts covering the identity category.
Speaker 3: transcript
We at my tech are proud of the positive impact we are making in the fight against digital identity fraud. And we remain dedicated to advancing our technologies and delivering even greater value to our customers.
We at Mitek.
Proud of the positive impact we are making in the fight against digital identity fraud, and we remain dedicated to advancing our technologies and delivering even greater value to our customers.
Speaker 3: transcript
Looking ahead for the deposits business, the timing of reorders can vary from quarter to quarter, and we saw a significant portion of our reorders occur in the first nine months of fiscal 2023. As a result, we expect deposits revenue to be down in the fourth quarter of fiscal 2020.
Looking ahead for the deposits business the timing of Reorders can vary from quarter to quarter and we saw a significant portion of our reorders occur in the first nine months of fiscal 2023 as a risk as a result, we expect a positive revenue to be down in the fourth quarter of fiscal 2023, having said that.
Speaker 3: transcript
Having said that, we ask our investors to look at the deposits business on a full year basis. And as I said earlier, for the full fiscal year 2023, we expect our deposits business to grow in excess of 20% year over year.
We ask our investors to look at the deposits business on a full year basis and as I said earlier for the full fiscal year 2023, we expect our deposits business to grow in excess of 20% year over year.
Speaker 3: transcript
Moving on to identity, as we have said in the past, we expect to see our identity business continue to grow, even in a difficult macroeconomic environment. However, the growth rates will vary depending on the timing of identity transactions.
Moving onto identity as we have said in the past, we expect to see our identity business continue to grow even in a difficult macroeconomic environment. However, the growth rates will vary depending on the timing of identity transactions.
Speaker 3: transcript
In the first half of fiscal 2023, we had several customers initiate new customer campaigns, which drove significant volumes of identity transactions from IPEC. These volumes are going to vary depending on our...
In the first half of fiscal 2023, we had several customers initiate new customer campaigns, which drove significant volumes of identity transactions for mitek.
These volumes are going to vary depending on our customers' actions and may cause our identity revenue to fluctuate quarter to quarter, having said that we expect to see mid teens organic revenue growth in identity. In Q4, we encourage our investors to look at our identity growth revenue growth on a full year basis as I.
Speaker 3: transcript
and may cause our identity revenue to fluctuate quarter to quarter. Having said that, we expect to see mid-teens organic revenue growth in identity in Q4. We encourage our investors to look at our identity growth revenue growth on a full-year basis.
Speaker 3: transcript
As I stated before, we expect our identity business to grow at least 18% year over year for the full fiscal year 2023. And we remain well positioned to increase the growth rate and capitalize on our new business pipeline and the significant market opportunity ahead once conditions improve.
Stated before we expect our identity business to grow at least 18% year over year for the full fiscal year 2023, and we remain well positioned to increase this growth rate and capitalize on our new business pipeline and the significant market opportunity ahead once conditions improve.
Speaker 3: transcript
We also continue to drive towards profitability for identity business, which we expect to occur by the end of fiscal 2020.
We also continue to drive towards profitability for identity business, which we expect to occur by the end of fiscal 2024.
Speaker 3: transcript
During the quarter, we continued to generate solid cash flow and strengthen our balance sheet and with our market leading product portfolio in place, we do not need to do additional acquisitions to further penetrate the significant market opportunities. We address instead, we are focused on using our cash flow to drive share.
Speaker 3: transcript
Instead, we're focused on using our cash flow to drive shareholder value in other ways. And we retain that. We routinely...
[noise] holder value in other ways and we reach it.
<unk> routinely.
Speaker 3: transcript
all capital allocation alternatives, including opportunistic share repurchase programs.
Assess all capital allocation alternatives, including opportunistic share repurchase programs.
Speaker 3: transcript
At this time, we are in a blackout period as we prepare our year end financials for our recently completed fiscal year. And our stuff is limited in the actions we can take until we are outside of our blackout period.
At this time, we are in a blackout period as we prepare our yearend financials for our recently completed fiscal year and are therefore limited in the actions. We can take until we are outside of our blackout period.
Speaker 3: transcript
Moving on to guidance, we are reiterating our full year fiscal 2023 guidance, which calls for revenue growth of approximately 18% year over year at the midpoint of the range, and for a non-gap operating margin in a range of 30 to 31% for the full fiscal year. This puts us very close to being a rule of 50's company, even in this difficult macro-environment.
Moving onto guidance, we are reiterating our full year fiscal 2023 guidance, which calls for revenue growth of approximately 18% year over year at the midpoint of the range and for a non-GAAP operating margin in a range of 30% to 31% for the full fiscal year. This puts us very close to being a rule of 50 company.
Even in this difficult macro environment.
Speaker 3: transcript
Before I turn the call over to Fawad, I also wanted to announce that Scott Carter will be stepping down from his executive role effective December 1st, 2023, but will remain as our chairman of the board.
Before I turn the call over to what I also wanted to announce that Scott Carter will be stepping down from his executive role effective December one 2023, but we will remain as our chairman of the board as you May recall, we brought Scott honestly executive chair back in January of 2023 to provide additional.
Max: It was another record revenue quarter for Mitek. We recorded third quarter revenue of $43.1 million, representing 10% growth year over year. We also delivered non-gap net income of $9.5 million, and cash flow from operations of $16.6 million during the quarter. Our third quarter results put us on track to meet our full fiscal year revenue guidance of 18% growth year over year and 30% to 31% non-gap operating margins for the full fiscal year.
Speaker 3: transcript
As you may recall, we brought Scott on as the executive chair back in January of 2023 to provide additional day-to-day support to the senior management team as we worked on refining our organic growth plan and to provide additional oversight assistance as we focused on getting our FEC filing's current.
Day to day support to the senior management team as we worked on refining our organic growth plan and to provide additional oversight assistance as we focused on getting our FTC filings current.
Speaker 3: transcript
In connection with his resignation as the executive role, Scott wanted it to be noted that the role was no longer necessary based on the company's being current on all its required filings, as well as the substantial progress made around the refinement of the company's organic growth strategy.
Connection with his resignation as the in the executive role Scott wanted it should be noted that the role was no longer necessary based on the company's being current on all its required filings as well as the substantial progress made around the refinement of the companys organic growth strategy.
Max: We expect our deposits revenue to grow over 20% year over year for the full fiscal year. While our identity revenue is on track to grow at least 18% year over year, also over the trailing 12 months and a June 30th 2023, Mitek's net revenue retention and our rate was over 120% which underscores the value our solutions deliver in the growing markets we serve. So let's dive a bit deeper into our two lines of business starting with deposits.
Speaker 3: transcript
We want to thank Scott for his help over the last 12, 10 months. Thank you, Scott, for all the hard work. And with that, I'll turn the call over to Fawad to discuss the financial results in more detail. Following Fawad's remarks, we'll open the call up for questions. Fawad, please go ahead.
We want to thank Scott for his help over the last 12 at 10 months. Thank you Scott for all the hard work and.
And with that I'll turn the call over to <unk> to discuss the financial results in more detail. Following <unk> remarks, we'll open the call up for questions. What please go ahead.
Speaker 1: transcript
Thank you, Max, and thank you everyone for joining us this afternoon. I'll start with our fiscal 2023 Q3 revenue and operating results.
Thank you Max and thank you everyone for joining us this afternoon.
I'll start with our fiscal 2023, Q3 revenue and operating results.
Speaker 1: transcript
With a third quarter of fiscal 23, my tag generated 43.1 million of revenue, a 10% increase year-over-year.
Max: The two major products in the deposits line of business are mobile deposit and check fraud defender, both of which continue to yield strong revenue growth. Our deposits revenue increased 13% year over year in Q3 with mobile check deposit reaching an incredible 925 million transactions during the first nine months of fiscal 2023. Mobile deposit continues to gain traction as financial institutions encourage their users to adopt it as the preferred and safest way to deposit checks.
For the third quarter of fiscal 'twenty, three mitek generated $43 1 million of revenue, a 10% increase year over year.
Speaker 1: transcript
Software and hardware revenue was 21.4 million up 10% year over year. The increase in software and hardware revenues due to the growing growth of our biometrics offerings and mobile deposit real.
Software and hardware revenue was $21 4 million up 10% year over year, the increase in software and hardware revenues due to the growing growth about biometrics offerings and mobile deposit reorders.
Speaker 1: transcript
As we have noted previously, biometrics revenue is transactional in nature in a part of our identity business. However, since it's offered on premise, we put that revenue into the software line for accounting purposes.
As we have noted previously our biometric revenue is transactional in nature and as part of our identity business. However, since as it offered on premise, we put that revenue into the software line for accounting purposes.
Services and other revenue, which includes transactional SaaS revenue maintenance and professional services revenue was $21 6 million for the quarter up 10% year over year.
Speaker 1: transcript
Services and other revenue, which includes transactional SaaS revenue, maintenance and professional services revenue, was 21.6 million foot a quarter, up 10% year over year.
Max: It's convenient and easy to use and consumers receive an immediate electronic confirmation after making a mobile check deposit. This month, bank rate, a financial services company that provides consumers with information and tools to help them make informed financial decisions did a feature on the seven tips for using mobile check deposit. We are delighted to see the interest in mobile deposit continue to grow. Additionally, our check fraud defender product continues to show positive momentum as bank losses associated with check fraud skyrocket.
Speaker 1: transcript
Our transactional SAS RW increased 5% year over year to 15.5 million.
Our transactional SaaS revenue increased 5% year over year to $15 5 million.
Speaker 1: transcript
Deposit revenue for the third quarter increased 13% year-to-24.8 million driven by mobile deposit re-OT
Deposits revenue for the third quarter increased 13% year over year to $24 8 million driven by mobile deposit reorders.
Speaker 1: transcript
Identity revenue increased 6% over year to 18.3 million given by increases in identity staff revenue as well as growth from our biometric office.
Revenue increased 6% year over year to $18 3 million driven by increases in identity SaaS revenue as well as growth from our biometric offerings.
Max: Check fraud defender is a secure cloud-based consortium that strengthens the financial institutions existing fraud prevention by using proprietary image analysis to extract data from stolen checks, account screens, and identification documents sold in criminal channels to provide alerts of potentially compromised accounts. This relevant data is shared with participating banks making it a powerful offering. One example of the rise of check fraud is a new check fraud defender customer who was experiencing three times the anticipated check fraud losses per year compared to the estimates by the American bankers association with their check fraud growing 220 percent in 2022. As this customer looked for a solution to address the significantly growing problem, a key requirement was the need for it to also have a case management solution.
We continued to deliver strong software and hardware gross margins, 98% for the quarter gross margin on services and other revenue was 76% for the quarter and total gross margin for the quarter was 87% up 200 basis points over last year.
Speaker 1: transcript
We continue to deliver strong software and hardware gross margins, 98% for the quarter, gross margin on services and other revenue was 76% for the quarter, and total gross margin for the quarter was 87% up, 200 basis points over last year.
Speaker 1: transcript
Total gap operating expenses including cost of revenue for the third quarter were 41.3 million compared to 38.3 million in Q3 of last
Total GAAP operating expenses, including cost of revenue for the third quarter were $41 3 million compared to $38 3 million in Q3 of last year.
Speaker 1: transcript
Sales and marketing expenses were 10.3 million compared to 11.2 million a year ago.
Sales and marketing expenses for the quarter were $10 3 million compared to $11 2 million a year ago.
Speaker 1: transcript
R&D expenses were $7.5 million compared to $8.4 million last year and our G&A expenses were $11.6 million compared to $6.6 million a year ago.
R&D expenses were $7 5 million compared to $8 4 million last year, and our G&A expenses were $11 6 million compared to $6 6 million a year ago.
Speaker 1: transcript
The increase in GNA expenses is mainly the result of increased one time. These associated with our delayed filing and the addition of resources to our corporate services team to accommodate our scaling business.
The increase in G&A expenses is mainly the result of increased one time fees associated with our delayed filings and the addition of resources to our corporate services team to accommodate our scaling business.
Max: Check fraud defender is integrated with my tech's MyVIP to provide this functionality and deliver other feature rich elements and was a significant contributing factor to winning this multi-year multi-million dollar check fraud defender Now, turning our focus to the identity line of business. In the era of ongoing digital transformation, organizations are constantly striving to deliver seamless and secure online experiences for their customers. Identity verification has emerged as a crucial component of every customer interaction and digital journey.
GAAP net loss for the quarter was <unk> four.
Speaker 1: transcript
Gap net gloss for the quarter was 0.4 million or a loss of one cent per diluted share.
<unk> 4 million or a loss of <unk> <unk> per diluted share.
Speaker 1: transcript
Our diluted share count was 46.5 million compared to 45.2 million shares a year ago.
Our diluted share count was $46 5 million compared to $45 2 million shares a year ago.
Turning to non-GAAP results.
Speaker 1: transcript
Non-GAP Net Income for Geo3 of Fiscal 23 was 9.5 million or 20 cents per diluted share compared to a non-GAP Net Income of 10.9 million or 24 cents per share for the same period last year.
non-GAAP net income for Q3 of fiscal 'twenty, three was $9 5 million or <unk> 20 per diluted share compared to a non-GAAP net income up $10 9 million or <unk> 24 per share for the same period last year.
Max: It plays a pivotal role in the success rate of customer onboarding, as well as detecting and preventing attempted impersonation fraud and enabling organizations to meet the rapidly changing regulatory environment. Mitek has strategically positioned itself to meet these growing demands and pride itself on the comprehensive state of its solution, which adds value to countless digital use cases including new customer onboarding, re-verification, and authentication for returning customers, and high risk payments and credential resets just to name a few.
Speaker 1: transcript
We believe non-GAAP net income provides a useful measure of companies' operating profitability and cash flow by excluding amortization and acquisition-related costs, stock comp expenses, one-time or non-recurring litigation expenses, amortization of debt discount and issuance costs, restructuring costs, and related tax impact of these items.
We believe non-GAAP net income provides a useful measure of company's operating profitability and cash flow by excluding amortization and acquisition related cost stock comp expenses, one time or nonrecurring litigation expenses amortization of debt discount and issuance costs restructuring costs and related tax.
Impact of these items.
Speaker 1: transcript
A reconciliation of gap to non-gap presentation is provided in a press relate issued earlier today.
A reconciliation of GAAP to non-GAAP presentation is provided in our press release issued earlier today.
Speaker 1: transcript
Turning to the balance sheet, we generated $16.6 million in cash flow.
Turning to the balance sheet, we generated $16 6 million in cash flow.
Max: Mitek's verified identity platform, MIVIP, is a fully integrated identity platform that leverages our intellectual property in biometrics, image capture, computer vision, and data intelligence and present it to the customer via a low code implementation platform. In addition, we added my past to its capabilities. My past is the industry's first multimodal biometric solution for continuous identity authentication. My past combines voice and face recognition using sophisticated liveness detection technology to defend against digital and deep fake attacks in real time.
from operations during the third quarter, bringing a total cashflow, cash and investments to 131 million as of June 30, 2023.
From operations during the third quarter, bringing our total cash flow cash and investments to $131 million as of June 32023.
Now, turning to 9 months results, for fiscal 2023, we reported 134.9 million of revenue, a 28% increase year over year.
Now turning to the two nine month results for fiscal 'twenty to 'twenty, three we reported $134 9 million of revenue or 28% increase year over year.
Speaker 1: transcript
Deposit revenue for the first nine months increased 35% year over year to 83.8 million driven by solid mobile deposit pre-orders and signing of a large multi-air contract in the first quarter that locked in favorable pricing for us over four years. Due to unique terms of this contract, we recognize additional license revenue relating to future periods of approximately seven million in the first quarter of fiscal 23.
Deposits revenue for the first nine months increased 35% year over year to $83 8 million driven by solid mobile deposit reorders and signing of a large multi year contract in the first quarter that locked in favorable pricing for us over four years due to a unique terms of this contract we recognize additional.
Max: With the onslaught of machine-driven fraud attacks, voice and face biometrics used together with built-in liveness checks are becoming the strongest and most effective effortless means to authenticate someone's identity online, combining the two biometrics as a significant security improvement beyond face recognition only systems many use today. Authenticating digital identities with my past also reduces the risks associated with on-device stored biometrics, which can easily be compromised, shared between people or overwritten with a simple path code.
License revenue related to future periods of approximately $7 million in the first quarter of fiscal 'twenty three.
Speaker 1: transcript
Identity revenue for the first nine months increased 19% year over year to 51.1 million driven by addition of HUYU revenue and strong growth in our biometrics rate.
<unk> revenue for the first nine months increased 19% year over year to $51 $1 million driven by addition of who your revenue and strong growth in our biometrics revenue.
Speaker 1: transcript
Moving on to guidance, as Max noted, we are reiterating our fiscal 2023 guidance. We expect revenue for the fiscal year ending September 30, 2023 to be in the range of 169 to 171 million, an increase of approximately 18% year over year from the midpoint of the guidance range. In addition, we expect our full year fiscal 2023 non-GAAP operating margin to be in the range of 30 to 31%.
Moving onto guidance as Max noted, we are reiterating our fiscal 'twenty two 'twenty three guidance, we expect revenue for the fiscal year ending September 32023 to be in the range of $169 million to $171 million, an increase of approximately 18% year over year from the midpoint of the guidance range.
Max: Experts estimate that more than 80 percent of hacking breaches involve use of stolen passwords or credentials, fraud that can cost large companies millions of dollars a year. By moving to a more secure passwordless approach to digital account authentication, companies can both increase customer loyalty and reduce the risk of identity theft and account takeover attacks. In Gartner's most recent market guide for user authentication, it states that user authentication is a cornerstone of digital identity and identity for security, citing that leaders should seek tools, leaders should seek tools, tool sets to minimize account takeover risks and optimize employee and customer user experience as a part of a piece of cybersecurity strategy that reflects human-centric design.
In addition, we expect our full year fiscal 2023, non-GAAP operating margin to be in the range of 30% to 31%.
Speaker 1: transcript
Finally, we are very pleased with our operating results. We included a record third quarter revenue, as well as solid operating margins and a very strong cash flow.
Finally, we are very pleased with our operating results, which included a record third quarter revenue as well as solid operating margins and a very strong cash flow.
Speaker 1: transcript
We are especially pleased with getting current on our ecstasy filings. We want to thank everyone who has worked tirelessly over the last several quarters to make this happen. We truly appreciate that all you're ever
We are especially pleased with getting current on our SEC filings, we want to thank everyone, who has worked tirelessly over the last several quarters to make this happen we truly appreciate all your efforts.
Speaker 4: transcript
That concludes our prepared remarks. Operator, please open the line for questions. We will now begin the question-and-answer session. To ask a question, you may press star, then 1. If you're using a speakerphone, please pick up your handset before pressing...
That concludes our prepared remarks, operator, please open the line for questions.
Max: I'm happy to say that our identity technology, including IDFACE, which is the world's first single image passive facial liveness detection capability, was highlighted in this Gartner report. IDLIFACE is the only single image solution independently tested to be both ISO 30107-3 compliant and unbiased. It provides facial liveness detection to confirm that a biometric selfie includes the face of a real live person and not that of a machine generated image. Today, ID Live Face is used to process millions of monthly transactions for customers worldwide.
We will now begin the question and answer session.
To ask a question you May press Star then one.
If you're using a speaker phone please pickup your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Speaker 4: transcript
The first question will come from Jake Roeberg with William Blair. You may now go ahead.
Our first question will come from Jake Roberg with William Blair You May now go ahead.
Speaker 5: transcript
Hey, thanks for taking the questions and nice to see you get back on file with the SEC filings. Appreciate the color on NRR. Not many software companies can talk about retention rates north of 120%, so that's pretty impressive. Understand the business is lumpy, so that's what's driving the step down in Q4. But excluding the timing of deals, how should we think about a sustainable net retention rate for both the mobile deposit and ID verification segments over the next year?
Hey, Thanks for taking my questions and nice to see you get back on file with the SEC filings.
Appreciate the color on and there are not many software companies can talk about retention rates north of 120%. So that's pretty impressive and understand the business is lumpy. So that's what's driving the step down in Q4, but excluding the timing of deal how should we think about a sustainable net retention rate for both mobile deposit and I'd verification segments over the next.
Max: Another of a biometric products highlighted in the Gartner report was ID Voice Verified, which is used to perform biometric speaker verification to detect and prevent online fraud enabled by speech synthesis, voice clones, and recorded replay. ID Voice Verified fights biometric spoofing with advanced voice liveness detection, confirming the voice presented for identification purposes is that of a live, present person. For large multinational banks to global marketplaces, our customers use our identity verification solutions to enable effortless and safe experiences for new and returning consumers.
Year or two.
Speaker 3: transcript
Sure thing, Jake. Well, thanks. Appreciate the question. This is a new, well, it's not a new KPI to my tech, but it's a new KPI as far as keep performance indicator that we're sharing. And it encouraged to try to provide more insights into the performance of the different lines of business that we have. It's greater than 100 and 100 percent, and it's over 110 percent for each one of the lines of business. So, you know, it's a...
Sure thing Jake well. Thanks I appreciate the question.
This is a new well, it's not new API to mitek, but its a new kpis for us key performance indicators.
Sure Ben.
<unk> to try to provide.
Some more insights into the performance of the different lines of business that we have.
It's greater than a 120% and it's over 110% for each one of the lines of business. So it.
Max: During the third quarter, we increased our identity revenue 6% year over year, despite the difficult macro environment. And in addition to our direct sales efforts that are focused on selling our solution to key market verticals such as financial services, insurance, telco, healthcare, and marketplaces, we have made solid progress in building our indirect business through global partnerships with Experian, DocuSign, Clear, and most recently Equifax. Our market leading offerings are not only attracting new customers and partners, but are also garnering additional industry analyst recognition and product validation. A couple of months ago, my tech was acknowledged by both Javilan and Limital, leading analyst covering the identity category.
Speaker 3: transcript
It's good in a lot of different ways. And we certainly aspire to keep the high like that. As far as trying to provide some sort of guidance or expectation, over 110%, I think that's considered better than...
It's good it's good in a lot of different ways, and we certainly aspire to keep the highlight that.
As far as trying to provide some sort of guidance or expectation over a 110%.
I think that's considered better than.
Speaker 3: transcript
Better than market, certainly superior to our competitors and that's what we'll continue to try.
Better than market, certainly superior to our competitors and that's what we'll continue to strive for.
Speaker 5: transcript
Great. And then really nice to hear about the large multi-year, multi-million dollar check fraud customer that you signed, and even the synergies between the ID and check business that helped land that customer. Two questions on the check fraud fund. First, how long will it take you to implement that technology for that large of a customer? And then second, are there any data points or proof of concepts you can share for what percent of fraud losses you've been able to save customers that have already signed onto the platform?
Great and then a really nice to hear about the large multiyear multimillion dollar check fraud customer that you signed them and even the synergies between the <unk> and check business that help landline customers two questions on the check fraud fun.
How long will it take you to implement that technology for that large of a customer and then second are there any data points or proof of concepts you can share for what percent of fraud losses, you've been able to save customers that have already signed on to the platform.
Max: We at my tech are proud of the positive impact we are making in the fight against digital identity fraud and we remain dedicated to advancing our technologies and delivering even greater value to our customers. Looking ahead for the deposits business, the timing of reorders can vary from quarter to quarter and we saw a significant portion of our reorders occur in the first nine months of fiscal 2023. As a result, we expect deposits revenue to be down in the fourth quarter of fiscal 2023.
Okay.
Speaker 3: transcript
Yeah, it's I guess both those become somewhat specific to the individual institution, you know, from a technical perspective, getting CheckFraud Defender switched on since it's, you know, cloud deployed and
Yeah, It's I guess both of those become somewhat specific to the individual institution from a technical perspective getting check fraud defender switched on since its cloud deployed in.
Speaker 3: transcript
available in a secure environment like that, from a my tech perspective, it's very, very quick. Obviously, we're dealing with...
Available in a secure environment like that from a from a mitek perspective, it's very very quick obviously, we're dealing with.
Speaker 3: transcript
Thanks for the like, a lot of compliance departments, a lot of the regulated entities. And so, you know, if we look back at the.
Thanks for the like a lot of compliance departments a lot in the regulated entities and so if we look back at the.
Max: Having said that, we ask our investors to look at the deposits business on a full year basis. And as I said earlier, for the full fiscal year 2023, we expect our deposits business to grow in excess of 20% year over year. Moving on to identity, as we have said in the past, we expect to see our identity business continue to grow even in a difficult macroeconomic environment. However, the growth rates will vary depending on the timing of identity transactions.
Speaker 3: transcript
the customers that we've already been through on this, from the time they find to the time they're actually processing checks and production, it can be six months, it can be nine months, for some of the much larger institutions, it can be over a year. You know,
The customers that we've already been through on this from the time they sign to the time, they're actually processing checks in production. It can be six months. It can be nine months for some of the much larger institutions that can be over a year.
Speaker 3: transcript
We're going to see revenue through the period of that, some of the implementation and just kind of assistance that we're providing for those customers. But I guess to the second part of your question, we now do have enough data with enough financial institutions that our introduction are getting the benefit to see that the product market fit is there. The system is working. We are finding fraud. We are reducing operational expenses.
Where we're going to see revenue.
Through the period of that some of the implementation and just kind of assistance that we're providing for those customers, but I guess the second part of your question. We now do have enough data with enough financial institutions that are in production and are getting the benefit.
Max: In the first half of fiscal 2023, we had several customers initiate new customer campaigns, which drove significant volumes of identity transactions for my tech. These volumes are going to vary depending on our customers' actions and may cause our identity revenue to fluctuate quarter to quarter. Having said that, we expect to see mid-teens organic revenue growth in identity in Q4. We encourage our investors to look at our identity growth revenue growth on a full year basis.
To see that.
Product market fit is there the system is working.
We are finding fraud, we are reducing operational operational expenses are.
Speaker 3: transcript
Our biggest customer, I want to be careful how I say this, but our biggest customer for check fraud defender today is
Our biggest customer.
Be careful how I say this but our biggest customer for check fraud defender today.
Is.
Speaker 3: transcript
eliminating tens of millions of dollars of hard dollar loss.
Eliminating tens of millions of dollars of hard dollar losses on an annual basis as a result of using check fraud defender and they've been able to validate that now.
Speaker 3: transcript
on an annual basis as a result of using CheckFraud Defender, and they've been able to validate that. Now, it is our biggest customer so far, and we can have bigger as we continue to go. They're not fully deployed across all the different lines of business, but they've got a pretty significant share out there, and so it's definitely not just a feather in our cap, but it's really helping with the other banks that are interested, getting their heads around how beneficial.
Max: As I stated before, we expect our identity business to grow at least 18% year over year for the full fiscal year 2023. And we remain well positioned to increase this growth rate and capitalize on our new business pipeline and the significant market opportunity ahead once conditions improve. We also continue to drive towards profitability for our identity business, which we expect to occur by the end of fiscal 2024. During the quarter, we continue to generate solid cash flow and strengthen our balance sheet, and with our market leading product portfolio in place, we do not need to do additional acquisitions to further penetrate the significant marker opportunities we address.
It is our biggest customers so far and we can have bigger as we continue to go.
They are not fully deployed across all the different lines of business, but they've got a pretty significant share out there and so it's it's definitely not just a feather in our cap, but it's really helping with the other banks that are interested getting their heads around how how beneficial this can be.
Speaker 5: transcript
Very helpful. And then if I could just sneak one more in. In the past, you've talked about the conversion of more checks, the mobile deposits, still being the largest growth driver for that segment. But as you look in the next year, do you still think that's the case, or could that shift towards check for out defender, given the traction you're seeing there, or potentially even just kind of pricing levers that you have as contracts come up for renewal in 2020.
Very helpful. And then if I could just sneak one more in in the past you've talked about the conversion of more tax and the mobile deposit still being a largest growth driver for that segment, but as you look into next year do you still think that's the case or could that shift towards check fraud defender given the traction youre seeing there or potentially even just kind of the pricing levers that you.
Max: Instead, we are focused on using our cash flow to drive shareholder value in other ways, and we routinely assess all capital allocation alternatives, including opportunistic share repurchase programs. At this time, we are in a blackout period as we prepare our year end financials for our recently completed fiscal year, and are thus limited in the actions we can take until we are outside of our blackout period. Moving on to guidance, we are reiterating our full year fiscal 2023 guidance, which calls for revenue growth of approximately 18% year over year, at the midpoint of the range, and for a non-gap operating margin in a range of 30 to 31%. This puts us very close to being a rule of 50s company, even in this difficult macro environment.
You have as contracts come up for renewal in 2024.
Speaker 3: transcript
It'll be interesting to see how long it takes for Czech-Fraud Defender to eclipse the growth, the impact on growth.
It'll be interesting to see how long it takes for check front defender to eclipse the growth the impact on growth.
Speaker 3: transcript
from just mobile check adoption on a mobile banking app. I don't know that I wanna predict that just yet for some of the things we've already talked about. It's early days for check fraud defender or the implementation cycle, some of that stuff. But it's very clear that that market is real and it's not just around defending against checks. What we're seeing now with the integration with MyVIP is that
From from just mobile check adoption on a on a mobile banking App I don't know I don't want to predict that just yet for some of the things we already talked about it's early days for check for a defender of the implementation cycles some of that stuff, but it.
It's very clear that that that market is real and it's not just around <unk>.
Pending against checks, what we're seeing now with the integration with my VIP is that.
We're taking things from the dark web, we're providing identity attributes there's a.
Speaker 3: transcript
We're taking things from the dark web. We're providing identity attributes. There's a...
Speaker 3: transcript
There's a big, we think, hypothesis currently is there's a bigger opportunity there over time to help financial institutions with other forms of reduction of payment fraud, not just the use of checks.
There's a big week.
Our hypothesis is currently is theres, a bigger opportunity there over time to help financial institutions with other forms of.
Max: Before I turn the call over to Fawad, I also wanted to announce that Scott Carter will be stepping down from his executive role effective December 1, 2023, but will remain as our chairman of the board. As you may recall, we brought Scott on as the executive chair back in January of 2023 to provide additional day-to-day support to the senior management team as we worked on refining our organic growth plan and to provide additional oversight assistance as we focused on getting our FEC filing current.
Reduction of payment fraud, not just to use objectives.
Very helpful. Thanks for taking my questions.
You Gotta Jake.
Max: In connection with his resignation as the executive role, Scott wanted it to be noted that the role was no longer necessary based on the company's being current on all its required filings, as well as the substantial progress made around the refinement of the company's organic growth strategy.
Our next question will come from Mike Grondahl with Northland Securities You May now go ahead.
Speaker 4: transcript
Our next question will come from Mike Grondahl with Northland Securities.
Speaker 6: transcript
Hey guys, thanks and congrats on getting your filings all caught up. I just want to make sure I understand the fourth quarter, you know, the implied in your guidance is $36 million of revenue.
Hey, guys, Thanks, and congrats on getting your filings all caught up.
I just wanted to make sure I understand the fourth quarter the.
Implied in your guidance is $36 million of revenue.
Speaker 6: transcript
and that's clearly a step down from the last three quarters. That's, did I hear right? That's primarily because the mobile deposit reorders were kind of pulled forward. And there's some lumpiness with some new mobile ID customer.
And it's clearly a step down from the last three quarters that's did.
Did I hear right, that's primarily because the mobile deposit reorders were kind of pulled forward.
And there is some lumpiness with some new mobile customers.
Max: We want to thank Scott for his help over the last 10 months. Thank you Scott for all the hard work.
Customers.
Speaker 6: transcript
And related to that, was there any promotional activity to call out with mobile light?
And related to that was there any promotional activity to call out with mobile I D.
Max: And with that, I'll turn the call over to Fawad to discuss the financial results in more detail. Following Fawad's remarks, we'll open the call up for questions.
Speaker 3: transcript
Yeah, I think just the first part of your question, I wouldn't use the term full forward. I would say that on whatever their normal need is, some of the larger orders from mobile deposit happened earlier in fiscal 23 than later in fiscal 23. But we stand behind, you know,
Yeah, I think just the first part of your question I wouldn't use the term pull forward I would say that.
Fawad Ahmad: Fawad, please go ahead. Thank you Max, and thank you everyone for joining us this afternoon. I'll start with our fiscal 2023 Q3 revenue and operating results. With a third quarter of fiscal 2023, my type generated 43.1 million of revenue, a 10% increase year-over-year. Software and hardware revenue was 21.4 million up 10% year-over-year. The increase in software and hardware revenues due to the growing growth of biometrics offerings and mobile deposit reorder. As we have noted previously, biometrics revenue is transactional in nature and is part of our identity business.
On whatever their normal.
Need is some of the larger orders for mobile deposit happened earlier in fiscal 'twenty three then.
<unk> been later in fiscal 'twenty three.
We stand behind.
Speaker 3: transcript
The deposit business, nothing's changed. I mean, you zoom out and this is how we ask our investors to look at it, not look at it in a month to month or quarter to quarter basis, but look at it over the full year and the deposit business this year is going to grow 20%. Yeah, so, you know, that's the way you got to look at it is we look into it next year. We're not going to necessarily provide guidance, but other than the really tough comp, we're going to have in Q1 because of the FY23 Q1, we're going to have a $7 million revenue that quadru…
The deposit business nothing has changed I mean, when you zoom out and this is how we ask our investors to look at it not.
Not looking at it month to month or quarter to quarter basis, but look at it over the full year and the deposits business. This year is going to grow 20%.
Yeah.
That's the way you got to look at as we look into next year, we're not going to necessarily provide guidance, but other than the really tough comp we're going to have in Q1 because of the FY2023 Q1 7 million.
Fawad Ahmad: However, since it's offered on premise, we put that revenue into the software line for accounting purposes. Services and other revenue, which includes transactional SaaS revenue, maintenance and professional services revenue, was 21.6 million for the quarter, up 10% year-over-year. Our transactional fast revenue increased 5% year over year to 15.5 million. Deposit revenue for the third quarter increased 13% year over year to 24.8 million driven by mobile deposit reoters. Identity revenue increased 6% year over year to 18.3 million driven by increases in identity fast revenue as well as growth from our biometric offering.
Revenue was mentioning in his remarks.
Speaker 3: transcript
remarks, you know, we continue to see the business.
We continue to see the business.
Speaker 3: transcript
on hold being a solid growth business and we're doing everything we can with it. Price increases, more adoption for mobile check deposit or check fraud defender and all the great traction we're getting there. It's a solid, great business and we look forward to it being that way for a long time.
On whole being a solid growth business and we're.
We're doing everything with bandwidth price increases more adoption for mobile check deposit.
Or check fraud defender and all the great traction we're getting there so.
It's a solid great business and we look forward to it being that way for a long time.
Speaker 6: transcript
got it that mobile idea any promotional revenue to call out in the quarter
Got it and then mobile I D at any promotional revenue to call out in the quarter.
Speaker 3: transcript
Yes, when you say promotional revenue, I think we've talked about this, but just for maybe folks that that are dialing in new.
Yeah. So when you say promotional revenue I think we've talked about this but just for maybe folks that are dialing in new.
Speaker 3: transcript
You know, the transaction volumes associated with identity verifications and authentications at times are tied to promotions that, let's use a bank as an example, that a bank can be running to be able to get...
The transaction volumes associated with identity verification and authentication at times are tied to promotions that let's use the bank as an example.
Fawad Ahmad: We continue to deliver strong software and hardware gross margins, 98% for the quarter, gross margin on services and other revenue was 76% for the quarter and total gross margin for the quarter was 87% up to 200 basis points over last year. Total gap operating expenses including cost of revenue for the third quarter were 41.3 million compared to 38.3 million in Q3 of last year. Sales and marketing expenses for the quarter were 10.3 million compared to 11.2 million a year ago.
Is that a bank can be running to be able to get.
Speaker 3: transcript
their competitors, banking clients to switch. And so we did see that in the first half of our fiscal year where there were some pretty significant promotions there. If I just reflect on first three quarters of the year,
There are competitors banking clients to switch and so we did see that in the first half of our fiscal year.
There were some pretty significant promotions there if I just reflect on the first three quarters of the year.
Speaker 3: transcript
You know, we've seen some really nice growth, particularly, you know, largely driven in some of the new product areas. So biometrics, who you have now idea in my path. So, you know.
We've seen some really nice growth, particularly.
Largely driven and some of the new product areas. So biometrics, the who you have now in my past so.
Fawad Ahmad: R&D expenses were 7.5 million compared to 8.4 million last year and our GNA expenses were 11.6 million compared to 6.6 million a year ago. The increase in GNA expenses is mainly the result of increased one time fees associated with our delayed filing and the addition of resources to our corporate services team to accommodate our scaling business. Gap net gloss for the quarter was 0.4 million or a loss of 1 cent per diluted share.
Speaker 3: transcript
While there's some challenging elements to the environment out there, I think this is one we expect, the same way we've talked about.
While there are some challenging.
Elements to the to the environment out there.
I think this is one we expect the same way we've talked about.
Speaker 3: transcript
targeting 18% year-over-year growth for identity in FY 23. When we think about next year, or maybe even longer term, if there isn't a change to the environment, that's a, we expect that to be a mid-to-high team scroller for us on an organic basis.
Targeting 18% year over year growth for identity and in FY2023 when we think about next year or maybe even longer term if there isn't a change to the to the environment that we expect that to be mid to high teens grower for us on an organic basis.
Fawad Ahmad: Our diluted share count was 46.5 million compared to 45.2 million shares a year ago. Turning to non-gap results. Non-gap net income for Q3 of fiscal 23 was 9.5 million or 20 cents per diluted share compared to a non-gap net income of 10.9 million or 24 cents per year. We believe non-gap net income provides a useful measure of company's operating profitability in cash flow by excluding amortization and acquisition related costs, stock comp expenses, one time or non-recurring litigation expenses, amortization of debt discount and issue and cost, restruction cost and related tax impact of these items. A reconciliation of gap to non-gap presentation is provided in our press relate issued earlier today.
Got it.
Speaker 6: transcript
on capital allocation max you you kind of said but i think you said hey we're in a blackout right now we really can't do anything incremental uh... if you weren't in a blackout now
On capital allocation Max you you kind of said or I think you said hey, we're in a blackout right now we really can't do anything incremental.
If you weren't in a black out now.
Do you do you think you would you do something to be more aggressive with that 131 million of cash you have or kind of what thoughts do you have.
Speaker 6: transcript
Do you do something, be more aggressive with that $131 million of cash you have, or kind of what thoughts do you have?
Speaker 3: transcript
Sure. So, you know, we want to make clear is, you know, we are really excited about the product portfolio that we have both for the deposits line of business and the identity line.
Sure. So we want to make clear is we are really excited about the product portfolio that we have both for the deposits line of business and the identity line of business and we've got what we need to be successful in the market can continue to grow.
Speaker 3: transcript
And, you know, we've got what we need to be successful in the market and continue to.
Speaker 3: transcript
whether the current situation and then as things change and the environment improves, get back on track. From a capital allocation perspective, that translates into we're not out there hunting to do acquisitions.
Whether the current situation and then as things changed in the environment improves you know get back on track.
From a from a capital allocation perspective that translates into you know, we're not out there hunting to do acquisitions and as we've talked about I think in the last three calls, which unfortunately it happened over the course of 60 days.
Fawad Ahmad: Turning to the balance sheet. We generated 16.6 million in cash flow from operations during the third quarter bringing a total cash flow and cash and investments to 131 million as of June 30, 2023. Now turning to 9 months results. For fiscal 2023 we reported 134.9 million of revenue a 28% increase year over year. Deposit revenue for the first 9 months increased 35% year over year to 83.8 million driven by solid mobile deposit 3 orders and signing of a large multi-year contract in the first quarter that locked in favorable pricing for us over 4 years.
Speaker 3: transcript
And as we've talked about, I think in the last three calls, which unfortunately have happened over the course of the last 60 days, we've been very head down making sure that not only do we get on filing, get current with RSC reporting, but also that we're re-fortifling our corporate services team. And while I talked about some of that in his prepare remarks.
We've been very heads down making sure that not only do we get on file and get current with our SEC reporting, but also that we're re fortifying our corporate services team and <unk> talked about some of that in his prepared remarks.
Speaker 3: transcript
so that we can continue to record.
So that we can continue to record file and support the operations of our business in a consistent way in our back office and our corporate service. So we can kind of translate that.
Speaker 3: transcript
file and support the operations of our business in a consistent way in our back office in our corporate services.
Speaker 3: transcript
So we're gonna translate that, you know, got $130 million cash. You know, the debt we have, we pay 75 basis points of interest on the debt. We're getting now something, you know, four to five percent interest on cash that we have. We think the stock, you know.
I've got $130 million of cash.
Is that we have we pay 75 basis points of interest on the debt you are getting now something.
Fawad Ahmad: In the unique terms of this contract we recognize additional license revenue relating to future periods of approximately 7 million in the first quarter of fiscal 23. Identity to Revenue for the first nine months increased 19% year-over-year to 51.1 million driven by addition of two year revenue and strong growth in our biometrics revenue. Moving on to guidance, as Max noted, we are reiterating our fiscal 2023 guidance. We expect Revenue for the fiscal year ending September 30, 2023 to be in the range of 169 to 171 million and increase of approximately 18% year-over-year from the midpoint of the guidance range.
5%.
Interest on the cash.
The cash that we have.
We think the Aquino.
Speaker 3: transcript
actually probably is the end of the day today. And, you know, if we had maybe some more latitude, you know, the board here will consider all of the different alternatives we have to use that capital effectively and efficiently. Got it.
Actual.
At the end of the day to day and.
If we had maybe some more latitude.
Here, we will consider.
All of the different alternatives, we have to use that and use that capital effectively and efficiently.
Got it I'll jump back in queue. Thanks.
Thanks, Mike.
Speaker 4: transcript
Again, if you have a question, please press star then one. Our next question will come from Scott, but with HC Wing right. You may now go ahead.
Okay and then you have a question. Please press Star then one our next question will come from Scott Buck with HC Wainwright you May now go ahead.
Speaker 3: transcript
Hi. Good afternoon, guys. Thanks for taking my questions. Max, can you talk a little bit about the assumptions that get you to break even or positive EBITDA in the identity business by year-end 24? Is it simply just, you know, scaling revenue another 20% or so, or is there more to it than that?
Hi, Good afternoon, guys. Thanks for taking my questions.
Fawad Ahmad: In addition, we expect our full year, fiscal 2023 non-gap operating margin to be in the range of 30 to 31%. Finally, we are very pleased with our operating results which included a record third quarter revenue as well as solid operating margins and a very strong cash flow. We are especially pleased with getting current on our SCC filings. We want to thank everyone who has worked tirelessly over the last several quarters to make this happen. We truly appreciate all your efforts.
Max can you talk a little bit about the assumptions that get you to breakeven or positive EBITDA.
The entity business by year end 'twenty four is it simply just scaling revenue another 20% or so or is there more to it than that.
Speaker 3: transcript
I think there's more to it than that. I just, so first, you get a sense of what we think growth should be, at least under the current circumstances, macroeconomic conditions, over the course of the next 18 to 24 months, based on the earlier comments.
Yeah, I think there's more to it than that.
I just so first you get a sense of what we think growth should be.
You know at least under the current circumstances macroeconomic conditions.
Over the course of the next 18 to 24 months based on the earlier comments and then also when you made it clear.
Speaker 3: transcript
And then also when the airline recommends me to clear, you know, the identity growth that we are seeing is free-being leveraged and is widely driven by the new products. And so I think as you know, when we think about it, Scott, it's getting continued improved productivity.
Max: That concludes our prepared remarks.
Operator: Operator, please open the line for questions. We will now begin the question and answer session to ask a question you may press star then one. If you are using a speaker phone, please pick up your answer before pressing the keys.
The idea of the growth that you asked.
And he is fully being leveraged and is driven by the new products and so I think as we think about it Scott. It's getting continued improved productivity from our go to market channels, both direct and indirect as we're becoming more adept and better at bringing these two products.
Speaker 3: transcript
from our go-to-market channels, both direct and indirect, as we're becoming more adapt and better at bringing these products to customer. For those who are in customer's, you're whether that's enabling and supporting partners.
Operator: To a drier question, please press star then two. At this time, we will pause momentary that a similar roster.
Two customer for those are in customers or whether that's enabling.
Jacob Roberge: Our first question will come from Jake Roeberg with William Blair. You may now go ahead. Thanks for taking the questions and nice to see you get back on file with the SCC question. I appreciate the color on NRR. Not many software companies can talk about retention rates north of 120%. That is pretty impressive. Understand the business is lumpy. That is what is driving the step down in q4.
And supporting partners. So I think that's a big part of it and there are places where we can be more efficient as a business generally.
Speaker 3: transcript
So I think that's a big part of it. And there are places where we can be more efficient as a business generally, whether that's go-to-market, whether that's engineering and product side of things. And so I think it's a combination. It's the growth and then the other things that I just talked about as far as getting greater productivity from the activities that take us to the next level.
Whether that's go to market, whether that's engineering and product side of things and so I think it's a combination it's the growth and then the other thing that I just talked about as far as getting greater productivity from the activities that take us through the next level.
Speaker 7: transcript
Great, that's helpful. And then on GNA cost in the quarter, obviously it's been elevated a bit likely due to the...
Great. That's helpful and then on the G&A costs in the quarter, obviously has been elevated a bit late.
Max: Excluding the timing of deals, how should we think about a sustainable net retention rate for both the mobile deposit and ID verification segments over the next year or two? Sure thing, Jake. Well, thanks. I appreciate the question. This is a new, well, it is not a new KPI to my tech, but it is a new KPI as far as keep performance indicator that we are sharing. It has been encouraged to try to provide some more insights into the performance of the different lines of business that we have.
Likely due to do the.
Speaker 7: transcript
extra auditing, I suppose, or the catch-up. I imagine that carries through fiscal 4Q, but maybe in 24 we start to see that back off a little bit. Is that fair?
Extra auditing I suppose a catch up.
I imagine that carries through fiscal <unk>, but maybe in 'twenty four we start to see that back off a little bit is that fair.
Speaker 1: transcript
Yeah, I mean, I'll answer that. Yeah, I think that's generally accurate. I think we had kind of a heightened cost structure or heavier cost structure in Q3, a little bit into Q4, because as you know, our Q wasn't, K wasn't filed until.
Yes, I'll answer that yes, I think that's generally accurate I think we had a kind of a heightened.
Cost structure are heavier cost structure in Q3, a little bit into Q4, because as you know our Q wasn't K wasn't filed until.
Max: It is greater than 120% and it is over 110% for each one of the lines of business. It is good in a lot of different ways. We certainly aspire to keep it high like that. As far as trying to provide some sort of guidance or expectation, over 110%, I think that is considered better than market, certainly superior to our competitors. That is what we will continue to strive for.
Speaker 8: transcript
end of July and then coming into next year, I think we'll see some reduction. I think we'd get back to kind of a more normalized manor and I think I've said that in the past and but I think we expect that to happen in
End of July and then coming into.
Into next year I think we'll.
We will see some some reduction I think we'd get back to kind of a more normalized manner and I think I've said that in the past, but I think we expect that to happen in 2024.
Speaker 4: transcript
Okay, perfect. And then last one, quick one. Did you guys repurchase any shares during the fiscal third quarter? We did not.
Okay, Perfect and then last one quick one did you guys repurchased any shares during the fiscal third quarter.
We did not.
Okay perfect I appreciate the time guys. Thanks a lot.
Max: Great, and then really nice to hear about the large multi-million dollar check fraud customer that you signed. And even the synergies between the ID and check business that help land that customer's two questions on the check fraud fund. First, how long will it take you to implement that technology for that large of a customer? And then second, are there any data points or proof of concepts? You can share for what percent of fraud losses you have been able to save customers that have already signed on to the platform.
You got it Scott.
Speaker 4: transcript
Our next question will be a follow up from Mike Grandall with Northland Securities.
Our next question will be a follow up from Mike Grondahl with Northland Securities. You May now go ahead.
Speaker 6: transcript
Hey guys, thanks. Just, uh, Max, you had said year to date mobile check deposit had 925 million transactions.
Hey, guys. Thanks, just.
Max you said year to date mobile check deposit had 925 million transactions.
Speaker 6: transcript
Do you have a similar apples-to-apples number for the prior year, just so we could see what transactions are growing?
Do you have a similar apples to apples number for the prior year, just so we could see what transactions are growing.
Max: Yeah, it's, I guess, both those become somewhat specific to the individual institution, you know, from a technical perspective, getting CheckFraud Defender switched on since it's, you know, cloud deployed and, you know, available, you know, in a secure environment like that, you know, from a, from a Mitek perspective, it's very, very quick. Obviously, we're dealing with, you know, thanks for the like, a lot of compliance departments, a lot in the regulated entities.
Speaker 3: transcript
Uh, sure. Uh, now this is, this is, um, imperfect.
Not sure I know this this is impart.
Imperfect, but what I recall us doing in FY 'twenty two the team celebrated.
Speaker 3: transcript
But what I recall us doing in FY22, the team celebrated it.
Speaker 3: transcript
Clipsing one billion checks Transacted for the year and it was the first time that that had happened. So you basically have What's called a billion in FY22 and whatever whatever that number was through the end of
Eclipsing 1 billion checks.
Transacted for the year and it was the first time that that had happened. So you basically have.
Yeah, let's call it $1 billion in FY, 'twenty, two and whatever whatever that number was through the end of Q.
Max: And so, you know, if we look back at the, the customers that we've already been through on this, you know, from the time they find to the time they're actually processing checks and production, it can be, you know, six months, it can be nine months, for some of the much larger institutions, it can be over a year. You know, we're, we're going to see revenue, you know, through the period of that, some of the implementation and just kind of assistance that we're providing for those customers.
Speaker 3: transcript
just to kind of give you a sense. Now, obviously that's not gonna help you with price increases and the contribution of check for a defender or any of that stuff. And, you know, where those checks come from, you know, kind of the mix of those checks, depending on which partner or which customer they come from, they're gonna be priced at a different level. But just to give you kind of a swag, which is probably the best I'm gonna be able to do off the top of my head. No, that's fair, that's fair. And then,
Q3, just to kind of give you a sense now obviously, that's not going to help you with price increases and the contribution of check fraud defender or any of that stuff.
Where those checks come from.
The mix of those checks, depending on which partner, which customer they come from they're going to be.
Priced at a different level, but just to give you a kind of a swag, which is probably the best number to be able to do off the top of my head.
Max: But I guess to the second part of your question, you know, we now do have enough data with enough financial institutions that are in production or getting the benefit to see that the product market fit is there. The system is working, you know, we are finding fraud. We are reducing operational operational expenses. Because our biggest customer, I want to be careful, I say this, but our biggest customer for check fraud defender today is eliminating tens of millions of dollars of hard dollar losses on an annual basis as a result of using check fraud defender and they've been able to validate that.
No that's fair that's fair and then.
What is there.
Speaker 6: transcript
You mentioned G&A at $11.5 million over like $6.6 million, and you said there were some one-time fees and some corporate expenses you had. Are you able to back out any one-time fees for us just so we know what kind of a core number is there?
Mentioned G&A at 11, and a half million over like $6 6 million and you said there were some one time fees and some.
Corporate expenses, you had or are you able to back out any one time fees for us just so we know what kind of a core number is there.
Max: Now, that is our biggest customer so far, and we can have bigger as we continue to go. They're not fully deployed across all the different lines of business, but they've got a pretty significant share out there. And so it's definitely not just a feather in our cap, but it's really helping with the other banks that are interested getting their heads around how beneficial this can be.
Speaker 8: transcript
I think when you look at our reconciliation,
I think.
When you look at the reconciliation.
<unk>.
Speaker 8: transcript
gap to non-gap, I think we provide that reconciliation because that, you know, those were gap numbers. I mean, those are gap numbers as you know.
GAAP to non-GAAP I think we've provided that reckon.
Reconciliation because that those were GAAP numbers I mean, those are GAAP numbers as you know.
Max: Very helpful.
Speaker 8: transcript
But, you can see that reconciliation. I think the big one in Q3 was the non-recurring audit fees and we backed out $800,000 for that. There was some non-recurring litigation costs, backed out approximately $400,000 there. So, you should be able to get that.
But you can you can see that reconciliation I think the big ones.
In Q3 was.
The nonrecurring audit fees I know you're back down 800 $800000 for that there was some.
Nonrecurring litigation costs.
On approximately $400000 there so.
Max: And then if I could just sneak one more in, in the past, you've talked about the conversion of more checks, the mobile deposits still being the largest growth driver for that segment. But as you look in the next year, do you still think that's the case or could that shift towards check fraud defender given the traction you're seeing there or potentially even just kind of pricing levers that you have as contracts come up for renewal in 2024.
Well, you should be able to get that.
Speaker 8: transcript
kind of for the back out for the non-gap piece from those line atoms.
Kind of.
The back out for the non-GAAP piece from those line items.
Got it.
Speaker 8: transcript
I mean, I think the reconciliation does a good job and I think you will be able to see what's in the G&A section.
I mean, I think the reconciliation does a good job and I think.
You'll be able to see what's in.
In the G&A section.
Speaker 6: transcript
Cool. And then just two more questions. One, Max, I just want to verify the multi-year, multi-million.
And then just two more questions one Max I, just wanted to verify the multi year multi million.
Max: It'll be interesting to see how long it takes for check fraud defender to eclipse the growth, the impact on growth, from just mobile check adoption on a mobile banking app. I don't know that I want to predict that just yet for some of the things I already talked about its early days for check fraud defender or the implementation cycle some of that stuff, but it's very clear that that market is real.
Speaker 6: transcript
Check fraud defender customer. That was new, I think you said. Any thoughts when that comes online?
Fraud defender customer that was new I think you said any thoughts when that comes online.
Speaker 6: transcript
Yeah, I tried to give a sense as to how long it depends on the size of the bank and their compliance and regulatory issues, the technology. You can switch it on in the day, right? It's all cloud, all cloud deployed. But I think in this instance, it could take a 69 months to get them to place where they're transacting in production at scale. Is that 69 months from...
Yeah, I tried to give a sense as to how long it depends on the size of the bank and their compliance and regulatory.
Max: And it's not just around, you know, defending against checks what we're seeing now with the integration with my VIP is that we're taking things from the dark web we're providing identity attributes. There's a there's a big with hypothesis currently is there's a bigger opportunity there over time to help financial institutions with other forms of reduction of payment fraud, not just the use of checks. Very helpful.
Issues that the technology you know you can switch it on in a day right. It's all cloud all cloud deployed.
But I think in this instance.
Six to nine months to get them to a place where their transaction, where they're transacting in production at scale.
Is that six to nine months from now.
Probably six to nine months from a couple of months ago.
Okay, but remember we're talking about Q3 here in October.
Speaker 6: transcript
Remember, we're talking about Q3 here in in the October . Good reminder. Good reminder there. And lastly.
Jacob Roberge: Thanks for taking my questions. You got to Jake.
October.
Good reminder, there.
And lastly.
Michael Grondahl: Our next question will come from Mike Grande with Northland Secure. 30s. You may not go ahead.
Speaker 6: transcript
You guys have talked a couple times and you've pointed it out well. Hey, the midpoint of the guidance, 170 million revenue, but in one queue you had that 7 million.
You guys have talked a couple of times and you pointed it out well at the midpoint of the guidance of $170 million of revenue, but Q1you had that 7 million tied to the contract.
Max: Hey guys, thanks and congrats on getting your filings all caught up. I just want to make sure I understand the fourth quarter, you know, the implied in your guidance is 36 million revenue and that's clearly a step down from the last three quarters. That's, that's, did I hear right? That's primarily because the mobile deposit reorders were kind of pulled forward and there's some lumpiness with some new mobile ID customers and related to that.
Speaker 6: transcript
tied to the contract, are we fair to sort of say core, maybe baseline number for 2023 is like 163 million?
Are we fair to sort of say core maybe baseline number for 2023 is like $163 million.
Is that how you look at it.
Well when we look at it based on where the revenue comes in right Theres no non gapping of of revenue.
Speaker 3: transcript
Well, we look at it based on where the revenue comes in, right? There's no non-gapping of revenue. You know, if we hadn't...
If we hadn't if if the contract recognition of revenue was different where we would've taken the $7 million over the <unk>.
Speaker 3: transcript
If the contract recognition of revenue was different where we would have taken the $7 million over the next three years, then yeah, the revenue in FY22, I'm sorry, FY23 would have been $170,000 minus $7,000, which is $163,000. And then you'd start to see that $7 million.
Max: Was there any promotional activity to call out with mobile ID? Yeah, I think just the first part of your question. I wouldn't use the term full forward. I would say that, you know, on whatever their normal need is, some of the larger orders for mobile deposit happened earlier in fiscal 23. Then, you know, been later in fiscal 23, but we stand behind, you know, the deposit business, nothing's changed. I mean, when you zoom out and this is how we ask our investors to look at it, not look at it in a month to month or quarter to quarter basis, but look at it over the full year and the deposits business this year is going to grow 20%.
Next three years.
And then yeah, the revenue and in FY 'twenty, two I'm, sorry, FY2023 would have been 170 minus seven which is $1 63.
And then you would start to see that $7 million.
Speaker 3: transcript
you know, maybe 7, 7.5 million show up in the next three years in Q1 on the anniversary of the conference. But that is absolutely not how the revenues being recognized here. Right, right.
You know, maybe 77 $5 million show up in the next three years in Q1 on the anniversary of the time, but that's not that is absolutely not out of the revenues being recognized here.
Right right Okay.
Okay, Hey, thanks, guys.
You got it Mike.
Speaker 4: transcript
This concludes our question and answer session. I would like to turn the comments back over to Todd Curly for the close remarks.
This concludes our question and answer session.
Max: Yeah, so, you know, that's the way you got to look at it as we look into it next year. We're not going to necessarily provide guidance, but other than the really tough comp we're going to have in Q1 because of the FY 23 Q1 7 million revenue that what was mentioning in his remarks, you know, we continue to see the business, you know, on hold being a solid growth business. And, you know, we're doing everything again with a price increases more adoption for mobile check deposit or the check for a defender and all the great traction we're getting there.
Let's turn the conference back over to Todd currently for any closing remarks.
Speaker 2: transcript
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.
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.
Speaker 4: transcript
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Max: So it's a solid great business and we look forward to it being that way for a long time. Got it. Then mobile ID. Any promotional revenue to call out in the quarter? Yes, when you see promotional revenue, I think we've talked about this, but just for maybe folks that that are violent and new. You know, the transaction volumes associated with identity verifications and authentications at times are tied to promotions that, let's use a bank as an example, that a bank can be running to be able to get, you know, their competitors, banking clients to switch.
Max: And so we did see that in the first half of our fiscal year, where, you know, there were some pretty significant promotions there. If I just reflect on first three quarters, you know, of the year, you know, we've seen some really nice growth, particularly, you know, largely driven in some of the new product areas. So biometrics, who you have now idea idea in my path. So, you know, while there's some challenging, you know, elements to the, to the environment out there.
Max: I think this is one we expect, you know, the same way we've talked about, you know, targeting 18% year-over-year growth for identity in FY23 when we think about, you know, next year or maybe even longer term if there isn't a change to the, to the environment. That's a, you know, we expect that to be a mid-to-high team slower for us on an organic basis. Got it, on Capitol Allocation Max, you kind of said, but I think you said, hey, we're in a blackout right now, we really can't do anything incremental.
Max: If you weren't in a blackout now, do you think you'd do something be more aggressive with that 131 million of cash you have or kind of what thoughts do you have? Sure, so we want to make clear is we are really excited about the product portfolio that we have both for the deposits line of business and the identity line of business. And we've got what we need to be successful in the market, we continue to whether the current situation and then as things change, the environment improves, you know, the fact contract, you know, from a, from a capital allocation perspective, you that translates into, you know, we're not there hunting to do acquisitions.
Max: And as we've talked about, I think in the last three calls, which unfortunately happened over the course of the last 60 days, you know, we've been very head down making sure that not only do we get on file and get current with RSCC reporting. But also that we're refortifying our corporate services team and well, I talked about some of that in his prepare remarks, you know, so that we can continue to, you know, record file and support the operations of our business in a consistent way in our back office and our corporate services.
Max: So we're going to translate that, you know, got $130 million cash, you know, that we have, we pay 75 basis points of interest on the debt, we're getting now something, you know, four to five percent interest on cash that we have. We think the stock, you know, it's actually the end of the day today and, you know, if we had maybe some more latitude, you know, the board here will consider all of the different alternatives we have to use that, you know, use that capital effectively and efficiently. Got it. Hey, I'll jump back and cute. Thanks. Thanks Mike. Again, if you have a question, please press star then one.
Operator: Our next question will come from Scott Buck with HC Wing, right? You may now go ahead. Hi, good afternoon guys. Thanks for taking my questions.
Scott Buck: Max, can you talk a little bit about the assumptions that get you to break even or positive. And the identity business by year and 24 is it simply just, you know, scaling revenue, another 20% or so, or is there more to it than that? Yeah, I think there's more to it than that. You know, I just, so first you get a sense of what we think growth should be, you know, at least under the current circumstances, you know, macroeconomic conditions, you know, over the course of the next 18 to 24 months based on the earlier comments.
Scott Buck: And then also in the early months made it clear, you know, we're the identity growth that we are seeing is free being leveraged and is what we driven by the products. And so I think is, you know, when we think about it, Scott, it's getting continued, improved productivity from our go to market channels, both directing and direct as we're becoming more adapt and better at bringing these products, you know, to customer for those are in customers, whether that's enabling and supporting partners.
Scott Buck: So I think that's a big part of it and, you know, there are places where we can be more efficient as a business generally, whether that's go to market, whether that's engineering and product side of things. And so I think it's a combination, it's the growth and then the other things I just talked about as far as getting greater productivity from, you know, the activities that take us to the next level.
Max: Great, that's helpful. And then on GNA cost in the quarter, obviously it's been elevated a bit likely due to the extra auditing, I suppose, or the catch-up. I imagine that carries through fiscal 4Q, but maybe in 24, we start to see that back off a little bit, is that fair? Yeah, I'll answer that. Yeah, I think that's generally accurate. I think we had kind of a heightened cost structure, or have your cost structure in Q3, a little bit into Q4, because as you know, K wasn't filed until end of July.
Max: And then coming into next year, I think we'll see some reduction. I think we'd get back to kind of a more normalized manner, and I think I've said that in the past. But I think we expect that to happen in 2024.
Fawad Ahmad: Okay, perfect.
Scott Buck: And then last one, quick one. Did you guys repurchase any shares during the fiscal 3Q? We did not. Okay, perfect. Appreciate the time, guys. Thanks a lot. You got a Scott. Thank you.
Michael Grondahl: Our next question will be a follow-up from Mike Grondahl with Northland Securities. He may not go ahead. Hey guys, thanks. Just Max, you had said year-to-date mobile check deposit had 925 million transactions. Do you have a similar Apple Dampels number for the prior year, just so we could see what transactions are growing? Sure. Now, this is imperfect, but what I recall us doing in FY22, the team celebrated. Eclipsing 1 billion checks transacted for the year, and it was the first time that that had happened.
Michael Grondahl: So you basically have what's called a billion in FY22, and whatever that number was through the end of Q3, just to kind of give you a sense. Now, obviously that's not going to help you with price increases and the contribution of check for a defender or any of that stuff. And where those checks come from, the mix of those checks, depending on which partner or which customer they come from, they're going to be priced at a different level.
Michael Grondahl: But just to give you kind of a swag, which is probably the best I'm going to be able to do off the top of my head. No, that's fair. That's fair. And then broad, is there, you mentioned GNA at 11.5 million over like 6.6 million. And you said there were some one time fees and some corporate expenses you had. Are you able to back out any one time fees for us just so we know what kind of a core number is there?
Michael Grondahl: I think when you look at our reconciliation gap to non-gap, I think we provide that reconciliation because those were gap numbers. I mean, those are gap numbers, as you know. But you can see that reconciliation. I think the big one in Q3 was the non-recurring audit fees. And we backed out $800,000 for that. There were some non-recurring litigation costs back in our approximately $400,000 there. So you should be able to get that, kind of put the back out for the non-gap piece from those line items. Got it. I mean I think the reconciliation does a good job and I think you'll be able to see what's in the G&A section. Cool.
Max: And then just two more questions. One, Max, I just want to verify the multi-year, multi-million check fraud defender customer. That was new I think you said. Any thoughts when that comes online? Yeah, I tried to give a sense as to how long it depends on the size of the bank and their compliance and regulatory issues. The technology you can switch it on in this day, right? It's all cloud, all cloud deployed.
Max: But I think in this instance, you know, could take a six to nine months to get them to a place where they're transaction, where they're transacting in production at scale. Is that six to nine months from like now? Probably six to nine months from a couple of months ago. Okay. Remember we're talking about Q3 here in October. Good reminder. Good reminder there. And lastly, you guys have talked a couple times and you've pointed it out well.
Max: Hey, the midpoint of the guidance, 170 million revenue, but in one queue you had that 7 million tied to the contract. Are we fair to sort of say core, maybe baseline number for 20, 23 is like 163 million. Is that how you look at it? Well, we look at it based on where the revenue comes in, right? There's no non-gapping of revenue. You know, if we hadn't, if the contract recognition of revenue was different where we would have taken the 7 million over the next three years, then yeah, the revenue in FYI-22, I'm sorry, FY23 would have been 170 minus 7, which is 163.
Max: And then you'd start to see that 7 million, you know, maybe 7, 7 and a half million, show up in the next three years in Q1 on the anniversary of the contract. But that's not, that is absolutely not how the revenue is being recognized here. Right, right. Okay. Hey, thanks, guys. You got a mic. This concludes our question and answer session. I would like to turn the comments back over to Todd Curley for any close remarks.
Max: 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. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.