Q4 2023 Mitek Systems Inc Earnings Call

Operator: Good day, and welcome to Mitek's fiscal 2023 fourth quarter and full year earnings conference call. All participants will be in listen-only mode.

Good day and welcome to my tax fiscal 2023 fourth quarter and full year earnings conference call.

All participants will be in listen only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on your telephone keypad. To withdraw your question, please press star, then 2.

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Operator: Please note, this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.

Please note the C band is being recorded.

I would now like to turn the conference over to Todd Curly of M. K R Investor Relations.

Please go ahead.

Todd Kehrli: Thank you, operator. Good afternoon, and welcome to Mitek's Cisco 2023 fourth quarter and year-end earnings conference call. With me on today's call are Mitek CEO Max Carnecchia and CFO Dave Lyle. Before I turn the call over to Max and Dave, I'd like to cover a few quick items. Today, Mitek issued a press release announcing its financial results for its fiscal 2023 fourth quarter and full year. That release is available on the company's website at MitekSystems.com.

Thank you operator, and good afternoon, and welcome to Mitek fiscal 2023 fourth quarter and year end earnings conference call.

With me on today's call are Mitek, CEO, Max Cornacchia, CFO, Dave Lyle.

Now I turn the call over to Max and Dave I'd like to cover a few quick items.

Today Mitek issued a press release announcing its financial results for its fiscal 2023 fourth quarter and full year that release is available on the company's website at Mitek systems Dot com.

Todd Kehrli: 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. I want to remind everyone that on today's call, management will discuss certain factors 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 when looking at state and federal funds. These forelooking statements may include comments about the company's plans and expectations of future performance. Foreseeable statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially.

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.

I want to remind everyone that on today's call management will discuss certain factors likely to influence the business going forward any factors discussed today that are not historical facts, particularly comments regarding our long term prospects and market opportunities should be considered forward looking statements. These forward looking statements may include com.

That's 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 10-Q for a complete description of these risks.

Todd Kehrli: We encourage all of our listeners to review our SEC filings, including our most recent 10-K and 10-Q, for a complete description of these risks. Our statements on this call are made as of today, March 19, 2024, and the company undertakes no obligation to revise or update publicly any of the forelooking statements contained herein, whether as a result of new information, future events, changes in expectations, or otherwise. Additionally, throughout this call, we'll be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release. With that said, I'll now turn the call over to Mitek's CEO, Max Carnecchia. Thanks, Todd. Good afternoon, everyone.

Our statements on this call are made as of today March 19th 2024, 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.

Additionally throughout this call we'll be discussing certain non-GAAP financial measures today's earnings release and the related current report on form 8-K describe the differences between our non-GAAP and GAAP reporting and <unk>.

The reconciliation between the two for the periods reported in the release.

That said I will turn the call over to Mitek CEO extract yet thanks, Todd and good afternoon, everyone. Thank you for joining us today I want to extend a warm welcome to our investors employees customers and partners joining us today. Thank you for your continued support and trust in Mitek.

Max Carnecchia: Thank you for joining us today. I want to extend a warm welcome to our investors, employees, customers, and partners joining us today. Thank you for your continued support and trust in Mitek. I'm excited to provide insights into our fiscal 23 performance, spell out our strategic direction going forward, and then hand the call over to Dave Lyle, our new CFO, to provide more financial details. At Mitek, our mission is clear.

I'm excited to provide insights into our fiscal 'twenty three performance spell out our strategic direction going forward and then hand, the call over to Dave Lyle, our new CFO to provide more financial details.

At Mitek, our mission is clear we help regulated businesses say, yes to more customers more deposits and more transactions with increased intelligence and customer safety.

Max Carnecchia: We help regulated businesses say yes to more customers, more deposits, and more transactions with increased intelligence and customer safety. We achieve this by providing unique signals that seamlessly bring identity, transaction, and intelligence together. Over the past decade, we've diligently developed solutions in pursuit of this mission.

We achieved this by providing unique signals that seamlessly bring identity transaction intelligence together.

Over the past decade, we've diligently developed solutions in pursuit of this mission.

Max Carnecchia: Today, leveraging our most current applications of AI and machine learning, we are proud to enable over 7,900 organizations with new levels of security and control while protecting the digital consumer from the most sophisticated fraud threats. I'm very proud of our 200 machine learning and AI engineers, data scientists, developers, and CloudOps team members who are dedicated to ensuring that our award-winning product offerings remain at the forefront of the industry and for their vital role in developing solutions to combat evolving fraud and enhance digital security. Thank you all, Mitek Nation, for your ongoing commitment to our mission and the incredible work you do.

Today, leveraging our most current applications of AI and machine learning, we are proud to enable over 7900 organizations with new levels of security and control while protecting the digital consumer from the most sophisticated fraud threat.

I'm very proud of our 200 machine learning and AI engineers data scientists developers and cloud ops team members, who are dedicated to ensuring that our award winning product offerings remain at the forefront of the industry and they are a vital role in developing solutions to combat evolving fraud and enhanced digital suite.

Geraghty.

Thank you all my Tech nation for your ongoing commitment to our mission and the incredible work you do.

Max Carnecchia: Before we discuss our financial results for Fiscal 2023, I'd like to introduce Dave Lyle, our newly appointed CFO. Later in the call, Dave will provide further insights into our financial performance and outlook for Fiscal 2023. Dave joined us in early January and has already made a substantial impact. With his broad experience across multiple business functions, Dave brings invaluable expertise to our team. We're thrilled to welcome him aboard.

When we discuss our financial results for fiscal 2023, I'd like to introduce Dave Lyle our newly appointed CFO later in the call Dave will provide further insights into our financial performance and outlook for fiscal 2024.

Dave joined US in early January and has already made a substantial impact with his broad experience across multiple business functions. Dave brings invaluable expertise to our team were thrilled to welcome him aboard.

Max Carnecchia: I'd also like to express my gratitude to Fuad Ahmad, who served as Mitek's interim CFO for a little over a year. Thank you, Fuad, for your dedication and contributions during this critical period. Turning to Mitek's record performance in fiscal 2023, I'm pleased to announce that we achieved solid growth across both deposits and identity, leading to total revenue growth of 19% year-over-year. Additionally, we achieved non-GAAP net income of $44.4 million and generated $31.6 million in cash flow from operations, further strengthening our balance. First, looking at our identity products, revenue grew 17% year over year in fiscal 2023, attributed to Our net revenue retention rate for fiscal 2023 was approximately 117%, which underscores the value of our solutions delivered. Notable customer expansions included Lloyd's, Chase, and NatWest. We want over 100 new identity customers in fiscal 2023, including major names like Nationwide, Verizon, Virgin Mobile O2, and Telefonica. The Nationwide Building Society was a very strategic win and a competitive takeaway.

I'd also like to express my gratitude to flood Ahmad who served as my text interim CFO for a little over a year. Thank you for what for your dedication and contributions during this critical period.

Turning to my tax record performance in fiscal 2023, I'm pleased to announce that we achieved solid growth across both deposits and identity, leading to total revenue growth of 19% year over year. Additionally, we achieved non-GAAP net income of $44 $4 million and generated 31.

$6 million in cash flow from operations further strengthening our balance sheet.

First looking at looking at our identity products revenue grew 17% year over year in fiscal 2023 attributed to strategic efforts in customer acquisition and expansion within our existing customer base. Our net revenue retention rate for fiscal 2023 was approximately 117.

A cent, which underscores the value of our solutions deliver.

Notable customer expansion included Lloyds Chase and Natwest.

We went over 100, new identity customers in fiscal 2023, including major names like nationwide Horizon, Virgin Mobile O two and Telefonica.

Nationwide building Society was a very strategic win in a competitive takeaway.

Max Carnecchia: This British cooperative financial institution is in the process of rebranding under the slogan, A Good Way to Bank, and its primary goal is to differentiate itself based on user experience and security. Mitek's mission and approach are very well matched to this rebranding, and we are confident it is one of the reasons we secured the business. Nationwide is implementing our solution in multiple use cases and has taken a phased approach, starting with a remediation project and expanding to device binding and step-up authentication for all app users as a replacement for card readers, using our multi-modal biometric solution, MyPASS. They have already enrolled 120,000 biometric faces, and all 5 million app users will be invited by April of this year. Verizon, another significant win, was also a competitive takeaway.

This British cooperative financial institution is in the process of rebranding under the slogan a good way to bank.

And its primary goal is to differentiate itself based on user experience and security.

My texts mission and approach are very well matched to this rebranding and we are confident it is one of the reasons. We secured the business nationwide is implementing our solution in multiple use cases and has taken a phased approach starting with a remediation project and expanding to device binding and onboarding.

The device binding and step up authentication in balls, all app users as a replacement for card readers using our multimodal biometric solution. My past they have already enrolled 120000 biometric basins and all 5 million App users will be invited by April of this year.

Horizon another significant win with also a competitive takeaway horizon will leverage our identity verification and face comparison tools to support its broad operations and customer experience teams initially with their b to B business and soon moving to.

Max Carnecchia: Verizon will leverage our identity verification and face comparison tools to support its fraud operations and customer experience, initially with their B2B business and soon moving to support the in-store consumer. Access to digitally enabled services continues to explode. And this accelerating shift to digital creates an immense challenge for organizations as they strive to balance customer experience with financial risk. As digital grows, so do the opportunities for fraud, and as long as criminals can cleverly exploit weaknesses in an institution's ability to distinguish a legitimate customer from an imposter, this threat will continue to grow. As such, we see customer interest, engagement, and inquiries dramatically increasing. According to industry analysts, the identity market is growing between 14% and 16% annually. And we have the opportunity to take market share given our unique proprietary, industry-leading biometrics offerings and orchestration platform. Our channel partner investment has also yielded returns during the year, with Experian, our longstanding partner in North America, the UK, and Europe, growing their Mitek business by 17% year over year across all regions. And we believe we are only just scratching the surface.

To support the in store consumer.

Access to digitally enabled services continues to explode and this accelerating shift to digital creates an immense challenge for organizations as they strive to balance customer experience with financial risks.

As digital grows so do the opportunities for fraud and as long as criminals can cleverly exploit weaknesses in an institution's ability to distinguish a legitimate customer from an impostor. This threat will continue to grow as such we see customer interest engagement and inquiries dramatically increasing.

According to independent industry analysts the identity market is growing between 14, and 16% annually and we have the opportunity to take market share given our unique proprietary industry, leading biometrics offerings and orchestration platform.

Our channel partner investment has also yielded returns during the year.

With experience our long standing partner in North America, the UK and Europe.

Growing their mitek business by 17% year over year across all regions and we believe we are only just scratching the surface with them.

Max Carnecchia: Our most recent win with Experian is in government healthcare in the UK. And Experian is also one of the biggest partners in the telco space, particularly in Europe. Partnerships like Experian are pivotal in our efforts to support new verticals, including government, telco, and healthcare, each of which presents a significant growth opportunity. As such, we continue to add new channel partners, most recently with industry leaders like Equifax and Nice Actimize. By leveraging these alliances, we aim to establish a strong foothold in new geographies, driving expansion and enhancing our global presence.

Our most recent win with experience is in the government health care and U K.

And experience is also one of the biggest partners in the telco space, particularly in Europe partnerships like Experian, our pivotal tool in our efforts to support new verticals, including government Telco health care, each which presents a significant growth opportunity.

As such we continue to add new channel partners. Most recently with the industry leaders like Equifax and nice actomyosin bye.

By leveraging these alliances we aim to establish a strong foothold in new geographies driving expansion and enhancing our global presence now.

Max Carnecchia: Now, let's shift our focus to the non-financial milestones achieved during the fiscal year across each line of business and outline our FY24 priorities. We see a large and growing opportunity in the intersection of fraud and identity, especially in regulated environments like financial services, mobile operators, iGaming, and healthcare. The role AI is playing in changing and accelerating regulation further benefits Mitek and our solution. As a result, our growth products, including our MyBIP platform and the AI-driven biometric solution MyPASS, have seen growing adoption. Today, integrated identity platforms are emerging technologies and essential tools that reshape how we secure and authenticate identities in the digital world. These platforms combine various verification methods, streamlining the process and enhancing security for our customers. The market discerns this by categorizing the orchestrators and the orchestrated. MyVIP is a leading orchestration solution in the market today through its highly differentiated offering.

Now, let's shift our focus to the non financial milestones achieved during the fiscal year across each line of business and outline our FY 'twenty four priorities.

We see a large and growing opportunity in the intersection of fraud and identity, especially in regulated environments like financial services mobile operators, I gaming and health care roll AI is playing in changing and accelerating regulation further benefits mitek and our solutions as a result, our gross products, including our my VIP platform.

And the AI driven biometric solution my past have seen growing adoption.

Today integrated identity platforms are emerging technologies and essential tools that reshape how we secure and authenticate identities in the digital world. These platforms combine various verification methods streamlining the process and enhancing security for our customers our market discerns. This by CAGR rising the orcas.

Traders and the orchestrated my VIP as a leading orchestration solution in the market today through its highly differentiated offering.

Max Carnecchia: Beyond traditional static ID checks and physical document verification, our orchestration platform incorporates proprietary biometric analysis and liveness inspection in combination with highly personalized external data signals to ensure the legitimacy of identities, thereby preventing synthetic and computer-generated fraud. In the ongoing battle against online fraud, deep fakes, and injection attacks, our biometric components, which are part of MyVIP, play a pivotal role in enhancing security and safeguarding digital transactions. Our IDR&D biometrics revenue has grown substantially since we acquired IDR&D in May of 2021 as use cases continue to expand, and the need for continuous authentication becomes mainstream. Voice biometrics expedites and secures customer authentication, especially when combined with face biometrics. Face biometrics also strengthen fraud prevention during a customer's digital onboarding by verifying a user's face against a government-issued ID, thus thwarting attempts to bypass screening processes using manipulated images. LiveSense detection technology confirms an individual's physical presence during authentication, effectively preventing the use of stolen photos, deepfake videos, masks, and other spoofs by spam bots and bad actors to create or access online accounts, thereby significantly enhancing security.

Beyond traditional synthetic I E checks and physical document verification, our orchestration platform incorporates proprietary biometric analysis and likeness inspection and combination with highly personalised external data signals to ensure the legitimacy of identities, thereby preventing synthetic and generated computer generated broad.

Yes.

And the ongoing battle against online fraud, deep fakes and injection attacks, our biometric components, which are part of my VIP play a pivotal role in enhancing security and safe guarding digital transactions.

Our I D. R&D biometrics revenue has grown substantially since we acquired IP R&D in May of 2021 as use cases continue to expand and the need for continuous authentication becomes mainstream.

Voice biometrics, expedite and secure customer authentication, especially when combined with based biometrics based biometrics also strengthened fraud prevention during our customers' digital onboarding by verifying a user space against the government issued I E. That's the wording attempts to bypass bypass screening processes using.

Related images, well I've just detection technology confirms an individual's physical presence starring authentication effectively preventing the use of stolen photos, you can fake videos masks and other spoofs by Spambots and bad actors to create or access online accounts, thereby significantly enhancing security.

Max Carnecchia: Leveraging all these proprietary technologies, in fiscal 2023, we introduced our exclusive four-point multimodal biometric solution, the only one of its kind, utilizing the combination of face biometric, face liveness, voice biometric, and voice liveness technologies. This innovative solution, MiPAS, seamlessly captures and verifies these biometrics simultaneously, providing near-instant authentication for digital users. Initially praised for expediting and securing customer authentication, voice biometrics are being challenged by the emergence of generative AI voice clips, known as vishing, or voice deepfakes, which malicious actors exploit to infiltrate financial accounts. Our IDR&D labs were quick to respond. And early this year, we introduced ID.Live voice clone detection to protect against bad actors impersonating their victims to commit fraud and crime. With just three seconds of a person speaking, the product can deliver a score indicating the likelihood that it was created using cloning technology. It can detect phone attacks that use replay or advanced software and hardware-based hacking methods. In a world of gen-AI, large-language models, and transformers, where deepfake impersonations are proliferating so rapidly, voice-clone detection plays an essential role in preserving trust between people and technology, and we are proud to be at the forefront of this innovation.

Leveraging all these proprietary technologies in fiscal 2023, we introduced our exclusive four point multimodal biometric solution. The only one of its kind utilizing the combination of face biometric face likeness voice biometric and voice liveliness technologies. This innovation innovative solution my past C.

Leslie captures and verifies these biometric simultaneously, providing near instant authentication for digital users initial.

Initially praised by expediting and secure customer authentication and voice biometrics are being challenged by the emergence of generative AI voice clips known as vision or voice defects, which malicious actors exploit to infiltrate financial accounts.

Our I D. R&D labs were quick to respond and early this year, we introduced I D. Like voice clone detection to protect against bad actors impersonating their victims to commit fraud and crime with just three seconds of a person speaking product can deliver a score indicating a likelihood that it is that it was.

Created using cloning technology. It can connect detect known attacks that use replay or advanced software and hardware based hacking methods.

The world of Gen. AI large language models and Transformers were deep vacant person nations are preliminary proliferating. So rapidly voice clone detection plays an essential role in preserving trusts between people and technology and we are proud to be at the forefront of this innovation.

Max Carnecchia: According to Gartner, the number of deepfake attacks worldwide in 2023 will be 10 times the number detected in 2022. With our leading industry biometric solutions preventing heat fakes, we expect biometrics and liveness to be a significant revenue growth engine for Mitek for years to come. We're also very excited about how our Identity Product Portfolio reinforces our Deposits business. Our end-to-end orchestration platform, MyVIP, is now serving both Deposits and Identity, and we're seeing our pipeline of potential new business increase as we provide a comprehensive suite of machine learning and AI-based tools that can help organizations fight fraud. Now, let's discuss our deposits business and where we see it going in Fiscal 24 and beyond. In Fiscal 23, we saw our deposits in revenue increase substantially, growing 20% year over year. We recorded over 1.2 billion mobile check deposits in Fiscal 2023. Notably, 8 billion checks were deposited in North America throughout the year.

According to Gartner the number of deep fake attacks worldwide. In 2023 was 10 times the number detected.

And 2022 with our leading industry biometrics solutions, preventing eat fakes, we expect biometrics and likeness to be a significant revenue growth engine for mitek for years to come.

We're also very excited about how our identity product portfolio reinforces our deposits business. Our end to end orchestration platform. My VIP is now serving both deposits and identity and we're seeing our pipeline of potential new business increase as we provide a comprehensive suite of machine learning and AI base.

Tools that can help organizations fight fraud.

Now, let's discuss our deposits business and where do we see it going in fiscal 'twenty four and beyond in fiscal 'twenty three.

We saw our deposits in revenue increased substantially growing 20% year over year, we recorded over $1 2 billion mobile check deposits in fiscal 2023, notably 8 billion checks were deposited in North America throughout the year analysts forecast the sustained demand for check deposit services over the next debt next.

Max Carnecchia: Analysts forecast sustained demand for check deposit services over the next decade with an estimated 5 billion checks per year still being deposited 10 years from now. We plan to capitalize on the increasing adoption of mobile check deposit among consumers and small businesses, as well as to continue to implement price increases as the leading provider of this solution. Now, let's talk about the momentum we are seeing with our Check Fraud Defender, or CFD, product offer, one of our most exciting prospects for growth over the coming years. Thanks for getting crushed by check fraud, which, according to a recent NASDAQ report, has eclipsed credit card fraud in the United States. CFD is making significant strides in combating check fraud with the potential to save banks billions of dollars in losses. We believe CFD has the potential to contribute $200 million in annual revenue within the next five to seven years. Let me walk you through how we got there.

Decade, with an estimate with an estimated 5 billion checks per year still being deposited 10 years from it we plan to capitalize on the increasing adoption of mobile check deposit among consumers and small businesses as well as to continue to implement price increases as the leading provider of this solution.

Yeah, let's talk about the momentum, we're seeing with check fraud defender for CFT Prada.

Product offering.

One of our most exciting prospects for growth over the coming years banks are getting crushed by check fraud, which according to the recent NASDAQ report has eclipsed credit card fraud in the United States CFT is making significant strides in combating check fraud with the potential to save banks billions of dollars in losses, we built.

<unk> has the potential to contribute $200 million in annual revenue within the next five to seven years.

Let me walk you through how we got there as a REIT as a recent Boston Fed article noted one industry analyst estimates over $24 billion in check fraud losses in 2023.

Max Carnecchia: As a recent Boston Fed article noted, one industry analyst estimates over $24 billion in check fraud losses in 2023. We believe CFD could help banks conservatively avoid around 40% of those losses based on our unique ability to visually detect fraud through machine learning. That would imply that CFD could potentially save approximately $10 billion in check fraud losses just this year. We believe a reasonably healthy bank-friendly ROI to combat this size of check fraud would be in the range of 10 to 1, meaning we would believe banks would be willing to invest $1 million to prevent $10 million in check fraud losses.

We believe CFT could help banks conservatively avoid around 40% of those losses based on our unique ability to visually detect fraud through machine learning.

That would imply that CFT could potentially save approximately $10 billion in check fraud losses, just this year we.

We believe a reasonably healthy bank friendly ROI to combat this size of check fraud would be in the range of 10 to one.

Meaning we would believe banks would be willing to invest $1 million to prevent $10 million in check fraud losses.

Max Carnecchia: That would allow for a $1 billion annual serviceable addressable market for SAM or a check fraud defender product. With less than a handful of potential competitors today, we believe a 20% market share should be achievable, especially given our leadership position and strong reputation in check processing. That would equate to $200 million in annual revenue opportunity for Mitek within the next five to seven years. And remember, check fraud is growing rapidly, so these estimates do not consider the growth over the coming years. Also important to note is the potential bank savings don't include additional operational efficiencies these banks will realize by using CFD and our new mind control product, our latest achievement in empowering banks to control check fraud by integrating CFD with MyBIP. Productivity gains using MyControl are significant. In the review of a potentially fraudulent check, agents can reduce what would have taken them as long as 10 minutes to just 90 seconds using MyClean.

That would allow for a 1 billion dollar annual serviceable addressable market or Sam or a check fraud defender product.

With less than a handful of potential competitors today, we believe that 20% market share should be achievable, especially given our leadership position and strong reputation in check processing.

That would equate to $200 million in annual revenue opportunity for Mitek within the next five to seven years and remember check fraud is growing rapidly. So these estimates do not consider the growth over the coming years.

Also important to note is the potential bank savings.

Don't include additional operational efficiencies. These banks will realize by using CSD and our new mine control product our latest achievement in empowering banks to control check fraud by integrating CFT with my VIP productivity.

<unk> gains using my control are significant.

In the review of potentially fraudulent check agents can reduce what it would have taken them as long as 10 minutes to just 90 seconds using my control.

Max Carnecchia: Also, CFD drives down false positives so that banks will spend more time looking at bad checks rather than good checks. We launched CFD two years ago to help banks solve this growing problem. In fiscal 2023, one of our customers reported saving over $16 million in less than six months using CFD to prevent fraudulent check losses and reduce the expense of dealing with this exploding problem. Today, CFD boasts a select group of clients, including two of the top 10 banks in North America.

Also C. S E drives down false positives. So the banks will spend more time looking at bad checks rather than good checks.

We launched CFT two years ago to help banks solve this growing problem in fiscal 2023, one of our customers reported saving over $16 million in less than six months using CFT to prevent.

Ross fraudulent check losses, and reduce the expense of dealing with this exploding problem today.

Today, CST boasts a select group of clients, including two of the top 10 banks in North America, our dedicated sales team and partners are diligently pursuing the top 100 financial institutions aiming to onboard dozens more as CFT clients.

Max Carnecchia: Our dedicated sales team and partners are diligently pursuing the top 100 financial institutions, aiming to onboard dozens more as CFD clients by the end of fiscal 2024. Despite the deliberate pace inherent in the regulated banking sector, our progress remains promising, driven by the substantial cost savings our CFD solution can deliver. Encouragingly, our pipeline of potential customers continues to expand, indicating a growing market interest in our offer. Contributing to this pipeline are our channel partners.

By the end of fiscal 2024, despite the deliberate pace inherent in the regulated banking sector. Our progress remains promising driven by the substantial cost savings our cfd solution can deliver incurred.

Encouragingly, our pipeline of potential customers continues to expand indicating a growing market interest in our offering.

Contributing to the pipeline are our channel partners. The channel has been a trusted blueprint for selling mobile deposit and we are thrilled with the momentum we are starting to see in the in the channel with CFT within a few months of Onboarding, our new partner of Rigo, we have already closed a couple of CSC deals.

Max Carnecchia: The channel has been the trusted blueprint for selling mobile deposits, and we are thrilled with the momentum we are starting to see in the channel with CFD. Within a few months of onboarding our new partner, Abrego, we have already closed a couple of CFD deals. CFP is just the beginning of a very large opportunity for Mitek. MyControl is the latest of many products being built on MyVIP's low-code, no-code platform for fast and simple implementation that we believe can drive revenue growth for us over the next several years.

He is just the beginning of a very large opportunity for Mitek. My control is the latest of many products being built on my Vips low code No code platform for fast and simple and limitation that we believe can drive revenue growth for us over the next several years, we are already planning follow on products to address other.

Max Carnecchia: We are already planning follow-on products to address other growing market opportunities in the retail, bank, payments, wire, and peer-to-peer space, which we believe is a substantially larger opportunity than even CFD. I want to reiterate the growing and important intersection of fraud and identity. CFE is leading the way into adjacent opportunities for Mitek to help with new AI-driven anti-fraud and identity capabilities.

Growing market opportunities in the retail bank payments wire and peer to peer space, which we believe has a substantially larger opportunity and even CFT.

I want to reiterate the growing the important growing intersection of fraud and identity.

CFT is leading the way into adjacent opportunities for mitek to help with new AI, driven anti fraud and identity capabilities.

Max Carnecchia: By leveraging our unique access to rare and privileged customer data and transaction intelligence, we can deliver additional differentiated value to our customers and drive increased shareholder value. In summary, Mitek is well-positioned for continued growth in both revenue and profitability. We are capitalizing on large, growing end markets at the nexus of big secular trends in AI, identity, and fraud. Mitek is delivering cutting-edge machine learning and artificial intelligence tools, empowering organizations to combat fraud and enhance trust and convenience across every digital interaction through our leading orchestration platform.

Leveraging our unique access to rare and privileged customer data and transaction intelligence, we can deliver a digital additional differentiated value to our customers and drive increased shareholder value.

In summary, Mitek is well positioned for the continued growth in both revenue and profitability. We are capitalizing on a large growing end markets at the Nexus of big secular trends in AI identity and fraud Mitek is delivering cutting edge machine learning and artificial intelligence tools empowering organizations to.

Bat fraud, and enhanced trust and convenience across every digital interaction through our leading orchestration platform.

Max Carnecchia: Notably, the introduction of new products positions Mitek for our next phase of additional growth. I'll now turn the call over to Dave to discuss the financial results in more detail. Following Dave's remarks, we'll open the call for questions. Dave, please go ahead.

Notably the introduction of new products positions Mitek for our next rate phase of additional growth.

I'll now turn the call over to Dave to discuss the financial results in more detail. Following daves remarks, we'll open the call for questions. Dave. Please go ahead.

David B. Lyle: Thanks, Max. I couldn't be more excited to be here at Mitek. It's a privilege to join a company that is not only a pioneer and a category creator in its space but has also established itself as a clear market leader while demonstrating consistent revenue growth and profitability. I'm looking forward to continuing my work with the team toward growth for years to come. I'm also looking forward to getting to know our shareholders and sell-side analysts.

Thanks Max.

Be more excited to be here at Mitek, It's a privilege to join a company that is not only a pioneer and a category creator in its space, but it's also established itself as a clear market leader, while demonstrating consistent revenue growth and profitability.

I'm looking forward to continuing my my work with the team towards growth for years to come I'm also looking forward to getting to know our shareholders and sell side analysts with that said, let me take you through our financial results for fiscal year 2023, which ended September 32023.

David B. Lyle: With that said, let me take you through our financial results for fiscal year 2023, which ended September 30, 2023. Looking first at revenue, it would be valuable to spend a few minutes describing how we talk about some of our revenue streams for those of you who are new to MindTech, like myself. Our 10-K filings talk about two revenue categories, software and hardware, and services and others. On the software and hardware revenue side, we include mainly software term license revenue and, to a limited extent, hardware scanner boxes, and on-premise appliance products revenue. Our deposits products contribute the vast majority of that revenue category as the mobile check deposits product is primarily an on-premise software license model. The only deposits product that will be primarily in the services and other revenue category is our Check Fraud Defender product.

Looking first at revenue it would be valuable to spend a few minutes describing how we talk about some of our revenue streams for those of you who are new to mitek like myself.

Our 10-K filings talk about two revenue categories software and hardware and services and other.

On the software and hardware revenue side. We include mainly software term license revenue and to a limited extent hardware scanner boxes and on premise appliance products revenue.

Our deposits products contribute the vast majority did that revenue category as the mobile check deposits product is primarily an on premise software license model.

He only deposits product that will be primarily in the services and other revenue category is there a check fraud defender product.

David B. Lyle: On the services and other revenue side, we include transactional SAS revenue, maintenance, and professional services revenue. Our identity products have historically contributed the vast majority to that revenue category as almost all identity products, except our IDR&D biometrics, some legacy hardware products are SAS-delivered as they are cloud-hosted solutions to our customers. Our check fraud defender product revenue is also primarily a SAS-delivered model, so it is contributing to the services and other revenue streams as well. So with that said, let's review our financial performance for fiscal year 2023. Top line revenue for the fiscal year grew 19% year over year to $172.6 million, just above the preliminary revenue number we announced on December 7 of last year.

On the services and other revenue side, we include transactional SaaS revenue maintenance and professional services revenue.

Our identity products have historically contributed the vast majority of that revenue category is almost all identity products, except our idea R&D biometrics.

Some legacy hardware products are SaaS delivered as they are cloud hosted solutions to our customers.

Our check fraud defender product revenue is also primarily SaaS delivered model. So it is contributing to the services and other revenue stream as well.

So with that said, let's review our financial performance for fiscal year 2023.

Top line revenue for the fiscal year grew 19% year over year to $172 6 million just above the preliminary revenue number we announced on December seven of last year.

David B. Lyle: Software and hardware revenue grew 21% to $88.4 million in fiscal year 2023, primarily due to an increase in sales of mobile check deposit products. Services and other revenue grew 17% to $84.2 million in fiscal year 2023. This increase was primarily due to strong growth in SAAS revenue from our WhoYou and MyVIP products as well as increased maintenance revenue associated with mobile check deposit software sales. Shifting to revenue for our two major product categories, deposits and identity, let's start with deposits. Deposits revenue grew 20% year-over-year in fiscal 2023 to $104.1 million.

Software and hardware revenue grew 21% to $88 4 million in fiscal year 2023, primarily due to an increase in sales of mobile check deposit products.

Services and other revenue grew 17% to $84 $2 million in fiscal year 2023. This increase was primarily due to strong growth in SaaS revenue from our who you in my VIP products as well as increased maintenance revenue associated with mobile check deposit software sales.

Shifting to revenue for our two major product categories deposits and identity, let's start with deposits.

<unk> revenue grew 20% year over year in fiscal 2023 to $104 1 million.

David B. Lyle: This growth was driven primarily by strength in mobile check deposit reorders and additional adoption and usage across the banking system. Please note that 75% of deposits revenue was from Mitek software and hardware revenue. 25% was in services and others. Identity revenue for fiscal year 2023 grew 17% year-over-year to $68.4 million, driven by our SaaS products revenue. Approximately 15% of identity revenue was in Mitek's software and hardware revenue, and 85% was in services and other revenue for fiscal year 2023. Moving on to gross margin, the total gross margin for fiscal 2023 was 86.7%, up 50 basis points from 86.2% in fiscal 2022. We continue to deliver strong software and hardware gross margins of 98%, while on services and other revenue, our gross margin was 74% for fiscal year 2023. Operating expense for fiscal year 2023 was $134 million compared to $112.6 million last year. Non-GAAP operating expense for fiscal 2023 was $96.4 million, compared to $80.5 million last year.

This growth was driven primarily by strength in mobile check deposit reorders and additional adoption and usage across the banking system.

Please note that 75% of deposits revenue was in my Tech software and hardware revenue, 25% was in services and other.

Identity revenue for fiscal year, 2023 grew 17% year over year to $68 4 million driven by our SaaS products revenue.

Roxanne at least 15% of identity revenue was in my text software and hardware revenue, 85% was in services and other revenue for fiscal year 2023.

Moving onto gross margin. The total gross margin for fiscal 2023 was 86, 7% up 50 basis points from 86, 2%.

Fiscal 2022.

We continue to deliver strong hard software and hardware gross margins at 98% while on services and other revenue our gross margin was 74% for fiscal year 2023.

Operating expense for the fiscal year, 2023 was $134 million compared to $112 $6 million last year non.

non-GAAP operating expense for fiscal 2023 was $96 4 million compared to $80 5 million last year.

David B. Lyle: The year over year increase was primarily related to fees associated with our delayed filings, including audit, accounting, and legal support, and to a lesser extent, the addition of resources to our corporate services team to accommodate our scalating business. Also excluded from our non-GAAP operating expenses are about $29.5 million of non-cash accounting items and $8.2 million in non-recurring cash items. The non-cash items were comprised of $19 million for amortization of purchased intangibles and $10.5 million in stock-based compensation expense.

The year over year increase was primarily related to fees associated with our delayed filings, including audit accounting and legal support and to a lesser extent. The addition of resources to our corporate services team to accommodate our scaling business.

Excluded from our non-GAAP operating expenses are about $29 $5 million of noncash accounting items and $8 2 million in nonrecurring cash items.

Noncash items were comprised of $19 million for amortization of purchased intangibles and $10 $5 million in stock based compensation expense.

David B. Lyle: The cash items were comprised of $4 million, mostly associated with non-recurring auditor fees, and about $4.2 million related to restructuring, executive transition, and litigation expenses. Please see our earnings release for a more detailed reconciliation. Our non-GAAP operating income grew 20% in fiscal 2023 to $53.2 million, or a 31% non-GAAP operating margin, excluded from non-GAAP operating income with $37.7 million in expenses, as described above and are detailed in our GAAP to non-GAAP reconciliation in today's earnings release. GAAP net income for fiscal year 2023 was $8 million or $0.17 per diluted share versus $3.7 million or $0.08 per Non-GAAP net income for fiscal year 2023 was $44.4 million, or $0.95 per diluted share, versus $40.5 million or $0.88 per diluted share in the prior fiscal year. Our diluted share count for the year was 46.5 million compared to 45.8 million shares a year ago.

The cash items were comprised of $4 million, mostly associated with nonrecurring auditor fees and about $4 $2 million related to restructuring executive transition and litigation expenses.

Please see our earnings release for a more detailed reconciliation.

Our non-GAAP operating income grew 20% in fiscal 2023 to $53 $2 million or a 31% non-GAAP operating margin.

Excluded from non-GAAP operating income was $37 $7 million in expenses as described above.

And are detailed in our GAAP to non-GAAP reconciliation in today's earnings release.

GAAP net income for fiscal year, 2023 was $8 million or <unk> 17 per diluted share versus $3 7 million or eight cents per diluted share in the prior fiscal year.

non-GAAP net income for fiscal year, 2023 was $44 $4 million or 95 cents per diluted share versus $40 5 million or <unk> 88 per diluted share in the prior fiscal year.

Our diluted share count for the year was $46 5 million compared to $45 8 million shares a year ago.

David B. Lyle: Turning to our balance, our cash and investments grew from $101 million at fiscal year-end 2022 to $134.9 million at fiscal year-end 2023. $31.6 million of that $34 million growth was provided by our cash flow from operations.

Turning to our balance sheet.

Our cash and investments grew from $101 million at fiscal year end 2022 to $134 9 million at fiscal year end 2023.

$31 6 million at that 34 million growth was provided by our cash flow from operations.

David B. Lyle: Moving on to guidance, we are reiterating our fiscal year 2024 revenue guidance range of $180 to $185 million, or a 6% growth rate at the midpoint of the range and a 12% growth rate if we backed out the future year license revenue from a large one-time mobile deposit deal from fiscal 2023. More specifically, material growth rates are expected this year from Check Fraud Defender as it moves from its nascent stage to accelerated growth, coupled with strong expected growth from the flagship identity platform, myVIP, myPASS, and our IDR&D Biometrics product. However, this growth is expected to be somewhat offset by revenue declines associated with the retirement of legacy I-CAR products as they move towards end of life.

Moving on to guidance.

We are reiterating our fiscal year 'twenty 'twenty four revenue guidance range of $180 million to $185 million or a 6% growth rate at the midpoint of the range and a 12% growth rate. If we backed out the future of your license revenue from the large one time mobile deposit deal from FIS.

For 2023.

More specifically material growth rates are expected this year from check fraud to Thunder as it moves from its nascent stage two accelerating growth.

With strong expected growth from the flagship identity platform might be I P. My past and our I D R&D biometrics products.

This growth is expected to be somewhat offset by revenue declines associated with our retirement of legacy by car products as they move towards end of life.

David B. Lyle: It's also important to note that we want a large mobile check deposit customer in fiscal Q1 of 2023, which creates a difficult year-over-year comparison. From a quarterly trending perspective, we expect top-line revenue to be lowest in fiscal Q1, ramping up in Q2, and again in Q3, with Q4 expected to be in the range of Q3 revenue. Quarter-to-quarter changes due to deal timing may influence these expectations.

It's also important to note that we want a large mobile check deposit customer in fiscal Q1 of 2023, which creates a difficult year over year comparison.

From a quarterly trending perspective, we expect top line revenue to be lowest in fiscal Q1 ramping in Q2 and again in Q3 with Q4 expected to be in the range of Q3 revenue.

Quarter to quarter changes due to deal timing may influence these expectations.

David B. Lyle: From a year-over-year perspective, we expect most of the year-over-year revenue growth quarters to be in fiscal Q3 and Q4. We continue to expect our identity business to reach standalone profitability on a fully burdened basis in the fourth fiscal quarter. This will be driven by revenue growth as well as additional operating leverage in the sales, marketing, and R&D functions. With regard to taxes, we expect to be a taxpayer in fiscal 2024 with a tax rate in the 25% plus or minus range of GAAP free tax net income.

From a year over year perspective, we expect most of the year over year revenue growth quarters to be in the fiscal Q3 and fourth quarter.

We continue to expect our identity business to reach Standalone profitability on a fully burdened basis in the fourth fiscal quarter.

This will be driven by revenue growth as well as additional operating leverage in the sales marketing and R&D functions.

With regard to taxes, we expect to be a taxpayer in fiscal 2024 with a tax rate in the 25% plus or minus range of GAAP pre tax net income.

David B. Lyle: In addition, we are reiterating our fiscal full-year 2024 non-GAAP operating margin guidance range of 30 to 31 percent. Moving to our capital allocation plans, we continue to generate solid cash flow and strengthen our balance sheet in fiscal 2023, and we expect to continue to generate cash in fiscal 2024. As Max has previously said regarding acquisitions, with our market-leading product portfolio in place, we do not need to do additional acquisitions to further penetrate the significant market opportunities we have in front of us. However, our team, with our Board of Directors, continues to assess all capital allocation alternatives routinely.

In addition, we are reiterating our fiscal full year 2024, non-GAAP operating margin guidance range of 30% to 31%.

Moving to our capital allocation plans, we continued to generate solid cash flow and strengthen our balance sheet in fiscal 2023, and we expect to continue to generate cash in fiscal 2024.

As Max as previously.

So he said regarding acquisitions with our market leading product portfolio in place, we do not need to do additional acquisitions to further penetrate our significant market opportunities we have in front of us.

Our team with our board of directors continues to assess all capital allocation alternatives routinely.

David B. Lyle: As we are currently in a blackout period while we prepare our fiscal quarter 10-Q filing, we are limited in the actions we can take until we are outside of our blackout period. Before I conclude, I would like to touch on where we are with our SEC filings and our expected investor relations activity during fiscal 2024 following those filings. With the fiscal year 2023 10k filing behind us, just out in the past 20 minutes, our team, with our auditors, are already working diligently. Get current on our 10-Q filing for the first fiscal quarter of 2024 ended December 31st, 2023. The first fiscal quarter 10-Q filing was due February 9.

As we are currently in a blackout period, while we prepare a fiscal quarter 10-Q filing we are limited in the actions. We can take until we are outside of our blackout period.

Before I conclude I would like to touch on where we are with our SEC filings and our expected investor relations activity during fiscal 2024 following those filings.

With the fiscal year, 2023, 10-K filing behind US just out in the past 20 minutes our team with our auditors are already working diligently to get current on our 10-Q filing for the first fiscal quarter of 2024 ended.

December 31 2023.

The first the first fiscal quarter 10-Q filing was due February nine.

David B. Lyle: Based on last year's 10-Q filing timing, we believe it should take about a month to file the fiscal first quarter 10-Q, which would put us sometime in mid-April, assuming no delays arise. We would then jump into our normal cycle to deliver the second fiscal quarter 10-Q in May. If we are able to achieve this timeline, we expect to increase our investor relations activities from there. This would include upcoming investor conferences in May and June with Needham and William Blair, as well as our long-awaited Analyst Day, which we are targeting to occur before our fiscal year end, which ends on September 30, 2024. We look forward to getting out and telling investors about the big opportunity we have in front of them. In closing, we are very pleased with our results, which included record revenue and record non-gas net income for the full year of fiscal 2023.

Based on last year's 10-Q filing timing, we believe it should take about a month the file the fiscal first quarter 10-Q, which would put us sometime in mid April assuming no delays arise.

We will then jump into our normal cycle to deliver the second fiscal quarter 10-Q in may.

If we are able to achieve this timeline, we expect to increase our investor relations activities from there.

It would include upcoming Investor conferences in May and June with Needham and William Blair as well as our long awaited analyst day, which we are targeting to occur before our fiscal year end, which ends on September 30th 2024.

We look forward to getting out and telling investors about the big opportunity we have in front of us.

In closing we are very pleased with our results, which included record revenue and record non-GAAP net income for the full year of fiscal 2023 with a forward to growing again in fiscal 2024, as we continue to deliver industry, leading machine learning and AI driven tools that enable us our customers to prevent fraud.

David B. Lyle: We look forward to growing again in fiscal 2024 as we continue to deliver industry-leading machine learning and AI-driven tools that enable us customers to prevent fraud. Operator, that concludes our prepared remarks. Please open the lines for questions. Thank you, and we will now begin the question and answer session. To ask a question, you may press star and then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

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

Thank you and we will now begin the question and answer session to ask a question you May Press Star then one on your touch 10 Fad.

If you are using a speaker phone please pick up your handset before pressing the keys.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause for a moment to assemble our roster. Our first question today will come from Chad Bennett of Craig Hallam. Please go ahead.

Is it any time your question has been addressed and you would like to withdraw your question. Please.

Please press Star then two.

At this time, we will pause for a moment to some of our roster.

Yes.

Our first question today will come from Chad Bennett.

Craig Hallum. Please go ahead.

Chad Bennett: Great. Thanks for taking my question or questions. Hey, Max, and welcome, David.

Oh, great. Thanks for taking my question or questions, Hey, Max and and welcome David.

Yeah, just a couple a couple of things just it was great you kind of laying out the linearity of the year from a revenue standpoint, I guess you know as much as you can see now that we're we're effectively almost halfway through the year in in maybe a more pertains to the identity part.

Max Carnecchia: Thank you. Just a couple things. It was a great kind of laying out the linearity of the year from a revenue standpoint.

Max Carnecchia: I guess, you know, as much as you can say now that we're effectively almost halfway through the year, and maybe it more pertains to the identity part of the business, just in terms of the macro and demand environment and volume environment on that side of the business. Any insight, Max, into kind of what you're seeing there or your thoughts on the demand or macro environment for that part of the business right now? Yeah, I don't know that I have a substantive update for you, Chad. I think things are similar to when we talked previously, at least in the recent past, you know, with where interest rates are. We definitely see challenges with anything that's, you know, kind of loan origination or interest rate sensitive, refinancing new mortgages, and HELOC. Scipio Carnecchia, Scott Buck, Michael Grondahl, Allen Klee, David Lyle, Stephanie Moore, Fuad. When times get tough, you know, fraud increases, right?

The business just in terms of the macro and demand environment and volume environment on that side of the business any insight Max into kind of what you're seeing there or your thoughts on on the demand or macro environment on that part of the business right now.

Yeah, I don't know that I have a I don't know that I have a substantive update for you Chad Big things are similar to when we when we've talked previously at least in the recent past.

With where interest rates are we definitely see challenges on anything that's you know kind of loan origination or or interest rate sensitive.

Refinancing new mortgages helocs, even even credit card issuance at these rates.

But I.

I do feel like we see some stabilization across the more revenue generation areas and I think as we've talked about in the past you know.

When when times get tough you know broad increases right and so we're seeing that on both sides of the business both on the identity side, but obviously with checkpoint defender.

Max Carnecchia: And so we're seeing that on both sides of the business, both the identity side, but obviously with Check Fraud Defender, you know, I could go on for hours on, you know, kind of the stats and what's being, you know, perpetrated on that side. So hopefully that's helpful. Yeah, and just in terms of the penetration you're seeing with with my VIP and my pass and the biometric solutions, I guess, can you give a sense of where you are in terms of penetration into your existing base with those solutions? Yeah, I would say we're in the very early stages that, you know, for our international audience, I don't want to use a baseball example, but you know, first, first 10, 15%, I don't know, first inning, I use baseball anyway, you know, for me, the the gen AI hype that's been out there over the course of the last five or six quarters, when you bring that to the fraud and identity space, it, it changes almost everything, what companies, regulated organizations are confronted with the changing expectations of consumers, the regulators who are trying to help but can't move fast enough, and the regulations that are in place, things like IDAS-2 in Europe, and FIDO-2, which is really more protocol and framework here in the U.S. Those were built and delivered and kind of conceptualized before the real rollout of transformer, large language model, Gen-AI. You know, it's a wind up to say, every one of these large regulated entities, whether they're banks, telcos, healthcare, they've got to figure out liveness. Who's on the other side of that device? And how do I make sure not only it's who they say they are, but that it's actually a live human?

I could go on for hours on kind of the stats in what's generally what's being perpetrated on that side. So hopefully that's helpful.

Yeah, and just in terms of of the penetration you're seeing with <unk>.

Might be VIP in my past and in the biometric solutions.

Yes can you give a sense of where you are in terms of penetration into your existing base with those solutions.

Yeah, I would say we're in the very early stages.

For our international audience I don't want to use a baseball example, but.

First first 10, 15% I don't know [laughter] first inning.

Baseball anyway.

For me the.

The Gen AI hype, that's been out there over the course of the last five or six quarters, when you bring that to the fraud and identity space. It it changes almost everything.

Yeah, what what companies regulated organizations are confronted with with the changing expectations of consumers. The regulators who are trying to help but can't move fast enough and the regulations that are in place things like I'd ask too in in Europe, and you know Phyto too, which is really more of a protocol and framework here in the U S.

Those were built and delivered and kind of conceptualized before the real rollout of transformer large language model jet AI and AR.

Well, it's all it's a wind up to say.

Every one of these large regulated entities, whether they are banks telcos health care.

They've got to figure out likeness who's on the other side of that device and how do I make sure not only it's who they say they are but that it's actually a live human and we are just so well positioned with the b first be best approach to face and voice I feel really good about it it's going to take some time right I mean early days.

Max Carnecchia: And we are just so well positioned with the "be first, be best" approach to face and voice. I feel really good about it. It's going to take some time, right? I mean, in the early days, it's going to take some time. But I don't know how you solve that problem. Otherwise, I really don't know how you do that in a general AI world.

It's going to take some time, but I don't know how you solve that problem otherwise I really don't know how you do that in a gen AI world.

And just on <unk>.

Max Carnecchia: And just on this, I like the way you laid out the opportunity in Check Fraud Defender. And I mean, it certainly seems like you guys are seeing traction with that product. You know, I guess maybe the best way to ask it is, have you rethought the growth potential of the deposit side of the business, Max? You know, I think it's certainly, you know, outgrown. I think at least my expectations, maybe yours, for the last couple of years.

I like the way you laid out the opportunity in check fraud defender and I I mean, it certainly seems like you guys are seeing traction with that product.

You know I guess, maybe the best way to ask it is.

Have you rethought kind of the growth potential of the deposit side of the businessman.

I think it certainly.

Outgrown I think at least my expectations, maybe yours. The last last couple of years Hum.

Max Carnecchia: But I think we've just generally thought about that business being, you know, maybe kind of single digits, 10%. It's certainly outgrown that materially. But just are you thinking any differently about that side of the business and the kind of growth rate for the next three to five years? No, we continue to believe the base check business, mobile check deposit, and the check intelligence business will continue to be contributing growth to Mitek from a revenue perspective and continue to produce, you know, impressive operating margins and profitability. We're going to do that because adoption of mobile banking is still in the very early days, right? When you use a stat like we processed 1.2 billion checks in FY23, that sounds amazing. And then you say, hey, 8 billion checks. You know, we're in the system. So, you know, you've only kind of scratched the surface.

But I think we've just generally thought about that business being you know maybe kind of high single digits, 10%. It's certainly outgrown that materially but just is it are you thinking any differently about that side of the business and kind of the growth rate. The next three to five years.

No. We consider continue believe the base check business mobile check deposit in the Czech intelligence business will continue to be contributing growth to mitek from a revenue perspective and continue to throw off.

Impressive.

Operating margins and profitability.

We're going to do that because.

The adoption of mobile banking is still in the very early days right. When you use or use a stat about we processed in FY2023 $1 2 billion checks that sounds amazing and then you say, hey, 8 billion checks where in the system.

So you've only kind of scratched the surface and you published some you publish them.

Max Carnecchia: And you've published some reports that, you know, kind of quote the Bank of America and Wells and JPMC. So there's a lot more to go there, as you know, because we're a dominant market player. We have pricing power, both with the end users of banks as well as with the core service channel providers that, you know, we rely on. So I think between the idea of those two things, we anticipate this continuing to be a growth element for the business. And CFD, the check fraud defender, just because of the explosive growth of check fraud, we think that's going to be, we see it already, right? One of the fastest growing things I've ever seen right now.

Reports that kind of what was the bank of America is in the in the wells and the and the J P. M. C. So there's a lot more to go there as you know because we were dominant market player we have pricing power both with the end using banks as well as with the core service channel providers that we rely on.

So I think between the idea of you know.

Those two things we anticipate this continuing to be a growth element to the business and CFT. The check fraud defender just because of the explosive growth check fraud.

That's going to be we theater it right it's a.

One of the fastest growing things I've ever seen right now.

Got it alright, thanks are great to see the K out obviously and look forward to a more investor facing activity as we go along here. Thanks.

Max Carnecchia: Got it. All right. Thanks. Great to see the K out, obviously, and look forward to more investor-facing activity as we go along here. Thanks. Got it. Thanks, Chad.

Thanks, Chad Thanks, Ed.

Our next question today will come from Jay CRO parish of William Blair. Please go ahead.

Operator: Our next question today will come from Jake Roberge of William Blair. Please go ahead. Hi guys, this is Jacob Chervé-Bond for Jake Roberge, and thank you for taking my... So obviously, check fraud defenders are seeing solid adoption, but just curious from a go-to-market perspective.

Hi, guys. This is Jacob on for Jacob Bears and thank you for taking my question. So obviously check for all defenders seeing solid adoption, but just curious from a go to market perspective are you dedicating teams to the product yet or is it still combined with the classic check deposit business and leveraging those preexisting relationship.

Jacob Roberge: Are you dedicating teams to the product yet, or is it still combined with the classic check-deposit business and leveraging those pre-existing relationships? I'm going to have another question. Thank you. Sure. Yeah, so the first part of that question, since its inception, since we announced going back almost two years ago and introduced Check Fraud Defender, we have had a dedicated team of sellers, resales engineers, customer success, and implementation. So it started out as a very small team. It's about almost three times the size of what it started out as today.

And then I have another question. Thank you.

Sure Yeah. So the first part of that question since its inception, since we announced going back almost two years ago and introduced check for a defender. We havent had a dedicated team of sellers refills engineers customer success and implementation. So it was it started out as a very small team.

It's about almost three times the size of what it started out to today, but yeah. It is a dedicated series of individuals that make their mortgage payments and make their car payments based on the success of helping customers fight fraud in the check area.

Max Carnecchia: But yeah, it is a dedicated group of individuals that, you know, make their mortgage payment and make their car payments based on the success of, you know, helping customers fight fraud in the check area. Got it, got it. That's good to hear. Thank you. And then just to touch on what you're seeing in the market from a competitive perspective, given the more difficult funding environment for private ID verification providers, are you seeing competitive benefits in the pipeline as a result of the uncertain macro? So, kind of a tailwind given the macro environment?

Got it got it that's good for you. Thank you and then just to touch on what you're seeing in the market from a competitive perspective, given the more difficult funding environment for private I'd verification providers are you seeing competitive benefit to the pipeline as a result of the uncertain macro so kind of a tailwind given the macro environment. Thank you.

Max Carnecchia: Thank you. Yeah, it's a good question, Jacob. I think the answer for sure is yes. The, you know, if we went back into the wayback machine, you know, two and a half, three years ago, you couldn't open Crunchbase any week without reading about a new company that was being, you know, created to take on the identity category. You couldn't, you know, you couldn't go a week without seeing additional, you know, eye-popping funding rounds. And most of those new competitors, you know, they spent a lot of that money on sales and marketing, and they were not, they were not investing in innovation and things that were both proprietary and differentiated.

Yes, it's a good question Jacob I think the answer for sure is yes.

The.

If we went back in the in the way back machine you know two and a half three years ago, you couldn't open crunch base any week without reading about a new company that was being created to take on the identity category. You couldn't you couldn't go a week without seeing additional eye-popping funding rounds and am.

Most of those new formed competitors.

They spent a lot of that money on sales and marketing and they were not they.

They were not investing in innovation and things that were both proprietary and differentiated and over the course of the last two years, we've absolutely seen that come home to roost and so as I as I said when Chad asked the question you know there's still uncertainty in the economy, there's still a lot of geopolitical stuff going on.

Max Carnecchia: And over the course of the last two years, we've absolutely seen that come home to roost. And so, as I said when Chad asked the question, there's still uncertainty in the economy, there's still a lot of, you know, geopolitical stuff going on. But the lay of the land, the competitive lay of the land for us has shifted, and we believe it has shifted in our favor. I mean, when you're going to look around as a, you're a mobile operator, you're a bank, you're a healthcare institution. Who are you going to partner with? Who are you relying on?

But the lay of the land the competitive lay of the land for US has shifted and we believe shifted in our favor I mean, when you when youre going to look around US are you you're a mobile operator, you're a bank you're a health care institution.

Who are you going to partner with who you're relying on who's going to be able to kind of come out. The other side of this and not just have great product, but be able to support you and have the vendor viability and I'll stand on the FY2023 10-K, that's vendor viability.

Max Carnecchia: Who's going to be able to kind of come out the other side of this and not just have a great product but be able to support you and have vendor viability? And I'll stand on the FY2310K, that's vendor viability. Got it. That sounds great. Congratulations on the results again.

Got it that sounds great. Congrats on the results again this thank you.

Jacob Roberge: Thank you. Thanks, Jacob. Your next question today will come from Owen Rickert of Northland Capital Markets. Please go ahead. Hi guys, this is Owen on for Mike Grondahl. I've got two questions.

Thanks Jacob.

Your next question today will come from Ella in regard of Northland Capital markets. Please go ahead.

Hi, guys. This is all went on for Mike Grondahl I've got two questions. So first what are your priorities for mobile IV in 2024.

Owen Rickert: So first, what are your priorities for mobile ID? Can you be a little more specific as to what you mean by that? I guess just priorities going forward in terms of going to market, what you're doing to improve the product, etc. Oh, sure. All right.

Can you be a little more specific as to what you mean by that.

I guess just priorities going forward in terms of go to market, what youre doing to improve the product et cetera.

Oh sure alright, thanks for clarifying.

Max Carnecchia: Thanks, Owen, for clarifying. You know, we're really excited about the progress that we're making with MyVIP, right? This end-to-end, orchestration, low-code, no-code environment, our ability to take on these really gnarly problems for regulated organizations, you know, I talked about what those vertical industries are, but to be able to do that, not just for onboarding journeys and to get, you know, new accounts open, but what The ability to help somebody with a, you know, password reset, you forgot your credentials, instead of sitting for a half hour on a, you know, a call center line and burning up a lot of time and having a terrible experience using MyVIP and now MyPass, the multimodal biometric identity authentication system, those are great opportunities for us, and as we've talked about in the past, our model is land and expand, right? You land the initial piece of business with a bank or a mobile operator, and inevitably, within a year or two, we're in two, three, four different use cases.

We're really excited about the progress that we're making with my VIP right. So this end to end.

Orchestration low code no code environment, our ability to take on these really gnarly problems for regulated organizations.

You talked about what those vertical industries are.

But to be able to do that not just for onboarding journeys and to get new accounts open, but what is often referred to.

This is in life journey straight the ability to help somebody with a password reset you forgot your credentials instead of city sitting for a half hour on a you know.

Our call Center line and burning up a lot of time and having a terrible experience using my VIP and now my past the multimodal biometric identity authentication system. Those are those are great opportunities for us and as we've talked about in the past our model is land and expand right you land the initial piece of business.

This with a bank or a mobile operator and inevitably within a year or two we're in 234 different use cases. Some of those are onboarding journeys, which are transaction driven but now with with you know what we're doing with my past and of course, the idea R&D biometrics and likeness componentry, having recurring revenue associated.

Max Carnecchia: Some of those are onboarding journeys, which are transaction-driven, but now with, you know, what we're doing with MyPass and, of course, the IDR&D biometrics and liveness componentry, having recurring revenue associated with more of a conventional subscription model, we're really excited about how that's growing the business and not just what we're saying. Great, thanks for the color. And then lastly, are there any Well, we're, you know, coming into FY 24, as we just said for Jacob, we've made some additional investments in what we're doing with check fraud defender. And, you know, now under my control. So putting more, if you will, logs on the fire to really kind of get that cooking. You know, on the identity side of the business, we've been investing in really kind of upgrading the team. We're probably halfway through a pretty big transformation, right? If you go back in time to when we got together with Huyu and had MyVIP, we were basically selling a point solution where we would be able to do identity verification using a government-issued identity document and a facial liveness test.

<unk> with more of a.

Our conventional subscription model.

We're really excited about how that is growing the business and not just what we're going to do for the rest of FY 'twenty four but really the future of this business you know over the intermediate term.

Great. Thanks for the color and then lastly are there any incremental updates on the sales team.

Well, we see you know coming into FY 'twenty four as we just said for Jacob we've made some additional investments in what we're doing with check fraud defender.

And now my control.

So putting more if you will logs on the fire to really kind of get that cooking you know.

On the on the identity side of the business, we've been investing and really upgrading the team where we're probably halfway through a pretty big.

Big transformation right. If you go back in the way back machine before we came together with who you and had my VIP, we were basically selling a point solution, where we would be able to do identity verification using a government issued identity documents and and official likeness test now with my VIP I've got an end to end enterprise solution.

Max Carnecchia: Now, with MyVIP, I've got an end-to-end enterprise solution that can be used in a lot of different places by a lot of different businesses. And the sales motion, the positioning of that, who we're targeting as far as the buyer cohort within our target accounts, all of those things have changed, and we've been making changes to our team and our selling motions to exploit that. And then with IDR&D separately, very much the selling of those components, just again, bringing in, it's not huge investments, but going from three sellers to five sellers makes a really big difference. And to have those folks located in places like Singapore or Brazil or Eastern Europe, just because that's where the action is.

That can be used in a lot of different places by a lot of different businesses and the sales motion the positioning of that who we're targeting as far as the buyer cohort within our target accounts all of those things have changed and we've been making changes to our team and our selling motions to to exploit that.

And then with I D R&D.

Separately very much the selling of those componentry, just again, bringing its not huge investments, but you know going from three sellers to five sellers makes a really big difference and to have those folks located in places like Singapore, or Brazil or eastern Europe.

Because that's where the action is.

Max Carnecchia: Great, thanks for answering my question. You got it, Owen. Oh, I'm sorry.

Great. Thanks for answering my questions.

You got it.

Oh I'm sorry, if you would like to ask a question today. Please press star and then one and.

Operator: If you would like to ask a question today, please press star and then one. And our next question will come from Allen Klee of Maxim. Please go ahead.

And our next question will come from Allen Klee of Maxim. Please go ahead.

Allen Robert Klee: Hello, good afternoon. Question on your guide. 30. I think that compares to 31% who didn't.

Hello. Good afternoon, a question on your guidance I think you're guiding to non-GAAP operating margin of 30% to 31%.

I think that compares to 31%.

David B. Lyle: 20. So my question is, if the mobile identity business is going to move from... during the year. So that should improve results. What's the offset that is making margins not go away?

23.

So my question is if you have the mobile identity business.

Goodbye to breakeven during the year, so that should improve.

So what's the offset that.

David B. Lyle: Thank you. Yeah, it's a couple different things. Just doing the high-level math first. You know, if you take our revenue guidance and assume kind of gross margins similar to 2023, looking at 2024, and backing into operating expense. We're growing operating expense. Somewhere in the $7 million range, year-over-year, 23 to 24, most of that is going to be investment in R&D from a cost perspective, and that's going to be a combination of products that we're investing in, particularly CFD, but also in some of the other earlier stage growth products that we have.

<unk> is making margins not go up.

<unk>.

Yeah, It's a couple of different exist doing the high level math first if.

If you take our revenue guidance and assume kind of gross margins similar to 2023 looking at 2024.

And backing into operating expense, we're growing operating expense.

Somewhere in that kind of $7 million range year over year of 23 to 24.

Most of that is going to be investment in RMB from a cost perspective.

And that's going to be a combination of.

Products that we're investing in and particularly CSD, but also some of the other.

Kind of earlier stage products that we have.

David B. Lyle: Great, thank you. And then in terms of capital allocation, I think the last call you had, you guys said you were considering, once you got out of a blackout, did you consider a buyback? How are you thinking about that today?

Great. Thank you and then in terms of capital allocation I think the last call you called some of them.

Once you got out of a blackout.

Ballpark.

How are you thinking about that today.

David B. Lyle: Yeah, you know, I said in the prepared remarks that I talked a little bit about the capital allocation plan. You know, the management team, Max, and myself, are working with our board of directors on a routine kind of basis to figure out what that capital allocation will look like going forward. We're looking at all alternatives, which could include a buyback, but we haven't specifically talked about, I think, historically, more than just that on our news call.

Yeah.

I said in the prepared remarks, I talked a little bit about the capital allocation plan.

The management team maximum itself.

Working with our board of directors on a routine basis to figure out what that capital allocation will look like going forward.

Looking at all alternatives.

Which could include a buyback, but we haven't specifically talked.

Historically more than just that on our earnings call.

David B. Lyle: Great. Last question is, is it possible at some point as well?

Great.

Last question is.

Is it possible at some point.

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Allen Robert Klee: As mobile identity grows, you might be able to break out the... More metrics related to it, either the basics of profitability or certain KPIs. Yeah, hey Allen. It's Max. You know, Dave's been in the chair here for about 60 days, and he brings a lot of fresh thinking, a lot of new eyes, and, you know, CFO at six other public companies before being here. I think you'll see we definitely learn some new tricks from him.

As mobilize doesn't grows but you might be able to break out the.

More metrics related to it either.

You know the basics of profitability or certain kpis.

Yeah, Hey, Alan it's Max.

Dave's in the chair here about 60 days and he brings a lot of fresh thinking a lot of new eyes and <unk>.

CFO at six other public companies before being here.

I think you'll see us definitely learn some new tricks from him. So the answer is yes.

Max Carnecchia: So the answer is yes. Let's give him a chance to get his sea legs and, you know, kind of find his way around and start to put his fingerprints on things here. And, you know, stay tuned. That's great. Thank you so much. Thanks for the call. At this time, we will conclude our question and answer session. I'd like to turn the conference back over to Todd Kehrli for any closing remarks. Thank you, operator. Thank you everyone for joining our call today and for your continued support. As always, if you have any follow-up questions or would like to meet with management, please feel free to reach out to me. And I'll set something up. Thanks for everything, and have a great day! The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.

But let's let's give him a chance to get our sea legs and kind of find its way around and start to put his fingerprints on things here and stay.

Stay tuned.

That's great. Thank you so much.

Yeah. Thanks for the call. Thank you.

This time, we will conclude our question and answer session I'd like to turn the conference back over to Tom Carley for any closing remarks.

Thank you operator, thank you everyone for joining our call today and for your continued support as always if you have any follow up questions or would like to meet with management. Please feel free to reach out to me.

And also thanks for everything and have a great day.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.