Q2 2024 Mitek Systems Inc Earnings Call

Operator: Good day, and welcome to the Mitek Fiscal 2024 Second Quarter Earnings Conference Call. All participants will be in listen-only mode.

Good day and welcome to the Mitek fiscal 'twenty 'twenty four second quarter 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 1 on your touch-tone phone. 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, Investor Relations. Please go ahead. Thank you, operator. Good afternoon, and welcome to Biotech Cisco 2024 second quarter.

I would now like to turn the conference over to Todd Curly Investor Relations. Please go ahead.

Todd Kehrli: Thank you, operator. Good afternoon, and welcome to Mitek's Cisco 2024 Second Quarter Earnings Conference Call. With me on today's call are Mitek's CEO, Max Carnecchia, CFO, Dave Lyle, and Chairman of the Board, Scott Carter. Before I turn the call over to Mitek's leadership, I'd like to cover a few quick items. Today, Mitek issued a press release announcing its financial results for its fiscal 2024 second quarter ended March 31, 2024. That release is available on the company's website at MitekSystems.com.

Todd Kehrli: Thank you operator, good afternoon and welcome.

Todd Kehrli: Fiscal 2024 second quarter earnings Conference call with me on today's call are my texts CEO Ikea CFO, Dave while chairman of the Board Scott Carter before I turn the call over to biotech leadership I'd like to cover a few quick items.

Todd Kehrli: <unk> issued a press release announcing its.

Todd Kehrli: Financial results for 2024 second quarter ended March 31.

Todd Kehrli: Definitely.

Todd Kehrli: The company's website.

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 for when the state... These forward-looking statements may include comments about the company's plans and expectations of future performance. Forms and statements are subject to a number of risks and uncertainties, which can cause actual results to differ materially.

Todd Kehrli: This call is being broadcast live.

Todd Kehrli: For all interested parties webcast will be archived on the Investor Relations page.

Speaker Change: Oh I'm sorry.

Speaker Change: I want to remind everyone that on today's call management will discuss certain factors likely to drive the business going forward any factors discussed today that are not historical facts.

Speaker Change: So a lot of his comments regarding our long term prospects are good opportunities should be considered forward looking statements.

Speaker Change: We're 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 10-Q for complete discussion.

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, May 13, 2024, and the company undertakes the obligation to revise or update publicly any of the reported misstatements contained herein, whether as a result of new information, future events, changes in expectations, or otherwise. Additionally, throughout this call, we will be discussing certain non-GAAP financial measures.

Speaker Change: Our statements on this call are made as of today May 13, four and the company undertakes no obligation to revise or update publicly any forward looking statements contained herein, whether as a result, new information.

Speaker Change: Changes in expectations or otherwise.

Speaker Change: Additionally throughout this call we will be discussing certain non-GAAP financial measures today's earnings release and related current report on form 8-K describe the differences between our GAAP and non-GAAP reporting and present the reconciliation between the two for the periods reported release with that said I'll now turn the call over to <unk> Chairman.

Todd Kehrli: Today is our release of the related current report on Form 8-K, describe the differences between our GAAP and non-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 Chairman, Scott Carter. Welcome, everyone, and thank you for joining us today.

Speaker Change: That's part one.

Scott Christian Buck: I am the Chairman of the Board for Mitek, and I've served on the Mitek board since February 2022. I'm joining the call today to talk to you about the press release the company issued this morning announcing a CEO transition. In the press release, we announced that Max Carnecchia will transition from the business and his role as Mitek CEO on May 31st, 2024 but will remain a member of Mitek's Board of Directors and will be available to assist with the CEO transition process.

Chairman: Welcome everyone and thank you for joining us today I am the chairman of the board for Mitek and served on the Mitek Sports in February 2022 I'm.

Chairman: I'm joining the call today to talk to you about the press release the company issued this morning announcing our CEO transition.

Chairman: In the press release, we announced that next correct, yes will transition from a business and his role with Mitek CEO on May 31, 2020, before but well remain a member of my Tech Board of directors and will be available to assist with the CEO transition process now.

Scott Christian Buck: Now Mitek has successfully navigated through the lead SEC file, and it's well-positioned to enter its next phase of growth. The board of directors determined that putting new leadership in place... would provide the best path for that group. Before I go any further, let me express the board's gratitude tonight. Also, I want to make sure to say that, for the avoidance of any doubt, there have been no allegations of wrongdoing or impropriety.

Mitek has successfully navigated through the SEC filings and is well positioned to enter its next phase of growth.

Chairman: Sort of directors determined that bring new leadership in place.

Chairman: We provide the best path for that.

Chairman: Before I before I go any further let me express the board's gratitude to ask.

Chairman: Thank you for tirelessly absolutely on behalf of our team our customers and our shareholders.

Also I want to make sure to say that the board isn't any doubt there've been no allegations of wrongdoing or improprieties rather they just finished the difficult chapter we caught up on our SEC filings regained NASDAQ compliance announced a share repurchase program and are now at an important inflection point.

Scott Christian Buck: Rather, we've just finished a difficult chapter where we caught up on our SEC filings, regained NASDAQ compliance, announced the share repurchase program, and are now at an important inflection point. Our board of directors is enthusiastic about the opportunity ahead of Mitek and has strong conviction in what the company is capable of achieving, both in the near term and the long term. We have an obligation to regularly assess the leadership skills that will be required in the coming years and to stay ahead of that curve. As such, we concluded that in order to achieve what we think is possible over the next couple of years, a different success profile is required than what we needed six years ago. So much has changed.

Chairman: Our board of directors as enthusiastic about the opportunity ahead of Mitek strong conviction about the company is capable of achieving both in the near term and the long term we have an obligation to regularly assess the leadership skills that will be required in the coming years and to stay ahead of that curve.

Chairman: As such we concluded that in order to achieve what we think is possible over the next couple of years, a different success required, but we need it six years ago.

Chairman: So much has changed the market we operate in the complexity and scale of our business across geographic and vertical markets product lines used cases.

Scott Christian Buck: The market we operate in, the complexity and scale of our business across geographic and vertical markets, product lines, use cases, and the potential to integrate transformational technology, particularly around AI. I can't emphasize enough what an exciting opportunity we have in front of us. We have become the market leader in voice and face biometrics liveness while positioning us to lead the industry response to the rising problem of deepfakes and voice spoofs. Our innovation engine continues to thrive, and we've launched several new products. This includes our MiPAS solution, which combines voice and facial biometrics in a single transaction.

Chairman: The capsule that integrate transformational technology, particularly around AI.

Chairman: I can't emphasize enough what an exciting opportunity we have in front of us.

Chairman: It becomes a market leader in voice and face biometrics widen us well positioned to lead the industry in response to the rising problem of deep fakes voices organization.

Speaker Change: Right. We have launched several new offerings. This includes on my past solution, combining voice and facial biometrics in a single transaction.

Scott Christian Buck: It also includes CheckFraud Defender, or CFD, where we are gaining considerable market traction. We also have new innovations in IVRD technology that allow for our voice biometrics to authenticate payment transactions on a mobile device, which opens up several new avenues for growth. None of these technologies were in our portfolio six years ago.

Speaker Change: The central defender our C O G, where we are gaining considerable market tracks. We also have new innovations IV or V technology.

Speaker Change: For voice biometrics to authenticate payment transactions on a mobile device.

Speaker Change: It was up several new avenues for growth.

None of these technologies bring our portfolio six years ago.

Scott Christian Buck: So, we are at the beginning of a new and exciting chapter and embarking on an ambitious and promising journey. After six years, it will be healthy to inject new leadership into the company with fresh perspectives and new energy. Maxwell remained as CEO through the end of May, and the board has asked me to take over as interim CEO after his departure to assist with a seamless transition while we conduct our search for a new permanent CEO. The board has engaged the services of a leading global executive search firm and has commenced the search for a new CEO.

Speaker Change: We are at the beginning of a new and exciting chapter and embarking on an ambitious promising journey.

Speaker Change: After six years, it'll be healthy to inject new really new leadership into the company with fresh perspectives and new energy.

Speaker Change: Max will remain as CEO through the end of May and the board has asked me to take over as interim CEO.

Speaker Change: His departure to assist with a seamless transition while we conduct a search for a new permanent CEO.

Speaker Change: Board is engaged the services, a leading global executive search firm and has commenced the search for a new CEO.

Scott Christian Buck: The profile we've developed for the new CEO emphasizes public company and domain expertise, along with the ability to enhance our strategic vision and drive operational and execution. Moreover, the ability to foster a high-performance collaborative culture and continue to develop a world-class team will remain a priority. While the board conducts this search, I look forward to working with the leadership team and partners to continue strengthening our business and driving profitable growth through operational discipline and execution.

Speaker Change: The profile, we've developed for the new CEO emphasizes public company and domain expertise along with the ability to enhance our strategic vision and drive operational execution.

Speaker Change: Moreover, the ability to foster a high performance collaborative culture.

Speaker Change: They need to develop a world class team will remain a priority.

Speaker Change: While the board conducts a search I look forward to working with the leadership team and partners to continue strengthening our business and driving profitable growth through operational discipline and execution.

Scott Christian Buck: In my role as Executive Chairman in 2023, I was deeply involved in Mitek's operations and was engaged with our product and sales teams and many of our customers. Therefore, I have a company-specific background needed for commodity and performance optimization.

Speaker Change: In my role as executive Chairman in 2020 three is deeply involved in biotechs operations.

Speaker Change: Our product and sales teams and many of our customers. So I have the company specific background needed for continuity and performance optimization.

Scott Christian Buck: I intend to leverage my CEO track record in the identity and fintech ecosystem to add value to Mitek out of the gate with a specific focus on accelerating profitable growth. Mitek's recent product innovations, including Check Fraud Defender, MyVIP, MyPath, and IDR and DeFi metrics, are gaining market acceptance, positioning us well for continued profitable growth, which is why the board also announced today that it's authorized a two-year share repurchase program of up to $50 million of Mitek's common stock.

Speaker Change: Tangible hybrids might see your track record in the identity and feet Fintech ecosystem to add value to my tech out of the gate with a specific focus on accelerating profitable for.

Speaker Change: Mitek recent product innovations check fraud to center my VIP, My past and I V by idea R&D biometrics are gaining market acceptance.

Speaker Change: Positioning us well for continued profitable growth, which is why the board also announced today that it has authorized two year share repurchase program of up to $15 million of biotech common stock.

Scott Christian Buck: The share repurchase plan reflects our confidence in our strategy for long-term profitable revenue growth and our belief that we can capitalize on the substantial market opportunities ahead for our new product offerings and deliver long-term shareholder value.

Speaker Change: Share repurchase plan reflects our confidence in our strategy for long term profitable revenue growth and our belief and capitalize on the substantial market opportunities ahead for our new product offerings and delivering long term shareholder value with a strong balance sheet and cash flow, we can repurchase shares.

Speaker Change: Maintaining sufficient cash resources to fund their operations and invest in growth opportunities.

Scott Christian Buck: With a strong balance sheet and cash flow, we can repurchase shares while maintaining sufficient cash resources to fund their operations and invest in growth opportunities. Before I turn the call over to Max and Dave to take us through the business performance, I want to thank Mitek's finance, operations, and legal teams for their extraordinary work in getting us back on track with our file. We are very happy to get back to our normal cadence of reporting on time.

Speaker Change: Before I turn the call over to Max the day to take us through the business performance I want to thank my Tech finance operations and legal teams for your extraordinary work and getting us back on track with our filings. We are very happy to get back toward normal cadence of reporting on time with that I will turn the call over to Max to update you on Mitek.

Scipio Maximus Carnecchia: With that, I will turn the call over to Max to update you on Mitek's progress this quarter. Thank you, Scott, and thank you, Mitek Nation, for the privilege of leading this organization over the last six years. Together, we've achieved a lot and grown this business into one of the leading identity and fraud authorities in the markets we serve. It is my pleasure to talk with you all today about how we continue to meet our customers' needs and grow our fraud prevention businesses in the second quarter and the bright future ahead for Mitek.

Max: This quarter.

Max: Thank you Scott and thank you my Tech nation for the privilege to lead this organization over the last six years together.

Max: Together, we've achieved a lot in growing this business into one of the leading identity and fraud authorities in the markets we serve.

Max: It is my pleasure to talk with you all today about how we continue to meet our customers' needs and grow our fraud prevention businesses in the second quarter and the bright future ahead for Mitek I'll then call I'll, then hand, the call over to Dave who will discuss our financial results and outlook.

Scipio Maximus Carnecchia: I'll then hand the call over to Dave, who will discuss our financial results and outcomes. At Mitek, it has always been about the mission, which is to advocate for yes, to help our customers say yes to more good customers, more deposits, and more transactions with increased intelligence and customer safety. Never has this important mission been more relevant.

Hi Tech and it's always been about me.

Max: Which is to advocate for yes to help our customers say, yes, more good customers more deposits and more transactions with increased intelligence and customer safety.

Max: Never has this important mission been more relevant.

Scipio Maximus Carnecchia: In a world where Gen AI is enabling digital transformation at a record pace, the imperative to aid banks in their fight against fraud while protecting their users has never been more present. With the dramatic surge in digital transaction volumes and the growing audacity of broadsters, the challenge has reached unprecedented levels. The global adoption of Gen AI has only exacerbated this situation, leading to a surge in fraudulent activities across all channels, be it online, mobile, or in-person transactions.

Max: In a world, where do you and AI is enabling digital transformation at a record pace the imperative to eight banks in their fight against fraud, while protecting their users has never been more pressing.

Max: With the dramatic surge in digital transaction losses, and the growing audacity of fraudsters that challenge has reached unprecedented levels. The global adoption of Gen. AI. It's only exacerbated this situation leading to a surge in fraudulent activities across all channels be it online mobile.

Or in person transactions.

Scipio Maximus Carnecchia: This trend is reflected in our results through increased consumption of our fraud management solution. New and existing customers are expanding usage or rolling out new use cases as fraud creeps into new channels across their business. So let's break it down a little further, starting with identity.

Max: This trend is reflected in our results through increased consumption of our fraud management solutions, new and existing customers are expanding usage or rolling out new use cases as broad reach into new channels across their business.

Max: Let's break it down a little further starting with identity our.

Scipio Maximus Carnecchia: Our MyVIP platform is now processing millions of transactions each month for customers across geographic markets. This data gives us insights into behaviors, fraud trends, and the impact of our solutions, enabling us to innovate and provide answers to the most current threats. This quarter, we launched critical use case functionality for injection effect detection and uninterrupted web streaming video. Both threats have evolved rapidly due to the advances in generative AI. Injection attacks are on the rods.

Max: My VIP platform is now processing millions of transactions each month for customers across geographic markets.

Max: It gives us insights into the behaviors broad trends and the impact of our solutions, enabling us to innovate and provide answers to the most current threats. This quarter. We launched critical use case functionality for injection attack detection and uninterrupted web streaming video both threats.

Max: Have you evolved rapidly due to advances in general do they are.

Max: Injection attacks are on the rise this type of attack involves using face swap videos trip online verification systems.

Scipio Maximus Carnecchia: This type of attack involves using face swap videos to trick online verification. Advancements in Gen AI have made face swaps more believable, and hackers are now submitting manipulated videos to verification systems by digitally injecting the video. These deepfakes are a quickly evolving type of synthetic media used for a variety of nefarious purposes, including spoofing facial recognition algorithms. According to the IDAP Research Institute, 95% of facial recognition systems cannot detect deep fakes, so organizations are rapidly searching for effective blindness solutions.

Max: Dances in Jennie O I has neat based swaps more believable at hackers are now submitting manipulated videos to verification systems by digitally injecting the video.

Max: These deep space are quickly evolving type of synthetic meet yet use for a variety of nefarious purposes, including soothing facial recognition algorithms. According to the <unk> Research Institute, 95% of facial recognition systems cannot detect defects. So organizations are rapidly search.

Max: For effective likeness solutions.

Scipio Maximus Carnecchia: This is where Mitek MyPath stands out as the first truly multi-modal biometric solution that captures four essential points of security, face match, face likeness, voice match, and voice likeness. It provides our customers with the advanced biometric authentication they require but also meets their end user demand for effortless usage. Customers are using MyPass to replace passwords and one-time passcodes. They use it for a stringent layer of defense for large-value transactions, and most popular this quarter, MyPass is being used in conjunction with MyVIP in retail stores to aid retailers in approving transactions with confidence.

Max: This is where it might affect my hat solution stands out as the first truly multimodal biometric solution that captures for central points of secure face match face likeness voice match and voice license. It provides our customers with the biometric authentication they require.

Max: But also meets their end user demand for effortless effortless usage.

Max: Customers, who are using my past replace passwords and onetime tax codes they.

Max: They use it for a stringent layer of defense for large value transactions and most popular this quarter. My past is being used in conjunction with my VIP in retail stores to eight retail assistance and approving transactions with confidence.

Scipio Maximus Carnecchia: From banks fortifying in-branch security to auto rental companies seeking dedicated kiosk protection during pickup, to a wireless service provider navigating the challenges of in-store transactions, MyPaaS offers customers an integrated omni-channel solution that not only safeguards transactions but enhances the overall user experience. The importance of protecting biometric security from deepfakes and injection attacks cannot be overstated.

Max: From banks fortifying in branch security to auto rental company seeking dedicated yes protection during pick up to a wireless service provider navigating the challenges of in store transactions. My past offers customers an integrated omni channel solution that not only see parts transact.

Max: But enhances the overall user experience.

Max: The importance of protecting biometric security from deep base and injection attacks cannot be overstated.

Scipio Maximus Carnecchia: Continuous authentication has become a focal point in this landscape. It ensures that users' identities are constantly verified throughout a session, mitigating risks associated with unauthorized actions. The market opportunity for biometric authentication is projected to grow at a CAGR of over 10% from 2024 to 2032 to reach more than $60 billion in annual spend by 2032. MyPASS is a tangible example of Mitek's best-in-class bioelectric authentication offering and a key differentiator from our competitors.

Max: Thank you Ms authentication has become a focal point in this landscape and ensures that users identity is constantly verified throughout assertion mitigating risks risks associated with unauthorized access.

Max: The market opportunity for biometric authentication is projected to grow at a CAGR of over 10% from 2024, 2012 32 to reach more than $60 billion in annual spend by 2032.

Max: My past is a tangible example of my Pet's best in class biometric authentication offering and a key differentiator from our competitors, we see my past as another strong growth engine for Mitek and wallet is in the nascent stage of its growth. We are very excited about the opportunity you might have had to be a winning some.

Scipio Maximus Carnecchia: We see MiPAS as another strong growth engine for MiPEC, and while it is in the nascent stage of its growth, we are very excited about the opportunity MiPAS has to be a winning solution in the biometric authentication market. Moving to the deposits business, our second quarter revenue returned to growth driven by mobile deposit reorders. We continue to see increased adoption of our industry-leading solution as the number of checks being deposited through mobile check deposit continues to increase. We are riding the wave of mobile check deposit up, not the trend of check writing down.

Max: Elution in the biometric authentication market.

Max: Moving to deposits.

Deposits business, our second quarter revenue returned to growth driven by mobile deposit Reorders. We continue to see increased adoption of our industry, leading solution as the number of checks being deposited through mobile check deposit continues to increase we are riding the wave of mobile check deposit up not a trend a check.

Max: Writing down.

Scipio Maximus Carnecchia: Check Front Defender is another one of our growth engines that we are extremely excited about. During the second quarter, we continued to see momentum build with strong market demand for this new solution. CFE is uniquely built to visually detect check fraud, which is easily missed by traditional fraud prevention protocols.

Max: Check brought defender is another one of our growth engines that we are extremely excited about during the second quarter. We continued to see momentum build with strong market demand for this new solution Cfe is uniquely built cause visually detect checkpoint, which easily missed by traditional fraud prevention protocols.

Scipio Maximus Carnecchia: In 2023, check fraud was the largest year-over-year fraud increase for U.S. financial institutions, comprising 31 percent of all fraud dollar losses according to the Federal Reserve. As these check fraud rates continue to surge, Check Fraud Defender provides financial institutions with a highly effective defense system powered by AI and securely hosted in the cloud. Our CFD value proposition continues to resonate as we close several new CFD customers during the quarter through our direct sales, which is focused on the top 200 banks in the U.S. And through the channel, which we have just started to build out, and we'll focus on the remaining long tail of U.S. financial institutions.

Max: In 2023 check fraud was the largest year over year brought increase where U S financial institutions, comprising 31% of all broad dollar losses. According to the federal reserve.

Max: These check fraud rates continued to surge check Rockford defender provides financial institutions with a highly effective defense system powered by AI and securely hosted in the cloud or CFT value proposition continues to resonate as we closed several new CFT customers during the quarter through our direct sales.

Max: Which is focused on the top 200 banks in the U S.

Max: And through the channel, which we have just started to build out and we will focus on the remaining long tail of U S financial institutions to highlight the early momentum we are seeing on the partner front one of our channel partners already has over 20 opportunities in your Q3 pipeline and we are actively working on adding.

Scipio Maximus Carnecchia: To highlight the early momentum we are seeing on the partner front, one of our channel partners already has over 20 opportunities in their Q3 pipeline, and we are actively working on adding more channel partners for CFD as we strive to become the leading provider in the growing check fraud prevention market. To that point, one of our newest technology partners on the check fraud side is Viewpoint, a leading managed content service provider handling billions of documents, including historical check images, for some of the world's largest financial firms.

Max: More channel partners for CSC, as we strive to become the leading provider in the growing check fraud prevention market.

Max: Yeah.

Max: To that 0.1 of our newest technology partners on the checkpoint side is viewpoint, a leading managed content service provider handling billions of documents, including historical check images for some of the world's largest financial firms they're recognized as one of the largest service providers to regulated industries.

Scipio Maximus Carnecchia: They are recognized as one of the largest service providers to regulated industries. This partnership will allow Mutool customers to enhance their fraud detection capabilities and start fighting check fraud faster. Once integrated, Viewpoint customers looking to deploy Checked Fraud Defender will be able to leverage their existing secure Viewpoint connectivity by flipping the CFD switch.

Max: This partnership will allow mutual customers to enhance their fraud detection capabilities and start fighting checkpoint faster.

Max: Once integrated viewpoint customers looking to deploy check right defender will be able to leverage their existing secure viewpoint and activity by flipping the C. S E switch.

Max: Even though we are just scratching the surface of the CFC opportunity we're already processing.

Scipio Maximus Carnecchia: [inaudible] Tens of millions of transactions per month, and we have information from over 300 financial institutions in our consortium models. The velocity of the consortium, coupled with the significant dollar savings from losses in fraud prevention and the operational cost savings of the solution, is yielding a very healthy and growing pipeline of potential CFP customers. Looking ahead, these are exciting times at Mitek. We have developed several significant growth opportunities with CFD, MyVIP, Biometrics Liveness, and MyPass, and while they are still in their nascent stage of growth today, each represents tremendous upside for Mitek and our shareholders. Before I turn the call over to Dave, I want to commend all Mitekians again for their hard work this quarter and over the last six years.

Max: Tens of millions of transactions per month, and we have information from over 300 financial institutions in our consortium models. The velocity of the consortium coupled with the significant dollar savings from losses and fraud prevention and the operational cost savings of the solution is yielding a very.

Max: Healthy and growing pipeline of potential <unk> customers.

Max: Looking ahead these are.

Max: Many times at Mitek, we have developed several significant growth opportunities for CSC My VIP biometrics liveliness in my past and while they are still in their nascent stage of growth today, each represents tremendous upside for mitek and our shareholders.

David B. Lyle: Your execution and discipline across the business, coupled with the very positive customer feedback we are receiving, give me strong conviction in the opportunities the company has in front of it. With that, I'll turn the call over to Dave to discuss the second quarter financial results in more detail. Following Dave's remarks, we'll open the call up for questions. Dave Albert. Thanks, Matt.

Max: I turn the call over to Dave.

Max: Wanted to commend all my Cat again for their hard work this quarter and over the last six years your execution and discipline across the business coupled with the very positive customer feedback. We are receiving gives me strong conviction in the opportunities. The company has in front of it with that I'll turn the call over to Dave to discuss the second quarter.

Max: Actual results in more detail all engaged remarks, we'll open the call up for questions Dave over to you.

Dave: Thanks Max.

David B. Lyle: I'll begin by taking you through the Fiscal Q2 2024 financial results and then comment on our outlook. Looking first at revenue, top line revenue for Fiscal Q2 increased 2% year over year to $47 million, at the top end of our previously announced preliminary revenue range of $46 to $47 million. We saw solid year-over-year growth in our new identity products, such as myVIP, myPASS, and IDR&D biometrics, but that growth was offset by our heritage identity products revenue, such as MobileVerify, where, as we said last quarter, we are seeing lower revenue as we shift more of these transactions from agent-per-view to automated.

Dave: I'll begin by taking you as of fiscal Q2, 2024 financial results and then comment on our outlook.

Dave: Looking first at revenue top line revenue for fiscal Q2 increased 2% year over year to $47 million at the top end of our previously announced preliminary revenue range.

Dave: At $46 million to $47 million.

Dave: We saw solid year over year growth from our new identity products, such as IV, IP, Ipass and IV R&D biometrics, but that growth was offset by our heritage identity products Rabadan, such as mobile verify where as we said last quarter, we are seeing lower revenue relationship more each time.

Dave: Actions from a just a view to automate it.

David B. Lyle: Our automated solutions are priced lower than agent transactions; however, these transactions are more profitable and are contributing to our efforts to get our identity products to profitability in Fiscal Q4 2024. In addition, we've seen some desperate pricing strategies from some of our identity competitors, which has created some additional pricing pressure on our Heritage Document Verification System. Mobile deposits orders rebounded during the quarter, which we expected, but did not generate significant growth due to last year's second quarter being one of the strongest quarters in the company's history.

Our automated solutions are priced lower than 80 transactions. However, these transactions are more profitable and are contributing to our efforts to get our identity products to profitability in fiscal Q4 2024.

Dave: In addition, we've seen some desperate pricing strategies for some of our identity competitors, which has created some additional pricing pressure with our heritage document verification systems.

Dave: Mobile deposit source rebounded during the quarter, which we expected, but did not generate significant growth due to last year's second quarter being one of the mobile deposit strongest quarters in our company's history.

David B. Lyle: Chuck Robinson also contributed to year-over-year revenue growth. However, software and hardware revenue declined 1% to $24.9 million in fiscal Q2 2024. Services and other revenue grew 6% to $22.1 million year-over-year, as we saw increases in transactional SAS revenue from identity product revenue growth. Deposits revenue grew 3% year-over-year in fiscal Q2 2024 to $29.5 million. 76% of deposits revenue was in Mitek software and hardware revenue.

Dave: Checkbox standard also contributed to year over year revenue growth.

Software and hardware revenue declined 1% to $24 9 million in fiscal Q2 2020 for services and other revenue grew 6% to 22 1 million year over year as we saw increases in transactional SaaS revenue from identity product revenue growth.

Dave: Deposit growth deposits grew 3% year over year in fiscal Q2, 2024 to $29 $5 million, 76% of deposits revenue within high Tech software and hardware revenue, 24% was in services and other rabbit.

David B. Lyle: 24% within services and other revenue. Identity revenue for the second fiscal quarter grew 1% year over year to $17.5 million, driven by our SAS products revenue. Approximately 14% of identity revenue was in Mitek software and hardware revenue, and 86% was in service and other revenue for the second quarter of fiscal year 24. Moving on to gross margin. The total gross margin for fiscal G-2-24 was the same as a year ago at 87%.

Dave: Identity revenue for the second fiscal quarter grew 1% year over year to $17 $5 million driven by our SaaS products revenue.

Dave: Approximately 14% like energy revenue with Mitek software and hardware revenue and 86% with a service and other revenue for the second quarter of fiscal year 'twenty four.

Dave: Moving onto gross margin the total gross margin for fiscal Q2, 'twenty four with the same as a year ago at 87%. We continue to deliver strong software and hardware gross margins are close to 100% for fiscal 'twenty for well servicing and other revenue gross margin was 72.

David B. Lyle: We continue to deliver strong software and hardware gross margins of close to 100% for fiscal Q2-24, while on services and other revenue, our gross margin was 72%, both similar to a year ago. GAAP operating expense for fiscal Q2-24 was $40.1 million compared to $31.5 million a year ago, with the increase primarily driven by fees associated with our delayed SEC files. Non-GAAP operating expense for fiscal Q2-24 was $27.9 million, compared to $22.7 million last year and up sequentially from $25.8 million in Q1-24.

Dave: Is that similar to a year ago.

Dave: GAAP operating expense for fiscal Q2, 'twenty four was $41 million compared to 31 five year ago with the increase primarily driven by fees associated with our delayed SEC filings.

Dave: non-GAAP operating expense for fiscal Q2, 'twenty four was $27 $9 million compared to $22 7 million last year and up sequentially by $25 8 million <unk> 24.

David B. Lyle: The year-over-year increase in non-GAAP operating expense was primarily related to fees associated with our delayed filing. The $2.1 million sequential increase in non-GAF operating expense was due mainly to higher personnel costs associated with merit increases and the calendar year reset of vacation approval and payroll taxes. Excluded from our non-GAAP operating expense was $12.1 million of non-recurring items, of which $7.7 million were non-cash accounting items and $4.4 million were cash items. Non-cash items were comprised of amortization of purchased intangibles and stock-based compensation.

Dave: The year over year increase in non-GAAP operating expense was primarily related to fees associated with or delayed filings.

Dave: The two 1 million sequential increase in non-GAAP operating expense was due mainly to higher personnel cost associated with merit increases and calendar year reset of vacation accruals and payroll taxes.

Dave: Excluded from our non-GAAP operating expense was $12 $9 million of nonrecurring items of which $7 7 million were noncash accounting items and $4 one or <unk>.

Dave: Cash items.

Dave: Noncash items are comprised of amortization of purchased intangibles and stock based compensation expense.

David B. Lyle: The cash items were primarily comprised of about $2.4 million in non-recurring product, $560,000 in executive transition costs, $530,000 in restructuring costs associated with shutting down our legal entity in Russia, and other various legal costs. Please see our earnings release for a more detailed reconciliation. Our non-GAAP operating income was $12.8 million in fiscal Q2-24, or a non-GAAP operating margin of 27%. Again, please see our earnings release for more ECO gaps and off-gap revenue. Gap net income for fiscal P2-24 was $0.3 million, or $0.01 per diluted share on 48 million shares, and non-gap net income was $11.5 million, or $0.24 per diluted share.

Dave: Yes, primarily price at about $2 $4 million and nonrecurring type fees $560000 and executive transition cost.

Dave: $530000 in restructuring costs associated with shutting down our legal entity in Russia and other various legal costs.

Dave: Please see our earnings release for a more detailed reconciliation.

Our non-GAAP operating income was $12 8 million in fiscal Q2, 'twenty four or a non-GAAP operating margin of 27%.

Dave: Please see our earnings release for a more detailed GAAP to non-GAAP reconciliation.

Dave: GAAP net income for fiscal Q2, 'twenty four 'twenty three nothing or one penny per diluted share on 48 million shares and non-GAAP net income was $11 5 million or 24 cents per diluted share.

David B. Lyle: Turning to our balance sheet, our cash and investments of $130.3 million were increased by $6.4 million sequentially from Q1. Moving on to guidance. We are reiterating our fiscal year 2024 revenue guidance range of $180 to $185 million. We are also reiterating our guidance for fiscal year 2024 non-GAAP operating margin to be in the range of 30 to 31 percent, which implies an increased margin in the second half of the fiscal year with much of the margin expansion above the guided range in fiscal G4 as we begin to see G&A expenses normalizing following heavier expenses related to getting S In Fiscal Q4, we expect non-GAAP G&A expense to begin to normalize and to be in the range of $8.5 million, but it may fluctuate depending on circumstances in that quarter.

Dave: Okay.

Dave: Turning to our balance sheet, our cash and investments of 133 million, which increased $6 $4 million sequentially from Q1.

Dave: Moving on to guidance, we are reiterating our fiscal year 2020 for revenue guidance range of $180 million to $185 million. We are also reiterating our guidance for fiscal year 2024, non-GAAP operating margin to be in the range of 30% to 31% which implied.

Dave: And increased margin second half of the fiscal year with much of the margin expansion above the guided range in fiscal Q4, as we begin to see G&A expenses normalizing following heavier expenses related to getting SEC filings current and prior periods.

Dave: And just so Q4, we expect non-GAAP G&A expense to begin to normalize and be in a range of $8 $5 million, but may fluctuate depending on circumstances in that quarter.

David B. Lyle: We also continue to expect our identity business to reach standalone profitability on a fully burdened basis in the fiscal fourth quarter. Before I conclude, I'd like to briefly comment on capital allocation. As you saw in today's release, our board of directors authorized a two-year share repurchase plan for up to $50 million of our common stock. Although we will not disclose our trading strategy, the first window available for us to trade will be Thursday, May 16.

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

Dave: Before I conclude I'd like to briefly comment on capital allocation as you saw in today's release, our board of directors authorized two year share repurchase plan for up to $50 million of our common stock.

Dave: Although we will not disclose our trading strategy. The first window available for us to trade will be aerospace may 16th.

David B. Lyle: As we thought through our repurchase plan options, we determined that for now, we wanted to keep open the ability to repay our $155.3 million principal amount of convertible debt in cash when it's due on February 1, 2026. With our cash balance at $130.3 million at March 31, 2024 and an expectation that we will continue to generate cash to that due date, we also want to have sufficient minimum cash along with our revolving line of credit for working capital purposes.

Dave: As we thought through a repurchase plan options, we determined that for now he wants it to keep open the ability to repay our $155 3 million dollar principal amount of convertible debt in cash when it's due in February 2026.

Dave: With our cash balance at $130 3 million at March 31, 2024, and an expectation that we will continue to generate cash through that to date. We also want to have sufficient minimum cash along with our revolving line of credit for working capital purposes.

David B. Lyle: Our approach considers that we have several new growth products beginning to ramp up from their native stage into the accelerated growth stage, and we need to see how that growth plays out. We believe we will have much better clarity about how much cash flow those products will provide over the coming year. In the meantime, our current focus is to continue to invest excess cash flow in our growth products, check fraud defender, IDR&D biometrics, in particular liveness capabilities, and myPATS and myVIP, as well as follow-up products that can expand our current market opportunities.

Dave: Our approach considers that we have several new growth products beginning to ramp up for their needs at stage into the accelerating growth stage and we need to see how that plays out.

Dave: We believe we will have much better clarity about how much cash flow those products right.

Dave: A year.

Dave: In the meantime, our current focus is to continue to invest excess cash flow in our growth products check brought defender IP R&D biometrics and particular likeness capabilities and my past my VIP as well as follow on products that can expand our current market opportunity.

David B. Lyle: We will also continue to invest to optimize our product cost structure to maximize margin expansion opportunities. In terms of growth through acquisitions, we believe we have sufficient growth opportunities with our organic product portfolio and do not foresee embarking on acquisitions in the near term.

Dave: We have lots of continued to the death.

Dave: Optimize our cost structure to maximize margin expansion opportunities.

Growth through acquisitions, we believe we have sufficient growth opportunities like our organic product portfolio and do not foresee embarked upon acquisition in the near term.

David B. Lyle: Now I would like to briefly touch on where we are with our SEC filing. We filed our 10Q for fiscal Q2 2024 last Friday. We remain current and expect to file our fiscal Q3 2024 filing on time in August, as we are now back on a normal filing page. And lastly, I want to say thank you to Matt. We built a very strong partnership very quickly, and I have thoroughly enjoyed working with you to advance my tech forward. You operate with the highest degree of integrity, professionalism, and respect, and on a personal level, I am sad to see you go. Operator, that concludes our prepared remarks. Please open the line for questions.

Dave: Now I would like to briefly touch upon where we are with our SEC filings.

Speaker Change: Thank you for fiscal Q2, 'twenty 'twenty four filed last Friday, we remain current and expect to file our fiscal Q3 24. Finally on time in August we are now.

Speaker Change: Now at normal fighting Ace and.

Speaker Change: And lastly, I want to say, thank you to Max.

Max: So a very strong partnership very quickly I have thoroughly enjoyed working with us to advance my tech forward.

Max: Right at the highest degree of integrity professionalism and respect and.

Personal level I am sad to see though.

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

Speaker Change: Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from...

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: We're using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: Anytime you question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question comes from Mike Grondahl with Northland Securities. Please go ahead.

Unidentified Analyst: Hey, thanks, guys. And I'll say, too, we'll definitely miss you, Max. That's for sure.

Michael John Grondahl: Hey, Thanks, guys and I'll say too, we'll definitely Miss you Max that's for sure.

Scott Christian Buck: A couple questions for Scott. Scott, are you in the running for the full-time CEO role? And two, do you anticipate any change in strategy going forward? And maybe lastly, I'd just like to hear your opinion on the CheckFraud Defender product.

Michael John Grondahl: A couple of questions for Scott.

Michael John Grondahl: Got or you wouldn't be running for the full time CEO role.

Michael John Grondahl: And two do you anticipate any change in strategy going forward.

Michael John Grondahl: And maybe lastly, I'd just like to hear your opinion on the chip front defender product.

Scott Christian Buck: Yeah, absolutely. Mike, I appreciate the question. First of all, as I said in the script, I am very passionate about the opportunities at Mitek. I know the team, this incredibly talented team, very well, the products, our market-leading position. While I am in the interim CEO role, I will be all in. I am not a candidate for the permanent CEO role; I've got personal family considerations that preclude me from making a permanent commitment, but you can count on me being all in and fully dedicated to helping the team on tap. This incredible opportunity we had is incredible. In terms of the, I think your second question was around strategy. We are. We've got, again, a terrific team in place.

Scott Christian Buck: Yeah, absolutely Mike I appreciate the question.

First of all as I said in the script I'm very passionate about the opportunities of myself out of the cheapest incredibly talented team first of all the products are market leading position.

Speaker Change: While I am in the interim CEO role I will be all in I am not a candidate for the permanent CEO role, while I've got personal family considerations that preclude you from making a permanent commitment but you.

Speaker Change: You can count on me being all in a fully dedicated.

Speaker Change: 10 months out this incredible opportunity we have in front of us.

Scott Christian Buck: We feel confident in our current strategy. We, of course, have a normal annual planning process, which we're actually kicking off very shortly. So we'll go through the process of refreshing our strategic plan that we're cascading through our annual operating plan. And we'll then, of course, you know, look at to what extent we might reallocate. You know, OPEX and Headcount and FOCUS and so forth to align with, you know, where the greatest opportunities are for us to drive. Thank y'all.

Speaker Change: In terms of the I think your second question was around strategy.

We are we've got a got a terrific team in place we feel confident in our current strategy. We of course have a normal annual planning process with we're actually kicking off very shortly so I'll go through the process of refreshing our strategic plan that will cascade into our annual operating plan.

Speaker Change: Well that of course.

Speaker Change: You know look at to what extent, we might reallocate.

Speaker Change: You know opex and head count focus and so forth to align with.

Speaker Change: Where are the greatest opportunities are for us to drive.

Speaker Change: Broke acceleration and increased contribution margin and that's the process. We have to go through but again, we've got just fantastic World class products to me it's about execution.

Speaker Change: Can you fill up tick on Tuesday, CFT is it's just remarkable.

Scott Christian Buck: On CFDs. Yeah, thank you. CFD is just remarkable.

Scott Christian Buck: You know, I had a chance when I was in the executive chairman role last year, given my background and my familiarity with the ecosystem, and the relationships I have with C-level executives in our client organizations. I went out and talked to these executives, and I was told, if there's no one else that can pull this together, you are. Check fraud is a massive problem, as we've talked about many times. We have a very unique set of capabilities that no one else could possibly replicate.

Speaker Change: A chance when I was in the executive chairman role last year, given my background and my familiarity with the ecosystem relationships.

Speaker Change: Our relationships I have with C level executives in our our client organizations I went out and talked to C level executives and I was told because there's no one else. They can pull this together you are check fraud is a massive problem as we've talked about many times, we have a very unique set of capabilities that no one else could possibly replicate.

Scott Christian Buck: And if you think about not only the heritage and computer vision and machine learning and looking at anomaly detection on the check, but by virtue of our orchestration platform now, through the WhoYou acquisition, we have the ability to syndicate other fraud-preventing signals, and the integration of that has substantially helped us sort of catalyze, if you will, the adoption of reduced sales cycles. So, again, there's a nice set of assets across our portfolio that are coming together to solve that problem in a way that no one else possibly could.

Speaker Change: Think about not only the heritage of computer vision and machine learning and looking at anomaly detection on the check.

Speaker Change: By virtue of our orchestration platform now through the through the who you acquisition, we have the ability to syndicate other province, any signals and.

Speaker Change: The integration of that has substantially.

Speaker Change: And so I'm, just sort of catalyze that you will be.

Speaker Change: The adoption of a new sales cycle. So again theres, a nice set of assets across our portfolio theyre coming together to solve that problem in a way that no one else possibly could.

Scott Christian Buck: Got it. Then maybe just a quick follow-up for Dave. Dave, G&A expenses are up quite a bit. They're about 20% of revenue now, up from 12% a couple years ago. Are you taking a look at those? Are those all required for investment?

Speaker Change: Got it and then maybe just a quick follow up for Dave.

G&A expenses are.

Dave: Are up quite a bit they're about 20% of revenue now up from 12% a couple of years ago.

Dave: Are you taking a look at those are those all required for investment how would you kind of help us understand that.

David B. Lyle: How would you kind of help us understand that? Yeah, you're right. On the GNA front, we still have inflation.

Dave: Yeah, Youre right on the G&A front, we still have inflated our expenses are actually going to continue through this current Q3 order.

Dave: Of course, we're going to see like I said, you know our biggest.

Dave: And G&A expense going into Q4, when you still will have some incremental expenses.

Dave: Norm normal run rate just because we're trying to remediate the material weaknesses from the past and that takes just fine.

Dave: Well, it's an effort externally.

David B. Lyle: Got it. Okay. Hey, thank you guys. Thanks, Mike. The next question comes from Jake Roberge with William Blair. Please go ahead.

Speaker Change: Got it Okay, Hey, thank you guys.

Speaker Change: Thanks, Mike.

Speaker Change: The next question comes from Jake Roberge with William Blair. Please go ahead.

Jacob Roberge: Hey, Thanks for taking the questions. Yeah. If you can just talk a bit more about what you're seeing with check fraud defender that'd be great do you still expect to exit this year with around 50 customers for that product and then I'm curious how how conversations with some of those larger mobile deposit partners are trending in <unk>.

Jacob Roberge: They've really onboarding them and getting them to start cross selling that solution into their customers.

Jacob Roberge: Thanks for the question, Jake. You know, I'll leverage maybe where Scott's enthusiasm took us. Just as a reminder, Check for a Defender. We've been at this, if you include the development cycle, for a little over three years.

Speaker Change: Thanks for the question James you know a leverage maybe where Scott Scott's enthusiasm took us.

Speaker Change: Just as just as a reminder, checkpoint center we've been at this if you include the development cycle, a little over three years and yep. Thanks take their time, they've got a lot of work a lot of compliance folks, but the history of CST and the creation of the of the actual capability was technology that we already had working in <unk>.

Scipio Maximus Carnecchia: And, you know, banks take their time. They've got a lot of lawyers, and a lot of compliance folks. But the history of CFD and the creation of the actual capability were technology that we already had working in conjunction with one of the largest banks in the United States to create an on-premise solution. So, you know, if you think about the top four banks in the United States, they're kind of like their own weather system.

Speaker Change: Drunken with one of the largest banks in the United States to create an on premise solution. So you know do you think about the top four banks and United States that are kind of their own weather system and that was the that was the originating point of this you know this product and then somebody here at the great idea of Hey, we can just re factor that lift and shift it put it in the secure cloud.

Scipio Maximus Carnecchia: And that was the originating point of this, you know, of this product. And then somebody here had the great idea of, hey, we can just refactor that, lift and shift it, and put it in a secure cloud.

Speaker Change: And create a consortium sounds really easy but for the last two years, that's really what we've been marching to and so there is combination here are customers that can consume this on premise that don't really enjoy the benefit of the network effect of the consortium participants and then we've got the newer participants that are that are exclusively.

Speaker Change: Consortium based and I'm sure at some point, we'll have some hybrids.

Speaker Change: To your question.

Speaker Change: Today like as of Friday of last week, when we sold when we close one of the top 100 banks in the United States through our our direct sales activities. We today have over 25 signed cfd contract customers and that is a combination of some of those early adopters.

Speaker Change: That were off premise and then the folks that I'm talking about here that have joined more frequent more recently this is growing very rapidly we had in the prepared remarks there are over three.

Speaker Change: 300 financial institutions that we are seeing checks from even though they may not be participants in the consortium themselves. The check is written on their check stock and so all of that is going into feeding our models. This this kind of reinforced network effect of the more banks that Santos checks the more.

Speaker Change: Check we see the more checks we see the better the models become the more effective the models are the more banks want to participate in that so that's all been mostly all been our direct selling activities. We have now at least two partners that are reselling that just coming up learning curve and we've started to see not just pipeline growth.

Actual deal activity, where they closed business.

Speaker Change: And then the traditional folks that have historically been our gateway into the banking industry for the core banking service providers. The Jack Henry If I ask the five serves we are hard at work with them.

Speaker Change: Getting to contract so that they can take this odd they're big organizations. They also have a lot of lawyers and a lot of compliance folks but.

Speaker Change: All the numbers I gave you before around where we're going to end the year I feel really good about that were halfway there already and momentum is only growing and pipelines are bigger than they were the last time, we spoke so a lot of them there, but hopefully that's helpful.

Scipio Maximus Carnecchia: I feel really good about that. We're halfway there already.

Scipio Maximus Carnecchia: So there is a lot in there, but hopefully that's helpful.

Jacob Roberge: Yeah, very helpful. Thank you.

Speaker Change: Yeah very helpful. Thank you and then can you just talk about the evolution of the IV business and where you're at in terms of really landing customers for point solution like the legacy document verification sales versus really selling that broader my V. I T and my past suites, and then just as a follow up there Dave I know you're sunsetting a few leg.

Speaker Change: See I D revenue streams can you remind us how much of an impact that's having on growth this year for that segment. Thanks.

Scipio Maximus Carnecchia: And then can you just talk about the evolution of the ID business and where you're at in terms of really landing customers for point solutions, like the legacy document verification sales versus really selling that broader MyBIP and MyPath suites. And just as a follow-up there, Dave, I know you're sunsetting a few legacy ID revenue streams. Can you remind us how much of an impact that is having on growth this year for that segment? Thanks.

Speaker Change: Yeah, Let me start and then I'll hand things over to date. So it takes today, we start every new identity opportunity every engagement with customers is really more around our solution enterprise approach, where we're just suffering where the pain points are what the outcome. The customer is looking for and typically that leads.

Scipio Maximus Carnecchia: Yeah, let me start. Then I'll hand things over to Dave. So, Jake, today we start every new identity opportunity, every engagement with customers, is really more around a solution enterprise approach, where we're discovering where the pain points are, what the outcome the customer's looking for, and typically, that leads us down a path where when we get into the solutioning and talking about how we're gonna solve the problem, it starts with My VIP as the platform.

Speaker Change: US down a path, where when we get into the solution and talking about how we're going to solve the problem. It starts with my VIP is the platform that really is our flagship for identity going forward.

Scipio Maximus Carnecchia: That really is our flagship for identity going forward. And My Pass, which we talked about at length here about identity authentication using multi-modal biometrics, is really an instantiation of that. It really is kind of an architectural implementation for identity authentication using biometrics.

Date: And my past, which we talked about at length here around identity authentication using multimodal biometrics is really an instantiation of that it really is kind of a.

Date: But architectural implementation around identity authentication using biometrics.

Scipio Maximus Carnecchia: So I would tell you that we still have the ability to do point products when we need to. We've got that flexibility in the architecture and the way that My VIP works. You could start with a single signal and then grow up into additional things where you're orchestrating many signals across the entire spectrum of the journeys. Or we can start in the middle. We can start in the deep end of the pool, or we can start in the middle somewhere, all depending on what the requirement of the customer is.

Date: So I would tell you that we still have the ability to do white products you know when we need to we've got that flexibility and the architecture and the way that <unk> works you could start with a single signal and then.

Date: Grow up into additional things, where you're orchestrating many signals across the entire spectrum of the journeys.

Date: Or we can start in the middle of US you know when you're starting to seep into the pool that we can start in the middle somewhere all depending on what the requirement of the customers.

Scipio Maximus Carnecchia: And then addressing, I think you were wanting me to address some of the legacy products. If you remember, the iCard legacy piece of hardware is starting to sunset here over the coming quarters and into 2025. We should be done by sometime in 2025. It's impactful, not a big impact as we're talking single-digit millions here in terms of revenue. And then the other piece was on the document verification piece. Also, not a lot in that, in fact, the mobile verify capability for document verification is integrated into the IVIP platform. So it's also going to be continuing to be a really important product for us, integrated into that product. Are you still out there, Jake? Yeah,

Date: And then addressing I think you were wanting to address some of the legacy products that you've never icon legacy kind of hardware piece.

Date: <unk> is starting to sunset here over the coming quarters and into 2025.

Speaker Change: Well it should be done by sometime in July.

Speaker Change: It's in fact with Apple not a big impact as we're talking single digit millions here in terms of revenue.

Speaker Change: Then the other piece less than that.

Speaker Change: And at first verification piece.

Speaker Change: Also.

Speaker Change: Not a lot in that.

Speaker Change: In fact that mobile verify kind of capability.

Speaker Change: Integrated into the Ibs platform.

Speaker Change: So it's also going to be continuing to be a really important product for us.

Speaker Change: To get to that platform.

Speaker Change: I lost chain still out there Jamie.

Jacob Roberge: Yeah, I'm here. Thanks for taking the questions. I appreciate it.

Jamie: Yeah I'm here, thanks for taking my questions I appreciate it.

Surinder Thind: The next question comes from Surinder Thind with Jeffreys. Please go ahead.

Jamie: The next question comes from sort of in their thinned with Jefferies. Please go ahead.

Surinder Thind: Thank you. Just following up on the G&A expense growth. I just wanted to make sure I understood. Is the idea that we're now at a headcount level where it's necessary for, you know, operationally being effective in terms of the business at this point? Was that the message? I want to be clear about that because it just seems like there was a lot of growth, but at the same time, I heard that maybe, you know, there's room for some improvement in that way.

Jamie: Thank you just following back up on the G&A expense growth.

Speaker Change: I wanted to make sure I understood. The idea is that we're now at a head count level, where it's necessary for operationally being effective in terms of the business at this point.

Jefferies: Was that the messaging I want to be clear about that because it just seems like there was a lot of growth, but at the same time I heard that maybe you'll do it.

Jefferies: Room for some improvement.

Jefferies: <unk> in that line item.

David B. Lyle: Yeah, so if you just look at Q3, Q2 fiscal quarter 2, for instance, we're at $9.6 million, and I talked about targeting $8.5 million by the time we get to Q4. So quite a few of the external consultants and outside services people that we've been using to help us through the process will start to drain. We're still going to see that inflated in fiscal quarter 3, which is the quarter we're in.

Speaker Change: Yeah. So if you just look at Q3 Q2 fiscal quarter. Two for instance, we're at $9 6 million and I talked about targeting 5 million by the time you get to Q4, so quite a few kind of external consultants and outside services people that we've been using to help us through the process will start.

Speaker Change: The drain off.

Speaker Change: We're going to see that inflated in fiscal quarter, three which is the quarter. We're in.

David B. Lyle: The biggest decline you'll see is in Q4. In terms of what that means for fiscal 25, I've got to be careful what I say here because I don't necessarily want it to guide. But keep in mind that that $8.5 million range has a lot of ins and outs in it, including a little bit of incremental costs associated with getting us through our remediation material weaknesses.

Speaker Change: The biggest decline you'll see it in Q4 in terms of what that means for fiscal 'twenty five I gotta be careful what I say here.

Speaker Change: They don't necessarily want to tip to guide, but keep.

Keep in mind that our key.

Speaker Change: $5 million range had a lot of ins and outs and I think reading a little bit of incremental costs associated with.

Speaker Change: Getting us through our remediation of material weaknesses.

Speaker Change: That makes sense.

Surinder Thind: I guess I was talking more in terms of the permanent headcount increases in GNA, like I assume there's been a staffing up of the process. Aside from all of the one-time incremental costs, that's what I was trying to get at in terms of what that number should look like.

I guess I was thinking about more in terms of the permanent head count and increases in G&A.

Speaker Change: I assume that's been staffing up with the process.

Speaker Change: From all of kind of the one time incremental cost and that's what I was trying to get at in terms of what that number should look like.

David B. Lyle: Yeah, I understand. From a headcount perspective, you're right. We're kind of heading into a situation where we're almost at where we need to be, from a run rate perspective, being able to support further growth into 2025, which we expect.

Speaker Change: Yeah.

Speaker Change: I understand from a head count perspective, you're right, we're kind of heading into a situation where we're.

Speaker Change: Almost half, where we need to be a run rate perspective.

Speaker Change: Sports further growth into 10, five should we expect.

Surinder Thind: Got it. And then in terms of just The Share Repurchase Program, it sounds like the idea is to maybe start off a little slow at this point. Is that the messaging? That you just want to kind of see how the different numbers in other parts of the business shake out from a revenue growth perspective before you become, I'll say, two opportunists.

Speaker Change: Got it and then in terms of just.

Speaker Change: The share repurchase program it sounds like be ideas to maybe start off a little slow at this point is that is that the messaging that you just wanted to kind of see how the different numbers.

Speaker Change: In other parts of the business shake out from a revenue growth perspective, before you become I'll say too opportunistic.

Surinder Thind: I heard you right. We hadn't indicated our trading strategy in particular. It certainly didn't indicate that we would go slow before we would go fast, but what we did say, or what I did say, was that the trading window opens for us this Thursday, and that's when we have the opportunity to start purchasing shares. In terms of how that goes, we have a strategy in place on how we want it to trade, and we'll see that in our reporting when we report in August for Q3. how we did.

Speaker Change: If I heard you right.

Speaker Change: He hasn't indicated.

Speaker Change: Our trading strategy and particular.

Speaker Change: Certainly didn't indicate that we would go slow before we'd go fast but you.

Speaker Change: Now what.

Speaker Change: What we did say or what I did say was that the trading window opens for us This Thursday.

And that's why we have the opportunity to start purchasing.

Speaker Change: Purchasing shares.

Speaker Change: Terms of how that goes and looking at we have a strategy in place and how we got to go trade.

Speaker Change: We'll see that in our reporting when we report in August for our Q3.

Speaker Change: It.

Surinder Thind: Got it. Um, fair enough. And then the final question here, just in terms of the search for a new CEO, any particular qualities? I think you mentioned some high-level criteria.

Speaker Change: Got it fair.

Speaker Change: Fair enough and then the final question here just in terms of the.

Speaker Change: The search for a new CEO.

Speaker Change: Any particular qualities I think you mentioned some high level criteria, but is there more specifics in terms of like like a hard tech background.

Speaker Change: Her experience as a very specific area whether its identity.

Speaker Change: The entity or something or security or how should we think about is there something there that you can provide color.

Scott Christian Buck: Yeah, this is Scott. I appreciate the question. One thing I would start by emphasizing, which isn't directly answering your question, but I think an important context is that given our much broader geographic footprint and the fact that many of our teams are operating virtually these days, we can now cast a much wider net for executive talent, right?

Speaker Change: Yeah, Craig This is Scott I appreciate the question.

One thing I would start by emphasizing it's not.

Scott Christian Buck: Directly answer your question, but I think important context is that given our much broader geographic footprint and the fact that many of our teams are operating virtually these days, we can now cast a much wider net for executive talent right. So that's something that we're really encouraged about we have significant presence of course in San Diego, but.

Scott Christian Buck: So that's something that we're really encouraged about. We have a significant presence, of course, in San Diego, but also in New York and London. So that will be something that we're evaluating as we move forward with the search. Domain expertise, either directly in the space or certainly in an adjacent market category, is important, but as we mentioned, there are a variety of different qualities that we're looking for in the CEO, and we're working closely with a very highly respected search firm. We've done a market assessment with them, and we'll evaluate what sort of candidates come in, are presented to us, and go from there.

Also in New York and London.

Scott Christian Buck: So that will be something that we're evaluating that as we move forward with the search.

Scott Christian Buck: We believe that.

Scott Christian Buck: Our domain expertise.

Scott Christian Buck: Either directly in our space certainly in an adjacent.

Scott Christian Buck: Market category is important.

Scott Christian Buck: But as we mentioned there are a variety of different you know qual.

Scott Christian Buck: Quality is sort of like before and the CEO and we're working closely with a very highly respected search firm.

Scott Christian Buck: Done a market assessment with them and well evaluate what sort of candidates come are presented to us and and go from there.

Speaker Change: Thank you.

Derek Greenberg: The next question comes from Derek Greenberg with Maxim Group. Please go ahead.

Speaker Change: The next question comes from Derrick Greenberg with Maxim Group. Please go ahead.

Derek Greenberg: Hey guys, thanks for taking my question. I just wanted to follow up on guidance a little bit. In previous calls, you provided a little more high-level detail in terms of how revenue should progress throughout the year. I was just wondering if third quarter and fourth quarter are still on track to be about even, based on your previous comments where I think it was the lowest first quarter, a sequential increase in second quarter, and then third quarter and fourth quarter increase over that about the same.

Derrick Greenberg: Hey, guys. Thanks for taking my question I, just wanted to follow up on guidance a little bit in previous calls you had provided a little more high level detail at Samsung.

Derrick Greenberg: How revenue should progress throughout the year.

Derrick Greenberg: Just wondering if third quarter and fourth quarter is still on track to be about even.

Derrick Greenberg: Through your previous comments, where I think it was first quarter lowest second quarter sequential increase for the third quarter and fourth quarter increase over that about the same.

David B. Lyle: Yeah, I'll take that. This is Dave. You're right, we have historically done that over the past two or so earnings calls. We purposely didn't do that this earnings call because we're in Q3 now, and more importantly, there are several larger deals that we're working on that we don't yet know if they will fall into Q3 or Q4, and that would change the total revenue for those quarters. But our overall annual guidance remains in place.

Speaker Change: Yeah I'll take that.

Dave: This is Dave.

Dave: We are we are right we had historically done that over the past two or so earnings calls.

Dave: We purposely didn't this earnings call because we are in Q3 now.

Dave: And more importantly, there are several kind of larger deals that we're working on that.

Dave: Don't know if it will fall into Q3, our Q4 and that could change.

Dave: Yeah, the total lapping for those quarters, but our our overall annual guidance remains in place.

Derek Greenberg: Okay, got it. That makes sense. And then, just on the identity side of things, I was wondering if that's still on track to become cash flow positive in the fourth quarter.

Speaker Change: Okay got it that makes sense and then just on the identity side of things I was wondering if that's still on track to become cash flow positive in the fourth quarter.

David B. Lyle: Yeah, Derek, if you go back, we were pretty clear in the prepared remarks that that's absolutely the intention. We're on that track. You know, Q4 is right around the corner.

Speaker Change: Yes, Eric if you go back and we were pretty clear in the prepared remarks that is absolutely. The intention we're on that track and you know.

David B. Lyle: Q4 is right around the corner, so we're going to make it happen.

Eric: Q4 show right around the corner so wanted to make it happen.

Derek Greenberg: Okay, great. Thanks, guys.

Speaker Change: Okay, great. Thanks, guys.

Speaker Change: Thank you.

Speaker Change: Okay.

Scott Christian Buck: Again, if you have a question, please press star then 1. The next question comes from Scott Buck with HC Rainwright. Please go ahead.

Speaker Change: Again, if you have a question. Please press Star then one.

Speaker Change: The next question comes from Scott Buck with H C. Wainwright. Please go ahead.

Scott Christian Buck: Hi, good afternoon guys. Thanks for taking my questions.

Scott Christian Buck: Hi, Good afternoon, guys. Thanks for taking my questions. The first one just a bit of a follow up there on the IV business in an attractive profitability.

Scott Christian Buck: The first one, just a bit of a follow-up on the ID business and the track to profitability. Visibility is there that you think you will be there in the fourth quarter. I'm curious if we should expect a meaningful, you know, kind of EBITDA margin tailwind into 25 then based on reaching the profitability pressure. Yeah, again, we're not prepared yet to guide 2025. That being said, based on exactly what you're saying, there is certainly an opportunity for a market. Okay, perfect. And then my only other one, I may have missed it; I jumped on the call a little late. In terms of the executive search, have you guys given a timeline as to when...

Scott Christian Buck: Like your your you know the.

Scott Christian Buck: The visibility there that you think you are there and in the fourth quarter I'm curious if we should expect a meaningful you know kind of EBITDA margin tailwind in the 25 that are.

Based on reaching our profitability thresholds.

Speaker Change: Yeah again, we're not prepared yet to guide 2025 that being said there based on exactly what you're saying.

Speaker Change: There is certainly opportunity for margin expansion.

Speaker Change: Okay, Perfect and then my only other one.

I may have missed it I jumped on the call a little late in terms of the exec.

Speaker Change: Executive search have you guys given a timeline as to when you.

Scott Christian Buck: you could potentially expect to make a hire there, or is it just way too early?

You could potentially.

To make a higher there or is it just way too early.

Scott Christian Buck: You know, we, I don't think we're prepared to make any sort of commitment today. We need to make sure that we're thoughtful and do our best to make sure we find the best possible candidate.

Speaker Change: Yeah.

Speaker Change: I don't think referred to make any sort of commitment today, we need to make sure that we're thoughtful and do our best to make sure we find the best possible.

Speaker Change: Canada.

Scott Christian Buck: Nope, I get it. I appreciate it, guys. That's all from me. Thank you. Scott, I'm just going to add one more, if you don't mind.

Speaker Change: No I got it I appreciate it guys. That's all for me. Thanks.

Scott Christian Buck: Thank you. Scott, I'm just going to add one thing, if you don't mind.

Speaker Change: That's gonna add if you don't mind.

Scott Christian Buck: As I said in my remarks, I know this business very, very well. Part of the board's consideration was that I could step in immediately without missing a beat, hit the ground running. And that gives us the luxury, I think, of being able to make sure that we...

Speaker Change: As I said in the remarks I know this business very very well a part of the board's consideration was that like except that immediately.

Speaker Change: I'm missing that would be a hit the ground running and and that gives us the luxury I think of being able to make sure that we again do justice for the team and our customers to make sure you've got the very best possible C of O.

Scott Christian Buck: That's helpful. I appreciate it, guys.

Speaker Change: That's helpful. I appreciate it guys.

Operator: This concludes our question and answer session. I would like to turn the conference over to you.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.

Todd Kehrli: Thank you, operator, and 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, Todd Kehrli at ARMS Relations. I'll be happy to set something up. Thanks, and have a great rest of your day.

Thank you operator, and thank you everyone for joining our call today for your continued support as always if you have any follow up questions or would like to make the Spanish but please feel free to reach out to me is a truly a pair of investor relations and I'll be happy to.

Speaker Change: Thanks, and have a great rest of your day.

Operator: 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.

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Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].