Q1 2025 Mitek Systems Inc Earnings Call

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Speaker Change: Good afternoon, and welcome to the MITEC Fiscal 2025 First Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded.

Speaker Change: I would now like to turn the conference over to Todd Kehrli of Pondell Wilkinson. Please go ahead.

Todd Kehrli: Thank you, Operator. Good afternoon, and welcome to MiTech's Fiscal 2025 First Quarter Earnings Conference Call. With me on today's call are MiTech's CEO, Ed West, and CFO, Dave Lyle.

Dave Lyle: Before I turn the call over to Ed, I'd like to cover a few quick items.

Dave Lyle: Today, MyTech issued a press release announcing its financial results for its fiscal 25 first quarter ended December 31, 2024. That release is available on the company's website at mytechsystems.com.

Dave Lyle: 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.

Dave Lyle: 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.

Dave Lyle: These forward-looking statements may include comments about the company's plans and expectations of future performance.

Dave Lyle: For the statements are subject to a number of risks and uncertainties which cause actual results to differ materially. We encourage all of our listeners to review our SEC filings including our most recent 10-K and 10-Q for a complete description of these risks.

Dave Lyle: Our statements on this call are made as of today, February 10, 2025, 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.

Dave Lyle: Additionally, throughout this call, we'll be discussing certain non-GAAP financial measures.

Dave Lyle: Today's earnings release and the related current report on Form 8K describe the differences between our GAAP and non-GAAP reporting and present the reconciliation between the two for the periods reported in the release.

Dave Lyle: For those who are new to MyTech, let me start with a quick overview of who we are, the problems we solve, and why our mission-critical solutions are becoming increasingly more important in today's market environment.

Dave Lyle: MyTechSystems is a global leader in computer vision, digital identity verification, biometric authentication, and fraud prevention. Trusted by over 7,900 organizations worldwide, including financial institutions, telecoms, FinTechs, and marketplaces.

Dave Lyle: We empower businesses to combat growing threats like AI-driven fraud, deepfakes, and cyberattacks using advanced AI, proprietary biometrics, and automation technologies, all delivered as software solutions.

Dave Lyle: Our mobile check deposit solution, enabled by industry-leading computer vision technology, has revolutionized consumer banking, processing approximately 1.2 billion transactions annually. It has become a foundational element of North American financial services.

Dave Lyle: His deep expertise in serving high-insurance industries has positioned us to expand.

Dave Lyle: Our total addressable market with innovative solutions like MyVIP, an end-to-end identity verification, orchestration, and authentication platform, along with advanced fraud prevention tools such as CheckFraudDefender and DigitalFraudDefender.

Dave Lyle: These offerings are designed to tackle sophisticated fraud threats using industry-leading technology.

Dave Lyle: We generate revenue through term license agreements for our heritage check-related products and stand-alone biometrics, as well as SAS agreements for our identity and fraud platform solutions.

Dave Lyle: Our focus in Fiscal 25 is on enhancing our solutions, operational excellence, and strengthening our foundation to position us for durable, profitable revenue growth in Fiscal 26 and beyond.

Dave Lyle: As digital check deposits remain essential and the demand for fraud solutions intensifies in the face of sophisticated AI-driven threats, we are uniquely positioned to lead the innovation and help secure the future of online transactions.

Thank you. Bye-bye.

Dave Lyle: Now, last quarter, we introduced a four-pronged framework to guide our transformation. Today, I'll provide some updates on our progress across the four pillars, which are, one, strengthening the foundation to provide a platform for durable, profitable growth in Fiscal 26.

to scaling our identity platform business.

Dave Lyle: to drive it towards the fulcrum point on profitability. Third, expanding our leadership and broad solutions. And fourth, maintaining operational excellence as the cornerstone of organic revenue growth, free cash flow generation, and driving shareholder value.

Dave Lyle: Now let's walk through the progress we've made on each of these pillars since the end of last fiscal year.

Dave Lyle: In Q1 and early Q2, we made meaningful progress on the first pillar of our strategy, which is strengthening our foundation for durable, profitable growth in fiscal 26 and beyond. I'd like to highlight a few key achievements.

Dave Lyle: First, we're fostering greater collaboration across our go-to-market teams by breaking down silos and enhancing cross-functional execution for new and expanded business.

Dave Lyle: I know it sounds pretty fundamental, but this effort is already bearing fruit by closing new business in Q1.

Dave Lyle: We also have additional meaningful contract negotiations, as well as new product developments currently underway as a result of these efforts.

Dave Lyle: These are early validation points that leverage MyTech's extensive relationships and credibility with financial institutions with the growing requests for identity and fraud use cases.

Dave Lyle: Second, we have realigned our R&D resources and team structures to better support our growth objectives.

Dave Lyle: We are advancing a one mind tech ethos by introducing a product driven framework, centralizing engineering and AI machine learning resources, and fostering deeper cross-team collaboration.

Dave Lyle: These initiatives get the machine learning engineers closer to the customer and are already driving greater effectiveness and accelerating innovation, particularly within our identity portfolio, which I will quantify later.

Dave Lyle: Our operational and cultural integration efforts serve as the catalyst for our technological integration, as I highlighted on our prior call.

Dave Lyle: The key initiative is consolidating our identity verification, or IDV, engines into a single unified platform on MyVIP. By integrating our IDV and fraud prevention capabilities, we are simplifying the customer experience while enhancing our competitive position.

Dave Lyle: In short, the walls within our business that remained after multiple acquisitions are rapidly coming down, and we expect to see measurable benefits from this in our P&L in fiscal 26.

Dave Lyle: Now turning to our second pillar, our progress towards the 80 to 85 million dollar fulcrum point in identity.

Dave Lyle: At the end of the first quarter, our last 12 months' identity revenue was $70.7 million, up from $68.5 million at the end of fiscal 24, demonstrating progress towards this critical milestone.

Dave Lyle: Now it's important to note that the SAS transaction volumes and timing of software license sales can create upward and downward movement on a quarter-to-quarter basis.

Dave Lyle: It's also important to recognize that the tipping point is dynamic. Any improvements in our unit economics and contribution margins along the way effectively lower the revenue threshold required to reach this key target.

Dave Lyle: The two key drivers that were closely monitoring an identity that are driving us towards our open point are as follows.

Dave Lyle: One, an increased mix of MyBIP identity transactions, which carry more attractive unit economics compared to our imperative stand-alone document verification solutions, due to the platform's greater intrinsic value.

Dave Lyle: And two, a higher mix of automated identity transactions which carry a lower cost per transaction and reflect improvements in our algorithm efficacy.

Dave Lyle: Together, these factors drive a higher contribution profit per transaction, and coupled with ongoing transaction growth, contribute to a growing bottom line.

Dave Lyle: On the first of these two drivers, the 26% year-over-year growth observed in identity SAS revenue was driven by accelerating transaction volume across the board, and most notably in MyVIP, with over 60% transaction volume growth in a quarter.

primarily driven through expansion with existing customers.

Dave Lyle: Currently, a minority of our identity transactions are running through our MyVIP platform, but as we improve our go-to-market execution with MyVIP,

Dave Lyle: and begin migrating customers from our standalone point solutions to our platform, we expect an increased mix of these higher value transactions.

Dave Lyle: On the second driver, we had a double-digit percentage reduction in direct cost per transaction year-over-year as our enhanced algorithms improved our MyDIP agent productivity versus last year, and automated transactions continue to increase both sequentially and year-over-year.

Dave Lyle: This shift towards higher margin automation drove the 300 basis points year-over-year improvement in gross margin in our services and other revenue, which Dave will discuss in more detail a little later.

Dave Lyle: Finally, our go-to-market optimization efforts are yielding results, as demonstrated by the transaction growth of recently acquired customers, expansion into new use cases with our existing customers, and acquiring new customers at false geographies and industries.

Dave Lyle: Looking at our customer cohorts, identity-related customers acquired just one year ago in Q1 of 24 are now spending almost 40% more with us, driven by higher transaction volumes and expanded use cases.

Dave Lyle: Our Q1 2023 cohort, which are customers who have been with us for two years, have increased spending by more than three times compared to their initial spending levels.

Dave Lyle: Notably among this top 10 are a number of leading financial institutions who initially partnered with MyTech for identity verification in online account openings.

would have since significantly increased their investment.

Dave Lyle: Today, they rely on MyTech as an end-to-end enterprise verification solution partner, with our solutions empowering a wide range of critical identity and fraud prevention workloads.

Dave Lyle: These solutions enable our customers to provide best-in-class customer experience and safely expand the products they can offer in their digital channels. Examples of these expansions include digital mortgages.

Dave Lyle: Commercial Onboarding, Telephony Authentication, Mobile Password Resets, Fraud and Dispute Claims, Commercial KYC, Document Verification, and Retail Fraud Prevention.

Dave Lyle: Overall, this deepening adoption highlights the increasing strategic value we provide to some of the world's largest high-assurance businesses.

Dave Lyle: At the same time, our ability to win and scale new business across industries and geographies reflects this early success of our go-to-market enhancements.

Dave Lyle: Now let's dive into our third pillar, which is expanding the reach and impact of our fraud solutions with a spotlight on Check Fraud Defender, or CFD. By harnessing the power of our growing consortium data network, this strategy drives compelling results for both our customers and MyTech.

CFD's annual contract value or ACV

Dave Lyle: experienced considerable growth in fiscal 24 as highlighted on our prior call.

Dave Lyle: with this momentum continuing in Q1 with HDV now approaching $12 million at the end of Q1 of 2025.

Dave Lyle: As mentioned, we have now seen checks from nearly all FIs in the country, and we now have accumulated data sets on approximately 18% of all checking accounts in the country.

Dave Lyle: up from 17% last quarter, reflecting our expanding footprint. While we successfully onboarded more paying customers in Q1, penetration remains below 1% of U.S. financial institutions, signaling the substantial untapped growth opportunity.

Dave Lyle: MITEC's competitive advantage lies in our credibility and expertise in checked imaging and computer vision combined with the machine learning and broad scoring. This is supported by our multi-decade track record of execution with these banking clients.

Dave Lyle: Now looking ahead, our goal remains to double CFD's ACV in Fiscal 25 from our Fiscal 24 exit, driven by an exciting pipeline of opportunities.

Dave Lyle: While we expect variability in the quarterly pacing towards this goal, the momentum remains clear.

Dave Lyle: Just last week, we signed another Top 10 FI in CFD with a Plan Go Live early next quarter. Each incremental institution strengthens the network, increasing the value of the data and insights for all participants.

Dave Lyle: As the fraud landscape continues to evolve, MiTeX is uniquely positioned to deliver industry-leading solutions and tackle our customers' most pressing challenges, from payment fraud to identity and digital fraud, helping them stay ahead of emerging threats.

And finally, our fourth pillar, which is operational excellence.

Dave Lyle: remains the cornerstone of our strategy. This is supported by durable organic growth, SAS expansion, cost efficiency, and strong free cash flow conversion to maximize shareholder value.

Dave Lyle: While overall revenue growth was clouded by the timing of mobile deposit reorders,

Dave Lyle: Total SAS revenue grew 29% year-over-year during the first quarter, with deposit SAS revenue up 64% and identity SAS revenue up 26%, driven by CFD and MyVIP, respectively.

Dave Lyle: Total SAS revenue for the last 12 months reached $67.8 million, a 13% year-on-year increase, now representing over 39% of our last 12 months' revenue, a notable sequential improvement.

Dave Lyle: As mentioned last quarter, looking out to fiscal 26, we're pursuing a goal for SAAS revenue to approach half of our total revenue.

Dave Lyle: On the profitability front, adjusted EBITDA increased 32% year-on-year in the first quarter, driven by our commitment to cost discipline and operational efficiency.

Dave Lyle: Last 12-month free cash flow conversion improved during the quarter to 83%, which is benefited by positive changes in net working capital and reductions in our non-GAAP adjustments, reflecting discipline management of these non-recurring costs.

Dave Lyle: So, in summary, it's still early in the year, but we are encouraged by the company's progress in Q1, positioning MiTech for durable, profitable growth in FISPA 26 and beyond. With that, let me turn the call over now to Dave for a few comments on the financials.

Thanks, Ed.

Dave Lyle: I'll start by walking you through our results for the quarter, highlighting the drivers behind our performance.

Dave Lyle: From there, I'll share some additional insights into how we're approaching the balance of the year.

First, our fiscal T1-25 results.

Dave Lyle: Our total revenue for fiscal Q1 was slightly ahead of last year's at $37.3 million, consistent with the revenue phasing remarks on our last earnings call. As expected, deposit products revenue was impacted by mobile deposit deal timing, declining 9% year over year.

Dave Lyle: Our identity product revenue increased by 13% year-over-year, underscored by accelerating transaction volumes and a sequential acceleration in revenue growth from the fourth quarter.

Dave Lyle: Our non-GAAP gross profit for the quarter was $31.5 million representing an 84% non-GAAP gross margin and an adjusted EBITDA came in at $7.8 million representing a 21% margin.

Dave Lyle: Both exceeded our expectations due to the benefits of cost efficiencies within our identity product portfolio and our company-wide focus on cost controls.

More on this in a moment.

Dave Lyle: Turning now to the specifics of our revenue performance, let's start with deposit products.

Dave Lyle: Deposit revenue declined 9% year-over-year to $19.3 million in Q1, primarily due to a 21% decline in our deposit software license revenue.

Dave Lyle: This decline reflects the anticipated timing air pockets and mobile deposit renewals as highlighted in our prior call.

Dave Lyle: Given the nature of the term license revenue lumpiness, we would encourage investors to look at longer term trends to assess the health of this revenue stream and, therefore, would highlight that LTM deposit revenue for fiscal Q1-25 was $101.8 million.

Dave Lyle: I'd like to provide additional insight into the nature of renewal timing in mobile deposit solutions.

Dave Lyle: Customers and channel partners typically purchase one or more years worth of transaction inventory in advance to ensure uninterrupted support and avoid disruptions.

Dave Lyle: While purchase timing and usage generally move in tandem, they can occasionally diverge. Importantly, our revenue recognition occurs at the time of purchase rather than when the transactions are actually used. This dynamic creates variability in our revenue phasing.

Renewal timing is influenced by two key factors.

Dave Lyle: The number of years of transaction inventory purchased up front and the rate at which transactions are consumed.

Dave Lyle: While we have good visibility into consumption patterns and can reliably anticipate when customers will need to replenish their inventory, the intermittent nature of their purchasing behavior contributes to the uneven revenue phasing.

Dave Lyle: That said, our transactional volumes, a more stable indicator of the product's health, continue to maintain an annual run rate of approximately 1.2 billion transactions.

Dave Lyle: Deposit revenue highlights this quarter included deposit maintenance revenue which posted steady 3% year-over-year growth and deposit SAS revenue led by CFD which grew over 60% year-over-year accelerating from a 40% growth rate in the fourth quarter of last fiscal year.

Dave Lyle: Now turning to Identity. Revenue from Identity products grew 13% year-over-year to $18 million, driven primarily by a 26% year-over-year increase in Identity SaaS revenue.

Dave Lyle: This growth resulted from accelerating transaction growth in both MyVIP and MobileVerify, which, due to less impactful pricing pressures from MobileVerify this quarter, allowed the transaction growth to shine through to revenue.

Dave Lyle: All in all, we were pleased to see MobileVerify revenue growth year over year for two quarters in a row and to see MyVIP continue its growth trajectory.

Dave Lyle: Now to tie this all together, our total revenue increased nearly 1% year-over-year as 21% year-over-year growth in our services revenue streams were offset by a 25% decline in software and hardware sales.

Dave Lyle: SAS revenue grew 29% year-over-year driving the increase in services revenue.

Dave Lyle: helping to counterbalance the decline in total software and hardware revenue which reflected fluctuations in our biometrics point solution software sales and the timing of mobile deposit software renewals.

Dave Lyle: Moving down the P&L, we maintain strong unit economics, achieving an 84% non-gap gross margin in the quarter.

This was driven by over 99% gross margins.

Dave Lyle: on our software license revenue, and more notably, a 77% gross margin on our services and other revenue, an improvement of nearly 300 basis points year over year, and our highest quarterly services gross margin in three years.

Speaker Change: As Ed highlighted, these results reflect the early financial benefits of our efforts to increase automation, improve cost efficiency.

and others. Thank you.

Speaker Change: Non-GAAP operating expense for the quarter total $24 million, a $1.9 million sequential increase from $22.1 million in fiscal Q4.

Speaker Change: The sequential increase was primarily due to the annual management bonus accrual reset, which occurred in our first fiscal quarter, and a return to normalized operational spending levels after enforcing some near-term cost controls on certain discretionary spending during the fourth quarter.

Speaker Change: We ended up approximately 2 million dollars below the expected 26 million dollar operating expense level which we communicated in December, primarily due to delaying hiring and other discretionary spending while we finalized our go-forward plan with Ed as our new CEO.

Speaker Change: The $10.4 million bridge between our non-GAAP operating expense of $24 million and GAAP operating expenses of $34.4 million consists of $2.4 million in cash adjustments and $8 million in non-cash accounting adjustments as detailed in our earnings release.

Speaker Change: Focusing on our non-cash adjustments, this amount has decreased from 5.1 million dollars or 14 percent of revenue.

Speaker Change: in the first quarter of 2024 to $2.4 million or 6% of revenue in this quarter.

Speaker Change: This 700 basis point free cash flow conversion improvement reflects discipline management of non-recurring costs, such as executive transitions, legal, and one-time audit fees, all of which have declined both sequentially and year over year.

Speaker Change: Elevated restructuring costs this quarter are attributable to the cultural and operational integration initiatives that occurred, particularly during December, as discussed earlier by Ed.

Speaker Change: Tying this all together, Adjusted EBITDA for Q1 2025 reached $7.8 million, up 32% year-over-year, representing a 21% Adjusted EBITDA margin.

Speaker Change: After factoring in other income, interest expenses, and taxes, this equates to $6.6 million in non-GAF net income, or $0.15 per diluted share, based on 45.2 million diluted shares outstanding.

Moving on to our balance sheet and capital allocation frame.

Speaker Change: At the end of Q125, our cash and investments balance was $137.9 million, and we have $22.8 million remaining under our current share repurchase authorization.

Speaker Change: As outlined on our December earnings call, we moderated our share repurchase activity in Q125 to maintain balance sheet flexibility while we actively assess and implement the optimal capital structure for our business.

Speaker Change: The key near-term priority in our capital structure strategy remains addressing our $155 million convertible senior notes, which mature on February 1, 2026.

Speaker Change: These notes feature an attractive 75 basis points annual cash coupon, a conversion price of $20.85, and an effective dilution threshold price of over $26 per share due to note hedges and warrants.

Speaker Change: We remain confident in our ability to retire these notes when economically advantageous.

Speaker Change: supported by our existing cash balance and cash flow generation as well as any external financing options that will be available to us.

Now turning to the fiscal 2025 guidance.

Speaker Change: resulting in a new guidance range of 25 to 28 percent.

Speaker Change: From a revenue phasing perspective, we continue to expect quarterly revenue seasonality in fiscal 2025 to follow a similar pattern to that of fiscal 2024.

Speaker Change: Now, to help with operating expense modeling for Q2, we expect non-GAAP operating expense to increase sequentially to approximately $26 million plus or minus $1 million, with depreciation expense around 70 basis points of revenue.

Speaker Change: Looking ahead, we anticipate non-GAAP increase sequentially throughout the remainder of the year as we invest in R&D and sales to support our new products.

Speaker Change: And finally, our Excel-based supplemental financial package containing trended historical financials has been updated for Q125 and is now available on our Investors Relations website.

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

We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Speaker Change: Our first question is from Jake Roberge with William Blair. Please go ahead.

Jake Roberge: Now that you've been with MyTech a bit longer, do you still feel confident that this is a business that can return to that double-digit growth key year following these transitions?

So good afternoon, Jake.

Jake Roberge: With what we've been going through the business and some of the actions already, you know experience this past quarter What we have ahead of us here for this year that we were executing against

Jake Roberge: is all very encouraging. In particular, which I particularly enjoy, is meeting with customers and prospects and spending time with our go-to-market team out in the market. And just hearing the level of dialogue and conversations that we have.

Jake Roberge: in particular around fraud, and helping solve some of their glowing issues that they have, leveraging our capabilities in financial services.

Jake Roberge: and on the identity side around the metrics, around as I mentioned earlier, around the AI.

Jake Roberge: and digital kind of threat vectors that are continuing to increase significantly.

Jake Roberge: And as they recognize our capabilities with the platform, with not just on the identity side, but authentication, the orchestration, bringing in deep fake and, you know, injection attack capabilities, and then in particular in financial services is now combining in check fraud.

into the dialogue. It's very encouraging.

Jake Roberge: Now obviously, as we talked about, you know, kind of muddling and kind of clouding the growth this year really gets back to some of the timing on the on the license sales on, in particular, and mobile deposits.

Jake Roberge: You know, Dave talked about on that and we used to have to look at that on an LTM basis and you know Hopefully that just kind of stabilizes itself out

Jake Roberge: So, going forward, it's really around those key areas and the SAS and that attractive growth level.

Jake Roberge: And we'll progress more this year, as I mentioned on the last call. We'll report back closer to the end of the year some of the things that we have underway.

Jake Roberge: you know product, new products, other activities, and you know report back about how we're feeling about 26 and beyond, but so far quite encouraged by the progress to date.

Speaker Change: That's helpful, thanks. And then, on the check fraud defender front, great to hear the momentum there.

signing that top ten FI last week.

Speaker Change: Can you talk about how the partner channel for that solution is trending, though? I know you all have a few partners already live on the platform, so it would be great to hear how those relationships are building. And then, is there any update on the potential for some of your larger mobile deposit partners to shift over and start selling that solution as well?

Speaker Change: Yes, on both fronts there. The partnerships that we have today are growing. You've got to remember, CFD is an early stage, earlier, you know,

Speaker Change: product and solution with the FIs. We've rolled out with several partners. Those are growing. The opportunity list is growing with those as they get their sea legs and having a conversation, the dialogue.

Speaker Change: In addition to the conversations we're having with some of the larger channel partners as well, and those conversations progress.

Speaker Change: You know, I think as banks continue and all FIs continue to experience growing fraud and seeing the value of this solution, you know, they will also continue to push on.

their partners being some of the

indirect channels to the channel partners there of ours.

Speaker Change: I'm pushing up for this solution and obviously our direct conversations continue on and mount.

Speaker Change: You know, it's pretty compelling when we can sit there and have a conversation.

Speaker Change: Even though this solution has only been around for a short period of time, we've already now seen 18%...

David Lyle: Scott Carter, David Lyle, Scott Carter, Edward West, David Lyle, Scott Carter, David Lyle,

David Lyle: in your portfolio. And, you know, it's a very compelling ROI because of the level of fraud that we're able to assess and see, and we have those conversations. So it's compelling. Has a quick return for them on a growing threat.

Speaker Change: Okay, great. And then if I could just sneak one more in. The past few quarters you've talked about the larger IDR&D deals and then the two banking campaigns for ID verification that were pushed out of it. Can you just give us an update on how those those deals are trending through the pipeline and just how they've been accounted for in the guide?

Speaker Change: I'm going to turn to Dave on the prior quarter of previous campaigns.

Dave Lyle: Yeah, it's a good question. We talked about that back in the Q4 time frame initially at a reset there, as you know. During that time and even last quarter, we kind of reiterated we think these are deals that eventually will close. It's just going to be a long sale cycle.

Speaker Change: and that we should start seeing some benefit to that in the second half of 25 and into 26.

Speaker Change: And let me, if I might take, you know, as a step back on IDRD, where as you were talking about earlier, you know, where it's seen...

Speaker Change: You know, the capabilities that MyTech has with that platform, that team, you know, frankly now attested by U.S. Department of Homeland Security with our passive lightness capabilities.

Speaker Change: That is, you know, second to none worldwide in terms of those capabilities around passive liveness.

Speaker Change: which is increasingly more important on the digital fraud that we're sitting on and frankly what's just growing significantly on a day-to-day basis and that captures a lot of the conversations

Speaker Change: that we've been having with a lot of these higher charge businesses. So we're very enthusiastic about that and continue to evolve different products and solutions.

Speaker Change: that we sell directly into the market, or also how those are integrated into broader platform solutions here. So, glad you asked, thanks.

Yeah, very helpful. Thanks for taking the questions.

Speaker Change: Thank you. Thanks. The next question is from Mike Grondahl with Northland Securities. Please go ahead.

Mike Grondahl: Hey guys, thanks. The top 10 bank you signed up for CheckFraudDefender, can you talk a little bit about how long the sales cycle was there? And what kind of revenue can this customer generate over the next couple years?

Speaker Change: Well the, good afternoon, the sales cycle is long. This is a comprehensive, I think you noticed the company's talked about that in previous calls and quarters.

Speaker Change: It's a long cycle because you have a lot of people involved with it, validation, many of them have some other solutions, some internal, some external.

Speaker Change: solutions and just kind of going through the validation and seeing it, but then once you get into the data and see, it's very compelling.

Speaker Change: and the value to it, and frankly, the more the network grows, the more valuable it is for all parties involved, all the parties in the network, as well as MyTech.

Speaker Change: Was it over a year, Ed? Was it over a year, the sales cycle?

that particular one

Speaker Change: I would say yes, but that particular one, other ones are shorter. We've had other ones that have come in in a very, very short period of time.

Speaker Change: But obviously that's a very large F5 going through a lot of different validations, a lot of tests, a lot of validations throughout the business.

Speaker Change: And what would the revenue potential be, a range if you will, like in year 3 or 4 for this bank?

Speaker Change: Yeah, we can't get into specifics on a particular institution. I would just say it's compelling for both them and it's a very attractive for all of us.

Speaker Change: It's great to have them as a partner in the network.

Speaker Change: It's nice to see a top ten bank, that's for sure.

Speaker Change: mobile check reorders did they come in a little bit more than you expected or how did that shake out in the December quarter?

Speaker Change: Yeah, that wasn't much different than we expected. I'd say it was just a relatively solid quarter relative to what we thought.

Got it, okay. Hey, thanks guys.

Thank you. Bye.

Speaker Change: The next question is from Alan Klee with the Maxim Group. Please go ahead.

Yes, hi. You talked about

Alan Klee: outside of my VOP that the mobile verified product had less pricing pressure this quarter so that and that was different than the quarter before. Could you comment on the change maybe in the competitive environment and and and how you're also thinking about

selling more pushing on my VIP. Thank you.

Alan Klee: Yeah, good afternoon, Allen. I would start with the latter, where that is our focus, is growing my VIP. Obviously having that full orchestration platform.

Alan Klee: bringing in more signals, more capabilities for our partners and greater intrinsic value for everybody involved. That is our focus.

Alan Klee: Yeah, having that integrated in and bringing these others doesn't make any sense to have historically four versus let's have the best algorithms going into from an IDV standpoint into VIP.

Alan Klee: So, that's coming along and I would just say that'll increasingly, you know, over time as we have more of the business shifting as a percentage into VIP, the...

Alan Klee: You know, I think some of those pricing pressures will be less, so, you know, obviously it's always competitive and, you know, always going to have different situations, but we like this direction.

Speaker Change: Thank you and I just wanted to I was just I know you don't give any 26 guidance but

Speaker Change: But if you did hit double digits, low double digits, and if I assume that the deposit transaction-related businesses flat,

that it would no longer be.

Speaker Change: At least it wouldn't it wouldn't be a drag on on your

Speaker Change: margins compared to what you said last year was like a high single-digit impact on EBITDA margins. Is that that that could go away is that is is there anything I say that I'm missing something?

Speaker Change: Yeah, Dave, I don't think you're missing anything. Again, it's going to depend on all the work we're doing now. We're actually seeing great results on the things Ed was talking about on how we're optimizing.

Speaker Change: you know, some of the way we operate. If that continues and we're able to achieve what we want, then, you know, I think that can be a, the answer can be yes.

Speaker Change: As we said last quarter, we'll come back later in the year in terms of progress on that.

Speaker Change: Our objective here is to pass that fulcrum point sooner rather than later, and just do it there, but in a durable way.

and we'll keep you updated. Great, thanks.

Thank you very much. Thank you. Thank God.

Speaker Change: The next question is from Surrender Thinned with Jefferies. Please go ahead.

Speaker Change: Thank you. Ed, I'd like to start with some of the restructuring that's been going on internally. Can you maybe expand upon, when we think about the sales force, we think about the engineering department, where we are in that process,

Speaker Change: and what does it mean for like head count and just the ability to sell, you know, is there some sort of resetting that or some air pocket that we should be aware of as you kind of work through some of these changes?

Speaker Change: As we executed on that, you know, it's kind of went thoroughly throughout throughout the business working with the teams How do we get these different platforms integrated together? How do we get our our R&D resources closer to the customer tied in tightly with product and go-to-market side?

Speaker Change: That was done then. Now we're focused on rolling up the sleeves and executing.