Mitek Systems Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jake Roberge - William Blair & Co. LLC - Analyst : Yeah, thanks for taking the questions and welcome aboard Ed. Added commentary and disclosures were really helpful, so, thanks to both you and Dave. Ed, you made some comments about refining the strategy to, to better prioritize organic growth. Can you help us parse out the lower hanging fruit that you're looking to address this year versus is maybe some of the longer term initiatives you're exploring? And then you talked about the three-year CAGR of 13%. As you look at the business moving forward, do you still see that as kind of the medium term opportunity here Once you work through those initiatives around ID verification and check fraud?

Question: Jake Roberge - William Blair & Co. LLC - Analyst : The second part was really around -- you talked about the three-year CAGR of 13% I guess as you look at the business moving forward. Do you see that as the medium term opportunity here? Because you were talking about double digit ID verification growth, check fraud, doubling next year. Just curious how you're how you're looking at that medium term growth opportunity.

Question: Jake Roberge - William Blair & Co. LLC - Analyst : Okay, very helpful. And then just a two parter on check fraud defender. Have you started to see conversations with new customers change in any way now that you've had kind of those initial customers up and running and likely have a clearer ROI message. And then on the partner front with CFD, are there any other large partners that you may be able to activate on that solution this year?

Question: Jake Roberge - William Blair & Co. LLC - Analyst : Yes. You have great opportunity ahead and thanks for taking the questions.

Question: Mike Grondahl - Northland Systems - Analyst : Hey, guys. Thanks a lot and welcome, Ed. My first question is really for you. When you reviewed Mitek and now that you've been there a while, have you found a competitor on the mobile check deposit side?

Question: Mike Grondahl - Northland Systems - Analyst : And my question more specifically is, you have such a dominant position out there. 7,000 out of 8,700 banks. What's your view on the pricing power that Mitek has in mobile check deposit and potential future price increases?

Question: Mike Grondahl - Northland Systems - Analyst : Fair enough. Hopefully it's something you guys take a hard look at. In check fraud defender, kind of two questions there. When do you think you'll be able to disclose quarterly revenue? And you talked about investing in check fraud defender this next year, roughly what is the dollar amount of that investment?

Question: Mike Grondahl - Northland Systems - Analyst : Okay. And then just last one for Dave, I don't have the model in front of me, Dave. But overall, this fiscal '25, will OpEx be about what '24 was? Do you expect a little bit of savings or, or a little bit of elevated spending? Just OpEx relative to fiscal '24.

Question: Mike Grondahl - Northland Systems - Analyst : Got it. Okay. Hey, thank you.

Question: George Sutton - Craig-Hallum - Analyst : Thank you. Ed, welcome, nice to have you on board. So my first question is for Dave, if we go back a quarter, the challenge in that quarter was in identity we're moving from point solution sales to more of a platform sale. We had certainly the ID R&D group, more of the engineers selling the deals. It looks like we saw some improvement there. Can you just give us a sense of what happened in terms of some of those deals that we had seen pushing? How many of those happen in this this last quarter versus what we're looking for in the next fiscal year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 16, 2024 / 10:00PM, MITK.OQ - Q4 2024 Mitek Systems Inc Earnings Call

Question: George Sutton - Craig-Hallum - Analyst : Got you. So Ed, on check fraud defender. You gave an interesting statistic. We basically have data sets on 17% of the checks, but our current penetration is less than 1%. Can you just give us the delta between those two numbers? What does that 17% in your mind represent in terms of opportunity?

Question: George Sutton - Craig-Hallum - Analyst : Got you. And one other thing for you, Cardtronics was a wonderful turnaround and the outcome was great. I'm curious as you look at this opportunity coming in, how similar or how different do you view this to be versus that opportunity?

Question: George Sutton - Craig-Hallum - Analyst : Got you. Finally my compliments today. But when we look at operating expenses down $5 million quarter over quarter and service gross margins at an all-time high [76]. I know that was hard work and that's why we're seeing the great results today. So congratulations.

Question: Allen Klee - Maxim Group, LLC - Analyst : Yes. Hi. I wanted to touch on your guidance at the midpoint of your revenue guidance, it's implying around a 2% increase year over year. And you've mentioned that deposits are going to be relatively flat with check defender up and the rest of the stuff down. I'm assuming a couple of things that's going to mean that there's a negative margin impact there. And it seems like -- why do we have -- I'm a little confused on how we have confidence that deposits is going to grow in the future. But then second, the guidance kind of implies that you're not going to really see much growth in identity and I'm not sure why that is if you could give the reasons behind that. Thank you.

Question: Allen Klee - Maxim Group, LLC - Analyst : Okay. One last question just following up on identity. Mobile identity was it $68.5 million of revenue in fiscal '24. And I thought I heard you say that when you get to $85 million, it can switch over to profitability. But based on what you're talking about, it sounds like best case is that maybe we would see that in '26. But am I thinking about that wrong?

Question: Allen Klee - Maxim Group, LLC - Analyst : Okay. Thank you very much.

Question: Surinder Thind - Jefferies - Analyst : Thank you. Ed, I'd like to start a question with about the I'll call it the integration or transformation program that you're going through. Can you walk us through that in a bit more detail in the sense of how big a lift that is at this point? And when you kind of expect to get to the end target? Is that a multi year journey? Is it a year long journey where you get most of the benefits? Sometimes, as you get into these projects, they can turn out to be a bit more complex than originally anticipated.

Question: Surinder Thind - Jefferies - Analyst : Understood. Definitely hear you on obviously having an integrated tech stack or approach from a product perspective as well as will definitely help on the organic side. But what about the actual execution of that in the sense of these projects can also get expensive, right? Because sometimes you need a lot of bodies to throw at, to get the problem solved within some reasonable time frame. How are you guys managing that part of the equation? Because when we look across the industry, we see others that have gone through some of these programs that they're not cheap per se. And so usually, you'll see things like expenses adjusted out of the numbers. And will we see anything like that or is this somehow you're managing within your existing cost structure?

Question: Surinder Thind - Jefferies - Analyst : Okay. That's actually really good to hear. And then maybe a question for you, Dave, here. When we think about the guidance on kind of the expense levels of fiscal 1Q and then kind of the modest build up after that, is that kind of the normalized level of expenses here or do we expect to see incremental cost savings coming in? Obviously, I assume all of this is incorporated within the numbers, but just kind of the puts and takes on that component of the expense line.

Question: Surinder Thind - Jefferies - Analyst : That is correct, yeah.

Question: Surinder Thind - Jefferies - Analyst : Got it. And then I guess the final question here just if I heard this correctly, there was some commentary around the reduction in some modest level of reduction in spend in the identity business. Can you provide additional color on that, especially when that's a business that you're investing to build?

Question: Surinder Thind - Jefferies - Analyst : Got it. Okay. I appreciate the time guys. Thank you.