Mitek Systems, Inc.

Welcome to the MyTek Systems Third Quarter Fiscal 2020 Financial Results Conference Call. Today's conference is being recorded, and at this time I would like to turn the conference over to Todd Kehrli, MKR Group. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to MyTek's Third Quarter Fiscal 2020 Earnings Conference Call. With me on today's call are MyTek CEO, Max Carnecchia, and CFO, Jeff Davison. Before I turn the call over to Max and Jeff, I'd like to cover a few quick items. This afternoon, Mytek issued a press release announcing its third quarter fiscal 2020 financial results. That release is available on the company's website at myteksystems.com. 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 that are likely to influence the business going forward. Any factors discussed today that are not historical facts, particularly comments regarding our long-term prospects and market opportunities, should be considered forward-looking statements. These forward-looking statements may include comments about the company's plans and expectations of future performance. Forward-looking statements are subject to a number of risks and uncertainties which could cause actual results to differ materially. We encourage all of our listeners to review our SEC filings. including our most recent 10-K and 10-Q for a complete description of these risks. Our statements on this call are made as of today, July 30, 2020, and the company undertakes no obligation to revise or update publicly any of the forward-looking statements contained herein, whether as a result of new information, future events, changes in expectations, or otherwise. Additionally, throughout this call, we'll be discussing certain non-GAAP financial measures Today's earnings release and the related current report on Form 8K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release. With that said, I'm going to turn the call over to MyTech's CEO, Max.

Thanks, Todd. Good afternoon, everyone, and thank you for joining us today. Before I cover the highlights of our strong Q3 performance, Let me first restate our commitment to the well-being of the Mytek community during these challenging times. We continue to safely operate at full strength while working from home and applaud our global team members who remain highly effective in all aspects of our operations and are delivering on all service levels. Mytek is steadfast in our commitment to empower trust and convenience in the digital economy, and we strive to ensure that all businesses are able to operate safely online to our simple to use, secure identity verification solution. To reference a recent Forbes article, the pandemic has put trust in remote digital onboarding center stage, and it's not just banking. Government benefits, health services, online education, dating companies, and gaming are just some of the sectors witnessing the demand for identity know your customer services. COVID-19 has also accelerated the adoption of digital banking and with it, electronic check deposits. Mytek remains the clear market leader with its remote check deposit solution, which is used by more than 7,000 financial organizations and has enabled over 4 billion electronic deposits. During this rapid shift online, Mytek is proud to provide a secure remote environment that enables digital transactions. With that, let's turn to our strong third quarter results. We delivered record revenue of $25.4 million, representing 16% growth year over year. We also generated non-GAAP net income of $6.8 million, or 16 cents per diluted share, which is up 43% year over year, and cash flow from operations of $9 million. SAS transactional revenue grew 42% year over year, validating the positive momentum in the identity verification market, and we continue to experience growth from our highly profitable deposits product line with consumers and businesses adoption and utilization continuing to increase. If there was ever a time when mobile check deposit was essential, it is now. Outside of the expected consumer usage from stimulus checks, banks continue to invest significant resources to meet the rising volume of active users in mobile and digital channels. As anticipated, growth levels for the mobile deposit business increased this quarter. While this growth in transactions didn't immediately impact our revenue, as we sell blocks of transactions in advance, this growth in usage will eventually flow through to revenue as banks expend their licensed transaction volumes faster than planned. We are proud of our mobile deposit offering and its ability to both assist people in this time of need while also providing layers of defense against fraud. Now onto identity. The COVID pandemic has changed the way we live and work forever. Financial services and online marketplaces face shifting fraud landscapes, and companies and consumers that formerly transacted business primarily in person have been forced to embrace a digital-first approach. The need for fast and secure remote services is magnified, and regardless of where our customers were in their digital transformation journey, they are now looking to accelerate it. Digital identity verification is an essential use case in this new economy. Using it, businesses are able to quickly and accurately verify legitimate customers online, which in turn helps them mitigate fraud and stay compliant. It is therefore not surprising that adoption of identity verification as a service Thank you for joining us. A European customer who is a leading provider of digital identities in Europe is able to quickly rise to the increased demand in digital applications due to COVID-19 relief packages. Through their automated identity proofing process using mobile verify, they were able to provide secure access to critical government benefits for citizens impacted by COVID-19. These two examples highlight my tech's ability to scale as well as the short-term advantage We are proud to have partnered with our customers during these challenging times. It is still impossible to predict the longer-term impact that COVID-19 will have on our current customers and our pipeline of potential new customers. We see some customers returning to normal volumes while other customers are still navigating the unknown as large swaths of the global economy are being affected. In your term, we continue to execute on our growth plan through channel expansion and continued product development. Channel partners who extend our offering into adjacent segments provided positive momentum in this quarter. One example was our product launch with the Venetian Casino and Resort. MyTech Mobile Verify is incorporated into the Agilisys Our Guest Express mobile product. This solution enables hotel guests to check in remotely and bypass the front desk and traditional check-in procedures. This innovative solution supports the customer's need to meet new social distancing requirements while also allowing guests to skip long check-in lines. The Venetian reopened on June 4th and preliminary results from our go-live have been very positive. Having this stature of a hotel as a successful first client is a critical milestone for our partnership with Agilisys. as they look to be the leading provider of hospitality software to hotels, resorts, and restaurants around the world. We also signed a new partnership to address the significant opportunity in the e-notary space. In response to COVID-19, many states have issued emergency measures allowing notaries to perform remote online notarization. At the same time, Congress is pushing to pass the new Standardizations and Secure Notarization Act. which would authorize every notary in the U.S. to perform remote online notarization as companies turn to digital services in the wake of social distancing regulations. With MyTek Mobile Verify, eNotary users can simply submit a picture of their driver's license or other government-issued ID document along with answering a few questions to quickly determine the authenticity of the user and their identity. This will ensure that sensitive documents are only shared, signed, and notarized with verified parties. Innovation and product development are intrinsic parts of our growth plan, and adoption of our face-compare with liveness detection technology has been very well received in the global markets since its launch in February. This high-assurance biometric signal is an important competitive differentiator for MyTech. Another clear differentiator for Mytek is the caliber of our professional services, customer success, and support organizations. This quarter was no exception, with record implementations and go-lives collectively contributing to our one-of-a-kind banking-grade reputation. We are committed to helping our customers and partners as they adapt to recover faster and attempt to emerge from this crisis stronger. We continue to invest in talent and innovation and successfully onboard onboarded new hires across the globe through effective remote processes. In closing, we are pleased with our results, which include record revenue and significantly improved profitability. I'm proud to lead the Mytek workforce, who has rallied to deliver the technology, products, and services that our customers need and value during these extraordinary times. We have the teams, the vision, the technology, and a market need of a solution that Mytek is uniquely positioned to deliver. Together, this amounts to a significant opportunity for all our employees and shareholders. Now I'll turn the call over to Jeff to discuss the financial results in more detail. Following Jeff's remarks, we'll open the call up for questions. Jeff, please go ahead.