Mitek Systems, Inc.

Good day, everyone, and welcome to today's MyTek Systems first quarter fiscal 2021 financial results conference call. Today's call is being recorded. At this time, I'd like to turn things over to Mr. Todd Kehrli, MKR. Please go ahead, sir.

Thank you, operator. Good afternoon, and welcome to MyTek's first quarter fiscal 2021 earnings conference call. With me on today's call are MyTek's 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, MyTech issued a press release announcing its first quarter fiscal 2021 financial results. That release is available on the company's website at mytechsystems.com. This call is being broadcast live over the internet for all interested parties, and a webcast replay 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. Four booking 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, for a complete description of these risks. Our statements on this call are made as of today, January 28, 2021, and the company undertakes no obligation to revise or update publicly any of the four booking 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 MyTek's CEO, Max.

Thanks, Todd. Good afternoon, everyone. Thank you for joining us today. I hope all of you and your families are staying healthy and safe. Jumping right into it, the first quarter was a solid one all around for Mytek, with both lines of business and each geography performing well. We delivered significant new account wins and impressive existing customer expansion, all of which resulted in another record quarter. First quarter revenue was a record $26 million, representing growth of 18% year over year. We also generated record non-GAAP net income of $6.2 million, or 14 cents per diluted share, up 23% year over year, and cash flow from operations was $8.7 million. We are energized by the ongoing momentum in the identity verification market, and the strength of our financial results demonstrates the expanding opportunity. We added significant new customers during the quarter, particularly in our target segments of financial services, gig economy and marketplaces and we continue to broaden our coverage with existing customers as they deploy our technology into new use cases and increase transactional volumes for traditional use cases. Almost all aspects of modern life now use digital channels. So the need to establish trust in the digital identities of customers, citizens, partners, and employees is rising rapidly. Identity verification has never been more relevant. Rapid advances in artificial intelligence are enabling novel forms of fraud such as synthetic media like bots and deepfakes. An increased scale and frequency of data breaches are all adding heightened pressure on organizations to protect their customers' data and access. Perpetrators and their methods of crime continued to evolve and accelerated during 2020. So even the best anti-fraud programs need to be continually assessed and refined. Organizations no longer have the luxury to simply verify access at the point of onboarding. Instead, they need to continuously authenticate and know exactly who their customers are across all channels and throughout the customer lifecycle. Consumer demand for outstanding digital experiences is also increasing pressure on organizations. Capgemini reports in its top trends in retail banking that superior customer experience is now a must for banks as design-centric technological innovations gains widespread industry acceptance and adoption. Customers expect the same experiences from their banking platforms that they get from their digital lifestyle applications offered by big tech players. Well-executed identity verification is primed to be the bridge between these two urgent requirements. Identity verification has moved beyond just being an enabler. It now serves as an integral element of most organizations' technology stack. And we believe the next decade of fraud prevention will be defined by an organization's approach to the lifecycle of continuous identity and access management capabilities. Our customers globally represent hundreds of the world's best known brands and banks. As we sharpen our identity capabilities and refine our relevance within these markets, our customers are discovering new essential use cases for identity verification and its vital role in enabling digital commerce. Avian Amro Bank, one of the largest banks in the Netherlands, implemented Mobile Verify into two new workflows for their banking members this quarter. In both areas, Thank you for joining us. and also experienced greater usage of their digital services. Additionally, in Q1, we continue to add new identity customers and grow our global pipeline of potential new identity customers and partners. This momentum is evident in both North America and Europe. MyTek's ambition is to be an indispensable partner in fighting identity fraud for the markets and geographies we target. Our approach is to provide advanced, linked and layered identity signals from initial user onboarding with documents, devices, and biometrics to authentication, reverification, and continuous identity fraud detection. Available today, MobileVerify includes the new standard in ID verification, face comparison with advanced liveness detection, as well as achieves the highest levels of assurance in fraud protection, data confidentiality, and security through our patented NFC solution. This solution uses a three-way face comparison to validate the document image against the one contained on the NFC chip and a high resolution selfie. Our biometrics also use passive liveness detection to provide customers with additional security against all aspects of identity fraud and can be used across any of the preferred channels. Our advanced technology determines whether it is a genuine selfie, and detect synthetic media and spoof attacks such as video reproductions, face masks or photos of photos. Mytek is the only enterprise class provider in the identity category and our standards of service remain unchallenged. MobileVerify delivers against all measurements of performance, acceptance, availability, speed and our professional services are the best in class. As such, our proven track record of success continues to grow as we expand our reach in this fast-growing market. Our relentless quest for customer success is delivered through a high-touch customer engagement and continuous product innovation. As we continue to innovate, we remain committed to exploring all avenues to achieve product superiority and expansion, whether through partnership, increased R&D innovation or acquisition. Turning to our deposits business for banks, Thank you for joining us today. which surveyed close to 2,000 American consumers. Among consumers who used their bank's mobile deposit capabilities this year, 42% did so for the first time in 2020. 85% intend to continue depositing checks using their mobile devices in 2021. To this point, 70% of respondents claim that depositing a check was one of the most important mobile banking features in 2020. As more and more customers demand the ability to use remote check deposit, we saw several large banks significantly increase the dollar value limits on checks deposited through the mobile channel, as well as reduce the number of days required to clear that check. Both are hugely important to consumers and we believe will drive the continued adoption of mobile deposit. During the first quarter, we successfully released Mobile Deposit 4.8 and Global Deposit 2.2. Both of which are mature, stable releases that will act as safe harbors for our customers and partners as they see rising demand for our solutions. Also, our deposits team is again working directly with the U.S. Treasury Department to ensure the smooth processing of physical checks issued by the IRS in subsequent rounds of economic impact payments approved by Congress. We are proud of our mobile deposit offering and its ability to assist people in this time of need. Now let me provide a brief update on the USAA litigation situation. As most of you know, the two USAA verdicts against Wells Fargo for patent infringement related to remote deposit systems are subject to post-trial motions that could overturn the rulings or result in new trials. These post-trial motions are still pending. Either way, the two cases will be the subject of appeals in the U.S. Court of Appeals for the Federal Circuit. Additionally, Mytek continues to prosecute its case for declaratory relief that our products do not infringe the patents at issue in the Wells Fargo lawsuit, and there are no updates in that matter. Separately, the U.S. Patent Office has exercised their discretion and declined our request for additional review of the validity of four USAA patents. Also, the Patent Office has concluded its review of certain challenges filed by Wells Fargo and did not invalidate any USAA patents based on that review. All of these decisions are subject to rehearing before the Patent Office and appeal to the U.S. Court of Appeals for the Federal Circuit, and we intend to continue to vigorously prosecute our case as Mytek invented all of its core technology, and we believe our products do not infringe on any USAA patents. Before I conclude, I want to thank Jeff for his many contributions to Mytek over the past three and a half years. As you are probably aware, in December, Jeff announced that he is planning to retire in 2021. Jeff has been a strong business partner for me since I joined Mytek and he is definitely going to be missed. The good news is he's agreed to remain our CFO until we find the right person for the job. A search is underway and Mytek has retained a top national recruiting firm to help us with this process. In closing, We're pleased with our strong results as we continue to strengthen our market position for 2021 and beyond. The acceleration in demand of our identity verification solutions is laying the foundation for future expansion, and our record results demonstrate how we have strengthened our market position. The myTECH workforce should take pride in delivering the technology, products, and services that our customers need and value in these unusual times. Their demonstrated resiliency and adaptability give me great optimism that we have the right team and culture to realize my tech's full potential. Now I'll turn the call over to Jeff to discuss the financial results in more detail. Following Jeff's remarks, we'll open up the call for questions. Jeff, please go ahead.