Mitek Systems, Inc.

Ladies and gentlemen, thank you for your patience and holding. Please continue to remain holding on the line. This conference will begin in approximately one minute. Please continue to remain holding on the line. This conference will begin in approximately one minute. Good day, and welcome to the MyTek Systems third quarter fiscal 2021 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Todd Kehrli, MKR Group. Please go ahead, sir.

Thank you, operator. Good afternoon and welcome to my tech's third quarter fiscal 2021 earnings conference call. With me on today's call are Max Karnakia, my tech's CEO, and Frank Terrell, my tech's CFO. Before I turn the call over to Max and Frank, I'd like to cover a few quick items. This afternoon, my tech issued a press release announcing its third 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 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 opportunity, 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 29, 2021. 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'll call over to Mytek's CEO, Max.

Thanks, Todd. Good afternoon, everyone, and thank you for joining us today. We have a lot to cover, and I'd like to focus my comments on four key areas. First, our all-time record revenue and strong financial results. Second, the key investments we made during the quarter in people and technology. Third, providing more insight into the breadth of our growing product landscape, which has, fourth, resulted in a doubling of our total addressable market. Before I begin, I want to take a moment to acknowledge my tech nation. It has been over 16 months since we all started working remotely, and I continue to be inspired by the commitment and resilience from the global my tech teams. This quarter, we embraced virtual first as our workplace culture, providing our global teams with more individual flexibility and alternate remote work options. Remote work is now our primary experience for all of our employees globally, and the offices provide a hub for collaboration and teamwork. We have reopened our North American offices in San Diego and New York City, and the teams are taking advantage of the opportunity to meet in person. We look forward to reopening all of our offices in Europe as country specific conditions allow. In the meantime, thank you to all my tech teams. Your response and dedication to making our customers successful is invigorating. And because of your dedication, we had another outstanding quarter reflecting our laser focus on providing exceptional customer value to the world's leading banks, fintechs, and marketplaces. Jumping into our financial results for the quarter, our transactional identity verification revenue continued its strong performance, growing 33% year over year, Highlighting our leadership in this market and our deposits business grew 23% year over year as consumer adoption of mobile deposit continued to increase. All of this resulted in record revenue of $31.8 million, up 25% year over year. Also, we delivered non-GAAP net income of $10.6 million, or 23 cents per diluted share, up 56% year over year. and cash flow from operations of $9 million. In addition to our record revenue and strong financial results, we successfully added key people in technology to MyTech during the quarter. We announced the appointment of Susan Repo to our board of directors and Frank Terrell to our leadership team as chief financial officer. Susan is currently the chief financial officer at ICI, a technology company enabling access to real-time imagery from space for federal and commercial industries. She joined Mytek's Board of Directors in June. Her experience in finance and operational leadership roles with MariaDB, Tesla, Juniper Networks, and Agilent Technologies will be very valuable as we accelerate growth. Frank, who is with us today on the call, joined Mytek as Chief Financial Officer and Senior Vice President on July 16. Frank succeeds Jeff Davison, who announced his retirement at the end of last year, Prior to Mytek, Frank was previously the Chief Operating Officer of Adara, a predictive intelligence company. Frank is a well-recognized thought leader in digital identity and fraud management, having led Threat Metrics as its General Manager and Chief Financial Officer. I'm thrilled to welcome both Susan and Frank to the Mytek team. During the quarter, we also added key technology and talent with the acquisition of IDR&D, an award-winning Provider of AI-based voice and face biometrics and liveness detection. Their pioneering technologies in combination with MyTek's solutions provide increased protection against today's most sophisticated fraud threats such as deep fakes and synthetic voice augmentation. Together, we deliver on the promise of passwordless access and imperceptible continuous authentication throughout the customer lifecycle. IDR&D's multimodal approach to identity authentication directly addresses these threats by combining passive facial liveness and voice anti-spoofing technologies, accurately identifying and preventing advanced AI-based deceptions to ensure each transaction is completed by a real person. Over the next 12 months, we expect to invest further in strategic acquisitions to accelerate our vision and product roadmap. We will invest in acquisitions to add logically adjacent capabilities in areas where we see a relevant market opportunity. These acquisitions will fast track our innovation in the fight against fraud. Our investments demonstrate continued commitment to the identity category and our determination to provide trust and convenience in this connected world. Identity verification has never been more relevant. To quote Andres Cesar from Forrester, The necessities of the pandemic have forced customers into a rapid digital revolution that requires digital identity in order to compete. Rapid advances in artificial intelligence are enabling novel forms of fraud and increased scale and frequency of data breaches, all of which is adding heightened pressure on organizations to protect their customers' data and access. Organizations no longer have the luxury to simply verify access at a point of onboarding. Instead, they need to continuously authenticate and know exactly who their customers are across channels and throughout the entire customer lifecycle. And while identity verification is rapidly becoming an integral element of most organizations' technology stack, 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. With our acquisition of IDR&D, Mytek steps out ahead to lead this fight using advanced, linked, and layered identity signals from initial onboarding with documents, devices, and biometrics to authentication, reverification, and continuous identity fraud detection. Mytek is the only enterprise class provider with this breadth of offering in the identity category, and our standards of service remain unchallenged. As a result, we continue to see customers choose MyTek. During the quarter, we gained further traction in both direct and indirect sales, bringing on more banking, wealth management, insurance, fintech, cryptocurrency, and decentralized patient care organizations. In Europe, our credibility with the world's leading banks was once again confirmed with yet another pan-European bank fully integrating mobile verify identity services to fight fraud. Our customers globally represent hundreds of the world's best-known brands and banks, and our proven track record of success continues to grow as we expand our reach into this fast growing market. Mytek's goal is to be an indispensable partner in fighting identity fraud and the momentum we are experiencing is evidence of this. Our pipeline of potential new customers is strong, our existing customers are expanding, our channel partnerships are gaining traction and as the industry leading solution for identity verification, we are committed to maintaining product superiority and expanding our reach into this large and growing market. We're committed to innovation and delivering products that are simple and intuitive to use while protecting organizations from the growing threat of fraud. Which ties right back to our introduction of Check Fraud Defender during the quarter. Check Fraud Defender is an AI-powered, cloud-hosted consortium for financial institutions to counterattack check fraud. Check fraud is on the rise, and financial institutions see their existing fraud detection processes generate mountains of false positives. This causes them to hire more and more people to sift through false positives in search of fraud, costing significant time and money. Check Fraud Defender helps protect against the growing sophistication of these check fraud attacks, which are estimated to account for 60% of all fraud attempts against deposit accounts. A report by the American Bankers Association shared in January of 2020 reveals total attempted check fraud increased to $15.1 billion. The powerful new signal provided by Check Fraud Defender will enable banks to reduce fraud losses, lower false positives, and reduce operational costs. 20% of the top 25 banks have already licensed check fraud defender technology and are experiencing up to 90% savings in manual review time following its initial deployment. We're excited to see banks onboarding to our consortium and trusting MyTech with this very sensitive, competitive data. Although check volumes continue to decline, check fraud continues to be a major challenge for financial institutions in the U.S., and by automating more check fraud detection and lowering false positives that require manual review, my tech can decrease banks operational costs as well as fraud losses. We are very excited about this new deposits product offering that joins our already highly profitable mobile check deposits business, which continued to grow during the quarter with its revenues increasing 23% year over year. We look forward to continued adoption of our mobile check deposit product as more and more consumers discover its ease and convenience and are very excited about the coming adoption of our new check fraud defender offering. In closing, the acceleration in demand for both our identity and deposit solutions shows the central role that our products are playing in this digital economy and our record revenue demonstrates our strengthened market position in 2021 and beyond while even more importantly doubling our total addressable market through our new product offerings. Now I'll turn the call over to Frank to discuss the financial results in more detail. Following Frank's remarks, we will open the call for questions.