Mitek Systems, Inc.

Good day and welcome to the MITAC Fiscal 2023 Second 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Todd Curley of MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to MITAC's fiscal 2023 second quarter and first six months earnings conference call. With me on today's call are MITAC's CEO, Max Karnakia, and interim CFO, Fwad Ahmad. Before I turn the call over to Max and Fwad, I'd like to cover a few quick items. This afternoon, MyTech issued a press release announcing its fiscal 2023 financial results for its second quarter and first six months. This 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 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 10K and 10Q for a complete description of these risks. Our statements on this call are made as of today, September 14th, 2023, 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 now turn the call over to MITEC's CEO, Max.

Thanks, Bob. Good afternoon, everyone. Thank you for joining us today. We're very excited to be talking with you today, having just released our fiscal 2023 second quarter and first six months results. We expect to file our 10-Q for the second quarter soon and anticipate filing our 10-Q for the third quarter before the expiration of our NASDAQ extension deadline of October 13th. With that filing, we will be current with our SEC files. Before I review the second quarter results, I want to take this opportunity to recognize and thank the MiTech Nation for their tremendous efforts, which has resulted in an exceptionally strong quarter. You have shown resilience despite the disruptions and distractions presented through the rigorous audit process. Thank you for your commitment to building a stronger MiTech. Now, let me talk about fiscal 2023 second quarter results. record second quarter revenue of $45.3 million, representing growth of 35% year over year. We delivered GAAP net income of $4.4 million for the second quarter and non-GAAP net income of $13.1 million. Also, we delivered cash flow from operations of $6.3 million during the quarter. These stellar Q2 results coupled with our record first quarter results, reflect some of our major accomplishments in the first six months of fiscal 2023, including being first to market with a multimodal biometric solution to elevate the fight against growing fraud. Beyond just our record revenue and earnings performance in the first six months of the fiscal year, we have distinguished ourselves as a critical solution in the fight against fraud. So let's dive a bit deeper. into our two lines of business, starting with deposits. The two major products, Mobile Deposit and Check Fraud Defender, continue to yield strong revenue growth, with deposits revenue increasing 35% year over year. Mobile Deposit continues to gain traction with consumers due to its convenience and ease of use, and the adoption of our Check Fraud Defender product showed positive momentum as bank losses associated with Check Fraud continued to skyrocket. Check Fraud Defender is a secure, cloud-based consortium that strengthens the financial institution's existing fraud prevention. Check Fraud Defender uses proprietary image analysis to extract data from stolen checks, account screens, and identification documents sold in criminal channels to provide alerts of potentially compromised accounts. As it is a consortium-based, relevant data is shared with all participating banks, making it a powerful offering. We believe Checkfront Defender will continue to grow its growth trajectory and be a growth driver for our deposits business for years to come. Before we move on to our identity business, I'd like to provide a quick update on the USAA litigation situation. While MyTech is not a party to any of the USAA lawsuits, We continue to pursue our declaratory judgment action against USAA to prove that our products do not infringe the four auto capture patents at issue in the USAA lawsuits as we look to provide support to our banking clients. Our declaratory judgment action is currently on appeal to the U.S. Court of Appeals for the Federal Circuit after the District Court found it did not possess jurisdiction to adjudicate our claims. Oral arguments on our appeal are expected late this year or early next year. Along with our efforts, there have been some positive developments in the matters related to USAA as the U.S. Patent Trial and Appeal Board, the PTAB, has invalidated five of the USAA patents that they have been relying on to sue various financial institutions, two of which are related to autocapture. We expect the PTAS to invalidate more of USAA's patents in the coming months as they continue their review of additional USAA patents, including one additional USAA patent related to auto-capture. We also intend to continue to vigorously prosecute our case as MyTech invented all of its core technology, and we believe our products do not infringe on any USAA patents. Turning our focus now to the identity-related business, we're pleased to report a robust 35% year-over-year growth in identity revenue, which is a remarkable achievement considering the challenging macroeconomic conditions we face. This outstanding performance underscores the increasing importance of identity verification in today's digital landscape. In the era of ongoing digital transformation, organizations are constantly striving to deliver seamless and secure data online experiences for their customers. Identity verification has emerged as a crucial component of every customer interaction and journey. It plays a pivotal role in ensuring regulatory compliance, detecting and preventing attempted impersonation fraud, and enhancing the success rate of customers onboarding with minimal friction. We have positioned ourselves strategically to meet the growing demands of our customers, whether it's at the point of initial customer onboarding or during the re-verification and authentication process for returning customers. MyVIP, our leading identity verification and authentication solution, leverages the power of AI with multimodal biometrics to provide our customers, consumers, with the utmost convenience and highest levels of security to meet the growing demands of the digital savvy consumer. MyTech's verified identity platform, MyVIP, is a fully integrated identity platform that leverages RIP in biometrics, capture, computer vision, and data intelligence, and presents it to the customer via a low code implementation platform. In the first half of fiscal 2023, we added MyPath to its capabilities. MyPath is the industry's first multimodal biometric solution for continuous identity authentication. MyPath combines voice, and face recognition using sophisticated liveness detection technology to defend against digital and deepfake attacks in real time. With the onslaught of machine-driven fraud attacks, voice and face biometrics used together with built-in liveness checks are becoming the strongest and most effortless means to authenticate someone's identity online. Combining the two biometrics is a significant security improvement beyond the face recognition-only system many use today. Authenticating digital identities with My Pass also reduces the risk associated with on-device stored biometrics, which can easily be compromised, shared between people, or overwritten with a simple passcode. My Pass is delivered via a developer-friendly SDK, which makes it easy to embed into a variety of customer use cases, such as simple account information updates, password resets, device rebinding, and high-risk financial transactions. Experts estimate that more than 80% of hacking breaches involve the use of stolen passwords or credentials, fraud that can cost a large company millions of dollars a year. By moving to a more secure, passwordless approach to digital account authentication, companies can both increase customer loyalty and reduce their own risk for identity theft and account takeover attacks. Staying with account takeover and highlighting our tremendous work in biometrics, Gartner predicts that in 2023, 20% of successful account takeover attacks will leverage deepfakes. MyTech's latest innovation, ID.Live Phase Plus, addresses the growing security threat posed to the institutions and consumers by deepfakes and digital injection attacks. ID Live Face Plus adds detection of digital injection attacks where fraudsters use hardware and software hacks to substitute a biometric capture with a fake digital image. It is the first known product to help ensure a proper selfie capture on both desktop and mobile devices with a frictionless approach that eliminates user abandonment caused by complicated security checks. As deepfakes have become more realistic and easier to produce, Injection attacks are an increasingly common method used to spoof biometrics. The innovative approach to combating peak fakes utilized by ID Live Face Plus will help our customers stay ahead of this increasing problem. Also in the first half of the fiscal year, a patent was awarded to MyFax ID R&D subsidiary for their novel approach to securing virtual assistant and chatbot sessions on a mobile device. The method involves the collection of multiple biometrics throughout a chat session without added prompts or tasks to the user. It provides a unique method to enable an intelligent chatbot to continuously confirm a person's identity and that they are in fact a live human being while maintaining a natural user experience. The timing of the Patent Award coincides with the launch and rise of the popularity of ChatGPT, a chatbot prototype that demonstrates dramatic advancements in conversational intelligence. The technology opens the door to a variety of new applications where interactive human to machine collaboration is productive. From a large multinational bank to government agencies, our customers and partners use our identity verification solutions to enable effortless and safe experiences for new and returning consumers. To quote our customer, Virgin Money, who are a proud digital first bank with a clear ambition to disrupt the status quo, quote, it is of paramount importance that the Virgin Money platform and the digital experiences the bank's customers encounter are world class. We want our smart digital tools to put our customers in control, and with MyTech, the journey helps our customers to successfully pass KYC where traditional name address checks have failed. We at MyTech are proud of the positive impact we are making, and we remain dedicated to advancing our technologies and delivering even greater value to our customers in the fight against digital identity fraud. During the first half of the year, our marketing efforts were concentrated on building momentum. We bolstered our digital presence and increased brand visibility through a series of global events, resulting in thousands of meaningful customer engagements. Our sales and marketing teams are not simply product sellers. They are dedicated to cultivating relationships and crafting tailored solutions. We firmly believe that this approach sets MyTech apart and is a vital element of our future-ready strategy. As we continue to innovate and adapt to the evolving digital landscape, our identity line of business remains a cornerstone of our success. We are committed to delivering solutions that exceed our customers' expectations, in an increasingly interconnected and security-conscious world. Looking ahead, I want to acknowledge the difficult macroeconomic environment and its impact on new enterprise spending. While we have delivered significant growth in the first half of our fiscal year, due to the timing of large deals, we do not expect the same type of growth to continue in the second half of our fiscal year. We, along with many other enterprise software companies, are seeing customers in our pipelines extend sales cycles and delay new purchases in an effort to control expenses in this challenging environment. While this posture continues, we will experience slower growth than we have, but we remain well positioned to capitalize on our new business pipeline and the significant market opportunity ahead of us once conditions begin to improve. Having said all of that, we are reiterating our annual guidance calls for revenue growth of 18% year-over-year at the midpoint and for the non-GAAP operating margin in a range of 30% to 31% for the full fiscal year. Now I'll turn the call over to Fuad to discuss the financial results in more detail. Following Fuad's remarks, we'll open the call to questions. Fuad, please go ahead.