Mitek Systems, Inc.

Hello and welcome to myTAC's fiscal 2024 first 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 telephone keypad, and to withdraw from the question queue, please press star, then two. As a reminder, this conference is being recorded. I would now like to hand the call to Todd Curley of MKR Investor Relations. Todd, please go ahead.

Thank you, Operator. Good afternoon, and welcome to MyTax Fiscal 2024 First Quarter Earnings Conference Call. With me on today's call are MyTax CEO, Max Karamekia, and CFO, Dave Lyle. Before I turn the call over to Max and Dave, I'd like to cover a few quick items. Today, MyTech issued a press release announcing its financial results for its fiscal 2024 first quarter, as well as preliminary results for its fiscal second quarter ended March 31, 2024. That release is available on the company's website at mytechch.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 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 for legal statements. These sort of new 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, April 15, 2024, 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 MyTech CEO, Max Garnacchia.

Thanks, Todd. Welcome, everyone, to our fiscal year 24 Q1 earnings conference call. As always, we appreciate that you joined us today, and thank you for your continued support and trust in MyTech. Today, I'll make some brief comments about MyTech's results and update you on the business priorities. I'll then turn the call over to Dave Lyle, our CFO, to review the first quarter financial results and provide our outlook. As previously discussed, In the first quarter of last year, we had a large one-time multi-year mobile deposit reorder that pulled forward three years of revenue into that quarter, creating a very difficult year-over-year comparison. It's important to note that this quarter's results are not representative of a business trend. In fact, to the contrary. With our fiscal 2024 guidance, We expect our deposits product revenue to grow 10 to 12 percent year-over-year on a normalized basis and our identity product revenue to grow 10 to 12 percent year-over-year on an organic basis. We anticipate that much of this growth will occur in the second half of the fiscal year, with the growth continuing in fiscal 2025. Our conviction in MITEC's significant market opportunity continues to grow, as we leverage our collective AI-powered data solutions to answer an accelerating fraud management needs in markets and geographies we serve. Evidence of this can be seen in three factors. Number one, the accelerated need for identity verification as fraud and cybercrimes grow in sophistication and continue to plague banks and enterprises of all sizes. Number two, the rapidly growing misuse of deepfakes and voice cloning poses a significant threat to personal and financial security. As a result, our award-winning biometric authentication technology is seeing rapidly increasing demand. And number three, the momentum we are seeing with check fraud defender offering is exceeding our expectations and highlights the rise in fraud across the board as a critical problem to solve. These factors reinforce our purpose and strengthen our market opportunity. As a reminder, our purpose is to empower regulated businesses to say yes to more good customers, more deposits, and more transactions with increased intelligence and customer safety. We focus on regulated businesses because the consequences are highest to those businesses and our core competency best suits those needs. Our mission informs our business decisions, and over the past decade, we've steadfastly developed solutions to fulfill this objective. With that said, let me briefly take you through our product evolution so you can better understand why we win. First, we leveraged computer vision to develop the advanced image processing capabilities that underpin all our solutions today. Let's call that MyTech 1.0. which began in 2008 and remains the undisputed leader in mobile capture and deposit technology with over 90 patents and 99 of the top 100 banks in the U.S. using our solution. In MyTech 2.0, we began about seven to eight years ago. We applied machine learning and AI to automate identity verification, mainly by providing document verification. Anticipating the need for more advanced identity attributes, We then integrated the unparalleled technology and biometrics from IDR&D acquisition in 2021 to prove liveness and support identity authentication. Then we added our low-code orchestration platform from WhoYou acquisition in 2022, yielding a solution today ready to tackle omnichannel identity fraud across the organization. Harnessing the latest advancements in Gen AI, coupled with the expansive capabilities of our orchestration platform, MyTech 3.0 is poised to be the leading authority in identity verification, authentication, and fraud management. By demonstrating our industry leadership, we are winning new channels within the banks and helping drive new benefits and efficiency gains for our banking customers, most recently by reducing check fraud. Banks are getting crushed by check fraud, which has reached an all-time high and rivals credit card fraud in the United States. In 2023, financial institutions reported unprecedented financial losses due to soaring check fraud. One institution reported $135 million in losses, while total losses in the Americas were over $20 billion, according to NASDAQ's Global Financial Crime Report. We launched Check Fraud Defender two years ago to help banks address this growing problem. Our solution offers banks a secure, cloud-hosted consortium that strengthens their existing fraud prevention and helps them significantly reduce financial losses. One of our CFP customers reported saving over $16 million in less than six months derived from both reductions in fraud check losses and reductions in operational expenses of dealing with this exploding problem. This significant cost savings benefit is driving substantial pipeline growth for this new product offering. At the end of fiscal 2023, we had a handful of CFD customers, and we exited the March ending quarter with over 20. By the end of fiscal 2024, which ends in September, we're targeting to have over 50 CFD customers contracted to participate in the consortium. Even with this rapid customer adoption, we're just scratching the surface as we target our nearly 8,000 MyTech banking customers. Starting to contribute to this pipeline are our channel partners. The channel has been a trusted blueprint for selling mobile deposit, and we're thrilled with the initial momentum we're seeing with the channel and check fraud defender. As I noted on our last call, CFD represents a noteworthy growth opportunity for MyTech. We estimate CFD has the potential to contribute $200 billion in annual revenue within the next five to seven years. CFD is also leading the way into adjacent opportunities for MyTech to help banks with new AI-driven fraud and identity management. By leveraging our unique access to rare and privileged customer data and transactional intelligence, we can deliver additional differentiated value to our customers and drive increased shareholder value. Regarding the identity line of business, we continue to execute our strategic priorities. While it is early and we have more to do, we are starting to see improved growth and increased market share for our identity orchestration platform, which we believe will drive higher returns over time. Market tailwinds continue to fuel the identity opportunity. In 2023, fraud scams and bank fraud schemes totaled $485 billion in losses globally. according to the Global Financial Crime Report from NASDAQ. Also in 2023, consumers reported losses exceeding $10 billion to fraud, a 14% increase from the previous year. Digital identity verification is no longer a back office concern, but a front line in the fight against fraud. There has never been a greater need for banks and technology providers to innovate together. NatWest is a great example of one such partner. and why our customers select MyTech verified identity platform, MyVIP, to take these challenges, take on these challenges. Like all major banks, NatWest faces rising threats from fraud rings and impersonation, but also the need to instill consumer confidence in their fraud defenses. Leveraging MyVIP, NatWest can configure different identity verification services to suit differing customer and business needs. as well as adjust for changing risk environments. As mandatory liveness detection becomes increasingly critical in digital identity processing, NatWest has enjoyed leveraging the platform to apply new biometric signals against growing use cases. As the Wall Street Journal reported this month, deep fakes are coming for the financial sector. Companies using photos or audios to verify customers' identities are preparing for bad actors gaining the system with generative AI. The surge in deepfake-related fraud underscores the need for vigilance and robust detection mechanisms. Facial liveness detection technology stands at the forefront of combating these challenges, offering a sophisticated way to distinguish genuine human presence from fraudulent and deepfake attempts. ID.Live FacePlus is designed to detect injection attacks and prevent deep fake fraud in a passive way, thus dramatically improving the overall customer experience. Most of today's facial liveness technologies are active, requiring users to blink, turn their heads, or move their phones back and forth. These systems are frustrating to the customer and can be tricked by fraudsters using computer-generated images, masks, or videos. MyTech's award-winning IDR&D teams have worked relentlessly to ensure our customers don't have to sacrifice usability for security. ID.Live FacePlus combines groundbreaking presentation attack detection with a unique approach to injection attack detection to prevent deep fakes and other fraudulent digital content. Instead of just focusing on the content of digital fakes like the image, it helps shut down the channel used to deliver it, such as a virtual camera. Customers and partners who have made the switch from active to passive facial likeness report a significant reduction in abandonment, lower false rejections of real users, and highly accurate presentation attack detection. Our IDR&D team's ongoing innovation continues to be at the center of our identity verification solutions, and their rapid integration of GenAI solutions continues to yield outstanding products. Leveraging the significant opportunities within burgeoning sectors influenced by AI and identity and fraud trends, MyTech is strategically positioned to expand its revenue and profitability. MyTech remains at the technological forefront, providing advanced machine learning and AI solutions, enabling businesses to effectively counter fraud while improving trust and convenience in digital transactions through our leading orchestration platform. Lastly, I'm thrilled that with the filing of our 10Q today, we are now current and back on track to file our quarterly and annual filings in the normal fashion. This has been a long and difficult process. With significantly improved financial controls and reporting in place, we are confident in our ability to maintain our filings going forward. I will now turn the call over to Dave financial results in more detail. Following Dave's remarks, we will open the call for questions. Dave, please go ahead.