Mitek Systems Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 26, 2023

There are 7 speakers on the call.

Operator

Afternoon, and welcome to the Mitek's Fiscal 2023 Third Quarter Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Would now like to turn the conference over to Todd Kehrli of MKR Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good afternoon, and welcome to Mitek's fiscal 2023 Third Quarter Earnings Conference Call. With me on today's call are Mitek's CEO, Max Carnecchia And Interim CFO, Foaad Ahmad. Before I turn the call over to Max and Foaad, I'd like to cover a few quick items. Today, Mitek issued a press release announcing its fiscal results for its Q3 and 1st 9 months of fiscal 2023.

Speaker 1

That release is available on the company's website at miteksystems.com. This call is being broadcast live over the Internet for all interested parties and the webcast I want to remind everyone that on today's call, management will discuss 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 ks and 10 Q for a complete description of these risks.

Speaker 1

Our statements on this call are made as of today, October 26, 2023, and the company undertakes no obligation to revise or publicly any of the forward looking statements contained herein, whether as a result of new information, future events, Additionally, throughout this call, we'll be discussing certain non GAAP financial measures. Today's earnings release and the related current report on Form 8 ks 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 Mitek's CEO, Max Karnakia. Max?

Speaker 2

Thanks, Todd, and good afternoon, everyone. Thank you for joining us today. We're very excited to be talking with you today, Having filed our fiscal 2023 Q3 10 Q earlier today. With this filing, we are now current with our SEC filings. Before delving into the fiscal 2023 3rd quarter results, it's important to acknowledge the remarkable efforts and collaboration of our Mitek teams who have worked closely with BDO to upgrade our internal processes and bring our filings current.

Speaker 2

We extend our sincere appreciation to all members of Mytek Nation and our valued shareholders for their patience and support throughout this crucial process That was aimed at improving our business operations and instilling additional rigor. Now let me talk about fiscal 2023 Q3 results. It was another record revenue quarter for Mitek. We recorded 3rd quarter revenue of $43,100,000 representing 10% growth year over year. We also delivered non GAAP net income of $9,500,000 and cash flow from operations of 16 point $6,000,000 during the quarter.

Speaker 2

Our 3rd quarter results put us on track to meet our full fiscal year guidance revenue guidance of 18% growth year over year and 30% to 31% non GAAP operating margins for the full fiscal year. We expect our deposits revenue to grow over 20% year over year for the full fiscal year. While our identity revenue is on track to grow at least 18% year over year. Also over the trailing 12 months End of June 30, 2023, Mitek's net revenue retention, NRR rate was over 120%, which underscores The value our solutions deliver in the growing markets we serve. So let's dive a bit deeper into our two lines of business, Starting with deposits.

Speaker 2

The 2 major products in the deposits line of business are Mobile Deposit and Check Fraud Defender, both of which continue to yield strong revenue growth. Our deposits revenue increased 13% year over year in Q3 With Mobile Check Deposit reaching an incredible 925,000,000 transactions during the 1st 9 months of fiscal 2023, Mobile Deposit continues to gain traction as financial institutions encourage their users to adopt it as the preferred and safest way to deposit checks. This month, Bankrate, a financial services company that provides consumers with information and tools to help them make informed financial decisions, did a feature On the 7 tips for using mobile check deposit, we are delighted to see the interest in mobile deposit continue to grow. Additionally, our Check Fraud Defender product continues to show positive momentum as bank losses associated with check fraud skyrocket. Check Fraud Defender is a secure cloud based consortium that strengthens the financial institutions' existing fraud prevention By using 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.

Speaker 2

This relevant data is shared with participating banks, making it a powerful offering. One example of the rise of check fraud is a new check fraud defender customer who was experiencing 3 times the anticipated check fraud losses Per year compared to the estimates by the American Bankers Association, with their check fraud growing 220% in 2022. As this customer looked for a solution to address the significantly growing problem, a key requirement was the need for it to also have Case Management solution. Check Fraud Defender is integrated with Mitek's My VIP to provide this functionality and deliver other feature rich elements And was a significant contributing factor to winning this multi year, multimillion dollar check fraud defender opportunity. Now turning our focus to the identity line of business.

Speaker 2

In the era of ongoing digital transformation, organizations are Constantly striving to deliver seamless and secure online experiences for their customers. Identity verification has emerged as a crucial component of every customer interaction and digital journey. It plays a pivotal role in the success rate of customer onboarding as well as detecting and preventing attempted impersonation fraud and enabling organizations to meet the rapidly changing regulatory environment. Mitek has strategically positioned itself to meet these growing demands and prides itself on the comprehensive state of its solution, which adds value to countless digital use cases, including new customer onboarding, reverification and authentication for returning customers And high risk payments and credential resets, just to name a few. Mitek's verified identity platform, My VIP, Is a fully integrated identity platform that leverages our intellectual property and biometrics, image capture, computer vision And data intelligence and present it to the customer via a low code implementation platform.

Speaker 2

In addition, we added myPASS to its capabilities. Mypass is the industry's 1st multimodal biometric solution for continuous identity authentication. Mypath combines voice and face recognition using sophisticated liveness detection technology to defend against digital and deep fake 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 2 biometrics is a significant Security improvement beyond face recognition only systems many use today.

Speaker 2

Authenticating digital identities with MyPass Also reduces the risks associated with on device stored biometrics, which can easily be compromised, shared between people or overwritten with a simple passcode. Experts estimate that more than 80% of hacking breaches involve use of stolen passwords or credentials, Fraud that can cost large companies 1,000,000 of dollars a year. By moving to a more secure passwordless approach To digital account authentication, companies can both increase customer loyalty and reduce the risk of identity theft and Account takeover attacks. In Gartner's most recent market guide for user authentication, it states that user authentication is a cornerstone of digital identity And Identity First Security, citing that leaders should seek tools toolsets to minimize account takeover risks and optimize employee and customer user experience as a part of a cohesive cybersecurity strategy that reflects human centric design. I'm happy to say that our identity technology, including ID.

Speaker 2

Face, which is the world's first single image Passive facial liveness detection capability was highlighted in this Gartner report. ID Live Face is the only single image Solution independently tested to be both ISO 3,107-three compliant and unbiased. It provides facial liveness Detection to confirm that a biometric selfie includes the face of a real live person and not that of a machine generated image. Today, ID Live Face is used to process millions of monthly transactions for customers worldwide. Another of our biometric products highlighted in the Gartner report was ID Voice Verified, which is used to perform biometric Speaker verification to detect and prevent online fraud enabled by speech synthesis, voice clones and recorded replay.

Speaker 2

ID Voice Verified fights biometric spoofing with advanced voice liveness detection confirming the voice presented For identification purposes is that of a live present person. For large multinational banks To global marketplaces, our customers use our identity verification solutions to enable effortless and safe experiences For new and returning consumers, during the Q3, we increased our identity revenue 6% year over year despite the difficult macro environment. And in addition to our direct sales efforts that are focused on selling our solution to key market verticals such as financial services, insurance, telco, Healthcare and Marketplaces. We have made solid progress in building our indirect business through global partnerships With Experian, DocuSign, Clear and most recently Equifax. Our market leading offerings Are not only attracting new customers and partners, but are also garnering additional industry analyst recognition and product validation.

Speaker 2

A couple of months ago, Mitek was acknowledged by both Javelin and Liminal, leading analysts covering the identity category. We at Mitek are proud of the positive impact we are making in the fight against digital identity fraud, and we remain dedicated to advancing our technologies And delivering even greater value to our customers. Looking ahead for the deposits business, the timing of reorders can vary from quarter to quarter And we saw a significant portion of our reorders occur in the 1st 9 months of fiscal 2023. As a result, we expect deposits Revenue to be down in the Q4 of fiscal 2023. Having said that, we ask our investors to look at the deposits business on a full year basis.

Speaker 2

And as I said earlier, for the full fiscal year 2023, we expect our deposits business to grow in excess of 20% year over year. Moving on to Identity. As we have said in the past, we expect to see our Identity business continue to grow even in a difficult macroeconomic environment. However, the growth rates will vary depending on the timing of identity transactions. In the first half of fiscal twenty twenty three, We had several customers initiate new customer campaigns, which drove significant volumes of identity transactions for Mitek.

Speaker 2

These volumes are going to vary depending on our customers' actions and may cause our identity revenue to fluctuate quarter to quarter. Having said that, we expect to see mid teens organic revenue growth in Identity in Q4. We encourage our investors to look at our Identity revenue growth On a full year basis, as I stated before, we expect our identity business to grow at least 18% year over year for the full fiscal year 2023, and we remain well positioned to increase this growth rate and capitalize on our new business pipeline and the significant market opportunity ahead once conditions improve. We also continue to drive towards profitability for Identity Business, which we expect to occur by the end of fiscal 2024. During the quarter, we continued to generate Solid cash flow and strengthen our balance sheet.

Speaker 2

And with our market leading product portfolio in place, we do not need to do additional acquisitions to further penetrate the significant market opportunities we address. Instead, we are focused on using our cash flow to drive Opportunistic share repurchase programs. At this time, we are in a blackout period as we prepare our year end financials for our recently completed fiscal year and are thus limited in the actions we can take until we are outside of our blackout period. Moving on to guidance. We are reiterating our full year fiscal 2023 guidance, which calls for revenue growth of approximately 18% year over year At the midpoint of the range and for a non GAAP operating margin in a range of 30% to 31% for the full fiscal year.

Speaker 2

This puts us very close to being a rule of 50s company even in this difficult macro environment. Before I turn the call over to Fuad, I also wanted to announce that Scott Carter will be stepping down from his executive role Effective December 1, 2023, but will remain as our Chairman of the Board. As you may recall, We brought Scott on as the Executive Chair back in January of 2023 to provide additional day to day support To the senior management team as we worked on refining our organic growth plan and to provide additional oversight assistance as we focused on getting Our SEC filings current. In connection with his resignation in the executive role, Scott wanted it to be noted That the role was no longer necessary based on the company's being current on all its required filings as well as the substantial progress made around the refinement of the company's organic growth strategy. We want to thank Scott for his help over the last 12 10 months.

Speaker 2

Thank you, Scott, for all the hard work. And with that, 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 up for questions. Wadh, please go ahead.

Speaker 3

Thank you, Max, and thank you everyone for joining us this afternoon. I'll start with our fiscal 2023 Q3 revenue and operating results. For the Q3 of fiscal 'twenty three, Mitek generated 43,100,000 A 10% increase year over year. Software and hardware revenue was $21,400,000 up 10% year over year. The increase in software and hardware revenue is due to the growing growth of our biometrics offerings and mobile deposit reorders.

Speaker 3

As we have noted previously, our biometric revenue is transactional in nature and is part of our identity business. However, since it's offered on premise, We put that revenue into the software line for accounting purposes. Services and other revenue which includes transactional SaaS revenue, maintenance and professional services Revenue was $21,600,000 for the quarter, up 10% year over year. Our transactional SaaS revenue increased 5% year over year to 15,500,000. Deposits revenue for the 3rd quarter increased 13% year over year to 24,800,000 driven by mobile deposit reorders.

Speaker 3

Identity revenue increased 6% year over year to 18,300,000 driven by increases in identity SaaS revenue as well as growth from our biometric offering. We continue to deliver strong software and hardware gross margins, 98% for the quarter. Gross margin on services and other revenue was 70 percent for the quarter and total gross margin for the quarter was 87%, up 200 basis points over last year. Total GAAP operating expenses including cost of revenue for the Q3 were $41,300,000 compared to $38,300,000 in Q3 of last year. Sales and marketing expenses for the quarter were $10,300,000 compared to $11,200,000 a year ago.

Speaker 3

R and D expenses were $7,500,000 compared to $8,400,000 last year and our G and A expenses were $11,600,000 compared to $6,600,000 a year ago. The increase in G and A expenses is mainly the result of increased one time fees associated with our delayed filings and the addition of resources to our corporate services team to accommodate our scaling business. GAAP net loss for the quarter was $400,000 or a loss of $0.01 per diluted share. Our diluted share count was 46,500,000 compared to 45,200,000 shares a year ago. Turning to non GAAP results.

Speaker 3

Non GAAP net income for Q3 of fiscal 'twenty three was $9,500,000 or $0.20 per diluted share compared to a non GAAP We believe non GAAP net income provides a useful measure of company's operating profitability and cash flow by excluding amortization and acquisition related costs, Stock comp expenses, one time or non recurring litigation expenses, amortization of debt discount and issuing costs, restructuring costs and related tax impact of these items. A reconciliation of GAAP to non GAAP presentation is provided in our press release issued earlier today. Turning to the balance sheet, we generated $16,600,000 in cash flow from operations during the Q3, bringing our total cash flow, Cash and investments to $131,000,000 as of June 30, 2023. Now turning To 9 months results, for fiscal 2023, we reported $134,900,000 of revenue, a 28% increase year over year. Deposits revenue for the 1st 9 months increased 35% year over year to 83,800,000 driven by solid mobile deposit preorders and signing of our large multiyear contract in the Q1 that locked in Favorable pricing for us over 4 years.

Speaker 3

Due to unique terms of this contract, we've recognized additional license revenue related to future periods of approximately $7,000,000 in the Q1 of fiscal 'twenty three. Identity revenue for the 1st 9 months increased 19% year over year to $51,100,000 driven by addition of 2U revenue and strong growth in our biometrics revenue. Moving on to guidance, as Max noted, we are reiterating our fiscal 2023 guidance. We expect revenue for the fiscal year ending September 30, 2023 to be in the range of $169,000,000 to $171,000,000 an increase of approximately 18% year over year from the midpoint of the guidance range. In addition, we expect our full year fiscal 2023 non GAAP Operating margin to be in the range of 30% to 31%.

Speaker 3

Finally, we are very pleased with our operating results, included a record 3rd quarter revenue as well as solid operating margins and a very strong cash flow. We are especially pleased with getting current on our SEC filings. We want to thank everyone who has worked tirelessly over the last several quarters to make this happen. We truly appreciate all your efforts. That concludes our prepared remarks.

Speaker 3

Operator, please open the line for questions.

Operator

We will now begin the question and answer session. Our first question will come from Jake Roeburg with William Blair. You may now go ahead.

Speaker 4

Hey, thanks for taking the questions and nice to see you get back on file with the SEC filings. Appreciate the Color on NRR, not many software companies can talk about retention rates north of 120%, so that's pretty impressive. Understand the business is lumpy, so that's what's driving A step down in Q4. But excluding the timing of deals, how should we think about a sustainable net retention rate for both And ID verification segments over the next year or 2.

Speaker 2

Sure thing, Jake. Well, thanks. Appreciate the question.

Speaker 3

This is

Speaker 2

a new Well, it's not a new KPI to Mitek, but it's a new KPI as far as key performance indicator that We're sharing and been encouraged to try to provide some more insights into the performance of the different lines of business that we have. It's greater than Greater than 120 percent and it's over 110% for each one of the lines of business. So It's good in a lot of different ways. And we certainly aspire to keep it high like that. As far as trying to Provide some sort of guidance or expectation, over 110%, I think that's considered Better than market, certainly superior to our competitors and that's what we'll continue to strive for.

Speaker 4

Great. And then really nice to hear about the large multiyear, multimillion dollar check fraud customer that you signed, and even the synergies between the ID and check business that Help land that customers. Two questions on the check fraud fund. First, how long will it take you to implement that technology for that large of a customer? And then 2nd, are there any data points or proof of concepts you can share for what percent of fraud losses you've been able to save customers That have already signed on to the platform?

Speaker 2

Yes. I guess both those become somewhat specific to the individual institution. From a technical perspective, getting Check Fraud Defender switched on since it's cloud deployed and available in a secure environment like that, From a Mitek perspective, it's very, very quick. Obviously, we're dealing with Thanks for the like. A lot of compliance departments, a lot in the regulated entities.

Speaker 2

And so if we look back at the customers We've already been through on this. From the time they signed to the time they're actually processing checks in production, it can be 6 months, it can be 9 months. For some of the much larger institutions, it can be over a year. We're going to see revenue through the period of that, some of the implementation and just kind of assistance that we're providing for those customers. But I guess to the second part of your question, we now do have enough data with enough financial institutions that are in production are getting the benefit To see that the product market fit is there.

Speaker 2

The system is working. We are finding fraud. We are reducing Operational expenses. Our biggest customer, I want to be careful how I say this, but our biggest customer for Check Fraud Defender today is Eliminating tens of 1,000,000 of dollars of hard dollar losses on an annual basis as a result of using Check Fraud Defender, And they've been able to validate that. Now that is our biggest customer so far and we can have bigger as we continue to go.

Speaker 2

They're not fully deployed across all the different lines of business, but they've got a pretty significant share out there. And so it's definitely not just a feather in our cap, it's really helping with the other banks that are interested getting their heads around how beneficial this can be.

Speaker 4

Very helpful. And then if I could just sneak one more in. In the past, you've talked about the conversion of more checks and mobile deposits still being the largest Growth driver for that segment. But as you look into next year, do you still think that's the case or could that shift towards Check Fraud Defender Given the traction you're seeing there or potentially even just kind of the pricing levers that you have as contracts come up for renewal in 2024?

Speaker 2

It will be interesting to see how long it takes for Check Fraud Defender to eclipse the growth, the impact on growth From just mobile check adoption on a mobile banking app. I don't know, I don't want to predict that just yet. For some of the things we've already talked about, it's early days for Check Fraud Defender or the implementation cycle, some of that stuff. But it's very clear that That market is real and it's not just around defending against checks. What we're seeing now with the integration with MyVIP is that We're taking things from the dark web.

Speaker 2

We're providing identity attributes. There's a big Hypothesis currently is there's a bigger opportunity there over time to help financial institutions with other forms of Reduction of payment fraud, not just the use of checks.

Speaker 4

Very helpful. Thanks for taking my questions.

Speaker 2

You got it, Jake.

Operator

Our next question will come from Mike Grondahl with Northland Securities. You may now go ahead.

Speaker 5

Hey, guys. Thanks and congrats on getting your filings all caught up. I just want to make sure I understand the 4th Quarter, the implied in your guidance is $36,000,000 of revenue and that's clearly a step down from the last three quarters. That's Did I hear right that's primarily because the mobile deposit reorders were kind of pulled forward and there's some lumpiness With some new mobile ID customers and related to that, was there any Promotional activity to call out with mobile ID?

Speaker 2

Yes. I think just the first part of your question, I wouldn't use the term pull forward. I would say that On whatever their normal need is, some of the larger orders for mobile deposit happened earlier in fiscal 'twenty three Then later in fiscal 'twenty three. But we stand behind the deposit business, nothing's changed. I mean, When you zoom out and this is how we ask our investors to look at it, not look at it a month to month or quarter to quarter basis, but look at it over the full year And the deposits business this year is going to grow 20%.

Speaker 2

Yes, so that's the way you got to look at it as we look into next year. We're not going to necessarily provide guidance. But Other than the really tough comp we're going to have in Q1 because of the FY 'twenty three Q1, dollars 7,000,000 revenue that Fad was mentioning in his Remarks. We continue to see the business on hold being a solid growth business and We're doing everything we can with the price increases, more adoption for mobile check deposit or check fraud defender and all the great We're getting there. So it's a solid great business and we look forward to it being that way for a long time.

Speaker 5

Got it. Then mobile ID, any Promotional revenue to call out in the quarter?

Speaker 2

Yes. When you say promotional revenue, I think we've talked about this, but just for maybe folks that are dialing in The transaction volumes associated with identity verifications and authentications at times are tied to promotions that Let's use a bank as an example, that a bank can be running to be able to get their competitors' banking clients to Switch. And so we did see that in the first half of our fiscal year, where there were some pretty significant promotions there. If I just reflect on the 1st three quarters of the year, we've seen some really nice growth, particularly largely in some of the new product areas. So biometrics, the Who You and now IDIQ and MyPath.

Speaker 2

So while there's some challenging Elements to the environment out there, I think this is one that we expect the same way we've talked about You know, targeting 18% year over year growth for identity in FY 'twenty three when we think about next year or Maybe even longer term if there isn't a change to the environment. That's a we expect that to be a mid to high teens grower for us on an organic basis.

Speaker 5

Got it. On capital allocation, Max, you kind of said I think you said, hey, we're in a blackout right now. We really can't do anything incremental. If you weren't in a blackout now, do you think you'd do something Be more aggressive with that $131,000,000 of cash you have or kind of what thoughts do you have?

Speaker 2

Sure. So we want to make clear is We are really excited about the product portfolio that we have both for the deposits line of business and the identity line of business. And we've got what we need to be successful in the market. We continue to weather the current situation and then as things change and the environment improves, Get back to contract. From a capital allocation perspective, that translates into we're not out there hunting to do acquisitions.

Speaker 2

And as we've talked about, I think in the last three calls, which unfortunately have happened over the course of the last 60 days, we've been very heads down making Not only do we get on file and get current with our SEC reporting, but also that we're refortifying our corporate services team and Wadd talked about some of that in his prepared remarks, So that we can continue to record, file and support the operations of our business in a consistent way In our back office and our corporate services. So kind of translate that, I've got $130,000,000 of cash. The debt we have, We pay 75 basis points of interest on the debt. We're getting now something 4% to 5% interest on The cash that we have, we think the stock it's actually at the end of the day today. And If we had maybe some more latitude, the Board here will consider all of the different alternatives we have to use that Use that capital effectively and efficiently.

Speaker 5

Got it. Hey, I'll jump back in queue. Thanks.

Speaker 2

Thanks, Mike.

Operator

Our next question will come from Scott Buck with H. C. Wainwright. You may now go ahead.

Speaker 6

Hi, good afternoon guys. Thanks for taking my questions.

Operator

Max, can you talk a

Speaker 6

little bit about the assumptions that get you to breakeven or positive EBITDA In the Identity business by year end 2024, is it simply just scaling revenue another 20% or so or is there more to it than that?

Operator

Yes, I think there's

Speaker 2

more to it than that. I just so first, to get a sense of what we think growth should be, at least under the current circumstances, Macroeconomic conditions over the course of the next 18 to 24 months based on the earlier comments. And then also in the year, you've mentioned made it clear, the identity growth that we are seeing is really being leveraged and is largely driven by the new products. And so I think as you know, when we think about it, Scott, it's getting continued improved productivity from our go to market channels, both direct and indirect, As we're becoming more adept and better at bringing these new products to customers, for those who are in customers or whether that's enabling And supporting partners. So I think that's a big part of it.

Speaker 2

And there are places where we can be more efficient as a business generally, Whether that's go to market, whether that's the engineering and product side of things. And so I think it's a combination. It's the growth and then the other things I just talked about as far as getting greater From the activities that take us to the next level.

Speaker 6

Great. That's helpful. And then on G and A cost in the quarter, obviously, it's been elevated a bit Likely due to the extra auditing, I suppose, or the catch up. I imagine that carries through fiscal 4Q, but maybe in 2024 we start to see that back off a little bit. Is that fair?

Speaker 3

Yes, I mean, I'll answer that. Yes, I think that's generally accurate. I think we had kind of a heightened cost structure Or have your cost structure in Q3, a little bit into Q4, because as you know, our K wasn't filed until End of July. And then coming into next year, I think we'll see Some reduction, I think we'd get back to kind of a more normalized manner. And I think I've said that in the past, but I think we expect that to happen in 2024.

Speaker 6

Okay, perfect. And then last one, quick one. Did you guys repurchase any shares during the fiscal Q3?

Speaker 3

We did not.

Speaker 2

Okay, perfect. I appreciate

Speaker 6

the time guys. Thanks a lot.

Speaker 2

You got it, Scott. Thank you.

Operator

Our next question will be a follow-up from Mike Grondahl with Northland Securities. You may now go ahead.

Speaker 5

Hey, guys. Thanks. Just Max, you had said year to date mobile check deposit had 925,000,000 transactions. Do you have a similar apples to apples number for the prior year, just so we could see what transactions are growing?

Speaker 2

Sure. Now this is imperfect, but what I recall us doing in FY 'twenty two, the team celebrated Eclipsing 1,000,000,000 checks transacted for the year and it was the first time that that had happened. So you basically have Let's call it $1,000,000,000 in FY 'twenty two and whatever that number was through the end of Q3, just to kind of give you a sense. Now, obviously, that's not going to help you with price increases and the contribution of Check Fraud Defender or any of that stuff. And Where those checks come from, kind of the mix of those checks depending on which partner or which customer they come from, they're going to be Priced at a different level, but just to give you kind of a swag, which is probably the best I'm going to be able to do off the top of my head.

Speaker 5

No, that's fair. That's fair. And then, Claude, is there you mentioned G and A at 11,500,000 Over like $6,600,000 and you said there were some one time fees and some corporate Expenses you had, are you able to back out any one time fees for us just so we know what kind of a core number is there?

Speaker 3

I think we when you look at our reconciliation GAAP to non GAAP, I think we provide that Reconciliation because that those were GAAP numbers. I mean those are GAAP numbers as you know. But You can see that reconciliation. I think the big one in Q3 was the non recurring audit fees and we backed out $800,000 for that. There were some non recurring litigation costs, back on approximately $400,000 there.

Speaker 3

So you will you should be able to get that kind of for the back out for the non GAAP piece from those line items.

Operator

Got it.

Speaker 3

I mean, I think the reconciliation does a good job and I think you'll be able to see what's In the G and A section.

Speaker 5

Cool. And then just two more questions. One, Max, I just want to verify The multi year, multi million check fraud defender customer, that was new I think you said. Any thoughts when that comes online?

Speaker 2

Yes. I tried to give a sense as to how long It depends on the size of the bank and their compliance and regulatory issues. The technology, you can switch it on in a day, right? It's all cloud All cloud deployed. But I think in this instance, it could take us 6 to 9 months to get them to a place where their transaction Whether you're transacting in production at scale.

Speaker 5

Got it. Is that 6 to 9 months from like now?

Speaker 2

Probably 6, 9 months from a couple of months ago.

Speaker 5

Okay.

Speaker 2

Remember, we're talking about Q3 here in October.

Speaker 5

Good reminder there. And then lastly, you guys have talked a couple of times and you've pointed it out well. Hey, the midpoint of the guidance, dollars 170,000,000 of revenue, but in 1Q, you had that $7,000,000 Tied to the contract. Are we fair to sort of say core, maybe Baseline number for 2023 is like $163,000,000 Is that how you look at it?

Speaker 2

Well, we look at it based on where the revenue comes in, right? There's no non gapping of revenue. If we hadn't if The contract recognition of revenue was different where we would have taken the $7,000,000 over the Next 3 years, then yes, the revenue in FY 'twenty two I'm sorry, FY 'twenty three would have been 170 minuteus 7, which is 163. And then you'd start to see that 7,000,000 Maybe $7,000,000 $7,500,000 show up in the next 3 years in Q1 on the anniversary of the conference. But that's not that is absolutely not how the revenue is being

Speaker 5

Right, right. Okay. Okay. Hey, thanks guys.

Speaker 2

You got it, Mike.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Todd Kehrli for any closing remarks.

Speaker 1

Thank you, operator, and thank you everyone for joining us today. We look forward to updating you again next quarter. Our call has concluded. Have a wonderful day.

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Mitek Systems Q3 2023
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