Mitek Systems(MITK) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Q4 2024 revenue was $43.2 million, a 15$1.1 million [38] - Identity products revenue grew 13% year-over-year, while deposit products revenue grew 17% [38] - Non-GAAP operating income for Q4 was $15 million, with a 34.8$172.1 million, roughly flat year-over-year, with a non-GAAP operating margin of 26% [41] - Free cash flow for fiscal 2024 was $30.3 million, with$141.8 million in cash and investments at year-end [47] Business Line Performance - Deposit products revenue declined slightly by less than 1% to $103.6 million, driven by timing of renewals, while Check Fraud Defender (CFD) showed strong growth [43] - Identity products revenue increased by less than 1$68.5 million, with growth in MiVIP offset by legacy ICAR hardware sunsetting and pricing pressure in Mobile Verify [45] - MiVIP platform transaction volumes more than doubled in several Tier 1 accounts, with revenue per transaction significantly higher than Mobile Verify [24] Market Performance - The U.S. check market processes 8-9 billion checks annually, with about one-third suitable for mobile capture. Mitek's platform handles over 1.2 billion transactions, representing a 40% digital adoption rate [44] - CFD's annualized contract value (ACV) grew nearly 60% year-over-year, exceeding $10 million at fiscal 2024's close, with strong interest expected to more than double ACV in fiscal 2025 [29] Strategy and Industry Competition - The company is focusing on organic growth, operational discipline, and transitioning to a higher proportion of SaaS revenue, aiming for SaaS to approach 50$24.2 million in fiscal 2024 and plans to continue share repurchases in fiscal 2025, albeit at a slower pace to maintain financial flexibility [47][48] - Mitek is transitioning some on-premise CFD customers to the consortium model, which may create a small GAAP revenue headwind but strengthens the consortium's data asset [50] Q&A Session Summary Question: Lower-hanging fruit for organic growth and medium-term growth opportunity [56][63] - The company is focusing on integrating solutions, improving algorithms, and rolling out new products like Digital Fraud Defender to drive organic growth [58][59] - Management sees a medium-term opportunity for double-digit growth, with a focus on achieving low-teens CAGR [64] Question: Check Fraud Defender (CFD) customer conversations and partner activation [67][69] - CFD has shown strong ROI, with datasets built on 17% of U.S. checking accounts, and the company expects significant growth in fiscal 2025 [67][69] Question: Pricing power in mobile check deposit [75][76] - Mitek has a dominant position in the mobile check deposit market, with pricing aligned to the value provided to customers [75][76] Question: CFD revenue disclosure and investment [77][79] - The company plans to report more on ACV for CFD and expects incremental investment in CFD to impact EBITDA margins by mid-single-digit percentage points [77][79] Question: Identity product growth and profitability [97][103] - The company expects identity product revenue growth to be driven by SaaS solutions, with a goal of reaching $80-$85 million in run-rate revenue for the identity portfolio to become margin accretive [97][103] Question: Integration and transformation program [106][110] - The company is focused on automating transactions, integrating platforms, and aligning the organization to drive organic growth and margin expansion, with significant progress expected in fiscal 2025 [106][110] Question: Expense levels and cost savings [113][114] - Management expects margin expansion beyond fiscal 2025 if operational efficiencies are achieved, with current guidance incorporating planned investments and cost reductions [113][114] Question: Reduction in identity business spend [115][117] - Spending on identity products will be flat to slightly down in fiscal 2025, with a focus on driving productivity and customer satisfaction while maintaining innovation [115][117]