MITEK SYSTEMS INC Q1 FY2025 earnings call

Mitek is a global leader in computer vision, digital identity verification, biometric authentication, and fraud prevention. The company's focus in fiscal '2025 is on enhancing solutions, operational excellence, and strengthening the foundation for durable profitable growth. Progress on four pillars: 1. Strengthening the foundation to provide a platform for durable profitable growth in fiscal '2026 and beyond, with meaningful progress made in Q1 and early Q2. 2. Scaling the identity platform business, where last 12-month identity revenue was $70.7 million, up from $68.5 million at the end of fiscal '2024, driven by factors like increased mix of MiVIP identity transactions and higher mix of automated identity transactions. 3. Expanding leadership in fraud solutions, with Check Fraud Defender (CFD) ACV approaching $12 million at the end of Q1 2025 and a goal to double CFD's ACV in fiscal '2025. 4. Maintaining operational excellence, with total SaaS revenue growing 29% year-over-year in Q1 2025, adjusted EBITDA increasing 32% year-over-year, and last 12-month free cash flow conversion improving to 83%.

Deposit products revenue declined 9% year-over-year to $19.3 million in Q1 2025, primarily due to a 21% decline in deposit software license revenue. Identity products revenue increased 13% year-over-year to $18 million. Last 12-month identity revenue was $70.7 million, up from $68.5 million at the end of fiscal '24. SaaS revenue grew 29% year-over-year during the first quarter, with deposit SaaS revenue up 64% and identity SaaS revenue up 26%. Non-GAAP gross margin was 84%, and adjusted EBITDA was $7.8 million, up 32% year-over-year.

Reiterates revenue guidance range of $170 million to $180 million. Raises the lower end of the adjusted EBITDA margin range by 100 basis points to 25% to 28%. For Q2, expects non-GAAP operating expense to increase sequentially to approximately $26 million, plus or minus $1 million, with depreciation expense around 70 basis points of revenue. Anticipates non-GAAP operating expense will continue to modestly increase sequentially throughout the remainder of the year as investing in R&D and sales to support new products.

Forward-looking statements are subject to a number of risks and uncertainties that cause actual results to differ materially. Non-GAAP financial measures have differences from GAAP reporting, and investors are encouraged to review SEC filings for a complete description of risks. Risks include variability in quarterly pacing towards goals like doubling CFD's ACV and timing of license sales in mobile deposits affecting revenue phasing.

Q: Jake Roberge asked about near-term opportunities, Check Fraud Defender partner channel, and ID R&D deals.

A: Ed West mentioned being encouraged by progress, partnerships for CFD are growing, and ID R&D deals are long sales cycles expected to benefit in the second half of '2025 and into '2026. Dave Lyle added ID R&D deals are eventually expected to close.

Q: Mike Grondahl asked about the sales cycle and revenue potential for the top 10 bank signed for Check Fraud Defender.

A: Ed West said the sales cycle is long due to comprehensive validation, and the revenue potential is compelling for both the bank and Mitek.

Q: Allen Klee asked about Mobile Verify pricing pressure and pushing MiVIP.

A: Ed West stated focus is on growing MiVIP, and as the business shifts to MiVIP, pricing pressures will likely be less.

Q: Surinder Thind asked about restructuring, sales process simplification, and Check Fraud Defender revenue opportunity.

A: Ed West said restructuring was done in Q1, focus is on executing and driving the business, and Check Fraud Defender is a key growth platform.

Q: Unidentified Analyst asked about MiVIP growth from cross-sell vs new customers.

A: Ed West and Dave Lyle said it will be a combination of existing customer expansion and new business.