Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mitek Systems Inc (MITK, Financial) reported a 2% year-over-year increase in top-line revenue, reaching $47 million for fiscal Q2 2024.
- The company has successfully navigated through delayed SEC filings and regained NASDAQ compliance, positioning itself for future growth.
- Mitek Systems Inc (MITK) announced a CEO transition, aiming to align leadership with its strategic growth plans and market opportunities.
- The launch of new products like myPath and Check Fraud Defender has been well-received, showing strong market demand and contributing to revenue growth.
- Mitek Systems Inc (MITK) has a strong balance sheet and cash flow, enabling a share repurchase program of up to $50 million, reflecting confidence in long-term profitable growth.
Negative Points
- Despite overall revenue growth, some heritage identity products like Mobile Verify are experiencing lower revenue as transactions shift from agent review to automation.
- GAAP operating expenses for fiscal Q2 2024 increased significantly to $40.1 million from $31.5 million a year ago, primarily due to fees associated with delayed SEC filings.
- The company is facing pricing pressure from competitors, particularly in its identity verification market.
- Mitek Systems Inc (MITK) is still in the process of searching for a new CEO, which could lead to uncertainties in leadership and strategic direction.
- While the company is maintaining strong gross margins, there is an ongoing need to manage and optimize operating expenses, particularly G&A expenses which remain inflated.
Q & A Highlights
Q: Scott, are you running for the full-time CEO role? And do you anticipate any change in strategy going forward?
A: Scott Carter, Chairman of the Board, clarified that while he is passionate about the company's opportunities and will be fully dedicated as interim CEO, he is not a candidate for the permanent CEO role due to personal family considerations. Regarding strategy, he emphasized confidence in the current team and strategy, noting that the company will undergo its normal annual planning process to potentially reallocate resources to drive growth and increase contribution margins.
Q: Can you talk a bit more about what you're seeing with Check Fraud Defender? Do you still expect to exit this year with around 50 customers for that product?
A: Scipio Carnecchia, CEO, shared that Check Fraud Defender has been gaining traction, with over 25 signed contract customers and a growing pipeline. He highlighted the network effect of the consortium model, which enhances the product's effectiveness as more banks participate. The momentum and customer interest suggest a positive outlook for reaching the target of 50 customers by year-end.
Q: Dave, G&A expenses were up quite a bit, about 20% of revenue now up from 12% a couple of years ago. Are you taking a look at those? Are those all required for investment?
A: David Lyle, CFO, acknowledged the increase in G&A expenses, attributing it to inflated costs that will continue through the current quarter. He anticipates a significant reduction in these expenses starting in Q4 as external consultancy fees taper off, with further normalization expected in fiscal 2025.
Q: Regarding the identity side of the business, is it still on track to become cash flow positive in the fourth quarter?
A: Scott Carter confirmed that the identity business is on track to reach cash flow positivity in Q4, aligning with the company's strategic goals and previous statements.
Q: In terms of the search for a new CEO, are there specific qualities or experiences you are looking for?
A: Scott Carter mentioned that the search for a new CEO will focus on candidates with domain expertise in adjacent market categories, emphasizing the importance of strategic vision and operational execution. The company is working with a respected search firm and aims to cast a wide net to find the best candidate.
Q: Could you provide more details on the share repurchase program and its expected impact on the company's financial strategy?
A: David Lyle explained that the share repurchase program reflects the board's confidence in the company's long-term growth strategy. He noted that the trading window for share repurchases opens soon, and the company has a strategy in place for executing trades, which will be disclosed in future financial reporting.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
