Mitek Systems, Inc. (NASDAQ:MITK) Q4 2023 Earnings Call Transcript

Mitek Systems, Inc. (NASDAQ:MITK) Q4 2023 Earnings Call Transcript March 19, 2024

Mitek Systems, Inc. beats earnings expectations. Reported EPS is $0.15, expectations were $0.14.
MITK isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day. And welcome to Mitek’s Fiscal 2023 Fourth Quarter and Full Year Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.

Todd Kehrli: Thank you, operator. Good afternoon. And welcome to Mitek’s fiscal 2023 fourth quarter and year-end earnings conference call. With me on today’s call are Mitek’s CEO, Max Carnecchia; and CFO, Dave Lyle. Before I turn the call over to Max and Dave, I’d like to cover a few quick items. Today, Mitek issued a press release announcing its financial results for its fiscal 2023 fourth quarter and full year. 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 will be archived on the Investor Relations page of the company’s Web site. 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 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-K and 10-Q for a complete description of these risks. Our statements on this call are made as of today, March 19, 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 8-K 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 Carnecchia.

Max Carnecchia: Thanks, Todd. Good afternoon, everyone. Thank you for joining us today. I want to extend a warm welcome to our investors, employees, customers and partners joining us today. Thank you for your continued support and trust in Mitek. I’m excited to provide insights into our fiscal ’23 performance, spell out our strategic direction going forward and then hand the call over to Dave Lyle, our new CFO, to provide more financial details. At Mitek, our mission is clear. We help regulated businesses say yes to more customers, more deposits and more transactions with increased intelligence and customer safety. We achieve this by providing unique signals that seamlessly bring identity transaction intelligence together. Over the past decade, we’ve diligently developed solutions in pursuit of this mission.

Today, leveraging our most current applications of AI and machine learning, we are proud to enable over 7,900 organizations with new levels of security and control while protecting the digital consumer from the most sophisticated fraud threats. I’m very proud of our 200 machine learning and AI engineers, data scientists, developers and cloud op team members, who are dedicated to ensuring that our award winning product offerings remain at the forefront of the industry and their vital role in developing solutions to combat evolving fraud and enhance digital security. Thank you all my technicians for your ongoing commitment to our mission and the incredible work you do. Before we discuss our financial results for fiscal 2023, I’d like to introduce Dave Lyle, our newly appointed CFO.

Later in the call, Dave will provide further insights into our financial performance and outlook for fiscal 2024. Dave joined us in early January and has already made a substantial impact. With his broad experience across multiple business functions, Dave brings invaluable expertise to our team. We’re thrilled to welcome him aboard. I’d also like to express my gratitude to Fuad Ahmad, who served as Mitek’s Interim CFO for a little over a year. Thank you, Fuad, for your dedication and contributions during this critical period. Turning to Mitek’s record performance in fiscal 2023. I am pleased to announce that, we achieved solid growth across both deposits and identity, leading to total revenue growth of 19% year-over-year. Additionally, we achieved non-GAAP net income of $44.4 million and generated $31.6 million in cash flow from operations further strengthening our balance sheet.

First, looking at our identity products. Revenue grew 17% year-over-year in fiscal 2023, attributed to strategic efforts in customer acquisition and expansion within our existing customer base. Our net revenue retention rate for fiscal 2023 was approximately 117%, which underscores the value of our solutions delivered. Notable customer expansion included Lloyd’s, Chase and NatWest. We won over 100 new identity customers in fiscal 2023, including major names like Nationwide, Horizon, Virgin Mobile O2 and Telefonica. Nationwide Building Society was a very strategic win and a competitive takeaway. This British cooperative financial institution is in the process of rebranding under the slogan, A Good Way To Bank, and its primary goal is to differentiate itself based on user experience and security.

Mitek’s mission and approach are very well matched to this rebranding and we are confident it is one of the reasons we secured the business. Nationwide is implementing our solution in multiple use cases and has taken a phased approach starting with a remediation project and expanding to device binding and onboarding. The device binding and step-up authentication involves all app users as a replacement for card readers. Using our multimodal biometric solution MiPass, they have already enrolled 120,000 biometric faces and all 5 million app users will be invited by April of this year. Horizon, another significant win, was also a competitive takeaway. Horizon will leverage our identity verification and face comparison tools to support its fraud operations and customer experience teams, initially with their B2B business and soon moving to support the in-store consumer.

Access to digitally enabled services continues to explode and this accelerating shift to digital creates an immense challenge for organizations as they strive to balance customer experience with financial risk. As digital grows so do the opportunities for fraud. And as long as criminals can cleverly exploit weaknesses and an institution’s ability to distinguish a legitimate customer from an imposter, this threat will continue to grow. As such, we see customer interest, engagement and inquiries dramatically increasing. According to industry analysts, the identity market is growing between 14% and 16% annually and we have the opportunity to take market share given our unique proprietary industry leading biometrics offerings and orchestration platform.

Our channel partner investment has also yielded returns during the year. With Experian, our longstanding partner in North America, the UK and Europe, growing Mitek business by 17% year-over-year across all regions and we believe we are only just scratching the surface with them. Our most recent win with Experian is in the government healthcare in UK, and Experian is also one of the biggest partners in the telco space particularly in Europe. Partnerships like Experian are pivotal in our efforts to support new verticals, including government, telco, healthcare each of which presents a significant growth opportunity. As such, we continue to add new channel partners most recently with the industry leaders like Equifax and NICE Actimize. By leveraging these alliances, we aim to establish a strong foothold in new geographies driving expansion and enhancing our global presence.

Now let’s shift our focus to the non-financial milestones achieved during the fiscal year across each line of business and outline our FY24 priorities. We see a large and growing opportunity in the intersection of fraud and identity, especially in regulated environments like financial services, mobile operators, iGaming and healthcare. The role AI is playing in changing and accelerating regulation further benefits Mitek and our solutions. As a result, our growth products, including our MiVIP platform and the AI driven biometric solution MiPass have seen growing adoption. Today, integrated identity platforms are emerging technologies and essential tools that reshape how we secure and authenticate identities in the digital world. These platforms combine various verification methods, streamlining the process and enhancing security for our customers.

The market discerns this by categorizing the orchestrators and the orchestrated. MiVIP is a leading orchestration solution in the market today through its highly differentiated offering. Beyond traditional [Indiscernible] [synthetic] ID checks and physical document verification, our orchestration platform incorporates proprietary biometric analysis and liveness inspection in combination with highly personalized external data signals to ensure the legitimacy of identities. Thereby, preventing synthetic and computer generated frauds. In the ongoing battle against online fraud, deepfakes and injection attacks, our biometric components, which are part of MiVIP, play a pivotal role in enhancing security and safeguarding digital transactions. Our ID R&D biometrics revenue has grown substantially since we acquired ID R&D in May of 2021 as use case continue to expand and the need for continuous authentication becomes mainstream.

Voice biometrics expedite and secure customer authentication, especially when combined with face biometrics. Face biometrics also strengthen fraud prevention during a customers’ digital onboarding by verifying a user’s face against the government issued ID. Thus, thwarting attempts to bypass screening processes using manipulated images. [Indiscernible] detection technology confirms an individual’s physical presence authentication, effectively preventing the use of stolen photos, deepfake videos, masks and other spoofs by spambots and bad actors to create or access online accounts thereby significantly enhancing security. Leveraging all these proprietary technologies, in fiscal 2023, we introduced our exclusive four point multimodal biometric solution, the only one of its kind, utilizing the combination of face biometric, face liveness, voice biometric and voice liveness technologies.

This innovative solution, MiPass, seamlessly captures and verifies these biometrics simultaneously providing near instant authentication for digital users. Initially praised by expediting and securing customer authentication, voice biometrics are being challenged by the emergence of generative AI voice clips, known as vishing or voice deepfakes, which malicious actors exploit to infiltrate financial accounts. Our ID R&D labs were quick to respond. And early this year, we introduced IDLive Voice Clone Detection to protect against bad actors impersonating their victims to commit fraud and crime. With just three seconds of a person speaking, product can deliver a score indicating the likelihood that it was created using cloning technology. It can detect clone attacks that use replay or advanced software and hardware based hacking methods.

In a world of Gen AI, large language models and transformers where deepfake impersonations are proliferating so rapidly Voice Clone Detection plays an essential role in preserving trust between people and technology, and we are proud to be at the forefront of this innovation. According to Gartner, the number of deepfake attacks worldwide in 2023 was 10 times the number detected in 2022. With our leading industry biometric solutions preventing deepfakes, we expect biometrics and liveness to be a significant revenue growth engine for Mitek for years to come. We’re also very excited about how our identity product portfolio reinforces our deposits business. Our end-to-end orchestration platform MiVIP is now serving both deposits and identity and we’re seeing our pipeline of potential new business increase as we provide a comprehensive suite of machine learning and AI-based tools that can help organizations fight fraud.

Now let’s discuss our deposits business and where we see it going in fiscal ’24 and beyond. In fiscal 2023, we saw our deposits revenue increase substantially growing 20% year-over-year. We recorded over 1.2 billion mobile check deposits in fiscal 2023. Notably, 8 billion checks were deposited in North America throughout the year. Analysts forecast the sustained demand for check deposit services over the next decade with an estimated 5 billion checks per year still being deposited 10 years from now. We plan to capitalize on the increasing adoption of mobile check deposit among consumers and small businesses, as well as to continue to implement price increases as the leading provider of this solution. Now, let’s talk about the momentum we are seeing with Check Fraud Defender or CFD product offering.

One of our most exciting prospects for growth over the coming years. Banks are getting crushed by check fraud, which according to the recent NASDAQ report has eclipsed credit card fraud in the United States. CFD is making significant strides in combating check fraud with the potential to save banks billions of dollars in losses. We believe CFD has the potential to contribute $200 million in annual revenue within the next five to seven years. Let me walk you through how we got there. As a recent Boston Fed article noted, one industry analyst estimates over $24 billion in check fraud losses in 2023. We believe CFD could help banks conservatively avoid around 40% of those losses based on our unique ability to visually detect fraud through machine learning.

That would imply that CFD could potentially save approximately $10 billion in check fraud losses just this year. We believe a reasonably healthy bank friendly ROI to combat this size of check fraud would be in the range of 10:1. Meaning, we would believe banks would be willing to invest $1 million to prevent $10 million in check fraud losses. That would allow for a $1 billion annual serviceable addressable market or SAM for our Check Fraud Defender product. With less than a handful of potential competitors today, we believe a 20% market share should be achievable, especially given our leadership position and strong reputation in check processing. That would equate to $200 million in annual revenue opportunity for Mitek within the next five to seven years.

And remember check fraud is growing rapidly so these estimates do not consider the growth over the coming years. Also important to note is the potential bank savings don’t include additional operational efficiencies these banks will realize by using CFD and our new MiControl product, our latest achievement in empowering banks to control check fraud by integrating CFD with MiVIP. Productivity gains using MiControl are significant. In the review of potentially fraudulent check, agents can reduce what would have taken them as long as 10 minutes to just 90 seconds using MiControl. Also, CFD drives down false positives so that banks will spend more time looking at bad checks rather than good checks. We launched CFD two years ago to help banks solve this growing problem.

In fiscal 2023, one of our customers reported saving over $16 million in less than six months using CFD to prevent fraudulent check losses and reduce the expense of dealing with this exploding problem. Today, CFD boasts a select group of clients, including two of the top 10 banks in North America. Our dedicated sales team and partners are diligently pursuing the top 100 financial institutions, aiming to onboard dozens more as CFD clients by the end of fiscal 2024. Despite the deliberate pace inherent in the regulated banking sector, our progress remains promising, driven by the substantial cost savings our CFD solution can deliver. Encouragingly, our pipeline of potential customers continues to expand indicating a growing market interest in our offering.

Contributing to the pipeline are our channel partners. The channel has been the trusted blueprint for selling mobile deposit and we are thrilled with the momentum we are starting to see in the channel with CFD. Within a few months of onboarding our new partner Abrigo, we have already closed a couple of CFD deals. CFD is just the beginning of a very large opportunities for Mitek. MiControl is the latest of many products being built on MiVIP’s low-code no-code platform for fast and simple implementation that we believe can drive revenue growth for us over the next several years. We are already planning follow-on products to address other growing market opportunities in the retail bank payments, wire and peer-to-peer space, which we believe is a substantially larger opportunity than even CFD.

I want to reiterate the important growing intersection of fraud and identity. CFD is leading the way into adjacent opportunities for Mitek to help with new AI driven anti-fraud and identity capabilities. By leveraging our unique access to rare and privileged customer data and transaction intelligence, we can deliver a digital additional differentiated value to our customers and drive increased shareholder value. In summary, Mitek is well positioned for the continued growth in both revenue and profitability. We are capitalizing on a large growing end markets at the nexus of big secular trends in AI, identity and fraud. Mitek is delivering cutting edge machine learning and artificial intelligence tools, empowering organizations to combat fraud and enhance trust and convenience across every digital interaction through our leading orchestration platform.

Notably, the introduction of new products positions Mitek for our next phase of additional growth. I’ll now turn the call over to Dave to discuss the financial results in more detail. Following Dave’s remarks, we’ll open the call for questions. Dave, please go ahead.

Dave Lyle: Thanks, Max. I couldn’t be more excited to be here at Mitek. It’s a privilege to join a company that is not only a pioneer and a category creator in its space, but it also established itself as a clear market leader while demonstrating profitability. I’m looking forward to continuing my work with the team towards growth for years to come. I’m also looking forward to getting to know our shareholders and sell side analysts. With that said, let me take you through our financial results for fiscal year 2023, which ended September 30, 2023. Looking first at revenue, it would be valuable to spend a few minutes describing how we talk about some of our revenue streams for those of you who are new to Mitek, like myself. Our 10-K filings talk about two revenue categories, software and hardware and services and other.

On the software and hardware revenue side, we included mainly software term license revenue and to a limited extent hardware scanner boxes and on-premise appliance products revenue. Our deposits products contribute the vast majority to that revenue category as the mobile check deposits product is primarily an on-premise software license model. The only deposits product that will be primarily in the services and other revenue category is our Check Fraud Defender product. On the services and other revenue side, we include transactional SaaS revenue, maintenance and professional services revenue. Our identity products have historically contributed the vast majority to that revenue category as almost all identity products, except our ID R&D biometrics and some legacy hardware products are SaaS delivered, as they are cloud hosted solutions to our customers.

Our Check Fraud Defender product revenue is also primarily a SaaS delivered model so does contributing to the services and other revenue stream as well. So with that said, let’s review our financial performance for fiscal year 2023. Top line revenue for the fiscal year grew 19% year-over-year to $172.6 million, just above the preliminary revenue number we announced on December 7th of last year. Software and hardware revenue grew 21% to $88.4 million in fiscal year 2023, primarily due to an increase in sales of mobile check deposit products. Services and other revenue grew 17% to $84.2 million in fiscal year 2023. This increase was primarily due to strong growth in SaaS revenue from our HooYu and MiVIP products, as well as increased maintenance revenue associated with mobile check deposit software sales.

Shifting to revenue for our two major product categories, deposits and identity, let’s start with deposits. Deposits revenue grew 20% year-over-year in fiscal 2023 to $104.1 million. This growth was driven primarily by strength in mobile check deposit reorders and additional adoption and usage across the banking system. Please note that 75% of deposits revenue was in Mitek software and hardware revenue, 25% was in services and other. Identity revenue for fiscal year 2023 grew 17% year-over-year to $68.4 million, driven by our SaaS products revenue. Approximately 15% of identity revenue was in Mitek’s software and hardware revenue and 85% was in services and other revenue for fiscal year 2023. Moving on to gross margin. The total gross margin for fiscal 2023 was 86.7%, up 50 basis points from 86.2% in fiscal 2022.

We continue to deliver strong software and hardware gross margins of 98% while on services and other revenue our gross margin was 74% for fiscal year 2023. Operating expense for the fiscal year 2023 was $134 million compared to $112.6 million last year. Non-GAAP operating expense for fiscal 2023 was $96.4 million compared to $80.5 million last year. The year-over-year increase was primarily related to fees associated with our delayed filings, including audit, accounting and legal support and to a lesser extent the addition of resources to our corporate services team to accommodate our scaling business. Excluded from our non-GAAP operating expenses are about $29.5 million of non-cash accounting items and $8.2 million in non-recurring cash items.

The non-cash items were comprised of $19 million for amortization of purchased intangibles and $10.5 million in stock-based compensation expense. The cash items were comprised of $4 million mostly associated with non-recurring auditor fees and about $4.2 million related to restructuring, executive transition and litigation expenses. Please see our earnings release for a more detailed reconciliation. Our non-GAAP operating income grew 20% in fiscal 2023 to $53.2 million or a 31% non-GAAP operating margin. Excluded from non-GAAP operating income was $37.7 million in expenses as described above and are detailed in our GAAP to non-GAAP reconciliation in today’s earnings release. GAAP net income for fiscal year 2023 was $8 million or $0.17 per diluted share versus $3.7 million or $0.08 per diluted share in the prior fiscal year.

Non-GAAP net income for fiscal year 2023 was $44.4 million or $0.95 per diluted share versus $40.5 million or $0.88 per diluted share in the prior fiscal year. Our diluted share count for the year was 46.5 million compared to 45.8 million shares a year ago. Turning to our balance sheet. Our cash and investments grew from $101 million at fiscal year end 2022 to $134.9 million at fiscal year end 2023. $31.6 million of that $34 million growth was provided by our cash flow from operations. Moving on to guidance. We are reiterating our fiscal year 2024 revenue guidance range of $180 million to $185 million or a 6% growth rate at the midpoint of the range and a 12% growth rate if we backed out the future rear license revenue from the large one-time mobile deposit deal from fiscal 2023.

More specifically, material growth rates are expected this year from Check Fraud Defender as it moves from its nascent stage to accelerated growth, coupled with strong expected growth from the flagship identity platform MiVIP, MiPass and our ID R&D biometrics products. This growth is expected to be somewhat offset by revenue declines associated with our retirement of legacy ICAR products as they move towards end of life. It’s also important to note that we won a large mobile check deposit customer in fiscal Q1 of 2023, which creates a difficult year-over-year comparison. From a quarterly trending perspective, we expect top line revenue to be lowest in fiscal Q1, ramping in Q2 and again in Q3 with Q4 expected to be in the range of Q3 revenue.

Quarter-to-quarter changes due to deal timing may influence these expectations. From a year-over-year perspective, we expect most of the year-over-year revenue growth quarters to be in the fiscal Q3 and fourth quarter. We continue to expect our identity business to reach standalone profitability on a fully burdened basis in the fourth fiscal quarter. This will be driven by revenue growth as well as additional operating leverage in the sales, marketing and R&D functions. With regard to taxes, we expect to be a taxpayer in fiscal 2024 with a tax rate in the 25% plus or minus range of GAAP pretax net income. In addition, we are reiterating our fiscal full year 2024 non-GAAP operating margin guidance range of 30% to 31%. Moving to our capital allocation plans.

We continue to generate solid cash flow and strengthen our balance sheet in fiscal 2023, and we expect to continue to generate cash in fiscal 2024. As Max has previously said regarding acquisitions, with our market leading product portfolio in place, we do not need to do additional acquisitions to further penetrate the significant market opportunities we have in front of us. Our team with our Board of Directors continues to assess all capital allocation alternatives routinely. As we are currently in a blackout period, while we prepare our fiscal quarter 10-Q filing, we are limited in the actions we can take until we are outside of our blackout period. Before I conclude, I would like to touch on where we are with our SEC filings and our expected Investor Relations activity during fiscal 2024 following those filings.

With the fiscal year 2023 10-K filing behind us, just out in the past 20 minutes, our team with our auditors are already working diligently to get current on our 10-Q filing for the first fiscal quarter of 2024 ended December 31, 2023. The first fiscal quarter 10-Q filing was due February 9th. Based on last year’s 10-Q filing timing, we believe it should take about a month to file the fiscal first quarter 10-Q, which would put us sometime in mid-April, assuming no delays arise. We would then jump into our normal cycle to deliver the second fiscal quarter 10-Q in May. If we are able to achieve this timeline, we expect to increase our Investor Relations activities from there. This would include upcoming investor conferences in May and June with Needham and William Blair, as well as our long awaited Analyst Day, which we’re targeting to occur before our fiscal year end, which ends on September 30, 2024.

We look forward to getting out and telling investors about the big opportunity we have in front of us. In closing, we are very pleased with our results, which included record revenue and record non-GAAP net income for the full year of fiscal 2023. We look forward to growing again in 2024 as we continue to deliver industry leading machine learning and AI driven tools that enable us, our customers to prevent fraud. Operator, that concludes our prepared remarks. Please open the lines for questions.

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Q&A Session

Operator: [Operator Instructions] Our first question today will come from Chad Bennett of Craig-Hallum.

Chad Bennett: Just a couple of things. Just it was great kind of laying out the linearity of the year from a revenue standpoint. I guess, as much as you can say now that we’re effectively almost halfway through the year and maybe it more pertains to the identity part of the business, just in terms of the macro and demand environment and volume environment on that side of the business. Any insight, Max, into kind of what you’re seeing there or your thoughts on the demand or macro environment on that part of the business right now?

Max Carnecchia: I don’t know that I have a substantive update for you, Chad. I think things are similar to when we’ve talked previously at least in the recent past. With where interest rates are, we definitely see challenges on anything that’s kind of loan origination or interest rate sensitive refinancing, new mortgages, HELOCs, even credit card issuance at these rates. But I do feel like we see some stabilization across the more revenue generation areas. And I think as we’ve talked about in the past, when times get tough, fraud increases, right? And so we’re seeing that on both sides of the business, both the identity side but obviously, with Check Fraud Defender. I could go on for hours on kind of the stats and what’s being perpetrated on that side. So hopefully, that’s helpful.

Chad Bennett: And just in terms of the penetration you’re seeing with MiVIP in MiPass in the biometric solutions. I guess, can you give a sense of where you are in terms of penetration in your existing base with those solutions?

Max Carnecchia: I would say we’re in the very early stages. For our international audience, I don’t want to use a baseball example. But first 10%, 15%, I don’t know — first inning, I use baseball anyway. For me, the gen AI hype that’s been out there over the course of the last five or six quarters, when you bring that to the fraud and identity space, it changes almost everything. What company’s regulated organizations are confronted with the changing expectations of consumers, the regulators who are trying to help but can’t move fast enough and the regulations that are in place, things like IDAS-II in Europe and FIDO2, which is really more protocol and framework here in the US. Those were built and delivered and kind of conceptualized before the real rollout of transformer large language model gen AI.

And it’s a wind up to say every one of these large regulated entities, whether they’re banks, telcos, healthcare, they’ve got to figure out liveness. Who’s on the other side of that device and how do I make sure — not only who they say they are, but that it’s actually a live human. And we are just so well positioned with the be-first be-best approach to face and voice, I feel really good about it. It’s going to take some time, right? I mean, early days, it’s going to take some time. But I don’t know how you solve that problem otherwise, I really don’t know how you do that in a gen AI world.

Chad Bennett: And just on — I like the way you laid out the opportunity in Check Fraud Defender. And I mean it certainly seems like you guys are seeing traction with that product. I guess maybe the best way to ask it is, have you rethought kind of the growth potential of the deposit side of the business, Max? I think it’s certainly outgrown, I think, at least my expectations, maybe yours, the last couple of years. But I think we’ve just generally thought about that business being maybe kind of high single digits, 10%, it’s certainly outgrown that materially. But just — are you thinking any differently about that side of the business and kind of the growth rate the next three to five years?

Max Carnecchia: No. We continue to believe the base check business, mobile check deposit and the check intelligence business will continue to be contributing growth to Mitek from a revenue perspective and continue to throw off impressive operating margins and profitability. We’re going to do that because the adoption of mobile banking is still in the very early days, right? When you use a stat about we processed in FY23, 1.2 billion checks, that sounds amazing. And then you say, hey, 8 billion checks were in the system. So you’ve only kind of scratched the surface, and you published some reports that kind of both the Bank of Americas and the Wells and the JPMC. So there’s a lot more to go there, as you know, because we’re a dominant market player.

We have pricing power, both with the end using banks as well as with the core service channel providers that we rely on. So I think between the idea of those two things, we anticipate this continuing to be a growth element of the business. And CFD, the Check Fraud Defender, just because of the explosive growth of check fraud, we think that’s going to be — we see it around, right? It’s a — one of the fastest growing things I’ve ever seen right now.

Operator: Our next question today will come from Jake Roberge of William Blair.

Unidentified Analyst: This is [Jacob] [Indiscernible] on for [Jake Roberge]. So obviously, Check Fraud Defender is seeing solid adoption,but just curious from a go-to-market perspective. Are you dedicating teams to the product yet or is it still combined with the classic check deposit business and leveraging those preexisting relationships? And then I have another question.

Max Carnecchia: So the first part of that question, since its inception, since we announced going back almost two years ago and introduced Check Fraud Defender, we have had a dedicated team of sellers, presales engineers, customer success and implementation. So it started out as a very small team, it’s about almost 3 times the size of what it started out to today. But yes, it is a dedicated series of individuals that make their mortgage payment and make their car payments based on the success of helping customers fight fraud in the check area.