Good day, and welcome to the Mitek third quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw a question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, and welcome to Mitek's third quarter fiscal 2022 earnings conference call. With me on today's call are Mitek's CEO, Max Carnecchia, and CFO, Frank Teruel. Before I turn the call over to Max and Frank, I'd like to cover a few quick items. This afternoon, Mitek issued a press release announcing its third quarter fiscal 2022 financial results. 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 website. I want to remind everyone that on today's call, management will discuss certain 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-K and 10-Q, for a complete description of these risks. Our statements on this call are made as of today, July 28, 2022, 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.
Thanks, Todd. Good afternoon, everyone, and thanks for joining us today. Once again, I'm happy to report that we delivered record revenue for the quarter with revenue growth of 24% year-over-year. Congratulations to all Mitekans for their standout work, and thank you for your ongoing commitment to this important mission and our customers all over the world. Before Frank reviews the financials in more detail, I want to focus on our significant market opportunity we are addressing. As consumers transact more business online than ever, identity verification has become essential to safe digital access. In 2021, traditional identity fraud and identity fraud scams affected 42 million consumers and cost companies a staggering $52 billion. While this is a very large number, the number of people online today is growing rapidly and is in the billions.
Identity fraud and the cost of this fraud is only going to get bigger. Mitek's identity solutions have been developed to address these growing challenges by providing organizations with the insights, technology, and solutions needed to determine if the individual accessing their digital account is verified, authenticated, or in fact real. With growing digital usage, verifying the identity of consumers before they can make a transaction or access a service enables organizations to prevent identity fraud, keep their consumer information safe, and meet the rising pressure of global regulation. Two notable use cases driven by increased regulation are Right to Work and Right to Rent laws in the U.K. Both require identity verification. The Right to Work law, also known as Workplace Choice, gives workers the freedom to choose whether or not to join a labor union in the workplace.
This law also makes it optional for employees in unionized workplaces to pay for union dues or other membership fees required for union representation. The importance of identity verification and identity authentication is critical so that unions, employers, and governments stay in control and minimize fraud related to these activities. Right to Rent is another government policy that was introduced in the U.K. under the Immigration Act of 2014. It places restrictions on undocumented residents accessing rented accommodations in England by making all adult documents prove they are in the U.K. legally before being granted tenancy. This quarter, HooYu was granted government digital identity provider certification to provide ID verification services for Right to Work, Right to Rent, and criminal records checks, making HooYu one of just two identity services providers in the U.K. to have achieved this highly anticipated high-profile government trust mark.
In addition to these new regulatory use cases, our customers are also diversifying their use of identity verification and leveraging the automation and scalability of Mitek's Mobile Verify as they find creative ways to attract new consumers to their digital platforms. This quarter, one of Mitek's large banking customers ran a series of televised promotional offers as part of a countrywide advertising campaign. There was an overwhelmingly positive response, which resulted in massive sign-ups and millions of identities being verified using our solution. We're proud to be their identity partner, powering this rapid surge in consumer onboarding twice within a thirty-day period. Additionally, an interactive gaming client launched a new in-game feature providing its users with the ability to make micro-transactions within the game to unlock specific features or game-changing enhancements. This feature was hugely successful and resulted in over 1 million age verifications within the first week.
Mobile Verify powered the identity verification workflow to support this, and in doing so, enabled the customer to generate significant additional revenue. One last example of Mobile Verify in action this quarter was a large tech company that used our solution to verify the identities of all the attendees of its Global Developers Network conference, highlighting the remote access use case as an emerging opportunity for an identity verification solution. These are just a few examples that demonstrate the ongoing and expanding business requirement for digital identity verification. As more transactions move online, our solutions are more necessary than ever, and they need to be fully inclusive. This quarter, ID R&D, our biometric subsidiary, whose products are used in over 70 countries globally, announced the results of the first-ever independent evaluation of a face liveness detection product for demographic bias.
The assessment was performed by iBeta, an accredited biometric testing laboratory. The results confirmed that ID R&D's IDLive Face product for facial liveness detection exhibits fairness in terms of bias for target demographic groups, including gender, age, and race. Liveness detection is considered essential in preventing spoofing attacks where biometrics are used for digital identity verification and authentication. Similar to biometric matching algorithms, a biased liveness algorithm can lead to an increased rate of inaccurate results for individuals in a particular demographic group. This, in turn, can cause digital banking and other services to be less accessible to these customers. The outcomes of this report will be used to inform ID R&D's ongoing development of machine learning-based products in support of responsible AI. It also reaffirms Mitek's commitment to providing inclusive digital access for all.
Mitek's product arsenal of identity solutions was also boosted further this quarter when we launched the Mitek Verified Identity Platform, MiVIP. Built to make digital access faster and more secure than ever, MiVIP gives companies comprehensive, secure control over the entire customer identity journey, saving them time and money. Mitek's new platform is the culmination of our best technologies, our most recent acquisition of HooYu, and our ongoing commitment to putting our customers in control of their consumers' experiences. As I previously mentioned, having a single platform that easily orchestrates and configures a KYC or know your customer journey to manage identities, minimize friction on good customers, and identify bad actors is imperative for digital commerce. With HooYu KYC technology at its core and the ID R&D biometrics and Mobile Verify verification integrated, we believe that MiVIP is the most comprehensive end-to-end identity platform on the market today.
Its low-code/no-code capabilities enable us to offer the platform to businesses of all sizes and quickly set them up to manage the KYC processes without needing an army of developers. This results in a significantly larger addressable market, more vertical segments, more geographies, and of course, more use cases for our existing customers and partners. MiVIP also provides organizations with a more complete view of the consumer for more accurate decisioning throughout the customer's journey, resulting in optimization of workflows and ongoing improvement to the customer experiences. We understand that business requirements change by region and vertical segment, and consumer experience is everything. To meet these requirements, we provide flexibility with identity data signals. MiVIP offers our clients orchestration capabilities that allow them to use the most relevant data signals for their business and the flexibility to change signals with ease.
Identity has moved beyond just being an enabler of digital commerce. It's now an integral element of an organization's technology stack because getting it wrong means billions of dollars of identity fraud, theft, or fines. This is definitely not a solved problem. It's getting worse and much more complicated. With MiVIP, we offer the market a full end-to-end platform that gives them the power to fight back. We're excited about MiVIP and how it expands our offering and the addressable market and positions us for accelerated growth. The examples of the expanded use cases I mentioned earlier point to greater adoption of digital identity verification as an essential recurring step in a customer's safe digital journey. Our mission at Mitek is to provide trust and convenience to every digital transaction. We look forward to sharing our progress with you all in the quarters to come.
With that, I'm going to turn the call over to Frank to discuss the third quarter's financial results in more detail. Following Frank's remarks, we'll open the call up for questions. Frank, over to you.
Thanks, Max, and thank you, Mitek nation, for all of your significant contributions this past quarter. Bridging from Max's remarks, the consumer's race to digital channels has meant that fraud attacks continue to accelerate and the increasing complexity costing companies billions in fraud losses and significant operating costs. As discussed, the torrid pace of these attacks has been especially difficult for organizations that lack the internal technical resources, infrastructure, and the expertise to respond at the speed of fraud. As such, has created urgency for orchestration-enabled solutions like our Mitek Verified Identity Platform or MiVIP. During the third quarter, we fully integrated the orchestration technology from our HooYu acquisition, and we launched MiVIP. We also continue to integrate our go-to-market teams and are already building a sales pipeline for our new orchestration platform here in the U.S.
As Max mentioned, during the quarter, we saw several new use cases for our digital identity verification solution, such as the regulatory requirements for the U.K. around, as Max stated, Right to Work and Right to Rent initiatives. Verification for this new interactive gaming customer for in-game purchases, and also excitingly, attendee verification for important events, all of which bolster our view that digital identity verification is an essential ongoing step throughout a customer's digital commerce journey. To that end, we are excited about the launch this quarter of our end-to-end identity platform, MiVIP, which significantly expands our addressable market and will position us to accelerate our identity revenue growth. With that preamble, let's unpack the Q3 revenue and operating results in more detail. Mitek generated three-quarter results of $39.3 million, a 24% increase year-over-year.
Software and hardware revenue was $19.8 million, up 17% year-over-year. The increase in software and hardware revenue is primarily due to the growing contribution of ID R&D, continued Mobile Deposit reorders, as well as Check Fraud Defender revenue. One item to point out is that ID R&D had another very strong quarter, as I mentioned, contributed to the growth in our overall software and hardware line. While this revenue is transactional in nature and is part of our identity business, because it's offered on-premise, ASC 606 requires that we put that revenue into the software line. Services and other revenue, which includes transactional SaaS revenue, maintenance and consulting services, was $19.5 million for the quarter, up 32% year-over-year. Our transactional SaaS revenue increased 45% year-over-year to $14.7 million.
Driving this growth in transactional SaaS revenue was increased Mobile Verify volumes as well as the addition of HooYu SaaS revenue. An important highlight here to note is that even without the addition of HooYu SaaS revenue, our transactional SaaS revenue would have increased solidly both sequentially and year-over-year. As we move forward and ID R&D, which is an on-prem solution, continues to grow, we will start to move away from providing transactional SaaS revenue numbers on a quarterly basis and will instead break out deposits and identity revenue to provide a more holistic picture of each business. For Q3 2022, our deposit revenue increased 5% year-over-year to $21.9 million, driven by Mobile Deposit reorders and a nice contribution from our new Check Fraud Defender product offering.
Identity revenue increased 58% year-over-year to $17.4 million, driven by the expanded use cases we mentioned earlier, as well as the addition of HooYu SaaS revenue and the very strong contribution from ID R&D. We delivered strong software and hardware gross margins of 97% for the quarter. Gross margins on services and other revenue was 79% for the quarter, and our total gross margin for the quarter was 88% compared to 89% in Q3 last year. Total GAAP operating expenses, including cost of revenue, were $38.1 million, compared to $26.3 million in Q3 of last year, and this increase is due to the investment to grow our identity business and the additional costs associated with the acquisition of ID R&D and HooYu.
Sales and marketing expenses for the quarter were $11.2 million, compared to $8.1 million a year ago. R&D expenses were $9.4 million, compared to $6.9 million a year ago. Our G&A expenses were $6.7 million, compared to $5.6 million a year ago. GAAP net loss for the quarter was $0.9 million or $0.02 per diluted share, reflective of the investment made to accelerate the growth of our HooYu business and the restructuring costs associated with realizing the acquisition synergies. Our diluted share count was 45.1 million shares compared to 45.2 million shares a year ago. Now, as a reminder, our earnings releases include a reconciliation between GAAP and non-GAAP net income.
We believe non-GAAP net income provides a useful measure of the company's operating results by excluding acquisition-related costs and expenses, stock comp expense, litigation expenses, amortization of debt discount and issuance costs, restructuring costs, and the related tax impact of all these items. Non-GAAP net income for Q3 was $10.2 million or $0.23 per diluted share, a decrease of 4% year-over-year. Our non-GAAP adjustments included $4.5 million of amortization and acquisition-related costs, $3.6 million of stock comp expense, $2 million in cash tax differences, $1.8 million of restructuring costs, another $1.8 million amortization of debt discount and issuance costs, and $438,000 of litigation expenses for the quarter. This was all offset by the income tax effect of pre-tax adjustments of $3 million.
Looking ahead, we expect sales from our new MiVIP platform will help us accelerate our identity revenue growth in fiscal 2023. While we are extremely excited about the opportunity with our new MiVIP as well as our other growth initiatives, we are cautiously optimistic about our ability to deliver similar revenue as we have had in the third quarter, again in the fourth quarter. As we have mentioned, our identity revenue is transactional and varies quarter to quarter based on consumer activity, such as the expanded use cases mentioned earlier. While it's exciting to see the expanded use cases for our digital identity verification solutions, it is possible that our fourth quarter identity revenue could be flat or even down sequentially despite being up year- over- year.
Now on the topic of profitability, we made the necessary investments in the third quarter to integrate our technology and our go-to-market teams as quickly as possible to magnify the opportunity of the new platform for our business. We believe this is an investment worth making given the high revenue growth and expanded addressable market, and we believe the new orchestration platform that we're bringing to Mitek. As I mentioned earlier, our quarterly results reflect a $1.8 million restructuring charge as a result of the cost synergies we were able to gain from the integration of HooYu into our organization, as well as the realignment of our expenses as we continue to move towards profitability in our identity business. We believe our identity business will reach profitability in the second half of fiscal 2024.
Lastly, we're excited to welcome our new auditors, BDO, who have come on board earlier this month, and we look forward to working with them on a go-forward basis. Welcome, BDO. In closing, we are pleased with our third quarter results, and we're extremely excited about the launch of MiVIP and the opportunity it creates for Mitek to accelerate our growth. We're also very pleased by the expanded use cases for our identity verification solution and the solid performance of our other growth initiatives, including ID R&D and Check Fraud Defender and of course, our mobile check deposit business. Mitek's position as a global leader in digital identity and digital fraud prevention is strengthening day by day as we work to make digital access faster and more secure than ever. Operator, that concludes our prepared remarks. Please open the line for questions.
We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Jake Roberge with William Blair. Please go ahead.
Hey, guys. Thanks for taking my questions and congrats on the great quarter. Sounds like business was actually really strong. I think everyone knows what's out there and was just wondering if you could actually touch a little bit on what you're seeing in the macro environment and specifically what you're seeing with customer buying behaviors. Have you seen any deals get pushed out, whether it be mobile deposit or ID verification, or have you seen any customers decrease usage volumes as a result of the macro environment? I know that there are likely puts and takes, but would love to just get some color on how the macro has impacted your business.
Yeah. Well, thanks for the question, Jake, and appreciate the positive comments. You know, obviously, there's a lot of uncertainty out there. You can't read a news story or listen to the radio and not come across it. You know, the SaaS transactional nature of our identity business, you know, as we use some of the examples in the prepared remarks, you know, that fluctuates with not just the cadence of an individual business, but also, you know, kind of the economic environment that their end consumers, you know, are working within. The direct answer to your question is, so far, we have not seen that impact individual customers or individual use cases or individual geographies. Period. Full stop. Related thought, you know, it's illogical that it wouldn't start to show up, right?
If we think about the increase in interest rates and we've got a lot of financial services customers, we've got a lot of fintechs. If you're doing mortgage origination, if you're doing HELOCs, you know, you're doing refinancing, you know, as those interest rates go up, the number of new loan originations is likely to go down. That may not be a huge part of our business, but that would be an example that I would anticipate to start to see some headwind in transaction volumes for a use case like that. You know, the direct answer to your question is, so far, no.
Yeah. That's great. Like I said, the numbers would show that. Just had to ask. Just second question. You mentioned in your prepared remarks that the MiVIP platform has opened up new use cases with both customers and partners. On that partner front, now that you may actually be more competitive with some of your old orchestration partners with HooYu, have you seen any changes to those relationships, or are those kind of status quo and you're actually seeing some expansion opportunities with other partners because of the added functionality?
Yeah. I think we've had some smaller partners that have felt that they view it as competitive and threatening. But our larger partners and prospective larger partners, you know, in that area of the world, information service providers, you know, view it very much as an opportunity. You've got the best-in-class offering and solution matched with, you know, a public company with great standing, a rock solid balance sheet, you know, all of the transparency that comes with, you know, being that public company. We just look like a great partner of choice with an enterprise class offering.
Great. Then just if I can sneak one more in. Could you talk a little bit more about how the initial customer reception has been for MiVIP? I know it's early, but have you seen any changes to the typical customer profile that your platform can target, as well as have you seen any increase in velocity in terms of what you're filling up the pipeline with as a result of adding that functionality?
Yeah. That's a nested set of questions. Just as a reminder for those maybe who aren't recalling or aren't as close to it, you know, the MiVIP is basically the HooYu platform, which had been up until our acquisition of HooYu exclusively offered and delivered in the U.K. It is that platform rebranded, relabeled, and then hosted here in the United States and then throughout Europe for GDPR purposes, integrated along with our best-in-class biometrics of face and voice from ID R&D, and then our world-class document identity verification solution, Mobile Verify. So that's basically what MiVIP is. We announced that we launched that at the end of June, and it is now available here in the United States. We've been, you know, demonstrating it to interested prospects. We've been engaging in sales cycles.
I would say at this point, we've probably had, you know, three dozen serious engagements to be able to kind of test the hypothesis. It's been going well, you know, up to and including doing demonstrations and now starting to do some, you know, lightweight proof of concepts. The direct answer to your question as far as, you know, it does allow us to get to
Businesses that maybe are more agile, more nimble than the world's largest banks, right? These born digital, you know, native businesses that are, you know, moving very, very rapidly, don't have huge development teams, but do have identity compliance requirements, whether those are anti-money laundering, know your customer, or just straight up something like age verification. We're very early days, but we're quite encouraged from what we've seen. Those examples I just used there, Jake, were here in North America, but we have likewise on the continent in Europe had similar engagement and similar, you know, kind of traction, initial traction.
Great. Well, thanks for taking my questions and congrats again on the quarter.
Thanks, Jake.
Our next question will come from Mike Grondahl with Northland Securities. Please go ahead.
Hey, guys. Thank you. First question is just kind of on the revenue outperformance. Was that primarily HooYu? Was it more legacy Mobile ID? Where would you kind of put performance?
Yeah. Hey, Mike, it's Frank, great to hear from you. You know, really, as I said in my prepared remarks, it's been a very interesting quarter. Our Mobile Verify product, in some of the use cases Max discussed, had a fantastic volume quarter and performed well. I would say it's a combination of both the contribution from HooYu, but also these new use cases. You know, the developer conference, the in-game, you know, kind of purchasing opportunity, those are all big, you know, Mobile Verify opportunities for us. We had the benefit of some pretty good Mobile Verify performance as well as the HooYu performance.
Got it. Those three use cases that were mentioned, I won't re-mention them, but were those related to both the HooYu sales force and Mobile ID legacy sales force? Kind of related to that, it is a little bit different than, I'll say, historical customers, meaning I don't wanna call it a one-off event, but clearly this advertising thing that the bank did and this gaming in-game purchase, those seem to have more of maybe a one- or two-quarter big benefit than maybe slow off until an event happens again and especially a conference.
Do you think this is a, you know, a big new opportunity for you guys, you know, going after, I'll say, a customer profile that might be more, I'll say, event driven or, you know, shorter term, but a lot of transactions?
Yeah. Great question. I'm gonna start with the latter, and especially as a granddad who buys the kids games right there. This is a phenomenal market opportunity. I think it represents a great kinda test case for us to look at that new vertical as a great way to expand, you know, to other companies that are providing in-app purchases, in-game purchases, you know, new lives enhancements, new features available to you know, characters and so forth. Same with the event business. I think these are great proof points for whether or not our technology is able to scale to handle the volumes that were significant, and it did well doing that.
I think rather than viewing as one-offs, I think they're great entries potentially into these markets and create a great learning experience for us to turn that into kind of an ongoing revenue opportunity. As it relates to the sales force, as Max mentioned in his comments, this was both, you know, the use cases we mentioned were both the HooYu sales force and the Mitek sales force. Obviously, Right to Work in the U.K., Right to Rent. Those are, you know, U.K. initiatives that were, you know, driven by our HooYu teams, but also the pipeline we're building, as Max mentioned what we're seeing in the U.S. is a combination of those two workforces cross-pollinating and, you know, kinda learning both products.
I think we've done a really good job in bringing the go-to-market teams together, you know, fostering that kinda cross-pollination and collaboration. I think that plus, you know, these interesting new opportunities, events, games, you know, the Right to Work, all of these are interesting new use cases for us that I think, you know, have real legs and at fruition could be very interesting.
Related to that, those three or four use cases also help with outperformance in the quarter. It seems like a couple of them would have been big enough to drive some real dollars.
Without a doubt.
Okay. Just on the MiVIP, we'll call it the new HooYu, if you will, almost. Is your sales force, like, all set to go and your pipeline, you know, are they on the ground and running hard, or is it still sort of, "Hey, we're educating these guys," and they're slow to get? Like, I'm just trying to understand how quick this pipeline can fill up.
Yeah, it's a good question, Mike. We're still investing in capacities in sales force and cross-pollination. Some are on the ground, some more will come. As we mentioned, I think last quarter, it's gonna be, you know, an exercise in getting there and building the right kinds of skill sets necessary to sell both products. We're not there yet. We're still investing. You know, more to come in the coming quarters. The good news is we've seen some pretty interesting, you know, pipeline growth already, and we're still not at maturity in terms of fleshing out that workforce.
Great. Lastly, I'll just say it sounded like Mobile Deposit and Check Fraud Defender had 5% year-over-year growth. Any of those points were Check Fraud Defender?
Yeah, we had a very strong contribution from Check Fraud Defender. What's happening if you're following fraud, Mike, it's so interesting. The fraud vector around checks and the average dollar value of fraudulent check has kind of really put a, you know, the klieg lights, if you will, on that industry. So a lot of folks are looking at it. It was a strong contributor, without a doubt. Yeah, we don't break it out, but it was a strong contributor.
Got it. Thank you.
Yeah, for sure.
Thanks, Mike.
Thanks.
Our next question will come from Scott Buck with H.C. Wainwright. Please go ahead.
Hi. Good afternoon, guys. Thanks for taking my questions. A bit of a follow-up on Mike's question on MiVIP. Could we get a little bit more color on the go-to-market strategy? I mean, are you know, have you cast a pretty wide net at this point, or are you targeting, you know, certain industries, certain companies within certain industries? What's that look like?
Sure, Scott. Thanks for the call. Thanks for the question. First off, MiVIP will be sold by all Mitek salespeople. The existing sales organization for HooYu, the existing sales organization for Mitek identity. The second part of your question, as far as, you know, who we're segmenting and targeting, if I had to, you know, just put a big label on it really is the regulated industries, which is not dissimilar to, you know, what we've focused exclusively with, Mobile Verify. Think fintech, financial services, gaming, you know, utilities. Anything that's really regulated is a great opportunity for us.
The difference now with MiVIP is it really opens the aperture on those segments so that you don't have to be just the largest, you know, tier one bank that has armies of developers to, you know, configure and build your own workflows and your own orchestration systems to integrate the various identity signals. This really allows us to get to, you know, some of the faster moving, very fast-growing businesses that are out there that maybe are a little constrained on application developer resources, but still need to go quite quickly and need to get good answers, need to have an effective system. That's where we are so far. Similar to, you know, Frank's response to Mike, it's still early days, right? We basically got this thing launched.
It was the end of June. Thanks to our team for all the hard work in making that a point of focus. Now we're enabling our selling organization and training them and making sure that they're targeting the right organizations. We're learning, right? It's a little bit of an iterative process. It's gonna take some time to figure out where the sweet spots are for us and to make those course corrections. As Frank indicated, we've started to build those pipelines, both here in North America as well as in Europe. We'll continue to report to you guys on the progress that we're making with that.
Great. That's helpful. Second, on the uptick in sales and marketing and in R&D costs both, you know, sequentially and year-over-year, how much of that is tied to, you know, the initial launch here of MiVIP versus, you know, is this more of the run rate going forward here?
Well, there's certainly some associated with the one-time launch, but remember, you've now got the HooYu organization in those lineups.
Layered on. Yeah.
That will be ongoing, right? We held on to all the HooYu folks.
Okay, great. Last one from me. Can you tell us what legacy HooYu revenue was in the quarter?
Yeah, we're not breaking that out. You know, I think we shared that in the last call. We gave you a sense of what the baseline was the day that we came together, you know, in the trailing twelve months. They continue to grow at their historic growth, very nice historic growth rate or better.
Okay. Super. I appreciate the time, guys. Thank you.
Thanks, Scott.
Thanks, Scott. Again, if you have a question, please press star then one. Our next question will come from Alan Klee with Maxim Group. Please go ahead.
Good afternoon. Can you just say again when you expect the identity segment to reach profitability?
Yeah. Hey, Alan, good to hear from you. As we've been mentioning in the past and in today's prepared remarks, we're looking for the second half of fiscal 2024 for that identity business to turn the corner.
Yeah. I wanted to follow up on that. Identity did around $17 million this quarter. We're talking an annual run rate of close to, you know, $70 million. I wanna. The market has changed, and just revenue growth with not profitability is not being awarded the same way it may have been a year ago. I'm trying to figure out if this is a good business or not, pretty much. Maybe you can help me understand why should it take so long to get to profitability? Do you have to do something with the tech to use more technology and to automate it more, or is it purely just scaling up? Because it seems like at a $70 million is a pretty good run rate.
I'm not sure I really understand why this is gonna lose money for such a long period of time.
Alan, great question. Two things. One, Max mentioned in his remarks, identity is an unsolved problem. This is an arms race, right? Threat vectors change, fraud vectors change. We adapt, they adapt, and we kind of leapfrog each other. By they, I mean, the bad guys, then the providers come up with solutions. There's a lot that goes into properly verifying identity, right? To really understanding who's behind that transaction, that's an important consequence. That's a lot of work. In addition to that, you know, you've got the sustaining efforts we've had, and you're carrying along, you know, some of the acquisitions we've done, those kinds of things. You know, we think, certainly profit's important. We're on a march towards profitability.
That's a driving focus of this management team is, you know, a growth as well as profitability. We think as you look at what it takes to address this market, get identity right, you know, we're laser focused on getting to that fiscal 2024, you know, kinda timeframe. It is a very difficult problem. You know, getting there, getting the right models, getting the right information, getting the right data, and then recognizing that everything we do today will likely change tomorrow because some new threat vector will manifest itself. That makes this a very dynamic and a rich market to operate in, but also a complicated market to operate in.
Yeah. What I'm trying to understand is how much of the issue is that you have to do something with your technology to upscale it versus just the scale of volume to turn the business profitable? And is there anything maybe you can answer that by talking about your technology a little bit of how you would say it compares to the competitors?
Yeah. Allen, this is Max. I think first, you know, the direct answer to your question is, this is a very good business.
Yes.
The second is, you know, we're focused here on identity, but when you zoom out and just let's recall that Mitek in composite are, you know, the entire portfolio is a Rule of 50 business, right? Getting both the growth and the very nice EBITDA profitability. I think to come to your specific question around the technology, we've got world-leading technology. We've also done what we think are very important and differentiated acquisitions, ID R&D in the biometric space, and then obviously the most recent HooYu, with the workflow and end-to-end low-code/no-code orchestration. We are gonna need some quarters to get all of these things kinda sorted out. There is some redundant capabilities across the portfolio that need to be ironed out, and it may take us, you know, three or four quarters to make all that happen.
On the other side of it, though, we think this is not just a very scalable system that's highly differentiated. We think that it's also scalable from a profitability and a leverage perspective.
Okay, thank you very much.
You got it. Thanks, Alan.
This will conclude our question and answer session. I would now like to turn the conference back over for any closing remarks.
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.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.