Good day, ladies and gentlemen, and welcome to the Mitek Systems fourth quarter and fiscal 2021 financial results conference call. Today's conference is being recorded. At this time, it is my pleasure to turn the conference over to Todd Kehrli in MKR Group. Sir, please begin.
Thank you, operator. Good afternoon, and welcome to Mitek's fourth quarter and full year fiscal 2021 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 fourth quarter and full year fiscal 2021 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 wanna 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, November 4, 2021, 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. Fiscal 2021 was another outstanding year for Mitek as we achieved record revenue, earnings, and cash flow from operations. Our market-leading fraud-fighting offerings delivered strong growth during the fiscal year as our customers and partners accelerated their digital transformation and increased their fight against fraud. Before looking at the numbers, I'd like to first congratulate Mitek Nation on another stellar year.
Mitek has never seen better execution or greater momentum, and each of you showed commitment and tenacity to deliver the best solutions and services for fighting the never-ending increase in fraud in the world of digital commerce. In the fourth quarter and throughout Fiscal 2021, we've delivered strong results against the backdrop of economic uncertainty and the lingering impacts of the COVID pandemic.
In doing so, you have each demonstrated the resiliency of our business and validated our growth strategy. Quickly, looking at the numbers for fiscal 2021, we recorded record revenue of $119.8 million, representing growth of 18% year-over-year.
We also generated record non-GAAP net income of $34.2 million or $0.76 per diluted share, up 19% year-over-year, and record cash flow from operations of $37.4 million. We accomplished a lot in fiscal 2021 beyond just our record financial performance. We provided exceptional customer value to the world's leading banks, fintechs, and marketplaces as they look to move more and more of their businesses online in a secure and trusted way.
Mitek is distinguishing itself as a critical component in the fight against fraud, and during the year, we made key investments in people and technology as we look to expand the breadth of our product offerings and the markets we serve.
With our acquisition of ID R&D, we added award-winning AI-based voice and face biometrics and liveness detection technology, providing increased protection against today's most sophisticated fraud threats. Rapid advances in AI are enabling novel forms of fraud and increased scale and frequency of breaches, which is adding heightened pressure on organizations to protect their customers' data and access.
ID R&D's multimodal approach to identity authentication directly addresses these threats by combining leading passive facial liveness and voice anti-spoofing technologies so that we can accurately identify and prevent advanced AI-based deceptions and ensure each transaction is being completed by a real person and the right person.
Organizations no longer have the luxury to simply verify access at the point of onboarding. Instead, they need to continuously authenticate their customers throughout the customer journey. With our acquisition of ID R&D, Mitek is again leading the industry with its use of advanced linked and layered identity signals to continuously fight fraud.
From the initial user onboarding with documents, devices, and biometrics to authentication and re-verification and continuous identity fraud detection, Mitek is the only enterprise-class provider with this breadth of offering in the identity market. As a result, we continue to see customers choose Mitek to provide trust in the digital world, and the 32% revenue growth we saw in our identity business this year is evidence of our success.
Our customers globally represent hundreds of the world's best-known brands and banks, and our proven track record of success continues to grow as we expand our reach into this growing market. During the year, we also further executed on our product roadmap with the launch of Check Fraud Defender, which bolsters our already highly successful deposits business.
Check Fraud Defender is the first AI-powered cloud-hosted network for financial institutions to counteract check fraud. In 2020, attempted check fraud totaled a staggering $15.1 billion in the U.S. alone. Check Fraud Defender helps protect against the growing complexity of check fraud attacks, enabling banks to reduce fraud losses, lower false positives, and reduce the substantial operational costs associated with managing check fraud.
Launched only last quarter, 20% of the top 25 U.S. banks have already licensed Check Fraud Defender technology and are experiencing up to a 90% operational cost savings following its initial deployment. This savings doesn't include the reduced fraud losses they are experiencing as a result of using this new powerful signal to fight fraud.
By automating check fraud detection and lowering false positives that require manual review, Mitek can decrease banks' operational costs as well as fraud losses. We are very excited about this new deposits product offering that joins our already highly profitable Mobile Check Deposit business, which continued to grow during the year with its revenues increasing 11% year-over-year. Looking to fiscal year 2022, I'm going to speak more broadly today about the key reasons why we believe that Mitek is even better positioned for growth than before the pandemic.
Digital engagement is a key driver of economic growth, and inclusive participation requires access to high trust identity verification services. From a con-consumer perspective, everyday access is enabled by identity-based technology. From unlocking a phone to signing up for grocery deliveries, our identities are shaping the way we access goods and services. From a business perspective, verifying the real identity is a critical enabler from a regulatory and compliance perspective, and an essential step for a trusted customer experience.
Recent research from MarketsandMarkets confirms that the biometric segments will hold the largest market share in the digital identity solutions category. We believe biometrics offer greater security and convenience for consumers who don't have to worry about remembering complicated passwords or compromised KBA questions.
Another concern are deepfakes, which we address today with liveness detection, a computer vision technology that detects the presence of a living user rather than a photo, recording, masked person, or manipulated media such as voice or video. As the shift to digital transactions picks up, so do fraudsters, so businesses have an urgent need to adopt new identity verification approaches.
In the financial services sector, for instance, percentage of banking products consumers can open through a digital channel has jumped from 43% to 76% over just the past two years, and about 90% of these can be opened from a mobile device. Getting identity right, especially where there is a high consequence to getting it wrong, has never been more important.
As a key component in the identity authentication and authorization layer, our ability to combine our multimodal biometric analytics, harmonization of digital identities to real-world authentic government-issued documentation, and global view of identity uniquely positions us to resolve identity when it matters most.
Our investment in ID R&D demonstrates our continued commitment to fighting fraud in the identity market and our determination to provide trust in this digital world. Just last week, ID R&D released IDLive Doc to help our customers prove the legitimacy of a document.
Bad actors use digital images of valid or altered driver's licenses, passports, and other identification documents in their attempt to spoof identity verification processes. IDLive Doc tests for document liveness and uses AI and computer vision to distinguish between an original document and a digital image of a document shown on a mobile device or a computer display.
ID R&D will continue to develop the sophistication of their face liveness solutions, which we believe is essential in any effective identity management solution today. Facial liveness is rapidly emerging as the preferred method to ensure the integrity of face biometrics for digital access and enhance the customer experience. Face recognition can accurately answer the question, is this the right person? It doesn't answer the question, is this the real person?
Hence, the need for liveness detection. ID R&D offers the leading solution in this regard. In fiscal 2022, we expect to invest further in strategic acquisitions to accelerate our innovation in the fight against fraud. In FY 2022, our investments in biometrics and rising role they play in managing online fraud and enabling imperceptible access will increase.
In closing, our ability to rapidly respond and execute to the accelerated requirements for digital access yields record financial performance in fiscal 2021. The growing demand for our market-leading fraud fighting offerings shows the pivotal use that our products are playing in providing trust in the digital economy. We're humbled by our role as a trusted partner and business enabler in this pursuit. As we enter fiscal 2022, we believe we are well-positioned to take more share as the clear leader in digital identity verification.
Strong growth with our innovative biometric and authentication technologies, scaled automation solutions, and the rise of our fraud network will continue to position us as a market leader. Our globally trusted brand and team of fraud experts remain committed to all of our customers and partners in our collective quest to fight fraud and abuse and enable trusted digital access.
Now I'll turn the call over to Frank to discuss the financial results in more detail. Following Frank's remarks, we'll open the call up for questions. Frank, please go ahead.
Thank you, Max. Congratulations, Mitek Nation on so many great accomplishments and another great year. Thank you everybody for joining us this afternoon. I'd like to start with Q4 revenue and operating results. For the fourth quarter of fiscal 2021, Mitek generated record revenue of $33.3 million, a 9% increase year-over-year.
Software and hardware revenue was $17.8 million, down 1% year-over-year. The decline in software and hardware revenue is due primarily to lower software revenue from our legacy on-prem ID products, which are being discontinued, as well as timing of mobile deposit reorders. Services and other revenues, which includes transactional SaaS revenue, maintenance and consulting services, was $15.5 million for the quarter, an increase of 22% over Q4 last year.
This increase was due to primarily the growth of transactional SaaS revenue, which increased 26% year-over-year to $10.2 million. For Q4 of 2021, deposits revenue increased 2% year-over-year to $21.9 million. Identity verification revenue increased 24% year-over-year to $11.3 million. We delivered strong software and hardware gross margins of 99% for the quarter.
Gross margins on services and other revenue was 81% for the quarter, and our total gross margin for the quarter was 90% compared to 88% in Q4 of last year. Total GAAP operating expenses, including the cost of revenue, were $28.9 million compared to $24.6 million in Q4 of last year. This increase is due to investments to grow our identity business and the additional costs associated with the ID R&D acquisition.
Sales and marketing expenses for the quarter were $8.4 million compared to $7.3 million a year ago. R&D expenses were $8.2 million compared to $6.1 million last year. Our G&A expenses were $6.1 million compared to $5.9 million a year ago. GAAP net income for the quarter was $2.2 million or $0.05 per diluted share.
Our diluted share count was 46.2 million shares compared to 43.0 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 compensation expense, litigation expense, and the related tax impact of these items.
Non-GAAP net income for Q4 decreased to $10.1 million or $0.22 per diluted share compared to $11.4 million or $0.26 per diluted share a year ago. Our non-GAAP adjustments include $3 million of stock compensation expense, $2.9 million of acquisition-related costs and expenses, $1.3 million in amortization of debt discount and issuance costs, $2.2 million in cash tax differences, and $330,000 in litigation expense for the quarter.
This was all offset by income tax effect of pre-tax adjustments of $1.8 million. Now, looking to the results for full 2021. Revenue totaled $119.8 million for the year, a record, an increase of 18% year-over-year. Software and hardware revenue was $60.1 million, up 11% from the prior year, due primarily to the growth in mobile deposits, offset by lower software revenue from our legacy on-prem ID products. We maintained very strong software and hardware gross margins of 96% for the year compared to 94% in 2020.
Services and other revenue was $59.7 million for the fiscal year, an increase of 27% over the $47.2 million in 2020. This increase is primarily due to the growth in transactional SaaS revenue, which increased 38% to $40.2 million. SaaS transactional volumes increased 40% year-over-year, and services and other gross margins was 80% for the year, up from 79% in 2020.
For our full fiscal 2021, deposit revenue increased 11% to $75.5 million, driven primarily by increased consumer adoption of mobile deposits. Identity verification revenue increased 32% to $44.3 million, driven by 36% growth in transactional revenue, which was partially offset by a decline in revenue from our legacy on-prem solutions, which are being discontinued.
Total GAAP operating costs and expenses for 2021 were $106.1 million, an increase of 15% compared to total operating expenses of $92.4 million in 2020. This increase is due to additional investments made throughout the year to fuel our growth in the identity business and additional costs associated with the acquisition of ID R&D.
GAAP net income for 2021 was $8.4 million or $0.19 per diluted share, compared to GAAP net income of $7.8 million or $0.18 per diluted share in fiscal 2020. Non-GAAP net income increased 19% for the year to $34.2 million or $0.76 per diluted share, compared to non-GAAP net income of $28.6 million or $0.67 per diluted share in 2020. The fully diluted share count for 2021 was 45.1 million, both for GAAP and non-GAAP earnings per share.
For the year, our non-GAAP adjustments include $11.5 million in stock compensation expense, $8.5 million of acquisition-related costs and expenses, $4.4 million in amortization of debt discount and issuance costs, $6 million in cash tax differences, $974,000 in litigation expense, and $428,000 in executive transition costs.
This was all offset by income tax effect of pre-tax adjustments of $6 million. As of September 30, 2021, our headcount was 469, compared to 399 a year ago. Now let's turn to the balance sheet. We generated $12.3 million in cash flow from operations during the quarter and a record $37.4 million for the full year, bringing our total cash and investments to $227.4 million as of September 30.
During the quarter, we repurchased approximately 10,000 shares for $190,000 at an average price of $0.1797 per share. As a reminder, our board authorized a $15 million share buyback program in June 2021, which runs through June 2022.
In closing, we are very pleased with our results, which include record revenue for both the fourth quarter and our full fiscal year 2021, as well as our record non-GAAP net income and cash flow for the full fiscal year. We look forward to continuing to deliver amazing fraud prevention identity services and continue to support our customers, globally. With that, operator, that concludes our call, and we open the line for questions.
Thank you. At this time, we will open the floor for questions. If you would like to ask a question, you may do so by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, that is star one to ask a question. Our first question comes from Bhavan Suri with William Blair & Company.
Hey, tech team. Congratulations. That was a solid quarter. Nicely done. I guess let me start off on the Check Fraud Defender product. You launched it four months ago. You said you commented, you know, 20 of the top 25 have adopted, and that's been steady for a couple of quarters. I guess I'm just wondering sort of how is that sales process going? Is that a evangelical sale yet, or is this something that customers are just sort of understand as a kind of necessity and need to have? Like how much of that is a push versus pull sale? Maybe I'll start there.
Yeah. Bhavan, it's Max. Thanks for the comments and the question. Just as a reminder, you know, Check Fraud Defender technology has existed. We had kind of the bones or the components of this, you know, for the last, I guess, two years. We've had customers, very large banks, implement it on premise with a lot of help from our services organization.
You know what we announced back in June, I guess maybe it was May, was the idea that we were going to now pop this up into the cloud, do a lot of technical work to make it secure and scalable and get it up on AWS, and then provide it so that there was cross-tenant capability in being able to look at those checks across a spectrum of institutions.
We were asking those institutions to basically join that network, quasi-consortium. The progress that we've made when we talk about the revenues or we talk about, you know, what we've learned and the kind of impact from an ROI and operational efficiency perspective, it's from what we've seen on premise. We've got a subgroup of those folks who've now joined the network consortium, and we're still working to build that product, you know, that was announced back in June, and we'll have that online here in the coming months.
Back to your question about kind of what the sale is like, there's a good deal of pull from the folks that have already seen the kind of benefits and value they get with an on-prem solution where they're only seeing the checks, you know, that come through their doors, with the idea that they would have a much larger ecosystem to be able to do this across some of the larger, you know, top 20, 25 banks. It's a little more evangelical, if you will, with the smaller mid-sized banks where, you know, we've never really kind of exposed them to it. But I will tell you that those pipelines are very robust. They're banks, right?
They're big banks, so they manage to go at a pretty glacial pace because they've got a lot of lawyers and a lot of compliance folks. Yeah, over time, with every passing week and month, I think it only validates what we think this should be able to turn into in the coming years. Frank, anything to add to that?
Yeah. The one thing I would add, Bhavan, good to talk to you, by the way, great for the outreach. As Max indicated, the interest is strong. You know, you heard from Max's release, check fraud in the U.S. alone is a staggering number. I think there's a high degree of interest in how we're doing this thing. Also we've got, you know, some great history. The on-prem solution has functioned incredibly well. To Max's point on the pull, for most folks that understand how it works, it's pretty good pull.
Yeah. Yeah, and I mean, I think obviously the cloud solution where you can sort of see that cross-organization piece ultimately.
Yeah.
Ultimately, I'm not saying it's happening soon. It becomes a no-brainer. Let me turn to the ID verification side quickly here. I know you're not giving guidance, but two questions I guess, or two parts to this question. One, I know you said 24% growth, but that's obviously sunsetting the on-prem business. Can you give us some sense what normalized growth was like, ex the on-prem business like to like?
And then what should we think of the growth rate of this business going forward? Sort of as we think about demand usage heading into fiscal 2022, are we thinking this is an acceleration type business? How should we think about that? Without sort of giving specific guidance, just frame us the sort of what you see in the pipeline demand environment to offset that.
Just kind of a quick numbers question and something more strategic about sort of how that pipeline drives into growth for that business over, say, the next 12 months-18 months.
Yeah. Bhavan, great question. This is Frank. I'm gonna handle the first one, then I'll pass the baton over to Max for the second question. Look, I think it's a we play in a market, if you look at the overall market, it's growing at a really good clip. The imperative to get it right continues to grow.
As you know, we don't provide numbers and guidance, but we feel strongly that, you know, there's a, you know, as we've indicated in the past, the kinda growth rates that we expect to see out of identity, we continue, you know, we think we can continue to reach those growth rates. Without providing numbers and guidance, we're very bullish on, you know, what's happening in IDV, especially when you think of the extensibility of these new products that we're layering in.
You know, the multimodal biometrics, the ability for us to expand deeper in that marketplace, I think bodes really well for us. Not getting into the numbers, but we feel pretty good about where that business is going.
Yeah, it's safe to say that, you know, if it was 24% with the legacy-
Yeah.
Net of the legacy, it's only superior to that. I think we can kind of lift our heads up and then answer your question on the pipeline.
I got that one figured out, Max. That part I got figured out.
Yeah. Well, I was saying for the other folks out there beyond listening, I know you had it, but you know, other folks. Yeah. That's a good one. You know, if we lift our heads up and kind of think about the pipeline, there's some pretty good. I think in the last 12 months, there've been some pretty good analyst reports, you know, that can help the Mitek group.
Juniper came out with some information. You know, for the markets that we serve, it's estimated in 2021 that, you know, the spend for IDV, this isn't even identity authentication, just proofing for onboarding journeys for banks in the U.S. or call it, you know, the Americas and Western Europe, is something like a $800 million spend category.
That when they run that out, you know, to 2025, it turns into like a $1.2 billion spend. So they're predicting a take here that's, you know, right around 15% for that. That doesn't include any of the biometrics, which, you know, as we said in the prepared remarks, is probably an even larger opportunity. So, you know, if I don't wanna say, you know, kind of market is 15%, but if it's someplace of 15%-20%, we think that we should be able to grow beyond that.
Yeah.
Take share, again, in the segments that we're focused in, the geographies and the industries we're focused in. The one quick thing I would point out is, you know, with ID R&D now, you know, those are components that end up, you know, on-prem and we license those. The ID R&D team license those on a subscription basis. That revenue is identity revenue, but it's gonna show up in the software line of our-
Yeah.
Our income statement. Some of the things that you'll see us announce in the coming months around identity authentication will be less transactionally driven from a revenue model. They'll be in the cloud, but they'll be more traditional subscription. I think you'll start to see the mix of how that identity revenue kind of comes together to build up that growth, you know, at those higher rates. It'll come from a number of different buckets.
Yeah.
Just because the portfolio that we're gonna have, the portfolio we have today is different than the one we had a year ago. It'll even be more different, you know, over the course of the next six to nine months.
Fair enough. You know, I think just to sort of iterate this, I think you know over time, separating those two, because there is obviously this concept of the check deposit business, take check fraud aside, as sort of a business that has a headwind, which is checks ultimately tend to decline, whereas the ID verification obviously has much more stronger sector tailwinds. It may help to separate those, even if they are in sort of different buckets, but just conversation for another time. I appreciate the answers, gentlemen, and the candor.
Yeah. It's a good tip. I think the one thing, you know, we see is definitely the legacy of, you know, the historical checks business where we're doing transactions certainly is not an identity signal. But Check Fraud Defender is absolutely an identity signal.
Mm-hmm.
Certainly a financial fraud signal. We still gotta figure out what the best way to present this so that investors understand where all this growth is coming from.
Great. Thank you.
Our next question.
Thanks, Bhavan.
comes from Mike Grondahl with Northland Securities, Inc.
Sure. Thanks, guys. Did you say a rough number of revenue that came from Check Fraud Defender? Any sense on what an average top 25 banks should be paying for the product in, let's say, a year?
Yeah. Just as a reminder, you know, the historical Check Fraud Defender has been this on-premise set of components that we help assemble and do some services around. The new, you know, consortium network in the cloud is still a work in progress.
We have a couple of charter customers that are working through that with us. The revenues in Q4 were de minimis relative to the cloud-based Check Fraud Defender. Your question around how we would license and how we price it really comes back to the kind of incredible value that these institutions are getting from it.
We've got those insights from the on-prem instances that are out there, and that's both very high dollars in check fraud prevention and a like high number of operational costs that get to be reduced because you don't need to have a whole bunch of humans running back and checking out these false positives on potential check frauds. That obviously leads to better, you know, customer satisfaction and experience as well. Frank, I'm gonna make sure I didn't miss anything.
Yeah, no, I think that's right, Mike. Great speaking with you again. You know, we're gonna figure it out as we go along. I think as Max indicated, if you look at the early results and the value they're seeing, I think you know as this thing grows and you know it kinda grows and gets to where we think it will be, it'll be compelling. We're gonna evolve the pricing, and we'll figure it out as we go along. I think that what we can say with certainty is the value our customers are getting on-prem is significant.
Got it. In mobile ID, any new use cases in the recent quarter?
Yeah. I think, you know, mobile ID is a very interesting space. Now think of it this way, you know, we're building a platform here that's as dynamic as the market is. If you think of use cases, and use cases are abundant in fraud prevention, as you know. How we verify people, how we harmonize that identity physically and digitally to a device with the halo effect of a real world authenticated government document, that's a compelling differentiator.
We think that ability to combine identities, harmonize them to a real world document, and then provide a higher degree of trust, as Max indicated in the talk track, you know, to our customers, is compelling. I think it lends itself to all kinds of great, you know, potential new use cases.
We're working with our customers to see how we expand. You know, as those use cases change, their fraud vectors are changing constantly, their requirements are changing constantly. We're there to adapt and try to figure it out with them.
I'd say there's a real opportunity there to really proliferate that degree of trust that we provide to, you know, to different use cases and different fraud vectors. I would say, Mike, one of the things we're seeing on a more consistent basis now is introducing Mobile Verify with some of the biometric capabilities that we've incorporated from ID R&D for the re-verification or rebinding of a device, right?
The idea that you've gotten an established relationship with whoever your financial service provider is, fintech, big bank, whatever, and you know you go get a new phone or you lose your phone and you've got to rebind that phone. That device is you know one of the major attributes that these institutions are using to establish identity.
Once you get a new phone, for whatever reason, it's got to be retethered to their records. Using both the biometric, but also then the you know high assurance government-issued identity document, that's something that you have combined with the face for something that you know that you are. You know, that's a rising use case. I don't know if I would call that a new one.
I think we've talked about it in the last couple of quarters, but it's definitely something that's gaining momentum.
Yeah. I might think of it this way. As Max indicated, these identity attributes have half-lives, and you've got to have some way to re-verify and rebind that keeps the customers happy, that they can still trust that combination of device, you know, behavior and identity. You know, it's good stuff.
Got it. Thank you, guys.
Yeah.
All right. Thank you. Our next question comes from Hamzah Mazari with Jefferies.
Hi, this is Mario Cortellacci filling in for Hamzah. My first question is around-
Hey, Mario.
How are you?
Good.
My first question is just around new product introduction, and maybe you can just give us a sense for what that new product introduction could look like in ID and fraud over the coming months. I believe that the previous question is just about new use cases.
Just because I'm wondering, is growth more about introducing new use cases or about actually introducing new products? Once a new product is introduced, how long does it normally take for that product to ramp or hockey stick or, I guess, contribute to growth in a meaningful way?
Yeah, I'll try to unpack that question. First, just a recap. We announced and introduced Check Fraud Defender. That was, you know, back in the June timeline. This quarter, I guess technically it was October, but part of this quarter, IDLive Doc was introduced at Money20/20 two weeks ago in Las Vegas. In the coming months, you'll hear from Mitek with the identity authentication solution.
Your question around, you know, that's the pattern. That's what we're doing. Use cases versus products. Sometimes it's uncovering new use cases with the products and solutions that we have. There's also, you know, we see these adjacent use cases. I just talked about the binding, the rebinding of devices.
You know, the ability to do that today with a face and a government-issued identity document is compelling. The ability to do that in the future with just a face and a voice and no government identity document or in addition to a step up with a government-issued identity document, there's an instance of we've got an extended use case, we've got to add product, we've got to add capabilities to the offering. I don't know if I covered the full series of questions there, but those are the ones I remember.
Yeah. Agreed.
No, no. That's super helpful. I guess just my follow-up is around your acquisition pipeline. Just could you just give us a quick update on what that looks like in both the near and long term? Then as you guys are assessing targets, I guess, is there any financial criteria that you're looking for? Or is it simply more about capabilities and technology that you can integrate into your platform and allow for more product innovation?
Yeah. That's a really good question, Mario. We'll kind of look back over the last, you know, kind of call it 90, 100 days since last we all spoke. We've been very active at targeting and outreach, at you know, pursuing opportunities, some of which have been brought to us because companies are you know, for sale.
More likely it's our own outreach in the areas that you know, we've targeted as being strategic capabilities that we'd like to partner with these organizations for. As you well know, because you're in the banking business, valuations in every area of technology have gone through the roof and borderline crazy in some instances.
Your question, you know, typically what we're doing is we're starting with a strategy. What are the areas that we're trying to extend our offering or fill gaps through acquisition, change the game? There's certainly, you know, does it fit the need? Do they have the right stuff? Does it work? Is it effective? We think about match and fit from a personality perspective, right?
The culture and the environment and having people that you wanna work with, like we did with ID R&D, it's just such a great match. You know, that counts. Then the financial question is one, you know, that we get hung up on. We get hung up on valuations, and we get hung up on structure.
You know, I would say of the dozens of things that we tried to action in the last 100 days, typically the place where we've you know, once you kind of sort through those other screens that I just outlined for you, the place we get hung up is, you know, folks have some very unrealistic expectations around their growth prospects and the value.
Then what that translates into in value. We're not slowing down. We're not giving up. We see this as a great opportunity. There's you know, new companies coming over the transom all the time, and we'll just continue to persist on it.
Great. Thank you so much.
All right, thank you. Again, to ask a question, please press star one. Our next question comes from Allen Klee with Maxim Group.
Hi, this is Derek Greenberg on for Allen . With you guys' identity services, I was wondering if that's at profitability or not, and if not, what the path towards that looks like, and when do you guys expect to achieve profitability?
Yeah. Hey, it's Frank. Great speaking with you. You know, we're building a model around that that's disciplined. We're way ahead of our profitability goals today. You know, the identity business is still a cash consumer. The deposit business is a great cash contributor, but we're way ahead of plan and our expectation is that probably a year before we thought we'd get there, we'll get there.
We're targeting coming out of FY 2023
Yeah.
the identity business being breakeven to capital positive.
Close. Yeah.
Awesome. Thank you. One more. Just how do you guys see your operating expenses growing in relation to revenues?
Slower than revenue.
Slower than revenue.
We're gonna make, you know, the right investments, as Max just indicated, to you know kinda flesh out and extend the offering. You know, we're disciplined here in terms of how we look at it. It'll grow, but it'll grow based on very deliberate, specific investments, and it certainly won't match the revenue growth.
Okay, thank you.
Yep.
Thanks, Derek.
Thank you. All right. There are no further questions in the queue at this time, so I'd like to turn the call back over to Mr. Todd Kehrli for 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.
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