Mitek Systems' (MITK) CEO James DeBello on Fiscal Q4 2017 Results - Earnings Call Transcript

Mitek Systems Inc. (NASDAQ:MITK) Q4 2017 Results Earnings Conference Call November 7, 2017 4:30 PM ET

Executives

Todd Kehrli - President, MKR Group

James DeBello - Chairman, President, and Chief Executive Officer

Jeff Davison - Chief Financial Officer

Analysts

Darren Aftahi - ROTH Capital Partners

Bhavan Suri - William Blair

Joel Fishbein - BTIG

Mark Schappel - Benchmark

Operator

Good day and welcome to the Mitek Fourth Quarter and Fiscal 2017 Financial Results Conference Call. Today's call is being recorded. At this time, I’d like to turn the conference over to Mr. Todd Kehrli, MKR Group. Please go ahead, sir.

Todd Kehrli

Thank you, operator. Good afternoon. And welcome to Mitek's fourth quarter and full year fiscal 2017 earnings conference call. With me on today's call are Mitek's Chairman and CEO Jim DeBello and CFO Jeff Davison.

Before I turn the call over to Jim and Jeff, I'd like to cover a few quick items. This afternoon, Mitek issued a press release announcing its fourth quarter and full year fiscal 2017 financial results. That release is available on the company's website at www.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’d like 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 our 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, for a complete description of these risks.

Our statements on this call are made as of today, November 7, 2017, 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 will be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8-K describes the differences between our non-GAAP and GAAP reporting and presents reconciliation between the two for the periods reported in the release.

With that, I’ll now turn the call over to Mitek's CEO Jim DeBello.

James DeBello

Hey thanks, Todd. And good afternoon, everyone. Thanks for joining us. I'm happy to report that Mitek achieved record revenue and profits in fiscal 2017. Our total revenue increased 31% to $45.4 million and we finished the year with non-GAAP net income of $11 million or $0.31 per share, up 26%.

These results were driven by continued solid growth from our digital identity verification platform and industry-leading mobile check deposit product. Our growing and profitable recurring business in mobile deposit continues to be a solid springboard from which to capture the growth in the global digital identity verification market.

Our identity platform is an enabler for e-commerce. We made significant progress during the year expanding further into several key verticals, growing our new ID customers by 30%, growing our ID revenue by 54%, and growing our SaaS transactions by more than 100%.

The breach at Equifax earlier this year accelerates an already rapidly growing global problem of verifying who you are in a remote digital world. Mitek does it with a photo capture and rapid verification of your ID, plus a selfie facial comparison to your photo for a second factor. We call this mobile verify. We think it’s a better way than what’s now a non-private Social Security number.

Consumer facing enterprises are beginning to agree and that’s one of the reasons we are growing as rapidly as we are. Now think of the Social Security number. Now widely breached, it was never intended to be a national identifier and in my opinion has run its race.

Historically, identity verification relied on something secret you knew, your Social Security number to make a model of your first car, or even the name of your first pet, but today, all of that information is available on the Internet, nothing secret about it, and that’s why fraud, and identity theft abound.

We believe in a new way, a way in which you prove your identity by what you have, namely your physical ID, and who you are, namely a facial comparison to your ID photo. As a result, Mitek is redefining how citizens around the globe verify their identity in a digital world.

Consider the history of identity before 1936, when the Social Security Act was passed and the evolution of the Social Security number and we’re now on the brink of a major change. We are beginning to see demand generated by the Equifax breach as enterprises look to Mitek to augment or replace traditional verification methods.

Last month, Mitek attended Money 2020, the industry-leading conference for digital payment and services. Identity verification was the buzz unlike prior shows. Words like landgrab, consolidation and uncertainty were used by industry-leading consultant Bob Hedges at his Annual A.T. Kearney dinner.

Traditionally, identity verification has been dominated by big data bureaus, but with the advent of the smartphone, we’ve got access now to unprecedented capabilities including capturing an image of a state issued driver’s license or passport both of which are still considered the most trusted source of identity verification today.

Mitek is leveraging these capabilities and transforming the industry with a unique approach combining the power of the camera for IDs and facial comparison to verify identity setting us apart from the slew of companies that are only focused on a single biometric.

Having said that, we believe identity verification will be a layered approach. Mitek will leverage our best-of-class identity document verification and facial comparison into a more nuanced identity as a service platform with additional capabilities such as bank account look up, and additional biometrics through partnerships.

We believe the secular trends are in our favour, including self-service, ubiquity of mobile devices and cameras, and the urgency to establish trust in digital commerce. Apple’s announcement of advanced 3-D face mapping for liveness [ph] heralds a wider consumer acceptance for an important biometric.

Combining facial comparison with ID document verification as Mitek does matches what you have, with who you are. The reliability of this combination promises to exceed traditional what you know methods in light of data losses and ineffectiveness of knowledge-based challenge questions that have grown so worrisome and unsafe for consumers.

To accelerate our plan and foster greater global identity coverage, we intend to use our balance sheet to grow both organically and through M&A. And to that end, last month we announced the acquisition of ICAR.

Founded in 2002 is a spinoff of the renowned computer vision Center at the University of Barcelona, ICAR has successfully positioned itself as a leading provider of consumer identity verification solutions in Spain and Latin America.

ICAR’s customers are premier banks including Kaiser bank, Banco Neon, and Bancoppel as well as leading network operators Telephonica and Orange. ICAR mainly sells its solutions through channel partners such as Accenture, Informática El Corte Inglés, and other top technology solution providers.

The addition of ICAR extends the scope of Mitek’s identity document coverage for North America, Europe and now Latin America and broadens our product portfolio with several new factors of authentication, including social scoring, email, phone number lookup and geolocation.

The acquisition also further enhances Mitek’s desktop capture capabilities, which enable customer on boarding and authentication using computers in addition to mobile devices. ICAR’s computer vision scientists are dedicated to ongoing research and development and by merging them with our Mitek labs will create now one of the most powerful research and development teams in the digital identity verification industry.

And let me dig in a little deeper into our success and identity verification as we furthered our mission to bring the highest quality user experience and performance to our customers globally. Some of our notable new customer acquisitions in the fourth quarter included a top 10 bank in the EU, who will be using our identity verification solution to comply with know your customer and anti-money laundering regulations for new account openings.

This is a used case that could be broadly adopted by other banks. For example, MoneYou, the fully digital consumer banking subsidiary of ABN Amro has also been using our mobile verify solution in the fourth quarter to securely onboard customers while meeting stringent KYC regulations.

Another new customer came from a new vertical for Mitek education. Yubico, a leading provider of authentication and encryption hardware is using our Mobile Verify to enable secure digital access to educational resources for students parents and staff and school districts in Wisconsin and California with further expansion plans in the future.

Yubico selected Mobile Verify as part of a pilot project, that received a grant in 2016 through the trusted identities group at the U.S. Department of Commerce National Institute Of Standards and Technology.

In addition, the world number one job site also selected Mobile Verify to verify unknown job posters as they had several new startups in the sharing economy. To complement our direct sales efforts, we continue to build out our channel distribution partners to accelerate our growth in our identity business.

As an example, we continue to see new identity wins from our partnership with Experian which grew over 100% during the year. Many of you know Experian is a global information services group with nearly 20,000 employees and operations in 40 countries. They are an important partner for Mitek as we look to expand our leadership position in the large and growing identity market.

By re-selling and integrating our identity verification technologies with partners like Experian, we believe we can augment our direct sales efforts and accelerate the expansion of our identity solutions and financial services and beyond.

In Q4, we also signed a new agreement with identity and access management provider, VASCO and expanded our existing relationship with account opening provider, Avoka. We also signed, ThisisMe, a South Africa partner who is working with the top three banks in South Africa to provide multifactor identity verification using our proprietary cloud platform.

All of these are great examples of how we continue to build our channel and partnership network for identity as we believe it will be a significant growth driver for Mitek in the years to come.

We’re also working hard to expand our identity platforms capabilities and we’re very busy on the product developed front in the fourth quarter. Last month, we introduced Mobile Verify for lending, a new five-step digital lending experience that enables lenders to verify identity and bank account information in real time for fast loan decisions with a simple process for borrowers on smartphone.

Digital lending is predicted to be $100 billion market by 2020, our new solution positions lenders to succeed in the digital channel by creating a process that’s simple for borrowers and gives lenders identity verification, bank account verification, and supports fraud mitigation and compliance in five easy steps.

During the quarter, we also further enhanced our technology, announced the addition of near field communications capability to our Mobile Verify solution. An additional factor of authentication for billions of global electronic IDs. By adding NFC, Mobile Verify can now read the biometric data embedded on RFID chips, delivering definitive authentication assurance by simply touching the document to the smart phone.

Almost 1 billion e-passports with embedded RFID chips have been issued to date and 3.6 billion people are expected to use RFID chipsets, enable ID cards by 2021. These documents are becoming the standard for identity verification and the preferred government issued route credential.

Delivering the best user experience in coverage with speed and accuracy has made Mitek the global market leader in identity verification. We’ve been perfecting the use of artificial intelligence to develop algorithms for image recognition and analysis for many many years.

Altogether, we had eight patents in fiscal 2017 and now hold 35 patents that all relate to capturing and processing documents with an additional 16 patents pending. As part of our ongoing commitment to innovation, today our scientists and engineers are focused on a subset of AI, called machine learning and deep learning, which enables computers to learn without being explicitly programmed.

Our cloud platform is continuously learning from the millions of ID documents it processes. It also means that we can easily add new document types from across the globe to provide our global customers unparalleled and accurate digital identity verification capability.

In addition to our growth and innovation in identity, we continue to dominate the mobile check deposit market with over 5900 financial institutions and over 80 million consumers using our mobile capture technology.

As you know, Mitek pioneered mobile deposit and were committed to ongoing innovation. This year we introduced the newest release of our patented mobile deposit solution with new capabilities and enhancements that improve the performance of mobile deposit for both banks and customers. This latest generation is the 23rd new release since Mitek invented mobile deposit 10 years ago.

While consumers love the convenience and ease of use of mobile deposit, financial institutions love it even more because its one tenth the cost of processing a check inside the branch. With this substantial cost savings, financial institutions continue to spend marketing dollars to drive their customers to use mobile check deposit, and Mitek continues to benefit from this push to the lower-cost mobile channel.

Just last month, the Fin-Tech and digital commerce research firm, Futurion released its second annual mobile deposit benchmark report, and you can read that on our website. The report revealed that consumer adoption over the past 12 months has continued to grow. This growth can be attributed to improvements in the user experience, increasing deposit limits and giving customers immediate access to their funds all of which were recommendations in the last years benchmark report.

While the adoption and usage of mobile check deposit continues to grow, there is still room for further growth. The key drivers of consumer penetration and frequency of use. With financial institutions focused on driving their customers to use the lower-cost digital channel, we are confident that we’ll see continued growth in mobile deposit in fiscal 2018 and for years to come.

Our success in mobile deposit has laid the foundation for Mitek to establish itself as the leading provider of digital identity verification solutions as evidenced by our 54% revenue increase this year.

Our record total revenue and profits in fiscal 2017 were driven by the successful execution of our growth plan for both ID and mobile deposit. We believe that we are well-positioned for continued growth in fiscal 2018 and beyond as we continue to execute on our strategy.

Now with that, I’ll turn the call over to Jeff to discuss the financial results in more detail. Jeff?

Jeff Davison

Thanks, Jim and thank you everyone for joining us this afternoon. Lets start with the Q4 revenue and operating results. For the fourth quarter of fiscal 2017, Mitek generated revenue of $12.9 million, a 33% increase year-over-year.

Software revenue of $8.4 million was up 28% year-over-year. We maintained strong software gross margins and 96% for the quarter. Services revenue which includes SaaS, maintenance and consulting was $4.5 million for the quarter, an increase of 44% over last year’s revenue of $3.1 million. This increase in services revenue was due primarily to growth and transactional SaaS revenues for our mobile identity products, which increased 78% year-over-year to $2.4 million.

Services gross margin improved to 82% for the quarter. Total operating expenses including cost of revenues were $11.2 million compared to $8.8 million last year. Sales and marketing expense for the quarter was $3.5 million compared to $3 million a year ago. R&D expenses were $2.9 million compared to $2.3 million last year and our G&A expenses were $3 million compared to $2 million a year ago.

The year-over-year increase in operating expense primarily reflects our continued investments to grow our identity business. As a reminder, our earnings release includes a reconciliation between GAAP and non-GAAP net income. We believe non-GAAP net income provide a useful measure of the company’s operating results by excluding acquisition -related costs and expenses, stock comp expense and litigation costs relating to protecting our intellectual property

GAAP net income for the fourth quarter was $12.9 million or $0.35 per diluted share. This includes a long time deferred tax benefit of 11 million resulting from the removal of our deferred tax asset valuation allowance.

Excluding this one-time benefit, net income was $1.8 million or $0.05 per diluted share, up 92% year-over-year. Non-GAAP not net income increased 63% year-over-year to $4.1 million or $0.11 per diluted share representing our 14th consecutive quarter of non-GAAP net income.

In Q4 we incurred 690,000 of acquisition -related costs and expenses compared to 536,000 last year. Stock comp expenses was $1.5 million compared to $971,000 a year ago. We had $51,000 and litigation expenses compared to $47,000 in Q4 of last year. Our diluted share count was 36.3 million shares compared to 34.9 million shares a year ago.

Now looking at results for the full fiscal year 2017, revenue totaled $45.4 million, an increase of 31% year-over-year. Software license revenue grew 31% to $29.6 million and services revenue was $15.7 million, up 30% year-over-year. Our gross margins were 91% for the year.

The growth in our software revenue was due primarily to the continued growth in our mobile deposit business which started the year with the customer base of 5400 banks and grew to more than 5900 by year end.

As Jim mentioned the key drivers from growth in mobile deposit are consumer penetration and frequency of use. Both of these were contributing factors for growth in 2017.

The increase in services revenue was due primarily to growth and transactional SaaS revenue for our mobile identity products which increased 51% year-over-year to $7.7 million. SaaS transactional volumes increased more than 100% year-over-year and our identity business continues to see high demand for SaaS versus on-premise with 90% of our identity bookings for the year being for our SaaS products.

The majority of our SaaS revenue to-date continues to be pay-as-you-go and is based on transactional volumes process and build each month and therefore is subject to fluctuations depending on volumes in any given month.

However, as the mobile identity verification market continues to evolve we are signing the higher mix of contracts with transactional minimums, so we expect the mix of SaaS revenue with minimum commitments to increase over time. All that said, we’re very pleased to see continued year-over-year SaaS volume increases.

In terms of product contributions to total revenue our identity products contributed around 29% of our revenues for fiscal 2017 as well as a very strong year-over-year growth rate of over 54%.

Our payments products which include mobile deposit and our legacy payment products comprised around 71% of our revenue and continue to see strong rate in excess of 23% year-over-year.

Total GAAP operating expenses for 2017 were $42.6 million, an increase of 29% compared to total operating expenses of $32.9 million in 2016. The increase is due to the additional investments throughout the year to fuel our identity business.

GAAP net income for 2017 was $14.1 million or $0.40 per diluted share. Excluding the one-time tax benefit net income was $3.1 million or $0.09 per diluted share, up 56% year-over-year.

Non-GAAP net income increased 26% year-over-year to $10.9 million or $0.31 per diluted share. This is based on an EPS share count of 35.5 million fully diluted shares for fiscal 2017 versus 33.8 million shares for fiscal 2016. Stock compensation expense was $5.5 million for fiscal 2017 compared to $4.1 million for fiscal 2016. As of September 30, 2017 our headcount was 139 FTEs.

Turning to the balance sheet, we generated $10.4 million in cash flow from operations during the year bringing our total cash and investments to $46.3 million at the end of Q4. Our accounts receivable balance of $7.1 million represented a DSO of 50 days.

Now, moving to guidance for fiscal 2018. We expect the annual revenue to be between $57 million and $59 million for our fiscal year ending September 30, 2018. This would represent revenue growth between 26% and 30% year-over-year.

As we enter fiscal 2018 we continue to see strong market demand for our digital identity verification solutions and we will continue to invest in this growth opportunity. However we also continue to expect to generate healthy non-GAAP profit margins of between 19% and 20% for the full fiscal year 2018.

Although we do not generally provide quarterly revenue guidance we typically experience seasonality with a strong fiscal Q4 and a latter fiscal Q1 and this year will be no exception.

For Q1 2018 we expect total revenue of between $11 million and $12 million representing growth of between 18% to 29% year-over-year. We expect total operating expenses excluding acquisition-related costs and stock comp expenses to be between $10.5 million and $11 million reflecting our continuing investment in the ID verification business.

We expect acquisition-related costs and expenses to be between 800,000 and 1 million and stock comp expense to be between 1.6 million and 1.7 million for Q1.

Operator that concludes our prepared remarks. If you‘d please open the line for questions.

Question-and-Answer Session

Operator

Thank you ladies and gentlemen. [Operator Instructions] And our first question will come from Darren Aftahi with ROTH Capital Partners.

Darren Aftahi

Hey, guys. Thanks for taking my questions and congratulations on a nice quarter. Just if I may on your guidance, can you give a sense for kind of with the ICAR impact is on both sort of a cost and the -- on the revenue side? And then, Jeff in your comment I think you’d said that the payment side of the business grew 23%. I know you have a little bit of a legacy OCR perhaps in that number. If you backed that number out, could you just give us a sense for how fast you’re going to core Mobile Deposit business grew? And then lastly, maybe for Jim, with the ICAR acquisition I know they’ve got a strong capability in desktop scanning among other features and just fairly prevalent within some hotel verticals. Is there any portability to that in the U.S. and I guess what sort of a time frame for that if it happens? Thanks.

Jeff Davison

Okay. I’ll the first couple. On the ICAR guidance on cost and revenue, we’re not providing that level of detail. ICAR does have revenue, but we’re just not going to share the extent of that in the guidance. We do expect their financials to be breakeven to accretive by the end of the first year. So some impact but we’re just not disclosing the amount. On the payment side, yes, the blended rate there was 23% growth which is terrific, and really does -- that pretty closely reflect kind of what we’re seeing in general transaction growth in the mobile deposit business if you look through it what runs through all the systems.

The legacy business is declining and that obviously is offsetting and reducing that combined rate. But we decided that we’re getting small enough, we combine those numbers this quarter and give you the blended. So I'm not going to give you specifically the Mobile Deposit percentage, but it is you know a pretty good number higher than the 23%, but when you bring in the legacy and blend them together we look at payments as 23% for the year.

James DeBello

And Darren to answer your question about ICAR these are terrific people. We are really pleased to work with them. They are part of Mitek. Over half of their employee base is research and development, and they've got a slew of terrific and very talented scientist that came out of the computer vision lab, so they add extra skills and buttress our efforts to continue to outperform in the marketplace on the technology and performance space.

So, we’ve also been with them in the field with our sales executives with theirs in Mexico already and major counts in Madrid and throughout the regions of operation. So we think the integration process will be relatively fast, but with a cautionary note obviously we pick up new customers, we’re learning them, we’re dealing in a different language and we’re dealing in many more countries now in Latin America than before.

We do think the technology is extensible to the U.S. They’ve got some really wonderful technology in the area of the computer vision for desktop computers. We think that's a benefit. We really like the new authenticators that working on with regard to work in the holograms and Kinegrams [ph]. And so we think we’ll see the integration of the product category and technology certainly within fiscal 2018.

Darren Aftahi

Thank you.

Operator

And next we’ll take a question from Bhavan Suri from William Blair.

Bhavan Suri

Hey, guys. Congratulations, that’s a greater number especially that 100% growth on the SaaS business. I guess, in terms just touching – of course yes, they were good sort of numbers there. Touching on the partner channel, did you guys have invested pretty heavily in a variety of partnerships across the board now? And it feels like that you see start to see the mobile ID business start accelerate a bit, obviously some of that might be in organic this quarter. But just help me understands sort of as you think through that on the leverage you get on the partners what you think that could due --- does it make sense I think about acceleration of that business over the next year, let’s say next three years as those partners go-to-market with the offering?

Jeff Davison

Bhavan, let me answer that. Absolutely, we expect to see that leverage and acceleration over the next two to three years. You know that we build Mobile Deposit exclusively with channel partners and has been wildly successful. So we have a lot of confidence and knowledge we had to operate in the channel. But it took some time to get those channel partners up and going and we were less mature as an organization. We are more mature, we are deeper on the bench and we are actively pursuing not only data bureau partners, like Experian, who by the way is integrating us into their platform globally, but also having discussions with the others, as well as signing on VASCO that we mentioned and other partners that you may not have heard about in different parts of the world.

So, we are actively pursuing to build out the channel. We expect to get leverage from that and the benefit is that it allows us to address markets that we’re not focused on a direction sales effort. We really are primarily focus on financial services, lending credit as we talked about before and we branched out into travel and also share the economy. So we really think that's an important area for us to be able to go laterally in the other verticals with a product that is very extensible in our identity platform.

By the way, I might add that ECAR [ph] or ICAR also sells exclusively through channels and so then we pick up a relationship with Accenture and with Telematica, Informática El Corte Inglés. So these are good channel partners that we already have a foot hole with few of our acquisition. So yes, expect to see more from the channel.

Bhavan Suri

I guess just in terms of follow-up on that, one of the things you mentioned was, some of the things we had with Mobile Deposit was rollout say with Bank of America. One of the customers, you’d announce the customer and there will be a lag to rollout. Now we’re seeing a lag to the revenue. As you think through the partners you’ve seen implement this now ID verification, what is that lag or timeframe look like? So, you just now with VASCO, very good partnership there. When does sort of that transaction revenue start rolling out? Is that six months, 12 months and how should we think about that?

James DeBello

There’s a couple of different from what we’re doing today than what we did then. Today we’re in the cloud, all right, so ultimately we’re it going to be cloud only provider today where cloud first, but we still do have some on-premise requirements from some of our financial customers primarily banks, but that’s evolving. So being in the cloud and with a defined API, your time to market through your partners and to your ultimate end user is faster.

So traditional with Mobile Deposit that look back that was on premise and that was through channel in a new world of smart phones and camera capture. We’ve gone way beyond that. So what was once a year from Mobile Deposit still maybe three to six months for identity verification realistically only because we’re dealing with large enterprises and with channel partners who are sizeable themselves. So we’re going to always have that lag through the channel. Bhavan, but we think it will be less of a drag co-efficient that it was earlier with Mobile Deposit because we’re now in the cloud and because there’s more familiarity and distribution of the smartphone cameras.

Bhavan Suri

Got it. And then, I may touch it on one more here. Lot of the applications that the partners are doing involves capturing other data, but its verification or something else. Are you seeing sort of -- remember, for example, progressive you guys have dump some stuff. You’d had photo bill paper, some data capture. Is that product being added into some of these opportunities, or you got the partners to develop some of stuff themselves. How should we think about sort this idea that I need verification of ID and documents sort of capture, data capture, and are you sort of playing with the a capture space to outside of just to verification?

Jeff Davison

Yes. In my prepared remarks I spoke about a layered approach and we can really do believe in that. And so, if you think about us in a cloud and we are cloud provider, this is an upsell opportunity. So we do offer in addition to Mobile Verify additional add-ons one of which is mobile documents and mobile documents is ability to capture an additional, I would call a trailing document to prove residency or other aspects of your financial life maybe even a W-2. This is key and part and parcel of what we talked about with Mobile Verify for lending.

The five steps include signing on your online account, but more importantly taking images not only for your ID front and back, but also of a point and proof of residency document such as a utility bill or in cases needed a W-2. So we believe it’s a upsell opportunity. We will add additional features and capabilities to our platform to enable e-commerce.

Bhavan Suri

That’s helpful, Jeff. Thank you for the color and congrats again. Thanks guys.

Jeff Davison

Yes. Thanks a lot Bhavan.

Operator

[Operator Instructions] Next we’ll take a question from Joel Fishbein from BTIG.

Joel Fishbein

Good afternoon guys and congrats on a quarter and on the ICAR acquisition. I just have a quick question for you on Equifax. You brought up the Equifax breach is being a potential driver to business. Are there any specific examples that you could ever see already Jim that you could share with us that where companies are rolling you guys out as a results of what happen there, that will be helpful?

James DeBello

Joel, it’s a good question and we were at Money 20/20 and we saw a tremendous level of interest in our activity and in our presentation there. And the buzz at the show really wasn’t about identity verification and the overarching cloud would be the Equifax breach on social security numbers. As you know there’s been lot of breaches, about a 1000 of them during the year around credit card numbers and other elements of identity. This is the first time on such a massive scale that the SSN was breached and it touched lot of Americans and as you know front-page news. So yes we do have examples, a large brokerage came to us and said because of that they would like to implement a Mobile Verify, so that is an example. I can’t name the name unfortunately because of the restrictions placed on us. And nonetheless it’s demonstrable, it's real and it is a market driver.

Now, of course moving this needle means that this is an approach that requires the enterprise to re-configure their workflow to augment their existing systems so I can’t say it’s going to be overnight, we’re going to see a spike, but it's a steady drumbeat of additional interest driven by the breach of the Social Security number.

Joel Fishbein

Great. That's very helpful. Thank you.

Operator

Our next question will come from Mark Schappel from Benchmark.

Mark Schappel

Hi, guys. Nice job on the quarter.

Jeff Davison

Hey, Mark. Thank you.

Mark Schappel

Hey, Jim, starting with you in your prepared remarks you noted some of the successes you’ve been having, building out your partner ecosystem in your ID business. And I wondering if you just touch a little bit on what’s you’re doing to build out the direct sales force in that business?

James DeBello

It’s a fair and good question Mark. We are investing I think Jeff specifically spoke about continued investment in the sales and marketing. Clearly in the sales side we have increased the number of our direct sales reps, as well as our channel sales representatives and so we have put more feet on the street contacting these important global distributors. We’re working very closely with the new ICAR distributors who we inherited through the merger and we’re adding marketing resources to our efforts to convey more of the product benefits, some of the great results we get from the field and to compel our channel partners to do a better job as they resell our product.

Recently, we were in Phoenix with regard to our largest partner experience and we’re in front of a sales force of nearly hundred people and we were invited also to the European presentation recently on the continent there where we presented to customers and the European sales force. So the key to channel development not only signing them but enabling them. And so our investment really is all about enablement from both touching them through our direct selling efforts and through our channel marketing materials and progress.

Jeff Davison

Joel, this is Jeff. I would just pile on a little bit there and give you little more on – you ask specifically about sales and marketing, but we’ll be investing this year or already are investing in technology, customer success and sales and marketing, and a lot of that investment is going to be very front-end loaded, so we’re going after this market. We need we need the resources to go do it and we know thankfully how does the mobile deposit business but gives us the cash do it. So, a lot of the increased investment will happen at the beginning of the year and then will continue through the year.

Mark Schappel

Great. Thank you. And then Jim, last quarter or so, I believe you hired a managing director for Europe and you did sort of accelerate growth on the comp, and I just wonder if you could just speak about some of the upcoming initiatives to drive growth there. Obviously ICAR is part of that, but I’m sure you have other things that are going as well?

Jeff Davison

Yes. Good question, Mark. You recall several years our first purchase was ID checker in Amsterdam. That is our Europe headquarters, Mitek Europe. Subsequently we bought ICAR in Spain for Latin America, Iberia meeting Spain, Portugal and they will report into our Amsterdam headquarters. Our new Managing Director is very experience. He has worked with multiple American public companies in technology. He is a hard-driving General Manager with a great deal of sales and marketing experience.

Already he has recruited a team in the sales and marketing area. We did not have that last year. And we have continued to work very hard on key customer accounts. Some of them we’ve announced like ABN Amro, one of the largest banks in the world, but others of that caliber who we have not named. So we are making progress in Europe. We do believe Europe is a big theater of opportunity for Mitek simply because of the digital strategies that they have implemented broadly for consumers particularly payments but also e-commerce and separately because of the heavy regulatory environment on know your customer and anti-money laundering which continued to get refined and tighter which support the need for mobile identity verification. So, we like the European theater and market a lot and we are investing in that. He is doing a terrific job for us.

Mark Schappel

Okay, great. That’s all from me. Thank you.

Operator

And next we’ll take a question from Mike Grondahl from Northland Securities.

Unidentified Analyst

Hi, guys. This is Mike for Mike Grondahl. Thanks for taking my questions. Just wondering on the Yubico customer wins, do you think that’s more of a one time deal with the pilots or you see more opportunities in that area?

James DeBello

I think it’s a bigger deal. The use case I think can be repeated. We talk in addition to Ubeco about Maricopa County in our last call, if I’m not mistaken. Maricopa is the largest community college district in the country. It’s based in Arizona and they're using it to streamline student enrollment. And that’s a really important thing and they went from two-weeks down to, I think it was 20 minutes to get somebody enrolled, so phenomenal.

So education requires a trusted relationship just like commerce does, in fact it's a form of commerce. And so, what we’re really doing if you distillate and we can do this across verticals is that we’re taking what was a physical process face-to-face and in today's world with a smartphone being a driver we’re now digitizing it and we’re enabling the same capabilities of seeing the face and comparing it to the ID, seeing the idea and making sure its real. We’re doing that digitally whereby was once done physically in person.

So, I think that use case will expand in education. As I do the shared economy. As I do in travel and most clearly as I see happening in lending and credit and banking, all for new enrolments and saying yes to more good customers.

Unidentified Analyst

That’s helpful. And then, you mentioned that Top 10 EU bank. Is that a win from a existing channel partner or is that a newer partner or is that direct sales from that?

Jeff Davison

I’m sorry, could you repeat the partner please?

Unidentified Analyst

I was wondering if is that a channel partner, is that direct sales for that customer win?

Jeff Davison

That’s a direct sale from our sales force in Europe going back to Mark’s question earlier about the effectiveness now where René Hendrikse is our Managing Director in Europe. So again that is indicative of the type of traction we’re getting. And that’s all digital bank MoneYou, it’s a wholly-owned subsidiary of ABN Amro, as they have instead of reengineering their model they’ve created a new subsidiary company to be purely digital.

Unidentified Analyst

Great. Thanks.

Operator

[Operator Instructions] And at this time we have no further questions in the queue. And I’d like to turn the call back over to management for any additional or closing remarks.

James DeBello

Thank you, operator and thank you everyone for joining us today. Mitek’s management will be presenting the second annual ROTH Technology Corporate Access Day on November 16th next week in New York. If you are planning on attending this conference please stop by and say hi. We’ll hope to see you there. This concludes our call. And thank you. And have a great day.

Operator

And once again, that does conclude our conference for today. Thank you for your participation. You may now disconnect.