Mitek Systems, Inc. 2026 Q3 Earnings Call

Good afternoon, and thank you for joining us today to discuss Mitek's fiscal third quarter 2026 financial results. Joining me today are Chief Executive Officer, Ed West, and Chief Financial Officer, David Lyle. Please note that today's call will include forward-looking statements, and because these statements are based on the company's current intent, expectations, and projections, they are not guarantees of future performance, and a variety of factors could cause actual results to differ materially. A description of these risks and uncertainties can be found in our 10-Q filing dated August 6th, 2026, and our other SEC filings.

These forward-looking statements include, but are not limited to, our expectations around customer demand for our products and services, expansion of our Check Fraud Defender, or CFD, data consortium, the ongoing stability of our check verification business, our growth and investment plans, expected improvements in gross profits and unit economics, improvement to operating leverage and scale, expected free cash flow conversion rates, and our FY 2026 financial outlook and guidance. Except as required by law, we do not undertake any obligation to update these forward-looking statements. This call will also include references to non-GAAP adjusted results. Please reference this afternoon's press release and our investor relations website for further information regarding forward-looking statements and reconciliations of GAAP to non-GAAP financial measures. With that, I'd like to turn the call over to Ed.

Good afternoon, everyone, and thank you for joining us. Today, I would like to give a quick summary of the quarter, provide some background on Mitek, and then hit four key takeaways for you. The team delivered a strong fiscal third quarter with total revenue growth of 18% versus last year, above our previous expectations. We also achieved record fraud and identity revenue and record total SaaS revenue up 36% versus last year, along with strong profitability and continued margin expansion. Now, for those less familiar with Mitek, our mission is to establish trust in digital interactions. We provide the verification, authentication, and fraud decisioning infrastructure that high assurance institutions rely on to protect customers and stop fraud across a broad digital life cycle.

Whether someone is opening an account, logging in, depositing a check, or approving a high-risk payment, our role is to help determine whether that person, session, document, check, or transaction can be trusted. By leveraging our data network, platform of digital fraud and detection solutions, expertise, and history in financial services, we believe that we are well-aligned to how the market is evolving to fight increasingly sophisticated AI-assisted digital fraud. This quarter's progress is a good indicator of that alignment. With that as context, I'd like to walk through four key takeaways from the quarter. First, our consortium network is scaling into a differentiated data-driven fraud prevention capability. Second, our fraud and identity portfolio is deepening across the customer life cycle and into new high assurance demand.

Third, check verification continues to perform well and deliver strategically important core capabilities with deep FI and channel partner relationships and remains a durable cash generative foundation. Fourth, our strong execution is showing up in the numbers. Beginning with our first takeaway. This quarter, our consortium data network reached an important milestone. A top five U.S. bank has now successfully completed its pilot and is now moving into the Check Fraud Defender consortium network. We earned this move by showing that the power of the network, combined with our cloud-based fraud software, delivered superior results to their existing solution, even though they're one of the largest banks in the nation. Our partner channel is also accelerating into tangible recurring contribution. I'm honored to announce that Fiserv is now live as a reseller of Check Fraud Defender, extending the network's availability to the thousands of institutions that they serve.

We added dozens of new logos this quarter through our partner channel, including through partners Abrigo, CSI, and DataVisor, which brings the consortium shared intelligence community and regional banks. As more institutions participate, the shared pool of data grows and the network becomes more valuable to everyone who participates. We estimate that we now have contributing data sets covering approximately 70% of the U.S. checking accounts and annualized volumes now measured in the billions. Check Fraud Defender ACV grew 73% year-over-year with growth accelerating over recent quarters. The network strength is also opening adjacent opportunities. Positive Pay+, which extends fraud detection to the point of check presentment, continued to gain traction. We expanded with an existing bank and added our first non-bank design partner, a leading business payments company, extending these capabilities into B2B payments and accounts payable for the first time.

That strength extends into our second key takeaway. Our fraud and identity portfolio is deepening both with existing customers and in entirely new areas of demand. At a high level, our portfolio summarizes to two core solutions. One, a data-driven network consisting of hundreds of FIs addressing the payments use case of check fraud. Second, our core identity platform with the Mobile Verify and MiVIP engines, which is enhanced by our proprietary and leading biometric capabilities. Customers engage with our platform in different ways. Some adopt the full journey across onboarding, verification, and authentication. Others come to us for a single capability. A striking example this quarter came in the use of age verification. Demand ran many millions of transactions beyond our expectations and drove identity transaction volumes well above any prior quarter. Our expertise, reliability, and ability to scale served this situation well.

This unexpected surge was tied to a specific regulatory driver involving age assurance. Our existing customers continue to deepen their relationships with us, increasingly through multiyear committed contracts. We also continue to win beyond our traditional FI core customer group. Recent examples range from a large enterprise software company using our verification for employee screening to one of the largest football clubs in the U.K. verifying and authenticating its season ticket holders. A common thread is that they all want the same thing. Bank-grade, high-assurance verification and authentication delivered as reliable infrastructure, not a patchwork of point tools. Increasingly, more of what we sell are multi-signal, fully orchestrated KYC journeys rather than single checks, with transactions per journey holding up well as customers adopt richer workflows.

Turning to our third key takeaway, check verification continues to deliver industry-leading convenience for millions of consumers like you and me and thousands of financial institutions on a daily basis. This solution brings Mitek credibility, expertise, an exceptional network of channel partners, and of course, terrific cash flow. Check verification also provides the core software for check fraud detection as software at the heart of our Check Fraud Defender network. At the macro level, the Federal Reserve's latest payment study, released a few weeks ago, confirms that paper check usage continues its gradual long-term decline, with approximately $9.2 billion checks written in the U.S. in 2024. Against that backdrop, our check verification revenue has stayed range-bound on a trailing 12-month basis as Mobile Deposit penetration, driven by its inherent convenience and disciplined pricing, have offset volume declines.

While we plan for check verification revenue to soften gradually over time, the strategic value stays with us through the embedded infrastructure and the relationships, and it opens the door to our broader fraud and identity portfolio. Fiserv is the clearest example. A check verification partner of ours for years, now leveraging our fraud network to market through their own channel. This brings us to the fourth key takeaway. Execution is showing up in the numbers. We paired double-digit revenue growth with expanding margins and real operating leverage, and that profitable growth is converting efficiently into cash. Just as important, the revenue base itself is becoming higher quality and more durable, with SaaS now approaching half of our total revenue. A more recurring, more predictable Mitek than just over one year ago. That profitability, together with a strong net cash position, gives us sufficient flexibility.

Our capital allocation approach remains balanced and disciplined. We continue to invest behind the platform while returning capital to shareholders through buybacks, with ample capacity remaining to do both. Before I turn it over to Dave, I want to share an important step forward for the organization. As we scale, we are unifying our go-to-market functions, including direct and channel partner sales, customer success, sales engineering, and professional service teams under a single CRO organization. As you saw in our earnings release this afternoon, we are pleased to welcome Aaron Saylor as our Chief Revenue Officer effective August 17th. Aaron has a terrific track record of achievement and revenue growth in the space. Our consortium data network and our identity platform are both driving growth, and solid execution is showing up in our results. With that, I'd like to turn the call over to Dave.

Thanks, Ed. I'll cover our third quarter results and then walk through our updated fiscal 2026 outlook. Summarizing the quarter, total revenue was $54 million, up 18% year-over-year and above the high end of our previous guidance range, with adjusted EBITDA margin of approximately 38% on revenue scale, favorable mix, and expense discipline. Beginning with fraud and identity, revenue was $29 million, up 14% year-over-year, near the targeted range of the mid to high teens for this product portfolio. Growth gains were somewhat offset by the conversion of a large on-premise software license customer to a Check Fraud Defender SaaS agreement, a one-quarter impact. The 37% fraud and identity SaaS growth had two primary drivers. One, underlying growth in identity transaction volumes and new Check Fraud Defender customers.

Two, an unexpected surge in age verification demand in our EMEA region, where new regulations required a one-time upfront age verification. Fraud and identity SaaS is a key growth driver of our business, and on a normalized basis, this quarter saw a similar high teens to low 20 SaaS growth rate that we have seen over recent quarters. Moving to check verification, revenue was $25 million, up 24%, driven by two large renewals that did not fall in the same quarter last year. This reflects renewal timing rather than underlying growth, and we remain confident in the approximately $90 million trailing 12 months revenue level for the full year. On revenue mix, our revenue base continues to improve towards more predictable and durable SaaS. Total SaaS revenue is now approximately 46% of last 12 months revenue, up from 41% a year ago.