Todd Kehrli – Investor Relations, MKR Group Jim DeBello – Chairman, President, and Chief Executive Officer Russ Clark – Chief Financial Officer.

Bhavan Suri – William Blair Darren Aftahi – ROTH Capital Markets Mike Grondahl – Northland Securities Mark Schappel – Benchmark Spencer Bogart – Needham & Company.

Good day, and welcome to the Mitek's Fiscal 2016 Fourth Quarter and Year-End Conference Call. At this time, I would like to turn the conference over to Mr. Todd Kehrli from the MKR Group. Please go ahead..

Thank you, operator, good morning and welcome to Mitek's fiscal 2016 fourth quarter and year-end earnings conference call. With me on today's call are Mitek's Chairman, President and CEO, Jim DeBello; and CFO, Russ Clark. Before I turn the call over to Jim and Russ, I would like to cover a few quick items.

This morning, Mitek issued a press release announcing its fiscal 2016 third quarter 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 would 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 and 10-Q for a more complete description of these risks.

Our statements on this call are made as of today, November 3, 2016 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 for any reason.

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 describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release.

I will now turn the call over to Mitek's CEO, Jim DeBello.

Jim?.

Hey, thanks, Todd, and good morning everyone. Listen I will speak a little slowly this morning for those Chicago Cubs fans who were up all night celebrating. That was a quite a game last night.

I think it showed a lot of great grit and determination by the Cubs, actually by both teams, and I think that really reflects who Mitek is as our employees have those same characteristics. I am happy to report that Mitek achieved record revenue in profits in fiscal 2016.

Our total revenue for fiscal 2016 increased 37% year-over-year to $35 million, and we finished the year with non-GAAP net income of $8.7 million or $0.26 per share. Our record revenue in the profits were driven by growth from both our mobile ID Solutions and our industry-leading mobile check deposit products.

We have made significant progress with our mobile ID Solutions business in fiscal 2016, utilizing the latest artificial intelligence and machine learning techniques to address the rapidly growing mobile ID verification market.

During the year, we signed several new mobile ID customers in the financial services sector, where we currently have over 5,400 enterprises using our industry-leading mobile check deposit solution.

These new mobile ID wins include three of the largest financial institutions in the U.S., the largest online retail mortgage lender, the two largest private label credit card issuers as well as pilots with two of the largest banks in Europe.

We continue to focus on expanding within the financial services vertical where we believe our solutions are uniquely positioned to address the pain points from significant regulatory requirements that must be met.

One of the clearest [ph] examples of this is within the payments processing market where there is significant Anti-Money Laundering or AML regulatory requirements for processing payments.

One of our first ID customers, a large global payments processor was being forced to temporarily suspend user accounts while they review the IDs manually to meet AML requirements. This caused many of the users to go frustrated, abandon the process, or even seek a competitive alternative.

Using our mobile verified solution, this customer was able to quickly and easily verify the identities of users sending and receiving money, and reduced the time needed to verify their identity from seven days to just minutes.

Using our ID solution, they successfully lifted 92% of the temporary restrictions halting money movement, resulting in increased customer satisfaction, higher customer retention and reduced abandonment. This particular example highlights the intensifying regulatory requirements that are driving adoption of ID product verification solutions.

Under AML directive 4.1 which will take effect the first day next year. There will be even lower dollar amount threshold, where ID verification will be required for money transfers in Europe.

We believe these types of increasing regulatory requirements will drive further adoption and usage of mobile ID verification solutions in the financial services vertical particularly in the mobile market where Mitek offers a unique experience.

Financial services companies need our product to address the shift consumers are making to the mobile channel and while at the same time, meeting their ever increasing regulatory requirements, with our market momentum competitive advantages and solid balance sheet, we are well positioned to broaden our lead in serving the financial services vertical and the fast growing identity capture and verification market and we look forward to delivering on this objective in fiscal 2017.

There is also significant opportunity for growth in our mobile ID solution outside of the financial services sector, where growing customer demand is forcing enterprises to embrace the mobile self-serving channel, new customer enrollments continue to be the Holy Grail for all enterprises, and mobile ID solutions help these enterprises successfully acquire more new customer through this growing channel.

We estimate that the total addressable market for mobile identity capture and verifications solutions is $3.8 billion and growing, this estimate includes financial services, banking and credit lending and payments as well as our telecom, insurance, employment, travel, healthcare, shared economy and retail.

We believe this number will grow with the proliferation of more mobile transactions and the ability to fast and accurately identify and verify this rapidly growing group of mobile consumers.

Mobile verifying enables an enterprise to verify the authenticity of a driver license and thereby the identity of the mobile customer during the mobile process and or even during the transaction. This is the digital equivalent of physically showing your driver license in a branch or at a store.

In addition, mobile verified mitigates the risk of fraud, which data shows is rapidly growing in the mobile channel.

Mobile verified, instantly verifies the authenticity of an underlying identity document using computer vision algorithms, utilizing the latest artificial intelligence and machine learning techniques, the authenticity of that ID can be verified entirely through a mobile device, eliminating the need for a customer to appear in person to prove their identity.

Mobile ID verification is quickly becoming an essential ingredient for any enterprise that's looking to successfully engage customers through the mobile self-service channel, while meeting the regulatory requirements. Using the customer smartphone camera to provide real-time mobile ID verification is a game changer.

For these businesses and Mitek's specific technical and market advantages make us a preferred partner for these enterprises.

At the center of our technology and built on patented algorithms Mitek's core flowing engine is a modular cross platform architecture that utilizes AI and machine learning to classify, extract data and authenticate documents including passports, ID cards, driver licenses and checks.

Mitek has deep experience on how to analyze and authenticate IDs, the significant quantity of unique metadata, we feed our AI engine makes it more robust and intelligent as our machine learning algorithm learn and get better with every ID we see. We have also been very active in establishing IP protection around our innovative ID products.

Mitek now has 29 patents issued and 12 patents pending. The latest patent issued to us was for our unique system for processing and extracting content from the image of a driver license captured using a mobile device.

Achieving superior image quality enables the verification algorithm and the machine learning capabilities that power our mobile verify to work fast and accurately with verifying the authenticity of a driver license.

We believe the fast and accurate mobile ID verification process ID the key to unlocking revenue in the mobile channel and reducing the cost of digital customer acquisition.

This ID solution patent along with several others that we have been granted and/or pending highlight our unique and advance image capture capabilities that we believe are a key competitive advantage of our ID verification solutions.

With our innovative mobile ID products we have a substantial competitive advantage with significant growth opportunities ahead, several of our ID customers have line with our solutions and we are already in the implementation process with several more.

We believe ID will be a significant growth driver for Mitek in fiscal 2017 and beyond as more banks and enterprises employ our solutions to help them optimize the mobile channel in a safe and secure fashion. Now let me quickly review our mobile deposit business, where we continue to dominate in this large and growing market.

Mitek's mobile deposit solution has been broadly adopted in the U.S. and Canada and it continues to grow among both consumers and the financial institutions that serve them. All of the top 10 banks in the U.S. use Mitek's mobile deposit and we now have over 5,400 financial institutions worldwide licensing our technology and more than 70 million users.

While consumers love the convenience and ease of use of mobile deposit, financial institutions love it even more as they recognize the substantially lower transaction costs, associated with processing checks through the mobile channel.

As financial institutions continue to spend on significant marketing dollars to drive their customer to use mobile check deposit, Mitek continues to benefit from this push to the lower cost mobile channel. While adoption and usage of mobile check deposits continues to grow only four out of 10 online customers in the U.S.

have deposited a check via mobile device according to a recent Futurion study.

So we still have substantial room for growth, the Futurion study, is the first time that banks have been scored of their mobile deposit experience and they found a strong correlation between customer experience scores and customer adoption of mobile deposit as banks drive customer to this significantly lower cost channel, it will generate an increase number of mobile deposits which will translate into growth for Mitek.

The same growth opportunity exist in commercial banks and for commercial banking, checks remain the single most dominant and most preferred B2B payment mechanism for millions and millions of businesses, with our new mobile multi check capture product, businesses will be able to make batch copies and deposits with a mobile deposit device and take advantage of the advance risk management and business intelligence features including endorsement detection.

We live in a mobile world and business customers are demanding mobile solutions from their banks, our mobile deposit solution provides the superior alternative to expensive scanners or trips to the branch as we highlighted. They certainly want these customers to shift over to this lower cost channel too.

In the fourth quarter we announced the availability of a new mobile multi check capture SDK for commercial mobile deposit, built on top of MiSnap, this new SDK is designed to help banks and app developers easily deploy mobile banking apps for businesses, faster than ever, with this SDK we have done the heavy lifting for all of them.

We believe the commercial markets represent a substantial opportunity for growth in the years to come as banks and businesses begin to focus on implementing commercial mobile check deposit. In confusion, we had a terrific year with record revenue and profitability.

We continue to see growth in mobile deposit, driven by increasing adoption in both the consumer and commercial markets. We continue to expand into the rapidly growing ID capture and verification market, with our new industry leading products enabling us to drive higher ASPs while also increasing our mix of recurring revenue through the cloud.

We are absolutely laser focus on establishing Mitek as the leading provider of mobile ID verification solution to banks and enterprises in the rapidly growing mobile self-service market and with our market momentum competitive advantages and solution balance sheet, we are well positioned for continued growth in fiscal 2017 and beyond.

Now with will I will turn it over to Russ to discuss the financial results in more detail..

Thanks, Jim, and thank you everyone for joining us this morning. Let's jump right in with Q4 revenue and operating results. As Jim mentioned Mitek generated record Q4 total revenue of $9.7 million a 23% increase year-over-year.

We also achieved non-GAAP net income in Q4 of $2.5 million or $0.07 per diluted share representing our 10th consecutive quarter of non-GAAP net income. Record Q4 software revenue of $6.5 million included 22 mobile deposit reorders and is up 20% compared to revenue of $5.5 million in the year ago quarter.

This growth is fueled by both mobile deposit and our mobile ID products. We maintain strong software gross margins at 96% for the quarter.

Q4 services revenue of $3.1 million increased 30% over last year's Q4 revenue of $2.4 million due primarily to growth in transactional SaaS revenues for our mobile ID products which more than doubled year-over-year to $1.4 million. Q4 services gross margins were consistent at 79%.

Total Q4 operating expenses were $8.8 million compared to $6.9 million in the year ago quarter. Q4 selling and marketing expenses were $3.0 million compared to $1.9 million in the year ago quarter and R&D expenses were $2.3 million in Q4 compared to $1.7 million a year ago.

Our Q4 G&A expenses were $2.0 million compared to $1.9 million in the year ago period. The year-over-year increases in OpEx reflect our continued investments in sales and marketing and R&D to grow our ID business.

As a reminder our earnings releases includes the reconciliation between GAAP and non-GAAP net income, we believe non-GAAP net income provides the usual measure of the company's operating results by excluding the following items.

Acquisition related cost and expenses, stock compensation expense and litigation cost related to protecting our intellectual property. In Q4, we incurred $536,000 of acquisition related cost and expenses, compared to $552,000 in Q4 of last year. Stock compensation expenses during Q4 was $971,000 compared to $873,000 in the year ago quarter.

IP litigation expenses totaled $47,000 in Q4 versus $410,000 in Q4 of last year. Moving on GAAP net income in Q4 was $960,000 or $0.03 per diluted share compared to GAAP net income of $955,000 or $0.03 per diluted share in the year ago quarter.

Non-GAAP net income in Q4 was $2.5 million or $0.07 per diluted share compared to non-GAAP net of $2.8 million or $0.09 per diluted share for Q4 of last year. Our diluted share count for Q4 was 34.9 million shares compared to 31.7 shares in the year ago quarter.

Now looking at results for the full fiscal year, revenue for 2016 totaled $34.7 million an increase of 37% year-over-year and was comprised of $22.6 million in software licenses and $12.1 million in SaaS maintenance and consulting services.

The year-over-year growth was due not only to continued adoption of our mobile ID products, but also to growth in our mobile deposit customer base from 4,500 banks at the start of the year to more than 5,400 at year-end, we also maintained our already very solution 90% gross margins for the year.

In terms of product contribution to total revenue, our ID products contributed around 25% of our revenues for fiscal 2016 as well as a very strong year-over-year growth rate of over 400%.

Mobile deposits comprised around 65% of our revenues and continue to see strong growth rates at close to 20% year-over-year, other non-core products including our legacy back office check engine and bill pay products accounted for close to 10% of the mix.

Total operating expenses for 2016 were $32.9 million an increase of 40% compared to total operating expenses of $23.5 million in 2015. The increase is primarily due to the addition of ID checker for the full fiscal year as well as additional investments in the sales, marketing and R&D to fuel growth in our ID business.

GAAP net income for 2016 was $2.0 million or $0.06 per diluted share compared to GAAP net of $2.5 million or $0.08 per diluted share in 2015. This is based on EPS share count of 33.8 million fully diluted shares for fiscal 2016 and 31.5 million shares for fiscal 2015.

Non-GAAP net income for fiscal 2016 was $8.7 million or $0.26 per diluted share compared to non-GAAP net of $8.1 million or $0.26 per diluted share for the prior year. Stock compensation expense was $4.1 million for fiscal 2016 compared to $3.4 million for fiscal 2015. As of September 30, 2016 our head count was around 115 FTEs.

Turning to the balance sheet, we generated $2.6 million of operating cash flows during Q4 and $7.9 million during fiscal 2016 raising our total cash investments balance to $35.8 million at fiscal year-end. Our account receivable balance of $4.9 million at fiscal year represented a DSO of 47 days which is in line with our normal historical levels.

Now moving to guidance for fiscal 2017, we expect annual revenue to be between $43 million and $45 million for our fiscal year ending September 30, 2017. Our guidance is based on continued strong growth in our mobile ID products as well as continued growth from mobile deposit.

We expect the revenue mix for fiscal 2017 to comprise around 35% from our ID products, 60% from mobile deposits and less than 5% from non-core products. Although we do not generally provide quarterly revenue guidance, we typically experience seasonality with the solution fiscal Q4 and a lighter fiscal Q1 and this year is no exception.

We expect revenues to be between $8.5 and $9 million for Q1 of fiscal 2017.

During fiscal 2016, we invested in sales and marketing and R&D to grow our ID business, while we added top notch talent, it remains a very competitive labor market and we did not hire to plan, this resulted in higher non-GAAP profit margins of 25% for the year versus our guidance of at least 20%.

As we enter fiscal 2017, we continue to see strong market demand for our mobile ID verification products and we will continue to invest in this growth opportunity. However, we also continue to expect to generate healthy non-GAAP profit margins of at least 20% for the full 2017 fiscal year.

We expect Q1 OpEx excluding acquisition related cost and expenses, stock compensation expense and litigation cost to be between $8.0 million and $8.5 million. We expect Q1 acquisition related costs and expenses to be between $500,000 and $600,000.

Q1 stock compensation expense to be between $1.2 million and $1.3 million and Q1 IP litigation costs to be less than $50,000. That concludes our prepared remarks. Operator, please open the line for questions..

Thank you. [Operator Instructions] And we will take our first question from Bhavan Suri from William Blair. Please go ahead..

Hey, guys thanks for taking my question. .

What were you doing last night, Bhavan?.

I was in Minneapolis watching the Cubs game at a hotel, not that exciting..

Okay..

But it was a great win. Anyway, thanks for the color. I think obviously nice job on the numbers and the guide. It's great to see some more color on the mix of the products. I guess, as you look at the business and look at the mix shift and the guidance, give us some sense of visibility into that guide and some sense of the recurring revenue mix.

We are sensitive [ph] you know, how much really have into the year at this point?.

Yes. Thanks, Bhavan, good question. Starting with the biggest portion of the business with mobile deposit, as you're seeing the business progress over the last several years, our installed base of end user banks is up to 5400 now, and we have our existing channel partner relationships.

And the bulk of that business, you know, I noted 22 reorders earlier today, so the bulk of the mobile deposits revenue is reorder base.

It is still a block model, but we have a high degree of visibility into that, and continue to work with our channel partners on closing deals in a manner on a quarterly basis that gives us high degree of visibility there.

On the ID business, our SaaS revenues grew up to $1.4 million in Q4, it is a transactional SaaS business, so we can flip the hood, any day, week or month and see how transactions are trending.

So there is a high degree of visibility there, but it is more of a transactional business that's subject to volume fluctuations but again we have up to the minute visibility and then on the other portion of the ID business for on-premise, we have -- we built up some backlog there, in terms of multi-year on-prem deals that will give us annual license fees, every year.

So we have a high degree of visibility there but in terms of new pipeline and new deals, that first year annual on-premise license fee is subject to deal time like any enterprise software business. So it's that last portion that is dependent on us being able to negotiate and close deals with very large enterprises during the time period we expect.

So I think building from the foundation of high visibility and to mobile deposit visibility into our SaaS business and our install base on-prem ID side. The last piece of new deals is really the one with the least visibility, but overall visibility continues to improve and definitely over the last several years has gotten much better..

Got it, got it and then obviously really healthy growth in the mobile ID product, you have got Mobile Fill and you got Mobile Verify and you got the ASP lift, when you look at the growth next year which obviously the numbers are changing dramatically, but sort of 50 plus percent growth.

When you look at that just could we get some sense of whether that's ARPU-driven or customer-driven or how does that mix look between net new customers or sort of ARPU growth within the existing base?.

Sure, Bhavan. It is primarily new customer acquisition on the ID side. I am sure we'll add several hundred more banks on the mobile deposit side, but on the ID side it's about acquiring new logos and getting those in the hopper and then it's also about increasing transactional volumes and revenues with the existing base in ID.

So I'd say new customer acquisition for ID number one and then farming the base and getting lives and getting volume increases in the installed ID base..

Got it. One last one for me for Jim, you've taken the photo [ph] verification and sort of the ID verification business and you've branched it to a number of really interesting verticals tied to financial services or healthcare or consumer healthcare, some of the gaming industry.

So as you see those, any of those really starting to get enough traction where you've got multiple wins in a vertical where you can sort of start thinking about creating vertical based solutions to further penetrate those market, just some sense of how you guys are approaching that and if you've had sort of multiple wins in any of those markets where it's outside of financial services but you are starting to see traction as a vertical solution in those market?.

Yes. Bhavan, I had mentioned those other verticals in light of the size of the market and the TAM that we see growing and those include everything from retail to shared economy and other types of verticals telecom included. We have however vertically built this as a beachhead in the financial services. That's where our core strength lies.

Obviously that's where the core installed base is and the trust with Mitek as a supplier of technology. So we see the greatest growth there.

We are getting opportunistic wins in other verticals as they come in and some of them are large in the area of shared economy but most of the wins that we have in ID are in broadly financial services which is lending, payments transactions, global transactions and banking.

So I don't want to indicate that we're taking a sharp end approach to this market, we're very focused on our core strength..

That's very helpful guys. Congrats again, and thanks for taking my questions..

Thanks Bhavan..

We'll take our next question from Darren Aftahi from ROTH. Please go ahead..

Hey, guys, good morning. Thanks for taking my questions.

Just if I may can you give us a sense you said you can really hit your hiring plan in fiscal '16 what was kind of your percentage of hiring that you kind of achieved and then do you expect to get some leverage out of the mobile ID sales force and some of the wins you've got in 2017 and I've got a couple of follow ups..

Sure, Darren. In terms of the hiring plan we added around 30 FTEs during fiscal '16. As we move into move into '17 we're looking to add maybe up to a couple of dozen more that's primarily sales and marketing but also R&D again sales and marketing first priority but we're investing as Jim mentioned in our capabilities and in AI and ML.

So we're adding some heads in the R&D area that sort of total sizing overall. In term so leverage from '16 to '17 we did essentially reiterate our guidance of greater than or equal to 20% non-GAAP profit margins for '17. Will we achieve our hiring plan in '17, we're out there aggressively hiring.

I think we added around 15 people just this last Q4 so we're hoping to fill the rest of the ranks earlier in the year and they stretch out little bit longer but it's important to get the right talent and here to keep it in the ID hard..

Yes, I think I'd add to that, Darren, also a big focus on sales. We saw a great lift in ID this last year. Do sell directly. We see an opportunity to a seat at the table would be a dominant leader just like we are in deposit. So we're going to take advantage of that opportunity. The products are terrific. The market pain is there.

There is a need that only deep and financial services but a Bhavan mentioned earlier across different verticals. We will keep focused on financial services primarily but we do see it branching out as opportunities arise. So we look at the investment as necessary in this emerging market and a high growth market.

Secondarily on the technology side it is an AI company. We are truly AI in machine learning. These are top notch scientist and we have they create algorithms and that is what we use sort of in a virtuous network to learn from the volume of IDs that we currently see. So the system gets better and better with time.

So now is the time to address appropriately to take advantage of what we considered a very large and high growth market..

Great. Just a couple of more if I may, I think you made some comments earlier about several mobile ID customers live I believe last time, I think you said you have one of your largest customers live. Any update there and then what is your sort of goal for those top 10 that you signed being live for the rest of the year.

And then lastly I think last quarter you had kind of given a sense for instances on the mobile ID, if you can call at that, any sort of sense for that kind of grew sequentially. Thanks..

Sure, Darren.

So in terms of live I guess I would remind everyone that there is a long sales cycle with these large enterprises in particular implementation cycles can six to 12 months and then once implemented these are typically staged out on a small basis it maybe an internal friends and family and then we rolled in different smaller market over time after that.

So it is a long process with these enterprises. They have multiple departments involved in implementations and so sort. So as Jim mentioned out of the larger accounts that we've announced at least on a no name basis we do have several live. They are in various states of live as I mentioned with the typical rollout schedules.

I wouldn't site a particular goal on how many of those will have live by when because there is a broad range that depends on the internal IT priorities at all those companies but we continue to work with all those customers to get live as soon as possible and get them processing more transactions.

What was your second question Darren?.

The second question was just around the number of instances where mobile ID transactions kind of sequentially what kind of growth you saw there..

So volumes with the installed base we're seeing uptick there. We're not - so trend wise volumes we see increases there.

We're not the point I think in maturity of the business where we'll start throwing out quarterly transactional volumes probably anytime soon but as I mentioned we're working with various customers to get them live and processing transactions and we expect that to continue to build throughout the year and beyond..

Great. Thank you..

Yes..

We'll take our next question from Mike Grondahl from Northland Securities. Please go ahead..

Hi guys thanks for taking the questions. The first one is just, the 22 reorders sort of really stuck out from previous quarters.

Were they of the same nature or size as previous quarters, can you kind of highlight what the 22 looked like compared to prior quarters?.

Yes, and again Q4 is a pretty heavy reorder quarter for mobile deposit and it has been for the last few years. So the 22 nothing sticks out to me in terms of being drastically different from prior quarters. Q4 the range of reorder size is fairly consistent. We have some sort of smaller end user financial institutions, who may place a $50,000 reorder.

We have larger ones in several hundred thousand dollar rage, a few during the year not including Q4 we have in the seven figure range. So it's a large range there.

The 22 again it's just a concentration of renewals for mobile deposit in Q4, wide range depending on size of the financial institution whether it's a small community bank, whether it's a large bank or whether it's maybe an ASP offering for one of our channel partners..

Got it, okay. And then a little bit follow-up to Darren's question. I think last quarter you said there were eight signed Fortune 500 Mobile Fill, Mobile Verify customers.

Has that number changed?.

So Mike, we are very pleased to that we signed and have announced eight Fortune 500 companies during fiscal 2016. We did not announce any additional ones in Q4. We are working with a couple very large banks in Western Europe now, who probably would qualify for Fortune 500 if in the U.S.

But we didn't announce any others there and I think in general moving forward to leverage off of what Jim said, we're very focused on our beachhead in financial services and that includes not only bank accounts and credit card accounts, but also money transfers, and other areas around the financial services vertical, so we're very focused on winning that beachhead.

And that's where our direct sales team spending the majority of its time. However, if we continue to get opportunities in other verticals like some of these Fortune 500 were it's hard to turndown big names like that. So focus in financial services, but some opportunistic wins in other verticals also..

How does the backlog or pipeline look compared to prior quarters?.

Backlog and pipeline are good. So with the investment we've made in sales and marketing, we've definitely put investment dollars into our SEO and SEM capabilities. Digital marketing, digital region invested there in terms of people and systems as well. So we're pleased with how that's progressing..

Got it, okay. Thank you..

We'll take our next question from Mark Schappel from Benchmark. Please go ahead..

Hi, good evening. Good job on the quarter, guys..

Thank you, Mark..

Thanks Mark..

Jim, first question for you, with respect to the goal of reaching 10 Fortune 500 customers this fiscal year, and coming up with eight, I mean does that cause you to rethink plans for the sales force for next year as far as maybe hiring up little bit more aggressively?.

No, actually not. What we see is an opportunity and that's why we're hiring it more aggressively, signing eight Fortune 500 is a monumental achievement for the Company. These folks have a very long sales cycle. Obviously lots of layers have approvals and intense scrutiny of the product.

So I think really that and verifies to the capability of the product offers by signing eight of them. As Russ mentioned, we also are selling in Europe. We have a concentrated effort in the UK, which we think is a very enrich opportunity. Its evidence two additional banks, which we think would qualify if they were U.S.

institutions would over hit that 10. But frankly we don't look at it that way. We set out the [indiscernible] only as a target they indicate momentum and we clearly achieve the momentum. Secondly, I think Russ indicated in our material increase and revenues year-over-year in terms of percentage growth.

And thirdly, we're investing in the sales force as it is a direct effort. Direct efforts of big enterprise customers are time sensitive and obviously take a lot of effort. So we feel we're right on track. We feel very confident. We were at the [indiscernible] 2020 show Mark, I don't know if you attended that. That was a week ago in Las Vegas.

It's one of the biggest industry gatherings of financial technology and what we saw there was a lot of the debate for the types of products and verification Mobile Fill and our Mobile Web products across the Board. So we are very confident as we entered this year that there's a large market to address. That's why we're investing in it..

Great, thanks.

And then [indiscernible] on the same theme with respect to the eight Fortune 500 customers or any of a black today, which is just a little bit too early?.

Yes, Mark, this is Russ. So as Jim mentioned in his comments, several of them are live. And as I mentioned a couple minutes ago, there's various stages of rollout for the Fortune 500 from internal, the pilot in selected market. So we do have several live and we're working with those deferred the rollout and with the others to get into production..

So Mark, as you know when they rollout - typically rollout the separate states as it rollout nationally. So it's a phased rollout [indiscernible] with the larger customers work and so we're the midst of those amongst several..

Okay, and then with respect to receiving revenue and for cost….

Yes..

Recollections, there is a time lag.

I guess one if you could just kind of remind us so with a typical time lag is?.

Sure, Mark. So with a typical SaaS implementation, it's going to depend - could be six to 12 months for a larger enterprise to get live, a small and we've seen some of the smaller customers get live in more of a three to six-month timeframe, but for the big guys it's a longer time period, maybe six to 12. We try to negotiate minimums, if we can.

But the bulk of the market that we're seeing today is more pay as you go transactional SaaS revenue. So that means that the bulk of the SaaS revenue there will start after they go live..

Okay, thank you. That's all from me..

Yep..

[Operator Instructions] And we'll take our next question from Spencer Bogart from Needham & Company. Please go ahead..

Hey, good morning. And I think this is - that it's the first time that you guys have really highlighted and specifically called out Europe at least to this extent.

Can you talk a little bit more about kind of the opportunity there and what you're seeing?.

Sure, Spencer. With the acquisition of IDchecker a little over a year ago now, we really broaden the Company's horizons in a number of ways. We've got ID document coverage outside the U.S. We expanded our technical architecture to SaaS from just on-premise and really establish that footprint in Europe.

IDchecker at the time had one salesperson in the UK and we've grown that office and are continuing to call on large financial institutions, not only in the UK, but also the Netherlands and other larger European markets that you would expect. So the need over there for ID verification is as great of a need and demand is as we're seeing in the U.S.

And as Jim mentioned with some of the changes in the AML standards over in Europe, that's lowering the thresholds for transactions over which you'll need to verify ID. So we see that as the regulatory factor that will also continue to drive demand in Europe..

Yes, I think the European market is more digital by its nature in its financial services. It is a financial capital of the world in London, still despite Brexit, lots of opportunities there. Heavily regulated obviously with anti-money laundering and some of the other financial regulations are in place.

Secondly, they had EMV introduced much earlier than the U.S. EMV is the chip to protect credit cardholders, which push fraudsters in other channels for identity fraud, [indiscernible] and other things which people are using to open fraudulent accounts. So we see that market is maybe even more right for addressing, particularly in the UK.

So we have made a conservative effort to have a presence there. We don't want to get too far afield. But we think it would be negligent, not to be in that market for what we are as a global ID company..

And then I guess just a follow on there is the kind of competitive dynamics there, any different than what you usually see in the U.S.?.

Yes, but I don't know that I would say it's different. I think in general whether you're in the U.S. or Western Europe or anywhere else, the competitive landscape is very fragmented.

There are a few smaller players out there, many of them venture backed or early stage, and it's interesting with our portfolio with Mobile Deposit as well in our revenue size. We're clearly one of the largest players in the industry..

What we do see Spencer is a different product required, but largely focused not only on driver license or state ID type, but passport. So it's required us to also be able to have store capabilities and passport. Fortunately, that's what IDchecker had is compliment what Mitek was doing..

Interesting, if I can shift gears and trying to squeeze into more questions here.

Glad to see you guys of 15 ID kind of on the financial services space just kind of given your outstanding relationships there and I get the sense that this is probably the largest short-term opportunity for the ID products? And I'm wondering if you can kind of quantify maybe how much of the temp you think is within financial services, specifically for the ID products?.

Sure, Spencer. In terms of TAM for financial services, we would include in that things like the 442 million bank accounts that are opened globally every year, and those are going to require ID verification. If you include loans in that as well, which we do, there are over 380 million loan applications a year, a billion global money transfers.

And then we get into some of the other verticals. So it's a good portion of our TAM is in financial services, which is where our bread and butter has been..

That makes sense.

And if can just squeeze in one last one here, maybe I missed this actually, but how much of ID revenue is on-prem versus SaaS?.

Yes, thanks for the question, Spencer. So we did provide revenue composition for fiscal '16, and expect the composition for '17 really by ID deposit, and then non-core. We haven't given breakdowns of product level in the various line items.

So hoping that the additional color on overall composition helps everybody a little bit more, and that's what we're prepared to provide right now..

Got it, thanks. Congratulations on the quarter, guys..

Thanks..

[Operator Instructions] And there doesn't appear to me be any more questions at this time, so I'll turn it back over the management for additional remarks..

Thank you operator, and thank you everyone for joining us today. Management will be attending the Roth Capital Technology Access Day in New York, on November 16, as well as the Benchmark Micro Cap Discovery Conference, in Chicago, on December 1. We hope to see you there.

If you're in attendance, please stop by and say "hi," and that concludes today's call. Thank you. Have a good day..

That does conclude today's presentation. Thank you for your participation. You may disconnect..