Good day, everyone, and welcome to the Mitek Systems First Quarter Fiscal Year 2019 Financial Results Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Mr. Kehrli, MKR Group. Please go ahead, sir..

Thank you, operator. Good afternoon, and welcome to Mitek's first quarter fiscal 2019 earnings conference call. With me on today's call are Mitek's CEO, Max Carnecchia and CFO, Jeff Davison. Before I turn the call over to Max and Jeff, I'd like to cover a few quick items.

This afternoon, Mitek issued a press release announcing its first quarter fiscal 2019 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'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 the Company's plans and expectations of future performance. Forward-looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially.

We encourage all of our listeners to review our SEC filings, including our most recent 10-K and 10-Q, for a complete description of these risks.

Our statements on this call are made as of today, January 29, 2019, 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 describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release.

With that said, I'll now turn the call over to Mitek's CEO, Max..

Thanks, Todd. Good afternoon, everyone. Thank you for joining us today. As many of you know, I started with Mitek in early November 2018 as CEO and as a member of the Board of Directors.

I joined Mitek because I am passionate about building and scaling technology businesses and Mitek is a very good company with all the right ingredients to be a great and very valuable business. As I imagine Mitek’s future, three key themes stand out for me.

Number one, acceleration in delivering high-value solutions to our target customers and markets; number two, continued development of a healthy and fulfilling environment for our global workforce; and number three, profitable growth for our owners.

I was very excited in late October to be asked to lead this business, and now about 90 days later, I am even more enthusiastic about this significant opportunity. Over the last 20 years, we have seen a well documented transition to a digital world.

In Marc Andreessen’s famous words, “software is eating the world.” Said another way, all businesses and organizations are technology companies. This includes disruptors in the digital economy as well as established incumbents transforming to digital to avoid an existential threat.

For over a decade, Mitek has played an essential role in bridging the physical world to the digital economy and has created groundbreaking solutions for our target customers that empower trust and convenience. We have a portfolio of exceptional products in market today.

Mitek invented the technology to deposit checks with your phone, which is the most fun you will have in banking other than receiving the check. We are the clear leader with almost no competition.

While the adoption of Mobile Deposit has steadily increased and there are over 80 million consumers using our Mobile Deposit technology, only about 16% of retail checks today are deposited through the mobile channel. So there is plenty of room for growth.

In addition, Mitek has leveraged its industry-leading technology and expertise that underpins Mobile Deposit to create another mission-critical solution, Mobile Verify. This enables digital identity verification, which we believe is the on-ramp to the digital economy.

In the same way, Mitek forever changed the world of check deposits with the Mobile Deposit product. We believe it is doing the same for the digital economy by allowing you as a consumer to prove who you are by taking a photo of your identity document with your smartphone and presenting it electronically.

Identity verification is an unbounded problem akin to cybersecurity. Businesses are trying to onboard more new good customers digitally, while preventing fraud and in the financial services, complying with mandatory Know Your Customer and Anti-Money Laundering regulatory requirements.

This is the first leg of a journey from the analog world into the digital economy. This is a large market that is fast growing in its early days with one clear leader, Mitek.

The Aite Group, a leading independent research firm, ranked Mitek number 1 overall in its latest study of identity document capture and verification providers, ahead of all other competitors in this study, further validation that Mitek is leading the way with its patented technology, global customer relationships, and proven ability to innovate and scale.

While the Mitek team has created an impressive franchise, there is always room for improvement, and my early observations reveal the opportunity to better unify the company through clarity and focus.

We will further elevate our expertise in artificial intelligence for image analysis and processing to help our customers thrive in the connected economy. Our teams, both in the U.S.

and internationally will refine their focus to be relevant to our specific target markets, and in doing so, continue to provide high-value solutions, services and support that customers find essential. We will also focus on strengthening our relationship with resellers and partners.

Mitek is a good small business that has the opportunity to be a great midsized business. I believe there are things we can do to tune up our execution and operations that will yield greater benefits for our customers and our shareholders and that's what we intend to do.

Now let's talk about the strong first quarter results that clearly reflect the positive momentum we continue to generate. First quarter revenue increased 46% to a record $17.7 million driven by solid double-digit growth in both our product families. We also achieved our 20th consecutive quarter of non-GAAP profitability.

Mitek Mobile Verify is a critical enabler of digital commerce and is being embraced by partners and customers of all sizes around the world.

One example is ANNA Money, a business-account app for startups and small businesses that has doubled the speed of its customer onboarding process and achieved its target of 25% more new good customers through the digital channel in just three months as a result of adopting Mitek Mobile Verify.

With customer success results like these driving our sales efforts, we were able to add over 25 new Mobile Verify financial services customers in the first quarter, including one of the largest brokerages in North America, TD Ameritrade, Varo Money, an exciting new challenger bank and online alternative lender, Plain Green.

Within the financial services vertical, we also are seeing great results from our partners, including Experian and Avoca, who helped deliver many of the financial services wins in the quarter.

Mobile Verify is also continuing to gain traction in the marketplace and sharing economies, fueled by our recent market study that revealed consumers are more likely to trust businesses that verify the identity of all their users. Not surprisingly, Mitek is seeing excellent traction in this segment.

New customers in the first quarter included RoomStore, a roommate finder and roommate search service, and Hire Car, an on-demand car rental service for drivers who want to drive for Uber, Lyft or Instacart. In all examples cited, the use case is new online account opening, more good customers. That's a revenue generation value proposition.

In addition, our partner's business strengthened as we added Agilisys, a provider of hospitality software and solutions for hotels and resorts. They will be leveraging Mitek into this exciting market by embedding Mobile Verify into their solution to enable remote hotel check-in and digital key provisioning.

With this continued positive momentum with customers and partners, we are confident to retain leadership and gain market share in this fast growing space. With our strong financial results, we believe there continues to be a substantial upside and value creation opportunities ahead for all shareholders.

At the same time, we are open to all alternatives to maximize value for our shareholders, including a strategic transaction. As previously disclosed in our 8-K filing on December 26, the Mitek Board in consultation with its financial and legal advisors is carefully reviewing and considering proposals made by ASG and other interested parties.

We will have no further comment until the Board has completed its review. In conclusion, Q1 was a terrific quarter across the Board, driven by meaningful topline growth in both our product families. Congratulations to our team for making all this happen. Now I'll turn the call over to Jeff to discuss the financial results in more detail.

Following Jeff’s remarks, we'll open up the call for questions. Jeff, over to you..

Thanks Max. And thank you, everyone, for joining us this afternoon. Let's start with the Q1 revenue and operating results. First quarter of fiscal 2019, Mitek generated revenue of $17.7 million, a 46% increase year-over-year. Software and hardware revenue of $10 million was up 39% year-over-year.

The increase in software and hardware revenue was due primarily to the addition of A2iA and the growth of Mobile Deposit revenue. We maintained strong software and hardware gross margins at 92% for the quarter.

Services and other revenue, which includes transactional SaaS revenue, maintenance and consulting services was $7.7 million for the quarter, an increase of 56% over revenue of $4.9 million in Q1 last year. This increase is primarily due to strong growth in transactional SaaS revenue, which increased 67% year-over-year to $4.4 million.

Gross margin on services and other revenue was 74% for the quarter, up sequentially from 73% last quarter. Total GAAP operating expenses, including cost of revenue, were $22.2 million, compared to $14.4 million in Q1 last year.

The year-over-year increase in GAAP operating expense reflects the addition of operating costs associated with our acquisitions of A2iA, increases in non-GAAP adjustments, including stock comp expense, acquisition-related costs, one-time executive transition costs, and costs associated with unsolicited ASG proposal, and our continued investments to grow our identity business.

Sales and marketing expenses for the quarter were $7.2 million, compared to $4.8 million a year-ago. R&D expenses were $4.5 million, compared to $3.3 million last year, and our G&A expenses were $5.8 million, compared to $3.5 million a year-ago. GAAP net loss for the quarter was $3.2 million or $0.08 per diluted share.

As a reminder, our earnings release includes a reconciliation between GAAP and non-GAAP net income.

We believe non-GAAP net income provides a useful measure of the Company's operating results by excluding acquisition-related costs and expenses, stock comp expense, executive transition expenses, and costs associated with the unsolicited ASG proposal activity. Non-GAAP net income was $1 million, or $0.03 per diluted share.

In Q1, our non-GAAP adjustments include $2.7 million of stock comp expense, $1.8 million of acquisition-related costs and expenses, and $864,000 in charges related to the ASG proposal, and $251,000 in executive transition costs. Our diluted share count was 40.1 million shares, compared to 36.2 million shares a year-ago. Turning to the balance sheet.

We generated $2.3 million in cash flow from operations during the quarter, bringing our total cash and investments to $19.7 million at the end of the first quarter. Our accounts receivable balance of $13.5 million represents a DSO of 70 days. Now moving to guidance for fiscal 2019.

For our fiscal year ending September 30, 2019, we are reiterating our previously provided guidance for full-year total revenue to be between $83 million and $86 million, which would represent revenue growth between 31% and 35% year-over-year. We also continue to expect our non-GAAP operating margins in fiscal 2019 to be between 18% and 20%.

Keep in mind, the impact of the purchase accounting on the A2iA revenue for 2019 is approximately $2 million. If we were to add this back to our revenue for 2019, our 2019 non-GAAP operating profit would be in the range of 20% to 22%.

For Q2 of fiscal 2019, we expect total revenue of between $19 million and $19.5 million, representing growth of between 33% to 37% year-over-year. We expect total expenses including cost of revenue for Q2 and excluding our non-GAAP adjustments to be between $17 million and $17.5 million.

For the quarter, we expect acquisition-related costs and expenses to be between $1.8 million and $1.9 million, and stock comp expense to be between $2.6 million and $2.8 million. Operator, that concludes our prepared remarks. Please open the line for questions..

[Operator Instructions] First, we'll go to Bhavan Suri from William Blair. Your line is open..

Hey guys.

Can you hear me okay?.

Yes..

Great. Congratulations. Nice job there, and good to be back on the call here. I guess I'd love to touch first just on the sales and marketing investment initiative on the ID side. Growth seems to be really strong there, but I'd love to understand, just a little more color on how the sales team has ramped in the market.

And then, how is there sort of success tracking versus, sort of, your internal expectations?.

Do you want to put a little color to it, and then I'll add some context..

Sure. Hi, Bhavan, and it's nice to have you back. So as we talked through all of last year, we were investing more in sales and marketing and that was ramping up, not only sales reps, but in our marketing department, product marketing and sales operations and support functions.

So if you compare the company to where we were, say, 18 months ago, the ID sales go-to-market team looks a lot different. We have a team of SDRs. We have more solution engineers, we have more sales reps across the globe. We've also expanded our marketing group and our product marketing group.

So that all contributes to the increases you've seen there in the investment. And as for performance, we're really pleased. I think that signing that number of customers we've signed both this quarter and last quarter are direct results of this investment.

With the tools we put in place, we have better visibility to the pipeline, and we have confidence in our growing pipeline. So I would say, we're tracking quite well, and we're pleased with where the team is..

And the only thing I'd add – I'm the new set of eyes here, I've spent the better part of three decades on the sales and marketing, customer-facing side of things.

What Jeff just shared really is kind of the perspective of the kind of growth and progress that the organization has made in sales and marketing, go-to-market on a global basis, in the last 18 months. I've been impressed with the team that I've inherited; I've been able to get to Europe twice in the last three months of being here.

We've got a good balance of direct versus channel with our partners. That channel is still somewhat – it's somewhat early days, so we're more co-selling than necessarily just taking POs directly from the channel, but I think we're well on our way to having a repeatable, scalable machine.

And in a software company, right, you want to get leverage on R&D, and you want to get leverage on the go-to-market, and I definitely see that – I see that in our future for sure..

That was really helpful.

Max, maybe I'll drill in a little bit given you are the new set of eyes, but obviously having been involved with the company, me been involved with the company, William Blair been involved with the company for a long, long time, one of the things was obviously just with folks and financial services, and there’s been sort of forays into insurance here, into other areas there's been sort of the opportunistic approach into it.

But as you think about expanding beyond the financial services vertical, specifically for ID, I'd love to get, how do you think the company looks at vertical expansion from a go-to-market perspective? Are you leveraging the challenge here? Do you think it's direct? Obviously, you had a ton of experience here.

But the company has really been focused, especially with the channel like, pick, Jack Henry or NCR or whoever in the financial services vertical.

So just love to get a sense of your perspective and how you’re thinking about branching out this vis-à-vis sort of what Jim has been doing over the, say, the last X number of years?.

Yes. So let's talk about the market first, before we even talk about Mitek, and it was in the prepared remarks. The idea of ID verification. ID verification has been taking place for many, many years, but now it has to take on a different – it takes on a different posture where I don't go to the branch to open a credit card.

There is no retail storefront for me to sign up to be an Instacart driver. AirBNB doesn't have retail locations to verify my identity. It's the other side of the computer or more likely it's the other side of a mobile device.

And in that regard, that tectonic shift, the technological tectonic shift that's happening there, puts you in a position where you've got to be able to do this ID verification on the other side of the mobile device. And in that regard, I think the market itself is in the very early days.

We could call it the first quarter, if we were playing football, we could call it the second inning, if we were playing baseball. It is a very big market. It's an essential market for both established companies that need to survive as – in their transition to digital as well as all of the challenger and new economy marketplaces.

So in that regard, it's an essential, very mission-critical set of capabilities in this fast- growing big market that's in its early days, and we're staking up the ground as the leader. So kind of coming back to your question, my experience at that stage in a market, these organizations typically don't die from starvation, they die from gluttony.

And so being very prescriptive and intentional about where you want to focus, where you're going to play, how you're going to win, is – that's the essential element to rising to become the leader in this space. I think having focused on financial services makes perfect sense to me.

We've defined financial services broadly so it's more than just what we've done with Mobile Deposit with banks, and that's because the value proposition and the use case broadly in financial services is the same. The new account opening, it's not just about fraud, right. It's not just about Know Your Customer and Anti-Money Laundering.

It’s more about, okay, all of my customers now want to onboard on the other side of a mobile device, how do I do that in the most frictionless convenient way while still being able to trust the answer that's on the other side.

So I think staying focused on financial services, and what we're seeing is that this marketplace, the new economy companies, the challengers, whether it's in financial services with Fintech or whether it's some of the examples we used earlier, whether it's Instacart, AirBNB, others, those are great place for us and has a very similar revenue generation, topline generating value proposition.

Hopefully, you'll find that helpful..

No, it's definitely helpful. One more, maybe more tactical follow-up.

As you look at sales and marketing spend, and again, not this year because you've sort of discussed that, but strategically over the next three years, do you think given the market size and the focus on partners plus direct plus sort of maybe you’re layering in sort of matrix to organizations here, is that going to increase? Do you think that's an accelerating spend to drive accelerating growth or do you think that's at a sustainable level where I don't need to increase that as a percentage of revenue? Again, not this year, but sort of more strategic and sort of more of a function of thought more than an actual number?.

Yes. So we'll do – well, you can figure out what we'll do on the IDB side of the business this year. We’re no longer a startup..

Sure..

This is an established fast-growing scaling business for us. And as a scaling business, it needs to be able to grow and take market share, so grow faster than the market, and it needs to be able to do that with an investment profile that starts to generate earnings.

So without providing any guidance for next year, just try to give you a sense of target operating model as we think about two, three, four years from now. Yes.

I think we can get a lot more leverage and lot more productively, both in the go-to-market side of things, but also in our development activities, the global development organization that we have..

Great. Thanks for taking my questions guys. Congrats..

Thank you..

And next we’ll go to Darren Aftahi from ROTH Capital Partners. Your line is open..

Hi, good afternoon. Hi, Max, great to have you with the Company, and hello Jeff, congrats on a quarter. I wanted to touch a couple of points. So one thing I think we've been kind of waiting on, Mitek is obviously in the hospitality space, and I'm glad you mentioned Agilisys, I was kind of playing around on the website.

I'm just kind of curious, Max, from where you sit. How deep is Agilisys with Tier 1 brands in hospitality and then how much are they kind of focal point is for Mitek as you kind of handicap some of these verticals? Second question, I guess maybe for Jeff and Max, just the sequential growth in transactional was really strong.

I think probably the strongest we've seen, just on aggregate dollar basis.

I'm curious if there was any kind of one-time elements in that number, if not, was it kind of broad-based? And then, amongst the 25 new ID customers, can you kind of just speak to the mix between direct wins from your sales force and channel partners and kind of how you see the mix going forward? Thank you..

Jeff, you want to try to take on that transactional question?.

Sure. It was terrific growth in the transactional SaaS number, it’s 67%. Darren, that's the result of bringing these customers on and getting them live. I wouldn't say there is like a one-time thing in there. As you've seen before, we've had some seasonality with our customers, if they have some seasonality.

But it's good performance and it's a result of bringing on new customers, getting them live and then increasing their transactions running through our systems..

So the question about the 25 new ID verification customers, I’d just quickly point out that we had more than 25, it was 25 in the financial services verticals. The question was really more around channel. And as we said in the prepared remarks, the whole space, the whole category is relatively new.

And so our relationships with folks like Avoca and Experian that we mentioned in the prepared remarks, they're very good relationships, but they're also very early on.

And what I mean by that is, as a channel matures, you can typically have a lot more arm's-length relationship where you're supporting them, but they're the face forward to the customer. They're generating revenue. They're generating orders. They're generating business with a modicum of less oversight, less handholding.

We're still very much co-selling and maybe it ties back to one of the previous questions. In Europe, we're doing a lot more of that.

More than 50% of our business coming in co-selling with our channel partners, the ones that we mentioned plus others, where in the United States, it's less than that and we have more of a direct relationship with these financial services and marketplace customers.

Darren, if I go all the way back to the first question you asked about Agilisys, this is a related point on the idea of a channel. Agilisys has a very strong set of relationships in hospitality companies and gaming. Quite frankly, the dominant in the resorts that have casino gambling on a worldwide basis.

So this is our first foray where we can leverage the channel partner like that that's embedding us. Obviously, it's a big value add for them, something they need with those customers. I think it's a non-exclusive relationship.

It puts us in a position so we can start to expand our footprint in that industry, while at the same time not losing our own focus, trying to do that through some sort of direct relationship. And back to my point about diluting, trying to do too many verticals, trying to do too many geographies at one-time. So we're excited about the relationship.

It's very early days, so we'll see where it goes..

Great. Thanks..

And next we’ll take Mike Grondahl from Northland Securities. Your line is open..

Hey. Thanks a lot guys. Hey Max, I just wanted to kind of pick your brain on the Mobile Check Deposit area and kind of pricing power. What's your thoughts after 90 or so days? You have that market to yourself and I think you said 16% of retail checks are deposited through the channel.

Any thoughts on raising price or leveraging that a little bit?.

So first, Mike, let me ask you a question back.

Do you use Mobile Deposit for depositing checks?.

I have used it, but I don't use it regularly. I just don't get enough to be honest with you..

But when you get them, you do it Mobile Deposit?.

I would say I'm half and half..

All right. Mike, we got to get you on Board here, man. This thing is too fun. It's too easy. It just makes life so – it's a hero app and that goes for anybody else who's listening, hearing my voice. It's great fun. 16% isn't much of a market share. So there's a lot of headroom there. I think we see that as nothing, but opportunity.

When you look at the big banks, somebody like Bank of America, they report.

They're sharing with their investors how they're doing with online banking, with mobile banking, because they see it as the halo effect as to whether they'll survive the storm of Fintechs, and 21%, 22% is best-in-class through a Bank of America lens and what they've been able to do.

We see plenty of headroom from there, even with Bank of America, the heaviest programs in the branch to help people learn how to do it. We know for the smaller regional and credit union type institutions, we see numbers under 10%. So there's plenty of headroom here.

To your point, I don't know what the other game in town would be, right? So if you're a bank and you need to have Mobile Deposit, you got to get it from us. We hold the patents, so there's a lot of leverage there. So Mike, I don’t have a price increase plan ready to rollout tomorrow.

But as the new guy, I know that's something that we have to investigate and I think it's an opportunity for us over time..

Got it. Good. Being the only game in town, you would think it's something you could leverage a little bit. And then how do you feel about pricing that you're getting on the mobile verify, mobile ID side? That was thought to be a premium product compared to check.

How do you feel about the prices you're charging there?.

Yes, it's probably early days for me to, start planning and pretending like I'm an expert. What I do know is the use case, as I've traveled around and spend time with the sales teams and started to meet customers and partners, the use case, particularly on financial services is a much higher value use case.

And we can command a higher price for that because we're doing more, so we're delivering more value. But the volumes may not be.

The millions of transactions that come through the system on a monthly basis from some of these high flying marketplaces that we mentioned earlier in the call, where maybe the value is in his high, but the per unit charge is lower and you make it up in volume.

Anything you add to that, Jeff?.

No, I think I'd say, well, yes, I would say. It's still pretty early days in the market. So the pricing is varied and in line with what Max saying, volume does often get, you'll see a little bit lower price there and then tying into the value prop. So I wouldn't say pricing is settled in. It's still early days until you see variable..

Got it.

And the 25 new financial services clients that you added in the December quarter, what does the pipeline look like? Could you kind of describe that?.

All right. So those specific – the number we specifically called out there was on the ID verification side of the business. Looking into the pipeline broadly both for Q2, and then thinking about the balance of the year, the demand generation, there’s just a lot of activity in the market, I'm satisfied that. We're seeing enough deals.

We're involved in enough things to live up to the projections and the guidance that we've provided..

Got it. Maybe just last question tied to that.

If you're not winning an RFP or a business, is there any competitor on the ID side? You're seeing more out there that might be taking a little bit of share or giving you a headache or two?.

Yes, it's such early days. I think when I speak to the sales team here, which is a great proxy the market. They definitely believe that the customers and the perspective customers are more knowledgeable today than they were a year or 18 months ago or maybe they didn't even know what the right questions to ask.

They didn't know that there were multiple folks that did this. We referred to the Aite Group research here. You're now starting to get some third party research for the category. You're starting to get some guidance for the potential buyers. I don't think there's any major change to who the competitors are.

I just think you've got a more knowledgeable buyer, a more intentional buyer on the other side..

Got it. Okay. Thank you..

The same list of suspects as what we've talked about before..

Okay..

[Operator Instructions] Next, we’ll go to Mark Schappel from Benchmark. Your line is open..

Hi. Thank you for taking my question. Max, welcome..

Thanks Mark..

And we'll start with you.

You've been in the Company now for a couple of months and as far as field execution goes, I was wondering if you could just sketch out for us what you think are the Company's largest challenges or some of your immediate things that you'll be addressing there?.

Well, in the prepared remarks, we talked about bringing alignment, focus and clarity to what we want to do. The genesis of that statement, Mark, has everything to do with how much opportunity there is out there.

We've taken at least two questions in the call so far around, are you only going to stay financial services and marketplaces? Do you want to do hospitality and hotels? I wouldn't call it a challenge. I would think of it almost as abundance of riches. There's so much opportunity in so many different verticals across so many different geographies.

Being a thoughtful and intentional and focused as to what we're going to do, where we're going to do it, and making sure that we're doing it brilliantly. So that we're just delighting our customers and beating back the competition. That's – it sounds like basic blocking and tackling, but I think we're well on our way there.

There's more we can do and that's what you're going to see me lean in on..

Okay, great. Thank you. And then Jeff, moving over to you, despite the two consecutive solid quarters of good performance here, cash flow from operations has been below levels that we've seen in the prior quarters.

I was wondering if you could just remind us of what the Company's plans are for operating cash flows this year and maybe just inform us if there is anything in that particular line item this quarter that made it comes in under year’s levels?.

Hi, Mark. As I look out for the year, cash from ops for us, it still be should be pretty close to what our operating margin would be, that's how the business should be.

What you're seeing this quarter and a little bit last quarter is – well, number one, with the addition of A2iA, we've ramped our receivables and we've got to kind of more backend loaded business in the last two quarters. So that's kind of driven the AR higher. But we’ve also had some payables, like Q1, we pay out bonuses and all the year-end stuff.

And so that's a draw on the cash from leaving the accrual that's going on the whole year. We also had earn-out payment that was due on the ICAR. So there is just a few things like that running through their, but otherwise, no – nothing really unusual, just change of working capital, and you'll see on the balance sheet..

Great, thank you. And then, one final question. Max, let's see here.

So have you detected any change in customer buying behavior, either favorably or unfavorably, as a result of all the buyout noise that's been going on of late?.

It's had no impacts with customer whatsoever..

Great. Thank you..

And next, we'll take Ilya Grozovsky from National Securities. Your line is open..

Thanks. It’s Grozovsky. Max, welcome, and I just wanted to kind of use your fresh set of eyes for getting two questions, answered.

One, on the competitive landscape front, you had said in your prepared remarks that on the Mobile Check Deposit side that you guys had word – I think the word you used was virtually no competition, which would imply there is competition.

So wanted to get your fresh eyes on, kind of the competitive landscape, if there is any because I don't see any but obviously, you might see some on the check deposit side, and also again same question on the mobile ID verification side, kind of how do you see the landscape you guys in the prepared remarks said you’re the leader in the space, but who else do you see out there? Thank you..

Sure. Ilya, thanks for dialing in, your attention on this. Yes, we used the word virtually. It's interesting as I have traveled around the last 90 days and spend a lot of time with our deposits team and thought about – it's a very unique and very special, I mean in the best way business.

When I’ve been asked about competition or when somebody’s talked about competition, every single time, I’ve got into the bottom of it. The competition is – we go-to-market in that business through resellers. There's six or seven very big core service providers, many of the names you would know that are focused on retail banking.

What I found time and time again is when somebody's talking to me about competition and I circle back with my team and try to figure out what they're talking about, it's basically two of our resellers competing for a bank's business with my product.

So it’s like, I've got all the horses in the race, and there may be some perception of competition around pricing or what's bundled and the sets of services that somebody like an NCR, Pfizer are delivering. But when it comes to Mobile Check Deposit, there's only one way for them to do it. So hopefully, that clarifies it for you.

Yes, the landscape on IDV, I’ll turn it to Jeff because he’s probably got a longer perspective on that, but it does sound a lot from my team as I've been traveling around and it's the usual suspects, same group of folks names that are in that Aite report..

Yes, Ilya. This is Jeff. I have not seen any information about a new competitor arising so it's the usual suspects that we talked about before. And you see them on the Aite report, its companies like Jumio, Acuant, Onfido, Authentix. That's the bulk of it..

So no change? Nothing new, given the new set of eyes?.

No..

Okay, fantastic. Thank you very much, guys..

And we have no further questions in the queue at this time. I'll turn it back to management for any closing remarks..

Thank you, operator, and thank you, everyone for joining us today. We look forward to updating you again next quarter. This concludes today's call. Have a wonderful day..