Good day, and welcome to the Mitek Fiscal 2024 Second Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Todd Kehrli, Investor Relations. Please go ahead. .

Thank you, operator. Good afternoon, and welcome to Mitek's Fiscal 2024 Second Quarter Earnings Conference Call. With me on today's call are Mitek's CEO, Max Carnecchia; CFO, Dave Lyle; and Chairman of the Board, Scott Carter. Before I turn the call over to Mitek leadership, I'd like to cover a few quick items.

Today, Mitek issued a press release announcing its financial results for its fiscal 2024 second quarter ended March 31, 2024. 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 want to remind everyone that on today's call, management will discuss certain factors 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, May 13, 2024, 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 GAAP and non-GAAP reporting and present the reconciliation between the 2 for the periods reported in the release.

With that said, I'll now turn the call over to Mitek's Chairman, Scott Carter. .

Welcome, everyone, and thank you for joining us today. I am the Chairman of the Board for Mitek and had served on the Mitek Board since February 2022. I'm joining the call today to talk to you about the press release the company issued this morning announcing a CEO transition.

In the press release, we announced that Max Carnecchia will transition from the business and his role as Mitek CEO on May 31, 2024, but will remain a member of Mitek Board of Directors and will be available to assist with the CEO transition process.

Now that Mitek has successfully navigated through delayed SEC filings and is well positioned to enter its next phase of growth, the Board of Directors determined that putting new leadership in place would provide the best path for that growth. Before I go any further, let me express the Board's gratitude to Max.

He has worked tirelessly and passionately on behalf of our team, our customers and our shareholders. Also, I want to make sure to say that for the avoidance of any doubt, there have been no allegations of wrongdoing or improprieties.

Rather, we just finished a difficult chapter where we caught up on our SEC filings, regained NASDAQ compliance, announced a share repurchase program and are now at an important inflection point.

Our Board of Directors is enthusiastic about the opportunity ahead of Mitek and has strong conviction in what the company is capable of achieving, both in the near term and the long term. We have an obligation to regularly assess the leadership skills that will be required in the coming years and to stay ahead of that curve.

As such, we concluded in order to achieve what we think is possible over the next couple of years, a different success profile is required than what we needed 6 years ago.

So much has changed, the market we operate in, the complexity and scale of our business across geographic and vertical markets, product lines, use cases and the potential to integrate transformational technology, particularly around AI. I can't emphasize enough what an exciting opportunity we have in front of us.

We have become the market leader in voice and face biometrics liveness, well positioning us to lead the industry response to the rising problem of deepfakes and voice spoofs. Our innovation engine continues to thrive, and we've launched several new offerings.

This includes our MiPass solution, combining voice and facial biometrics in a single transaction. It also includes Check Fraud Defender, or CFD, where we are gaining considerable market traction.

We also have new innovations in ID R&D technology that allow for our voice biometrics to authenticate payment transactions on a mobile device, which opens up several new avenues for growth. None of these technologies were in our portfolio 6 years ago.

So we are at the beginning of a new and exciting chapter and embarking on an ambitious and promising journey. After 6 years, it will be healthy to inject new leadership in the company with fresh perspectives and new energy.

Max will remain as CEO through the end of May, and the Board has asked me to take over as interim CEO after his departure to assist with a seamless transition while we conduct our search for a new permanent CEO. The Board has engaged in services of a leading global executive search firm and has commenced the search for a new CEO.

The profile we've developed for the new CEO emphasizes public company and domain expertise, along with the ability to enhance our strategic vision and drive operational execution. Moreover, the ability to foster a high-performance collaborative culture and continue to develop a world-class team will remain a priority.

While the Board conducts this search, I look forward to working with the leadership team and partners to continue strengthening our business and driving profitable growth through operational discipline and execution.

In my role as Executive Chairman in 2023, I was deeply involved in Mitek's operations and was engaged with our product and sales teams and many of our customers. So I have a company-specific background needed for continuity and performance optimization.

I intend to leverage my CEO track record in the identity and fintech ecosystems to add value to Mitek out of the gate with a specific focus on accelerating profitable growth.

Mitek's recent product innovations, including Check Fraud Defender, MiVIP, MiPass, and ID R&D biometrics, are gaining market acceptance, positioning us well for continued profitable growth, which is why the Board also announced today that has authorized a 2-year share repurchase program of up to $50 million of Mitek common stock.

The share repurchase plan reflects our confidence in our strategy for long-term profitable revenue growth and our belief that we can capitalize on the substantial market opportunities ahead for our new product offerings and delivering long-term shareholder value.

With our strong balance sheet and cash flow, we can repurchase shares while maintaining sufficient cash resources to fund our operations and to invest in growth opportunities.

Before I turn the call over to Max and Dave to take us through the business performance, I want to thank Mitek's finance, operations and legal teams for your extraordinary work in getting us back on track with our filings. We are very happy to be back to our normal cadence of reporting on time.

With that, I will turn the call over to Max to update you on Mitek's progress this quarter. .

face match, face liveness, voice match and voice liveness. It provides our customers with the advanced biometric authentication they require, but also meets their end user demand for effortless usage. Customers are using MiPass to replace passwords and onetime passcodes. They use it for a stringent layer of defense for large value transactions.

And most popular this quarter, MiPass is being used in conjunction with MiVIP in retail stores to aid retail assistance in approving transactions with confidence.

From banks fortifying in-branch security to auto rental companies seeking dedicated kiosk protection during pickup, to a wireless service provider navigating the challenges of in-store transactions, MiPass offers customers an integrated omnichannel solution that not only safeguards transactions, but enhances the overall user experience.

The importance of protecting biometric security from deepfakes and injection attacks cannot be overstated. Continuous authentication has become a focal point in this landscape. It ensures that users' identity is constantly verified throughout a session, mitigating risks associated with unauthorized access.

The market opportunity for biometric authentication is projected to grow at a CAGR of over 10% from 2024 to 2032 to reach more than $60 billion in annual spend by 2032. MiPass is a tangible example of Mitek's best-in-class biometrics authentication offering and a key differentiator from our competitors.

We see MiPass as another strong growth engine for Mitek. And while it is in the nascent stage of its growth, we are very excited about the opportunity MiPass has to be a winning solution in the biometric authentication market. Moving to deposits -- our deposits business. Our second quarter revenue returned to growth driven by Mobile Deposit reorders.

We continue to see increased adoption of our industry-leading solution as the number of checks being deposited through mobile check deposit continues to increase. We are riding the wave of mobile check deposit up, not the trend of check writing down. Check Fraud Defender is another one of our growth engines that we are extremely excited about.

During the second quarter, we continued to see momentum build with strong market demand for this new solution. CFD is uniquely built to visually detect check fraud, which is easily missed by traditional fraud prevention protocols. In 2023, check fraud was the largest year-over-year fraud increase for U.S.

financial institutions, comprising 31% of all fraud dollar losses according to the Federal Reserve. As these check fraud rates continue to surge, Check Fraud Defender provides financial institutions with a highly effective defense system powered by AI and securely hosted in the cloud.

Our CFD value proposition continues to resonate as we closed several new CFD customers during the quarter through our direct sales, which is focused on the top 200 banks in the U.S. and through the channel, which we have just started to build out and will focus on the remaining long tail of U.S. financial institutions.

To highlight the early momentum we are seeing on the partner front, one of our channel partners already has over 20 opportunities in their Q3 pipeline, and we are actively working on adding more channel partners for CFD as we strive to become the leading provider in the growing check fraud prevention market.

To that point, one of our newest technology partners on the check fraud side is Viewpoint, a leading managed content service provider handling billions of documents, including historical check images for some of the world's largest financial firms. They are recognized as one of the largest service providers to regulated industries.

This partnership will allow mutual customers to enhance their fraud detection capabilities and start fighting check fraud faster. Once integrated, Viewpoint customers looking to deploy Check Fraud Defender will be able to leverage their existing secure Viewpoint connectivity by flipping the CFD switch.

Even though we are just scratching the surface of the CFD opportunity, we are already processing tens of millions of transactions per month, and we have information from over 300 financial institutions in our consortium models.

The velocity of the consortium, coupled with the significant dollar savings from losses in fraud prevention and the operational cost savings of the solution is yielding a very healthy and growing pipeline of potential CFD customers. Looking ahead, these are exciting times at Mitek.

We have developed several significant growth opportunities with CFD, MiVIP, biometrics liveness and MiPass. And while they are still in their nascent stage of growth today, each represents tremendous upside for Mitek and our shareholders.

Before I turn the call over to Dave, I want to commend all Mitekians again for their hard work this quarter and over the last 6 years. Your execution and discipline across the business, coupled with the very positive customer feedback we are receiving, give me strong conviction in the opportunities that the company has in front of it.

With that, I'll turn the call over to Dave to discuss the second quarter financial results in more detail. Following Dave's remarks, we'll open the call up for questions. Dave, over to you. .

Thanks, Max. I'll begin by taking you through the fiscal Q2 2024 financial results and then comment on our outlook. Looking first at revenue. Top line revenue for fiscal Q2 increased 2% year-over-year to $47 million at the top end of our previously announced preliminary revenue range of $46 million to $47 million.

We saw a solid year-over-year growth from our new identity products such as MiVIP, MiPass and ID R&D biometrics, but that growth was offset by our heritage identity products revenue, such as Mobile Verify, where, as we said last quarter, we are seeing lower revenue as we shift more of these transactions from agent review to automated review.

Our automated solutions are priced lower than agent transactions. However, these transactions are more profitable and are contributing to our efforts to get our identity products to profitability in fiscal Q4 2024.

In addition, we've seen some desperate pricing strategies from some of our identity competitors, which has created some additional pricing pressure with our heritage document verification systems.

Mobile Deposit's orders rebounded during the quarter, which we expected, but did not generate significant growth due to last year's second quarter being one of Mobile Deposit's strongest quarters in the company's history. Check Fraud Defender also contributed to year-over-year revenue growth.

Software and hardware revenue declined 1% to $24.9 million in fiscal Q2 2024. Services and other revenue grew 6% to $22.1 million year-over-year as we saw increases in transactional SaaS revenue from identity product revenue growth. Deposits revenue grew 3% year-over-year in fiscal Q2 2024 to $29.5 million.

76% of deposits revenue was in Mitek software and hardware revenue and 24% was in services and other revenue. Identity revenue for the second fiscal quarter grew 1% year-over-year to $17.5 million, driven by our SaaS products revenue.

Approximately 14% of identity revenue was in Mitek software and hardware revenue and 86% was in service and other revenue for the second quarter of fiscal year '24. Moving on to gross margin. The total gross margin for fiscal Q2 '24 was the same as a year ago at 87%.

We continue to deliver strong software and hardware gross margins of close to 100% for fiscal Q2 '24, while on services and other revenue, our gross margin was 72%, both similar to a year ago.

GAAP operating expense for fiscal Q2 '24 was $40.1 million compared to $31.5 million a year ago, with the increase primarily driven by fees associated with our delayed SEC filings. Non-GAAP operating expense for fiscal Q2 '24 was $27.9 million compared to $22.7 million last year and up sequentially from $25.8 million in Q1 '24.

The year-over-year increase in non-GAAP operating expense was primarily related to fees associated with our delayed filings. The $2.1 million sequential increase in non-GAAP operating expense was due mainly to higher personnel costs associated with merit increases and calendar year reset of vacation accruals and payroll taxes.

Excluded from our non-GAAP operating expense was $12.1 million of nonrecurring items, of which $7.7 million were noncash accounting items and $4.4 million were cash items. The noncash items were comprised of amortization of purchased intangibles and stock-based compensation expense.

The cash items were primarily comprised of about $2.4 million in nonrecurring product fees, $560,000 in executive transition costs, $530,000 in restructuring costs associated with shutting down our legal entity in Russia and other various legal costs. Please see our earnings release for a more detailed reconciliation.

Our non-GAAP operating income was $12.8 million in fiscal Q2 '24 or a non-GAAP operating margin of 27%. Again, please see our earnings release for a more detailed GAAP to non-GAAP reconciliation.

GAAP net income for fiscal Q2 '24 was $0.3 million or $0.01 per diluted share on 48 million shares, and non-GAAP net income was $11.5 million or $0.24 per diluted share. Turning to our balance sheet. Our cash and investments of $130.3 million, which increased $6.4 million sequentially from Q1. Moving on to guidance.

We are reiterating our fiscal year 2024 revenue guidance range of $180 million to $185 million.

We are also reiterating our guidance for fiscal year 2024 non-GAAP operating margin to be in the range of 30% to 31%, which implies an increased margin in the second half of the fiscal year, with much of the margin expansion above the guided range in fiscal Q4 as we begin to see G&A expenses normalizing following heavier expenses related to getting SEC filings current in prior periods.

In fiscal Q4, we expect non-GAAP G&A expense to begin to normalize and to be in the range of $8.5 million, but may fluctuate depending on circumstances in that quarter. We also continue to expect our identity business to reach stand-alone profitability on a fully burdened basis in the fiscal fourth quarter.

Before I conclude, I'd like to briefly comment on capital allocation. As you saw in today's release, our Board of Directors authorized a 2-year share repurchase plan for up to $50 million of our common stock. Although we will not disclose our trading strategy, the first window available for us to trade will be Thursday, May 16.

As we thought through our repurchase plan options, we determined that for now, we wanted to keep open the ability to repay our $155.3 million principal amount of convertible debt in cash when it's due on February 1, 2026.

With our cash balance at $130.3 million at March 31, 2024, and an expectation that we will continue to generate cash through that due date, we also want to have sufficient minimum cash, along with our revolving line of credit for working capital purposes.

Our approach considers that we have several new growth products beginning to ramp up from their native stage into the accelerated growth stage, and we need to see how that growth plays out. We believe we will have much better clarity about how much cash flow those products will provide over the coming year.

In the meantime, our current focus is to continue to invest excess cash flow in our growth products, Check Fraud Defender, ID R&D biometrics, in particular, liveness capabilities, and MiPass and MiVIP, as well as follow-on products that can expand our current market opportunity.

We will also continue to invest to optimize our product cost structure to maximize margin expansion opportunities. In terms of growth through acquisitions, we believe we have sufficient growth opportunities with our organic product portfolio and do not foresee embarking on acquisitions in the near term.

Now I would like to briefly touch on where we are with our SEC filings. 10-Q for fiscal Q2 2024 filed last Friday [ will ] remain current and expect to file our fiscal Q3 '24 filing on time in August as we are now back on a normal filing pace. And lastly, I want to say thank you to Max.

We built a very strong partnership very quickly, and I have thoroughly enjoyed working with you to advance Mitek forward. You operate with the highest degree of integrity, professionalism and respect. And on a personal level, I am sad to see you go. Operator, that concludes our prepared remarks. Please open the line for questions. .

[Operator Instructions] The first question comes from Mike Grondahl with Northland Securities. .

And I'll say too, we'll definitely miss you Max. That's for sure. A couple of questions for Scott. Scott, are you in the running for the full-time CEO role? And two, do you anticipate any change in strategy going forward? And maybe lastly, I'd just like to hear your opinion on the Check Fraud Defender product. .

Yes, absolutely. Mike, I appreciate the question. First of all, as I said in the script, I am very passionate about the opportunities of Mitek. I know the team is an incredibly talented team very well, the products, our market-leading position. While I am in the interim CEO role, I will be all in. I am not a candidate for the permanent CEO role.

I've got personal family considerations that preclude me from making a permanent commitment. But you can count on me being all-in and fully dedicated [indiscernible] is incredible opportunity we have in front of us. In terms of the -- I think your second question was around strategy. We are -- we've got, again, a terrific team in place.

We feel confident in our current strategy. We, of course, have a normal kind of annual planning process, which we're actually kicking off very shortly. So we'll go through the process of refreshing our strategic plan that we're cascading through our annual operating plan.

We'll then, of course, look at to what extent we might reallocate OpEx and headcount and focus and so forth to align with where the greatest opportunities are for us to drive growth acceleration and increased contribution margin, and that's a process we have to go through. But again, we've got just fantastic world-class products.

To me, it's about execution. .

How do you feel about CFD?.

CFD, yes, thank you. CFD is just remarkable. I had a chance when I was in the Executive Chairman role last year, given my background and my familiarity of the ecosystem, relationships I have with C-level executives in our client organizations. I went out and talk to C-level executives.

And I was told that there's no one else that can pull this together but you are. Check fraud is a massive problem, as we've talked about many times. We have a very unique set of capabilities that no one else could possibly replicate.

And if you think about not only the heritage and computer vision and machine learning and looking at anomaly detection on the check, by virtue of our orchestration platform now, through the HooYu acquisition, we have the ability to syndicate other fraud and any signals.

And the integration of that has substantially -- has helped us sort of catalyze if you will, the adoption of reduced sales cycles. So again, there's a nice set of assets across our portfolio. They're coming together to solve that problem in a way that no one else possibly could. .

Got it. Then maybe just a quick follow-up for Dave. Dave, G&A expenses are up quite a bit. They're about 20% of revenue now, up from 12% a couple of years ago.

Are you taking a look at those? Are those all required for investment? How would you kind of help us understand that?.

Yes, you're right. On the G&A front, we still have inflated expenses. That's actually going to continue through this current Q3 quarter. We're going to see, like I said, our biggest improvement in G&A expense going into Q4.

We still will have some incremental expenses from what's a typical normal run rate just because we're trying to remediate material weaknesses from the past, and that takes just time as well as some effort externally. .

The next question comes from Jake Roberge with William Blair. .

Yes, if you can just talk a bit more about what you're seeing with Check Fraud Defender, that would be great.

Do you still expect to exit this year with around 50 customers for that product? And then I'm curious how conversations with some of those larger Mobile Deposit partners are trending in terms of really onboarding them and getting them to start cross-selling that solution into their customers. .

Thanks for the question, Jake. I'll leverage maybe where Scott's enthusiasm took us. Just as a reminder, Check Fraud Defender, we've been at this, if you include the development cycle, a little over 3 years. And banks take their time. They've got a lot of lawyers, a lot of compliance folks.

But the history of CFD and the creation of the actual capability was technology that we already had working in conjunction with one of the largest banks in the United States to create an on-premise solution. So if you think about the top 4 banks in the United States, they're kind of their own weather system.

And that was the originating point of this product. And then somebody here had the great idea of, hey, we can just refactor that, lift and shift it, put it in a secure cloud environment and create a consortium. It sounds really easy. But for the last 2 years, that's really what we've been marching to.

And so there is a combination here of customers that can consume us on-premise that don't really enjoy the benefit of the network effect of the consortium participants, and then we've got the newer participants that are exclusively consortium-based. And I'm sure, at some point, we'll have some hybrids. Back to your question.

We, today, like as of Friday of last week when we sold -- when we closed one of the top 100 banks in the United States through our direct sales activities. We today have over 25 signed CFD contract customary.

And that's a combination of some of those early adopters that were on-premise and then the folks that I'm talking about here that have joined more recently. This is growing very rapidly.

We had in the prepared remarks, there are over 300 financial institutions that we are seeing checks from, even though they may not be participants in the consortium themselves, the check is written on their check stock.

And so all of that is going into feeding our models, this kind of reinforced network effect of the more banks that send us checks, the more checks we see. The more checks we see, the better the models become. The more effective the models are, the more banks want to participate in this. So that's all been mostly all been our direct selling activities.

We have now at least 2 partners that are reselling, that are just coming up the learning curve, and we've started to see not just pipeline growth, but actual deal activity where they close business.

And then the traditional folks that have historically been our gateway into the banking industry for the core banking service providers, the Jack Henry, the FIS, the Fiservs, we are hard at work with them getting to contracts so that they can take this on. They're big organizations.

They also have a lot of lawyers and a lot of compliance folks, but we -- all the numbers I gave you for around where we're going to end the year, I feel really good about that. We're halfway there already. And the momentum is only growing, and the pipelines are bigger than they were the last time we spoke.

So a lot in there, but hopefully, that's helpful. .

Yes. Very helpful.

And then can you just talk about the evolution of the ID business and where you're at in terms of really landing customers for point solutions like the legacy document verification sales versus really selling that broader MiVIP and MiPass suites? And just as a follow-up there, Dave, I know you're sunsetting a few legacy ID revenue streams.

Can you remind us how much of an impact that's having on growth this year for that segment?.

Yes. Let me start, and then I'll hand things over to Dave. So Jake, today, we start every new identity opportunity, every engagement with customers is really more around a solution enterprise approach where we're discovering where the pain points are, what the outcome the customer is looking for.

And typically, that leads us down a path where when we get into the solutioning and talking about how we're going to solve the problem, it starts with MiVIP as the platform. That really is our flagship for identity going forward.

And MiPass, which we talked about at length here around identity authentication using multimodal biometrics, is really an instantiation of that. It really is kind of an architectural implementation around identity authentication using biometrics. So I would tell you that we still have the ability to do point products when we need to.

We've got that flexibility in the architecture in the way that MiVIP works, you could start with a single signal and then grow up into additional things where you're orchestrating many signals across the entire spectrum of the journeys or we can start in the middle of the -- we can start the deep end of the pool, and we can start in the middle somewhere, all depending on what the requirement of the customers.

.

And then addressing -- I think you were wanting to address some of the legacy products. If you remember, the ICAR legacy kind of hardware piece is starting to sunset here over the coming quarters and into 2025 -- it should be done by sometime in 2025. It's impactful, not a big impact as we're talking single-digit millions here in terms of revenue.

And then the other piece was on the document verification piece, also not a lot. And that, in fact, that Mobile Verify kind of capability on document verification integrated into the MiVIP platform. So it's also going to be continuing to be a really important product for us integrated into that platform. .

The next question comes from Surinder Thind with Jefferies. .

Just following the back up on the G&A expense growth. I just wanted to make sure I understood, is the idea that we're now at a headcount level where it's necessary for operationally being effective in terms of the business at this point. Was that the messaging? I want to be clear about that because it just seems like there was a lot of growth.

But at the same time, I heard that maybe there is room for some improvement in that line item. .

Yes. So if you just look at Q3 -- Q2, fiscal quarter 2, for instance, we're at $9.6 million, and I talked about targeting $8.5 million by the time we get to Q4. So quite a few kind of the external consultants and outside services people that we've been using to help us do the process will start to drain off.

We're still going to see that inflated in fiscal quarter 3, which is the quarter we're in. The biggest decline you'll see is in Q4. In terms of what that means for fiscal '25, I got to be careful what I say here because I don't necessarily want to guide.

But keep in mind that, that kind of $8.5 million range had a lot of ins and outs, and I think including a little bit of incremental costs associated with getting us through our remediation of material weaknesses.

Does that make sense?.

I guess I was talking about more in terms of the permanent headcount increases in G&A, like I assume there's been a stacking up of the process aside from all of kind of the onetime incremental cost. And that's what I was trying to get at in terms of what that number should look like. .

Yes. I understand. From a headcount perspective, you're right, we're kind of heading into a situation where we're almost at where we need to give you a run rate perspective and be able to support further growth into '25, which we expect. .

Got it. And then in terms of just the share repurchase program, it sounds like the idea is to maybe start off a little slow at this point.

Is that the messaging that you just want to kind of see how the different numbers in other parts of the business shake out from a revenue growth perspective before you become, I'll say, too opportunistic?.

I heard you right. We hadn't indicated our trading strategy, in particular. Certainly didn't indicate that we would go slow before we would go fast. But what we did say or what I did say was that the trading window opens for us this Thursday, and that's when we have the opportunity to start purchasing shares.

In terms of how that goes, we're going to -- we have a strategy in place on how we want to go trade, and we'll see that in our reporting when we report in August for Q3, how we did. .

Got it. Fair enough.

And then the final question here, just in terms of the search for a new CEO, any particular qualities? I think you mentioned some high-level criteria, but is there more specifics on -- in terms of like a hard tech background or experience in a very specific area, whether it's identity or something or security? How should we think about -- is there something there that you can provide color on?.

Yes. This is Scott. I appreciate your question.

One thing I would start by emphasizing, it's not directly answering your question, but I think an important context is that given our much broader geographic footprint and the fact that many of our teams are operating virtually these days, we can now cast a much wider net for executive talent, right? So that's something that we're really encouraged about.

We have significant presence, of course, in San Diego, but also in New York and London. So that will be something that we're evaluating as we move forward with the search. We believe that domain expertise, either directly in the space or certainly in an adjacent market category, is important.

But as we mentioned, there are a variety of different qualities that we're looking for in the CEO, and we're working closely with a very highly respected search firm. We've done a market assessment with them, and we'll evaluate what sort of candidates come, are presented to us and go from there. .

The next question comes from Derek Greenberg with Maxim Group. .

I just wanted to follow up on guidance a little bit. In previous calls, you had provided a little more high-level detail in terms of how revenue should progress throughout the year.

I was just wondering if third quarter and fourth quarter is still on track to be about even through your previous comments where I think it was first quarter lowest, second quarter sequential increase and then third quarter and fourth quarter increase over that about the same. .

Yes, I'll take that. This is Dave. We -- you're right. We had historically done that over the past 2 or so earnings calls. We purposely didn't this earnings call because we're in Q3 now.

And more importantly, there are several kind of larger deals that we're working on that we don't yet know if they will fall into Q3 or Q4, and that would change the total revenue for those quarters. But our overall annual guidance for remains in place. .

Okay. Got it. That makes sense. And then just on the identity side of things, I was wondering if that's still on track to become cash flow positive in the fourth quarter. .

Yes, Derek, if you go back, we were pretty clear in the prepared remarks, that is absolutely the intention. We're on that track and Q4 is right around the corner, so we want to make it happen. .

[Operator Instructions] The next question comes from Scott Buck with H.C. Wainwright. .

The first one, just a bit of a follow-up there on the ID business and track to profitability. It sounds like your -- the visibility is there that you think you are there in the fourth quarter. I'm curious if we should expect a meaningful kind of EBITDA margin tailwind into '25 then based on reaching the kind of profitability threshold. .

Yes. Again, we're not prepared yet to guide 2025. That being said, they're based on exactly what you're saying. There is certainly opportunity for margin expansion. .

Okay. Perfect. And then my only other one, I may have missed it, I jumped on the call a little late.

In terms of the executive search, have you guys given a time line as to when you could potentially expect to make a hire there? Or is it just way too early?.

Yes. We -- I don't think we're prepared to make any sort of commitment today. We need to make sure that we're thoughtful and do our best to make sure we find the best possible candidate. Just want to add, if you don't mind. As I said in the remarks, I know this business very, very well.

Part of the Board's consideration was that I could step in immediately without missing a beat, hit the ground running. And that gives us the luxury, I think, of being able to make sure that we, again, do justice for the team and our customers to make sure we've got the very best possible CEO going forward. .

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. .

Thank you, operator, and thank you, everyone, for joining our call today and for your continued support. As always, if you have any follow-up questions or would like to meet the management, please feel free to reach out to me, Todd Kehrli [ at ] MKR Investor Relations. I'll be happy to set something up. Thanks, and have a great rest of your day. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..