Mitek Systems Inc Q2 FY2024 Earnings Call

Good day, and welcome to the Mitek Fiscal 2024 Second Quarter Earnings Conference Call. 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 two 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 have 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's 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 for Mitek and has strong conviction in what the company is capable of achieving, both in the near term and 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 that 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 six 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 position 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 six years ago. So we are at the beginning of a new and exciting chapter and embarking on an ambitious and promising journey. After six 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 and assist with a seamless transition while we conduct our search for a new permanent CEO. The Board has engaged in the 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 from the get-go 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 it 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 their 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.

Thank you, Scott, and thank you, Mitek Nation, for the opportunity to lead this organization over the last six years. We have accomplished a lot together and transformed this business into one of the leading authorities on identity and fraud in our markets. I am pleased to discuss how we continue to address our customers' needs and expand our fraud prevention services in the second quarter, as well as the promising future for Mitek. I will then hand it over to Dave to go over our financial results and outlook. At Mitek, our mission has always been to help our customers embrace opportunities by enabling them to accept more good customers, manage more deposits, and process more transactions with enhanced intelligence and safety. This mission is particularly crucial today. As generative AI drives rapid digital transformation, the need for banks to combat fraud while safeguarding their users has become more urgent than ever. The significant increase in digital transaction volumes and the boldness of fraudsters present unprecedented challenges. The global rise of generative AI has intensified this situation, resulting in a spike in fraudulent activities across all channels—online, mobile, and in-person. We are seeing this trend reflected in our results through heightened demand for our fraud management solutions. Both new and existing customers are increasing their usage or implementing new applications as fraud infiltrates new areas of their businesses. Let's take a closer look, starting with identity. Our MiVIP platform is now processing millions of transactions each month for customers across various geographical markets. This data provides us insights into behaviors, fraud patterns, and the effects of our solutions, allowing us to innovate and address the most pressing threats. This quarter, we introduced essential use case functionalities for detecting injection attacks and facilitating uninterrupted web streaming. Both of these threats have evolved rapidly due to advancements in generative AI. Injection attacks are increasing, involving the use of face swap videos to deceive online verification systems. The progress in generative AI has made these face swaps more convincing, leading hackers to submit altered videos to verification systems through digital injection. These deepfakes are a rapidly developing form of synthetic media used for various malicious purposes, including bypassing facial recognition algorithms. According to the IGAP Research Institute, 95% of facial recognition systems are unable to detect deepfakes, prompting organizations to urgently search for effective liveness solutions. Here, Mitek's MiPass solution excels as the first truly multimodal biometric solution, capturing four critical security points: face match, face liveness, voice match, and voice liveness. It offers our customers the sophisticated biometric authentication they need while also satisfying their end-users’ desire for ease of use. Customers are adopting MiPass as a replacement for passwords and one-time passcodes, using it to provide an extra layer of protection for high-value transactions, and increasingly this quarter, it is being utilized alongside MiVIP in retail settings to assist sales staff in confidently approving transactions. From banks enhancing in-branch security to car rental agencies looking to secure kiosks during pickups, to a mobile service provider addressing challenges with in-store transactions, MiPass delivers an integrated omnichannel solution that safeguards transactions while improving the overall user experience. The significance of securing biometric systems against deepfakes and injection attacks is critical. Continuous authentication has emerged as a key focus in this environment, ensuring users' identities are consistently verified throughout a session to reduce risks of unauthorized access. The market potential for biometric authentication is anticipated to grow at a compound annual growth rate of over 10% from 2024 to 2032, reaching over $60 billion in annual expenditures by 2032. MiPass exemplifies Mitek's leading biometric authentication capabilities and serves as a major competitive differentiator. We see MiPass as a strong growth driver for Mitek. Though it is still in the early stages of development, we are excited about the potential it has to succeed in the biometric authentication sector. Turning to our deposits segment, our second-quarter revenue has returned to growth, primarily due to the increase in Mobile Deposit reorders. We continue to observe growing adoption of our industry-leading solution as more checks are being deposited through mobile check deposit. We are benefiting from the uptick in mobile check deposits, not the decline in check writing. Another significant growth area for us is Check Fraud Defender. In the second quarter, we noted ongoing momentum with robust market demand for this new solution. CFD is specifically designed to visually identify check fraud, which is often overlooked by traditional fraud prevention methods. In 2023, check fraud represented the most significant year-over-year increase in fraud for U.S. financial institutions, accounting for 31% of all fraud dollar losses, according to the Federal Reserve. With check fraud rates continuing to rise, Check Fraud Defender offers financial institutions a highly effective defense mechanism powered by AI and securely hosted in the cloud. Our CFD value proposition is resonating well as we secured several new CFD clients during the quarter through our direct sales to the top 200 banks in the U.S. and through channels we are just beginning to develop, focusing on the broader array of U.S. financial institutions. To illustrate the early success we are experiencing with partners, one of our channel partners currently has over 20 opportunities lined up in their Q3 pipeline, and we are actively working to onboard more channel partners for CFD as we aim to become the leading provider in the expanding check fraud prevention market. Notably, one of our new technology partners in check fraud prevention is Viewpoint, a prominent managed content service provider managing billions of documents, including historical check images for some of the world’s largest financial firms. They are recognized among the largest service providers for regulated industries. This partnership will enhance our mutual customers' fraud detection capabilities and accelerate their efforts against check fraud. Once integrated, Viewpoint clients looking to implement Check Fraud Defender will conveniently switch on CFD by leveraging their existing secure Viewpoint connectivity. Although we are just beginning to explore the CFD opportunity, we are already processing tens of millions of transactions each month and have data from over 300 financial institutions in our consortium models. The speed of our consortium, alongside the substantial potential savings from fraud prevention losses and operational efficiencies from the solution, is creating a robust and expanding pipeline of prospective CFD customers. Looking forward, we are entering an exciting phase at Mitek. We have cultivated several significant growth avenues with CFD, MiVIP, biometric liveness, and MiPass. While these opportunities are still in their infancy, each holds substantial promise for Mitek and our shareholders. Before I turn the call over to Dave, I want to express my gratitude to all Mitekians for their dedication this quarter and over the past six years. Your hard work and discipline across the business, combined with the positive feedback we are receiving from customers, reinforce my strong belief in the opportunities that lie ahead for our company. Now, I will hand the call over to Dave to provide a detailed discussion of our second-quarter financial results. After Dave's remarks, we'll open the floor for questions.

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 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 have 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 the 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. The 10-Q for fiscal Q2 2024 filed last Friday will remain current and we 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.

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, I appreciate the question, Mike. I am very passionate about the opportunities at Mitek. I recognize that the team is incredibly talented and that we have market-leading products. While I am serving as interim CEO, I will be fully committed. I am not a candidate for the permanent CEO position due to personal family considerations. However, you can rely on my complete dedication to the exciting opportunities ahead of us. Regarding your second question about strategy, we have a great team, and we are confident in our existing strategy. We will soon start our annual planning process, which includes updating our strategic plan in alignment with our annual operating plan. We will evaluate how to potentially reallocate operational expenses and headcount to focus on areas that can drive growth and improve our contribution margin. This is an important process, and we have outstanding products. Execution is key for us.

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 with the ecosystem, and the relationships I have with C-level executives in our client organizations. I went out and talked 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 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 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 signals. And the integration of that has substantially helped us catalyze the adoption of reduced sales cycles. So again, there's a nice set of assets across our portfolio that are coming together to solve that problem in a way that no one else could possibly do.

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 three years. 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 four 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 idea of saying, '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 two 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. Today, as of last Friday, when we closed one of the top 100 banks in the United States through our direct sales activities, we now have over 25 signed CFD customers. That's a combination of some of those early adopters that were on-premise and then the folks who 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, and this reinforces the network effect of seeing more checks. 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 from our direct selling activities. We have now at least two partners that are reselling and have just come up the learning curve, and we've started to see not just pipeline growth but actual deal activity where they close business. The traditional folks that have historically been our gateway into the banking industry for the core banking service providers, like Jack Henry, FIS, and Fiserv, we are hard at work getting to contracts so that they can take this on. They're big organizations; they also have a lot of lawyers and compliance folks. But all the numbers I gave you around where we're going to end the year, I feel really good about. 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?

Let me start by saying that every new identity opportunity begins with a solution-oriented approach focused on customer pain points. This process usually leads us to discussions about how we can address those issues, starting with MiVIP as our main platform for identity moving forward. MiPass, which we've discussed extensively in relation to identity authentication through multimodal biometrics, is essentially a specific implementation of that. It serves as an architectural solution for identity authentication utilizing biometrics. I want to emphasize that we still have the capability to offer individual products when necessary. Our MiVIP architecture offers the flexibility to begin with a single signal and expand into a broader array of signals throughout various customer journeys, or we can dive directly into more complex solutions based on customer needs.

I believe you wanted to discuss some of the legacy products. As you might recall, the ICAR legacy hardware is beginning to phase out over the next few quarters and should be fully transitioned by sometime in 2025. This change will have some impact, but it will be relatively minor, affecting revenue by single-digit millions. Additionally, regarding document verification, the Mobile Verify feature is integrated into the MiVIP platform and will continue to play a significant role within that framework.

The next question comes from Surinder Thind with Jefferies.

Just following 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 Q2 fiscal quarter, we were 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, 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 the one-time incremental costs. 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 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.

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 are 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. You're right. We had historically done that over the past two earnings calls. We purposely didn't this earnings call because we're in Q3 now. More importantly, there are several 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 remains in place.

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, 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 timeline as to when you could potentially expect to make a hire there? Or is it just way too early?

Yes. I don't think we're ready to make any commitments today. We need to be thoughtful and do our best to find the right candidate. I'd like to add that I know this business very well. Part of the Board's consideration was my ability to step in immediately and keep things moving smoothly. This allows us the time to ensure we select the best possible CEO for our team and customers moving 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.