Q4 2023 Mitek Systems Inc Earnings Call
Participants
Todd Kehrli; Investor Relations; MKR Investor Relations, Inc.
Max Carnecchia; CEO and Board Member; Mitek Systems Inc
David Lyle; Chief Financial Officer, Senior Vice President, Principal Accounting Officer, Principal Financial Officer; Mitek Systems Inc
Chad Bennett; Analyst; Craig-Hallum Capital Group LLC
Jake Roberge; Analyst; William Blair & Co LLC
Owen Rickert; Analyst; Northland Securities Inc
Allen Klee; Analyst; Maxim Group
Presentation
Operator
Good day, and welcome to Mitek's fiscal 2023, fourth quarter and full-year earnings conference call. (Operator Instructions) Please note this event is being recorded.
I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.
Todd Kehrli
Thank you, operator, and good afternoon, and welcome to Mitek's fiscal 2023 fourth quarter and year-end earnings conference call. With me on today's call are Mitek's CEO, Max Carnecchia; and CFO, Dave Lyle.
Before I turn the call over to Max and Dave, I'd like to cover a few quick items. Today, Mitek issued a press release announcing its financial results for its fiscal 2023 fourth quarter and full year. 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 about 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, March 19, 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'll be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8-K describes 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 turn the call over to Mitek's CEO, Max Carnecchia.
Max Carnecchia
Thanks, Todd. Good afternoon, everyone. Thank you for joining us today. I want to extend a warm welcome to our investors, employees, customers, and partners joining us today. Thank you for your continued support and trust in Mitek. I'm excited to provide insights into our fiscal '23 performance, spell out our strategic direction going forward, and then hand the call over to Dave Lyle, our new CFO, to provide more financial details.
At Mitek, our mission is clear. We help regulated businesses say yes to more customers, more deposits, and more transactions, with increased intelligence and customer safety. We achieve this by providing unique signals that seamlessly bring identity transaction intelligence together. Over the past decade, we've diligently developed solutions in pursuit of this mission. Today, leveraging our most current applications of AI and machine learning, we are proud to enable over 7,900 organizations with new levels of security and control, while protecting the digital consumer from the most sophisticated fraud threats.
I'm very proud of our 200 machine learning and AI engineers, data scientists, developers, and cloud op team members who are dedicated to ensuring that our award-winning product offerings remain at the forefront of the industry and their vital role in developing solutions to combat evolving fraud and enhance digital security.
Thank you all my tech nation for your ongoing commitment to our mission and the incredible work you do.
Before we discuss our financial results for fiscal 2023. I'd like to introduce Dave Lyle, our newly appointed CFO. Later in the call. Dave will provide further insights into our financial performance and outlook for fiscal 2024. He joined us in early January and has already made a substantial impact with his broad experience across multiple business functions. Dave brings invaluable expertise to our team. We're thrilled to welcome him aboard.
I'd also like to express my gratitude to Ford Amod, who served as my tax interim CFO for a little over a year.
Thank you, Juan, for your dedication and contributions during this critical period.
Turning to my text record performance in fiscal 2023, I'm pleased to announce that we achieved solid growth across both deposits and identity, leading to total revenue growth of 19% year over year. Additionally, we achieved non-GAAP net income of 44.4 million and generated 31.6 million in cash flow from operations, further strengthening our balance sheet.
First, looking at looking at our identity products, revenue grew 17% year over year in fiscal 2023 attributed to strategic efforts and customer acquisition and expansion within our existing customer base.
Our net revenue retention rate for fiscal 2023 was approximately 117%, which underscores the value of our solutions deliver notable customer expansion included Lloyds Chase and NatWest. We won over 100 new identity customers in fiscal 2023, including major names like nationwide, Verizon, Virgin Mobile, O2 and Telephonica Nationwide Building Society was a very strategic win and a competitive takeaway. This British co-operative financial institution is in the process of rebranding under the slogan of good way to bank. And its primary goal is to differentiate itself based on user experience and security. Mitek's mission and approach are very well matched to this rebranding, and we are confident it is one of the reasons we secured the business nationwide is implementing our solution in multiple use cases and has taken a phased approach, starting with a remediation project and expanding to device finding and on-boarding for device binding and step-up authentication involves all app users as a replacement for card readers using our multimodal biometric solution bypass. They have already enrolled 120,000 biometric faces and all 5 million app users. We'll be invited by April of this year.
Verizon, another significant win was also a competitive takeaway. Verizon will leverage our identity verification and face comparison tools to support its product operations and customer experience teams initially with their B2B business and soon.
Moving to support the in-store consumer access to digitally enabled services continues to explode. And this accelerating shift to digital creates an immense challenge for organizations as they strive to balance customer experience with financial risks as digital grows. So the opportunities for fraud and as long as criminals can cleverly exploit weaknesses in an institution's ability to distinguish a legitimate customer from an impost or this threat will continue to grow. As such, we see customer interest engagement and inquiries dramatically increasing according to industry and industry analysts. The identity market is growing between 14% and 16% annually, and we have the opportunity to take market share given our unique proprietary industry-leading biometrics offerings and orchestration platform.
Our channel partner investment has also yielded returns during the year, we've experienced our long-standing partner in North America, the UK and Europe growing their MiTAC business by 17% year over year across all regions. And we believe we are only just scratching the surface with them. Our most recent win with Experian is in the government health care in U.K. and Experian is also one of the biggest partners content in the telco space, particularly in Europe. Partnerships like Experian are pivotal to in our efforts to support new verticals, including government, telco, healthcare, each, which presents a significant growth opportunity as such, we continue to add new channel partners, most recently with the industry leaders like Equifax and NICE Actimize. By leveraging these alliances, we aim to establish a strong foothold in new geographies, driving expansion and enhancing our global presence.
Now let's shift our focus to the non-financial milestones achieved during the fiscal year across each line of business and outline our FY 24 priorities. We see a large and growing opportunity in the intersection of fraud and identity, especially in regulated environments like financial services, mobile operators, gaming and healthcare role. Ai is playing in changing and accelerating regulation, further benefits MiTAC and our solutions. As a result, our growth products, including our MIBIP. platform and the AI driven biometric solution.
My past have seen growing adoption today. Integrated identity platforms are emerging technologies and essential tools that reshape how we secure and authenticate identities in the digital world. These platforms combine various verification methods, streamlining the process and enhancing security for our customers market discern this by categorizing the orchestrator and the orchestrated. My VIP. is the leading orchestration solution in the market today through its highly differentiated offering beyond traditional synthetic ID checks and physical document verification. Our orchestration platform incorporates proprietary biometric analysis and likeness inspection in combination with highly personalized external data signals to ensure the legitimacy of identities, thereby preventing synthetic and generated computer-generated frauds from the ongoing battle against online fraud. Deep fakes and injection attacks are biometric components, which are part of my BIT. play a pivotal role in enhancing security and safeguarding digital transactions. Our ID & D biometrics revenue has grown substantially since we acquired IDR. and D. in May of 2021, as use cases continue to expand and the need for continuous authentication becomes mainstream voice, biometrics, expedite and secure customer authentication, especially when combined with face biometrics face biometrics also strengthen fraud prevention during the customer's digital onboarding by verifying a user space against the government issued ID as storing attempts to buyback bypass screening processes using manipulated images. Licensed detection technology confirms an individual's physical presence during authentication, effectively preventing the use of stolen photos, videos, masks and others moves by spam bots and bad actors to create more access online accounts, thereby significantly enhancing secured leveraging all these proprietary technologies.
In fiscal 2023, we introduced our exclusive four point multimodal biometric solutions and only one of its clients utilizing the combination of face biometric face lightness, voice, biometric and voice live in this technology. This innovation, innovative solution bypasses seamlessly captures and verifies these biometrics simultaneously providing near instant authentication for digital users initially praised by expediting and securing customer authentication. Voice biometrics are being challenged by the emergence of generative AI voice clips, known as vision for voice, deep fix which malicious actors exploit to infiltrate financial accounts. Our IT R&D labs were quick to respond. And early this year, we introduced ID live voice clone detection to protect against bad actors in person aiding their victims to commit fraud and crime with just three seconds of a person speaking product and to deliver a score indicating the likelihood that it has that it was created using cloning technology in contact, detect known attacks that use replay or advanced software and hardware-based hacking methods in a world of Gen-i large language models and Transformers were each Vacon person nations are prolific proliferating so rapidly. Voice plus detection plays an essential role in preserving trust between people and technology. And we are proud to be at the forefront of this innovation. According to Gartner, the number of E. fake attacks worldwide in 2023 was 10 times the number of detected in 2022 with our leading industry biometric solutions, preventing FX. We expect biometrics and likeness to be a significant revenue growth engine for Mitek for years to come.
We're also very excited about how our identity product portfolio reinforces our deposits business, our end to end orchestration platform, my BIP. is now serving both deposits and identity. And we are seeing our pipeline of potential new business increase as we provide a comprehensive suite of machine learning and AI based tools that can help organizations fight fraud.
Now let's discuss our deposits business and where we see it going in fiscal 24 and beyond. In fiscal 23 as our deposits in revenue increased substantially growing 20% year over year, we recorded over 1.2 billion mobile check deposits in fiscal 2023. Notably, 8 billion checks were deposited in North America throughout the year. Analysts forecast the sustained demand for tech deposit services over the next decade with an estimate with an estimated 5 billion checks per year still being deposited 10 years from now, we plan to capitalize on the increasing adoption of mobile check deposit among consumers and small businesses as well as to continuing to implement price increases as the leading provider of this solution.
Now let's talk about the momentum we are seeing with Check Fraud Defender or CFD product offering one of our most exciting prospects for growth over the coming years. Banks are getting crushed by check fraud, which according to the recent NASDAQ report, has eclipsed credit card fraud in the United States. Cft is making significant strides in combating check fraud with the potential to save banks billions of dollars in lost. We believe CFT has the potential to contribute to 100 million in annual revenue within the next five to seven years.
Let me walk you through how we got there. As I read a recent Boston Fed article noted one industry analyst estimates over 24 billion in check fraud losses in 2023. We believe CFT can help banks conservatively avoid around 40% of those losses based on our unique ability to visually detect fraud through machine learning that would imply that CFT could potentially save approximately 10 billion in check fraud losses just this year, we believe a reasonably healthy bank friendly ROI. to combat this size of check fraud would be in the range of 10 to one, meaning we would believe banks would be willing to invest 1 million to prevent 10 million in check fraud losses. It would allow for a 1 billion annual serviceable addressable market or SAM for our Check Fraud Defender product with less than a handful of potential competitors today, we believe a 20% market share should be achievable, especially given our leadership position and strong reputation in check processing that would equate to $200 million in annual revenue opportunity for Mitek within the next five to seven years. And remember, check fraud is growing rapidly. So these estimates do not consider the growth over the coming year.
Also important to note is the potential bank savings don't include additional operational efficiencies. These banks will realize by using CD. and our new mine control product. Our latest achievement in empowering banks to control check fraud by integrating CFC with my BIP. productivity gains using my control are significant in the review of potentially fraudulent check agents can reduce what would have taken them as long as 10 minutes to just ninety seconds using my control. Also, CFT drives down false positives. So the banks will spend more time looking at bad checks rather than good checks. We launched CFD two years ago to help banks solve this growing problem. In fiscal 2023, one of our customers reported saving over 16 million in less than six months using CFC to prevent from fraudulent check losses and reduce the expense of dealing with this exploding problem.
Today, CST boasts a select group of clients, including two of the top 10 banks in North America. Our dedicated sales team and partners are diligently pursuing the top 100 financial institutions aiming to onboard dozens more SCFE. clients by the end of fiscal 2020 fourth, despite the deliberate pace inherent in the regulated banking sector, our progress remains promising, driven by the substantial cost savings our CFD solution can deliver. Encouragingly, our pipeline of potential customers continues to expand, indicating a growing market interest in our offerings. Contributing to the pipeline are our channel partners. The channel has been the trusted blueprint for selling mobile deposit, and we are thrilled with the momentum we are starting to see in this in the channel CFP within a few months of onboarding our new partner of Rego. We have already closed a couple of CSC deals. Cmp is just the beginning of a very large opportunity for my tech. My control is the latest of many products being built on my BIP.s, low-code no-code platform for fast and simple implementation that we believe can drive revenue growth for us over the next several years. We are already planning follow on products to address other growing market opportunities in the retail bank payments, wire and peer to peer space, which we believe is a substantially larger opportunity and even CSP, I want to reiterate the growing the important growing intersection of fraud and identity. Cfe is leading the way into adjacent opportunities for my tech to help with new AI-driven anti-fraud and identity capabilities. By leveraging our unique access to rare and privileged customer data and transaction intelligence, we can deliver additional additional differentiated value to our customers and drive increased shareholder value.
In summary, Modtech is well positioned for the continued growth in both revenue and profitability. We are capitalizing on a large growing end markets at the nexus of big secular trends in AI. identity and fraud. Mitek is delivering cutting edge machine learning and artificial intelligence tools, empowering organizations to combat fraud and enhanced trust and convenience across every digital interaction through our leading orchestration platform. Notably, the introduction of new products positions MiTAC for our next rate phase of additional growth.
I'll now turn the call over to Dave to discuss the financial results in more detail. Following Dave's remarks, we'll open the call for questions. Please go ahead.
David Lyle
Thanks, Max. I couldn't be more excited to be here at Lightech. It's a privilege to join a company that is not only a pioneer and a category creator in its space, but has also established itself as a clear market leader while demonstrating consistent revenue growth and profitability. I'm looking forward to continuing my my work with the team towards growth for years to come and also looking forward to getting to know our shareholders and sell-side analysts. With that said, let me take you through our financial results for fiscal year 2023, which ended September 30th, 2023. Looking first at revenue, it would be valuable to spend a few minutes describing how we talk about some of our revenue streams. For those of you who are new to Lightech like myself, our 10 K filings talk about two revenue categories, software and hardware and services and other on the software and hardware revenue side, we include mainly software term license revenue and to a limited extent, hardware scanner boxes and on-premise appliance product revenue. Our deposits products contribute the vast majority to that revenue category as a mobile check deposits product is it primarily an on-premise software license model the only deposits product that will be primarily in the services and other revenue category is our Check Fraud Defender product.
On the services and other revenue side, we include transactional SaaS revenue, maintenance and professional services revenue. Our identity products have historically contributed the vast majority of that revenue category as almost all identity products, except RIDR. and D. biometrics and some legacy hardware products are SaaS delivered as their cloud hosted solutions to our customers. Our Check Fraud Defender product revenue is also primarily a SaaS delivery model. So it is contributing to the services and other revenue stream as well.
So with that said, let's review our financial performance for fiscal year 2023, top line revenue for the fiscal year grew 19% year over year to $172.6 million, just above the preliminary revenue number we announced on December 7th of last year. Software and hardware revenue grew 21% to $88.4 million in fiscal year 2023, primarily due to an increase in sales of mobile check deposit products, services and other revenue grew 17% to 84.2 million in fiscal year 2023. This increase was primarily due to strong growth in SaaS revenue from our who you and my BIP. products as well as increased maintenance revenue associated with mobile check deposit software sales.
Shifting to revenue for our two major product categories, deposits and identity let's start with deposits. Deposits revenue grew 20% year over year in fiscal 2023 to $104.1 million. This growth was driven primarily by strength in mobile check deposit reorders and additional adoption and usage across the banking system. Please note that 75% of deposits revenue was in high-tech software and hardware revenue, 25% was in services and other identity revenue for fiscal year 2023 grew 17% year over year to $68.4 million, driven by our SaaS product revenue, approximately 15% of identity revenue was in Mid-Tex software and hardware revenue and 85% was in services and other revenue for fiscal year 2023.
Moving on to gross margin. Total gross margin for fiscal 2023 was 86.7%, up 50 basis points from 86.2% in fiscal 2022, we continue to deliver strong hard software and hardware gross margins of 98%, while on services and other revenue, our gross margin was 74% for fiscal year 2023.
Operating expense for the fiscal year 2023 was $134 million compared to 112.6 million last year. Non-gaap operating expense for fiscal 2023 was 96.4 million compared to $80.5 million last year. The year-over-year increase was primarily related to fees associated with our delayed filings, including audit accounting and legal support, and to a lesser extent, the addition of resources to our corporate services team to accommodate our scaling business, excluded from our non-GAAP operating expenses are about 29.5 million of noncash accounting items and $8.2 million in nonrecurring cash items. The non-cash items were comprised of 19 million for amortization of purchased intangibles and 10.5 million of stock-based compensation expense. Cash items were comprised of $4 million, mostly associated with nonrecurring auditor fees and about 4.2 million related to restructuring, executive transition and litigation expenses. Please see our earnings release for a more detailed reconciliation.
Our non-GAAP operating income grew 20% in fiscal 2023 to $53.2 million or a 31% non-GAAP operating margin. Excluded from non-GAAP operating income was 37.7 million in expenses as described above and are detailed in our GAAP to non-GAAP reconciliation in today's earnings release.
Gaap net income for fiscal year 2023 was 8 million or $0.17 per diluted share versus $3.7 million or $0.08 per diluted share in the prior fiscal year. Non-gaap net income for fiscal year 2023 was 44.4 million or $0.95 per diluted share versus $40.5 million or $0.88 per diluted share in the prior fiscal year. Our diluted share count for the year was 46.5 million compared to 45.8 million shares a year ago.
Turning to our balance sheet, our cash and investments grew from 101 million at fiscal year end 2022 to $134.9 million at fiscal year end 2023, $31.6 million of that $34 million growth was provided by our cash flow from operations.
Moving on to guidance, we are reiterating our fiscal year 2024 revenue guidance range of 180 to $185 million for a 6% growth rate at the midpoint of the range and a 12% growth rate. If we backed out the future real license revenue from a large one-time Mobile Deposit deal in fiscal 2023. More specifically, material growth rates are expected this year and Check Fraud Defender as it moves from its nascent stage to accelerated growth, coupled with strong expected growth from the flagship identity platform, IBIP. bypass and our IDR. and D. biometrics products. This growth is expected to be somewhat offset by revenue declines associated with our retirement of legacy PayCard products as they move towards end of life. It's also important to note that we won a large mobile check deposit customer in fiscal Q1 of 2023, which creates a difficult year-over-year comparison. From a quarterly trending perspective, we expect top line revenues to be lowest in fiscal Q1, ramping in Q2 and again in Q3 with Q4 expected to be in the range of Q3 revenue quarter to quarter changes due to deal timing may influence these expectations. From a year-over-year perspective, we expect most of the year-over-year revenue growth quarters to be in the fiscal Q3 and Q4. We continue to expect our identity business to reach standalone profitability on a fully burdened basis in the fourth fiscal quarter. This will be driven by revenue growth as well, additional operating leverage in the sales, marketing and R&D functions with regard to taxes, we expect to be a taxpayer in fiscal 2024 with a tax rate in the 25% plus or minus range of GAAP pretax net income in addition, we are reiterating our fiscal full year 2024 non-GAAP operating margin guidance range of 30% to 31%.
Moving to our capital allocation plans, we continued to generate solid cash flow and strengthen our balance sheet in fiscal 2023, and we expect to continue to generate cash in fiscal 2024 as Max has previously written previously said regarding acquisitions with our market-leading product portfolio in place, we do not need to do additional acquisitions to further penetrate the significant market opportunities we have in front of us. Our team with our Board of Directors continues to assess all capital allocation alternatives routinely as we are currently in a blackout period. While we prepare our fiscal quarter 10 Q filing, we are limited in the actions we can take until we are outside of our blackout period.
Before I conclude, I would like to touch on where we are with our SEC filings. And our expected Investor Relations activity during fiscal 2024 following those filings with the fiscal year 2023 10 K filing behind us just out in the past 20 minutes, our team with our auditors are already working diligently to get current on our 10 Q filing for the first fiscal quarter of 2024 ended December 31st, 2023. As for the first fiscal quarter, 10 Q filing was due February nine based on last year's 10 Q filing timing, we believe it should take about a month to file the fiscal first quarter 10 Q, which would put us sometime in mid April. Assuming no delays arise, we would then jump into our normal cycle to deliver the second fiscal quarter 10 Q in May. If we are able to achieve this time line, we expect to increase our Investor Relations activities from there. This would include upcoming investor conferences in May and June with Needham and William Blair as well as our long awaited Analyst Day, which we're targeting to occur before our fiscal year end, which ends on September 30th, 2024. We look forward to getting out and telling investors about the big opportunity we have in front of us.
In closing, we are very pleased with our results, which included record revenue and record non-GAAP net income for the full year of fiscal 2023. We look forward to growing again in fiscal 2024 as we continue to deliver industry leading machine learning and AI driven tools and enable us our customers to prevent fraud.
Operator, that concludes our prepared remarks. Please open the lines for questions.
Question and Answer Session
Operator
(Operator Instructions) Chad Bennett, Craig-Hallum.
Chad Bennett
Thanks for taking my question or questions. Hey, Max; and welcome, David on here. Just a couple couple of things on just it was great.
You kind of laid out the linearity of the year from a revenue standpoint. I guess you know as much as you can say now that we're effectively almost halfway through the year on in maybe more pertains to the identity part of the business, just in terms of the macro and demand environment and volume environment on that side of the business, any insight max into kind of what you're seeing there? Are your thoughts on the demand or macro environment on that part of the business right now?
Max Carnecchia
Yes, I don't know that I have a I don't know that I have a substantive update for you, Chad. I think things are similar to when we when we've talked previously, at least in the recent past that with interest rates are we definitely see challenges on anything that's kind of loan origination or interest rate sensitive refinancing, new mortgages, he locks even even credit card issuance at these rates. But I do feel like we see some stabilization across the more revenue generation areas and I think as we've talked about in the past, when when times get tough, you know, broad increases rate. And so we're seeing that on both sides of the business, both the identity side. But obviously, we Check Fraud Defender. I could go on for hours on kind of the stats and what's generally what's being perpetrated on that side. So hopefully that's helpful.
Chad Bennett
And just in terms of the penetration you're seeing with what might be the IP. and myPath and the biometric solutions, I guess, can you give a sense of where you are in terms of penetration into your existing base with those solutions?
Max Carnecchia
Yes, I would say we're in the very early stages for our international audience. I don't want to use a baseball example, but the first first 10, 15% on and off first inning use baseball anyway for me, the JNI height that's been out there over the course of the last five or six quarters when you bring that to the fraud and identity space, it changes almost everything. And yet what companies regulated organizations are confronted with the changing expectations of consumers, regulators who are trying to help but can't move fast enough. And the regulations that are in place, things like ADS. two in Europe and Fido two, which is really more protocol and framework here in the US. Those were built and delivered and kind of conceptualized before the real rollout of transformer, a large language model JNI. And we're told it's a wind up to say every one of these large regulated entities, whether they're banks, telcos, health care, they've got to figure out live lose on the other side of that device? And how do I make sure not only it's who they say they are, but that it's actually a live human and we are just so well positioned with the B first, the best approach to face and voice, I feel really good about it can take some time, right? I mean, early days can take some time, but I don't know how you solve that problem. Otherwise, I really don't know how you do that in a JNI world.
Chad Bennett
And just on I like the way you laid out the opportunity in Check Fraud Defender. And I mean, it certainly seems like you guys are seeing traction with that product from, you know, I guess maybe the best way to ask it is, have you rethought kind of the growth potential of the deposit side of the business?
Max, I think it's certainly sustainable outgrowth, I think, at least my expectations, maybe yours the last last couple of years on. But I think we've just generally thought about that business being in all maybe kind of high single digits, 10%. It's certainly outgrown that materially.
Max Carnecchia
But just are you thinking any differently about that side of the business and kind of the growth rate the next three to five years now we consider continue, I believe the base check business mobile check deposit and the check intelligence business will continue to be a contributing growth to MiTAC from a revenue perspective and continuing to throw off an impressive operating margins and profitability. We're going to do that because the adoption of mobile banking is still in the very early days, right? When you use a stat about We processed in FY 23, 1.2 billion checks.
That sounds amazing. And then you say, hey, 8 billion checks were in the system. And so you really kind of scratched the surface and you publish them. You publish them reports to kind of close the Bank of America's and the wells and the JPMC. So there's a lot more to go there, as you know, because we are a dominant market player. We have pricing power both with the end using banks as well as with the core service channel providers that we rely on. So I think between the idea of those two things. We anticipate this continuing to be a growth elements of the business and CFE, the Check Fraud Defender, just because of the explosive growth of check fraud, we think that's going to be we see it right. It's a one of the fastest growing things I've ever seen right now.
Chad Bennett
Got it. Thanks. Great to see the payout, obviously, and look forward to more investor facing activity as we go along here. Thanks.
David Lyle
Thanks, Chad.
Max Carnecchia
Thanks again.
Operator
Jake Roberge, William Blair.
Jake Roberge
Hi, guys. This is goes every bond for J. Crew bears and thank you for taking my questions. So obviously, Check Fraud Defender seeing solid adoption, but just curious from a go-to market perspective, are you dedicating teams to the product yet? Or is it still combined with the classic check deposit business and leveraging those preexisting relationships? I'm going to have another question. Thank you.
Max Carnecchia
Sure. Yes. So the first part of that question, but since its inception, since we announced going back almost two years ago and introduced Check Fraud Defender, we have had a dedicated team of sellers, presales engineers, customer success and implementation. It started as a very small team. It's about almost three times the size of what it started out to today. But yes, it is a dedicated series of individuals that make their mortgage payment and make their car payments based on the success of helping customers fight fraud in the Czech area.
Got it. Got it. That's got your. Thank you.
Jake Roberge
And then just to touch on what you're seeing in the market from a competitive perspective and given the more difficult funding environment for private ID verification providers. Are you seeing competitive benefits in the pipeline as a result of the uncertain macro, so kind of a tailwind given the macro environment thinking?
Max Carnecchia
Yes. It's a good question, Jacob. I think the answer for sure is yes, on the if we went back in the way back machine 2.5, three years ago, you couldn't open crunch face any week without reading about a new company that was being created to take on the identity category. You couldn't you couldn't go a week without seeing additional eye-popping funding rounds and most of those new formed competitors. And they spent a lot of that money on sales and marketing, and they were not and we're not investing in innovation and things that were both proprietary and differentiated. And over the course of the last two years, we've absolutely seen that come home to roost.
And so as I as I said, when Chad asked the question. You know, there's still uncertainty in the economy. There's still a lot of geopolitical stuff going on, but the lay of the land, the competitive lay of the land for us has shifted and we believe shifted in our favor. I mean, when you're going to look around as a you're a mobile operator, you're a bank, you're a healthcare institution, who are you going to partner with who you're relying on, who's going to be able to kind of come out the other side of this and not just have great product, but be able to support you and have the vendor viability. And I'll stand on the FY. 23, 10 K, that's vendor liability.
Jake Roberge
Got it. That sounds great. And congrats on the results. Again, just thinking of a shake-up.
Operator
Owen Rickert, Northland Capital Markets.
Owen Rickert
Hi, this is Owen on for Mike Grondahl. I have two questions. So first, what are your priorities for mobile ID in 2024?
Max Carnecchia
Can you be a little more specific as to what you mean by that?
Owen Rickert
I guess, just priority going forward in terms of go-to market, what you're doing to improve the product, et cetera.
Max Carnecchia
So sure. All right. Thanks a lot for clarifying. We're really excited about the progress that we're making with my VIP, right? So this end to end orchestration, low-code, no-code environment, our ability to take on these really gnarly problems for regulated organizations talked about what those vertical industries are, but to be able to do that, not just for onboarding journeys and to get new accounts open. But what is often referred to as this is in life journey, right?
The ability to help somebody with a password reset, you forgot your credentials instead of sitting sitting for a half hour on a call center line and burning up a lot of time and having a terrible experience using my VIP. and now my past, the multimodal biometric identity authentication system, those are those are great opportunities for us. And as we've talked about in the past, our model is land and expand, right? You land the initial it's a business with a bank or a mobile operator.
And inevitably within a year or two, we're in two, three, four different use cases. Some of those are onboarding journeys, which are transaction driven, but now with what we're doing with my past. And of course, the IDR. and D. biometrics and lightness componentry, having a recurring revenue associated with more of a conventional subscription model. We're really excited about how that's growing the business and not just what we're going to do for the rest of FY24. But really the future of this business over the intermediate term Great. Thanks for the color.
Owen Rickert
And then lastly, and any incremental updates on the sales team?
Max Carnecchia
Well, we see coming into FY24. As we just said for Jacob, we've made some additional investments in what we're doing with Check Fraud Defender and you know, now my control. So putting more, if you will, logs on the fire to really kind of get that cooking on the on the identity side of the business, we've been investing in really kind of upgrading the team. We're probably halfway through a pretty big transformation, right? If you go back in the way back machine before we came together with who you and had my VIT., we were basically selling a point solution where we would be able to do identity verification using a government-issued identity document and an official live this test.
Now with my VIP., I've got an end to end enterprise solution that can be used in a lot of different places by a lot of different businesses and the sales motion, the positioning of that who we're targeting as far as the buyer cohort within our target accounts. All of those things have changed, and we've been making changes to our team and in our selling motions to us to exploit that. So and then with IDR. and D. separately, very much the selling of those componentry just again, bringing it's not huge investments, but going from three sellers to five sellers makes a really big difference. And to have those folks located in places like Singapore, Brazil or Eastern Europe. It's because that's where the action is.
Owen Rickert
Great. Thanks for answering my questions. Got it.
Operator
(Operator Instructions) Allen Klee, Maxim.
Allen Klee
Hello, good afternoon. A question on your guidance. Yes, I think you're guiding to non-GAAP operating margin of 30% to 31%. I think that compares to 31% you did in fiscal 23. So my question is if the mobile identity business is going to move from losing money to breakeven during the year, so that should improve results. What's the offset that is making margins not go up? Thank you.
David Lyle
Yes, it's a couple doesn't exist two and a high level math. First, if you take our revenue guidance and assume kind of gross margins similar to 2023, looking at 2024 and backing into operating expense were growing operating expense and somewhere in that kind of $7 million range year over year '23 to '24 on most of that is going to be investment in R&D from a cost perspective. And that's going to be a combination of products that we're investing in particularly CSD, but also in some of the other kind of earlier stage products that we have.
Allen Klee
Great, thank you. And then in terms of capital allocation, I think the last call you had because once you got out of a blackout, you would consider a buyback. How are you thinking about that today?
Max Carnecchia
And as I said in the prepared remarks, I talked a little bit about the capital allocation plan and the management team max myself and are working with our Board of Directors on a routine kind of basis to figure out what that kind of capital allocation will look like going forward?
We're looking at all alternatives, which could include a buyback, but we haven't specifically talked, I think historically more than just that on our on our earnings call.
Allen Klee
Great. And last question is on, is it possible at some point as NAM as mobile identity grows that you might be able to break out beyond with more metrics related to it, either on the basics of profitability or certain KPI.s?
Max Carnecchia
Yes, Allen, it's Max. Dave's in the chair here about 60 days and he brings a lot of fresh thinking, a lot of new wise and CFO at six other public companies before being here, I think you'll see us definitely learn some new tricks from him. So the answer is yes, let's let's give them a chance to get his sea legs and kind of find his way around and start to put his fingerprints on things here and stay tuned.
Allen Klee
That's great. Thank you so much and thanks for the call.
Operator
Taking its time, we will conclude our question-and-answer session. I'd like to turn the conference back over to Todd Kehrli for any closing remarks.
Todd Kehrli
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 we'd like to meet with management. Please feel free to reach out to me and also from mode. Thanks for everything and have a great day.
Operator
The conference has now concluded Thank you for attending today's presentation. You may now disconnect.
