Mitek Systems - Q4 2022

Transcript

Operator (participant)

Good afternoon, and welcome to the Mitek Systems Fiscal 2022 Fourth Quarter and Full-Year Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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 (President)

Thank you, operator. Good afternoon, welcome to Mitek's Fourth Quarter and Full-Year Fiscal 2022 Earnings Conference Call. With me on today's call are Mitek's CEO, Max Carnecchia, and Interim CFO, Fuad Ahmad. Before I turn the call over to Max and Fuad, I'd like to cover a few quick items. This afternoon, Mitek issued a press release announcing its fourth quarter and full year fiscal 2022 financial results. That release is available on the company's website at miteksystems.com. I want to remind everyone that on today's call, management will discuss certain factors that are likely to influence the business going forward.

Any factors discussed today that are not historical facts, particularly comments regarding our long-term prospects and market opportunities, should be considered forward-looking statements. These forward-looking statements may include comments about the company's plans and expectations of future performance. Forward-looking statements are subject to a number of risks and uncertainties, which cause actual results to differ materially, and 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, June 29th, 2023, and the company undertakes no obligation to update or revise publicly any of the forward-looking statements contained herein, whether as a result of new information, future events, changes in expectations, or otherwise.

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 describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release. With that said, I'll now turn the call over to Mitek's CEO, Max.

Max Carnecchia (CEO)

Thanks, Todd. Good afternoon, everyone. Thank you for joining us today. I'm very excited to finally report our Full-Year Fiscal 2022 Results. The enlisting of BDO has enhanced our financial controls and governance, and while it temporarily impacted the filing of periodic fiscal reports, we are now a stronger business. Fiscal 2022 was another record year for Mitek. Record revenue, record earnings, and strong cash flow from operations. Product innovation also continued during that time. We launched Mitek's integrated identity platform, MiVIP, IDLive Face Plus, and enhanced check intelligence within the Check Fraud Defender offer. We were also awarded patents recognizing our commitment to biometric excellence.

This ongoing momentum reinforces our optimism about our long-term prospects and our ability to further penetrate our large target addressable markets. Quickly looking at the numbers for fiscal 2022, we recorded record revenue of $143.9 million, representing growth of 20% year-over-year. We also generated record non-GAAP net income of $40 million, or $0.87 per diluted share, up 17% year-over-year, as well as strong cash flow from operations of $26 million. We accomplished a lot in fiscal 2022 beyond just our record revenue and earnings performance. We provided exceptional customer value to our world's leading banks, fintechs, and marketplaces as they lift move more of their businesses online in a secure and trusted way.

Mitek continues to distinguish itself as a critical component in the fight against fraud, and during the year, we expanded the breadth of our product offerings and the markets we serve. With that now, let me touch on our two lines of business and their performance during the fiscal year. Our deposits line of business continued to grow in fiscal 2022, with revenue growth of 14% year-over-year. Mobile check deposit is used by over 7,500 financial institutions and continues to gain traction with consumers due to its convenience and ease of use. Adoption of our Check Fraud Defender product also increased, as losses associated with check fraud started to skyrocket.

Check Fraud Defender helps banks identify and defend against these fraudulent activities, significantly reducing fraud losses, and our most recent innovation, Check Liveness, enhances the detection of forgeries and synthetic checks. We added several new Check Fraud Defender customers during fiscal 2022, and we believe it will be a growth driver for our deposits business for years to come. Before we move on to our identity business, I'd like to provide a quick update on the USAA litigation situation. While Mitek is not a party to any of the USAA lawsuits, we continue to pursue our declaratory judgment action against USAA to prove that our products do not infringe the four auto capture patents at issue in the USAA lawsuits.

As we look to provide support to our banking clients. Along with our efforts, there have been some positive developments in the matters related to USAA, as the U.S. Patent Trial and Appeal Board, the PTAB, has in the last six months invalidated five of the USAA patents that they have been relying on to sue various financial institutions, two of which are related to auto capture. We expect the PTAB to invalidate more USAA patents in the coming months as they continue their review of additional USAA patents, including one additional USAA patent related to auto capture.

We also intend to continue to vigorously prosecute our case as Mitek invented all of its core technology, and we believe our products do not infringe on any USAA patents. Switching to Identity, I'd like to take this opportunity to highlight the tremendous market opportunity that lies within this sector. As the world becomes increasingly interconnected and digital, the need for robust identity verification solutions has never been more crucial. Financial crimes are becoming more sophisticated, posing significant risks to individuals and organizations alike. The rapid rise of digital transformation has created a demand for seamless and secure online experiences.

Mitek is at the forefront of addressing these challenges by providing AI and biometric identity verification solutions that not only mitigate risks, but also enable smooth and trustworthy interactions throughout the customer life cycle. With the acquisition of HooYu in 2022, and the subsequent full integration of those platform technologies with our leading biometrics and existing computer vision solutions, we are strategically positioned to capture a substantial share of this expanding market and create significant value for our shareholders. In 2022, we launched Mitek's Verified Identity Platform, MiVIP. Positioned as our leading growth product, this fully integrated identity platform leverages our IP into biometrics, capture, computer vision, and data intelligence, and presents it to the customer in a low-code implementation model.

Already adopted by leading banks, MiVIP has expanded our addressable markets and delivered improved unit economics. Shortly following the close of fiscal 2022, we launched MiPass, the industry's first multimodal biometric solution for continuous identity authentication. With the onslaught of machine-driven attacks, voice and face biometrics used together with built-in liveness checks, becomes the strongest and most effortless means to authenticate somebody's identity online. I couldn't be prouder of the team's vigilance in getting this product to market, and I'm eager to see it implemented as quickly as possible from those who have already purchased it. MiPass further expands Mitek's footprint in this category, as well as our overall addressable market.

During the past quarter, I had the privilege of attending our Annual European Customer Summit, where I had the opportunity to engage directly with our valued customers. It was an incredibly insightful experience, as I heard firsthand about the value our company is creating and the ongoing battle against digital identity fraud. From large multinational banks to government-associated screening agencies, our customers use our identity verification solution to enable effortless and safe experiences for their, for their new and returning consumers. Their testimonials serve as evidence of our commitment to combating fraudulent activities and providing innovative solutions that address the evolving needs of the market.

We are proud of the positive impact we are making, and we remain dedicated to advancing our technologies and delivering even greater value to our customers in the fight against digital identity fraud. In fiscal 2022, our Identity business grew 31% year-over-year. Our product achievements and customer wins in fiscal 2022 reaffirm our leadership position. I would like to thank every Mitekian worldwide for their unique contributions to our success. Together, we will continue delivering significant value to our customers. Before closing, please note that we are planning an Investor Day event for later in the calendar year.

This will be an opportunity for interested parties to attend a dedicated event to learn of our long-term strategy with specific detail on the next chapter of the deposits business and the significant growth opportunity for our identity products. I'll turn the call over to Fuad to discuss the financial results in more detail. Following Fuad's remarks, we will open the call for questions. Fuad, please go ahead.

Fuad Ahmad (Interim CFO)

Thanks, Max, and thank you everyone for joining us today this afternoon. I will start with Q4 revenue and operating results. For Q4 of fiscal 2022, Mitek generated $38.8 million of revenue, a 17% increase year-over-year. Software and hardware revenue was $19.8 million, up 11% year-over-year. The increase in software and hardware revenue is primarily due to the growing contribution of ID R&D, as ID R&D had another strong quarter and continued Mobile Deposit reorders. As such, we are pleased with the continued progress in the deposit business. As we have noted previously, ID R&D revenue is transactional in nature and is part of our Identity business.

However, since it's offered on-prem, we put that revenue into the software line for accounting purposes. Services and other revenue, which includes transactional SaaS revenue, maintenance and professional services revenue, was $19 million for the quarter, up 22% year-over-year. Notably, our transactional SaaS revenue increased 31% year-over-year to $13.4 million. Driving this growth in transactional SaaS revenue was increased Mobile Verify volumes as well as the addition of the HooYu SaaS revenue. For Q4 2022, Deposits revenue increased 7% year-over-year to $22.6 million, driven by Mobile Deposit reorders. Identity revenue increased 34% year-over-year to $15.2 million, driven by acquisition of HooYu SaaS revenue and strong contribution from ID R&D and growth in our Mobile Verify product line.

We delivered software and hardware gross margins up 98% for the quarter. Gross margin on service and other revenue was 74% for the quarter. Total gross margin for the quarter was 87% compared to 90% in Q4 of last year. Total GAAP operating expenses, including cost of revenue, were $35.8 million compared to $29.3 million in Q4 of last year. This increase is due to investments to grow our Identity business and additional costs associated with the acquisitions of ID R&D and HooYu. Sales and marketing expenses for the quarter were $10 million compared to $8.4 million a year ago. Our R&D expenses were $8.3 million compared to $8.2 million last year.

Our G&A expenses were $8 million compared to $6.1 million a year ago. GAAP net loss for the quarter was $300,000, or a loss of $0.01 per share. Our diluted share count was 45.3 million, compared to 46.2 million a year ago. Turning to our non-GAAP results. Non-GAAP net income for Q4 was $9 million, or $0.20 per share, a decrease of 11% year-over-year as a result of additional headcount and other expenses from the acquisition of HooYu. We believe non-GAAP net income provides a useful measure of company's operating profitability and cash flow by excluding amortization and acquisition-related costs, stock compensation, one-time and non-recurring litigation expenses, amortization of debt discount and issuance costs, restructuring and related tax impacts of those items.

A reconciliation of GAAP to non-GAAP presentation is provided in our press release issued earlier today. Looking at results for the full year fiscal 2022. Total revenue was a record $143.9 million, an increase of 20% year-over-year on strong growth in the deposit business that grew 14%, and the growth of our identity product line that grew 31% over fiscal 2021. Software and hardware revenue was $72.9 million, up 21% over the prior year, due primarily to the growth in Mobile Deposits and our Check Fraud Defender product line, as well as the growth in ID R&D. As a result, our gross margin decreased 200 basis points from 96% in fiscal 2021 to 98% in fiscal 2022.

Services and other revenue was $71 million for fiscal 2022, an increase of 19% over $59.7 million in fiscal 2021. This increase is due primarily to growth in transactional SaaS revenue, which increased 25% to $50.3 million. Gross margin on services and other revenue was 74% for the year, compared to 80% for the comparable period in fiscal 2021. For our full year fiscal 2022, Deposits revenue increased 14% to $85.8 million, driven primarily by continued adoption of Mobile Deposit and Check Fraud Defender product lines. Identity verification revenue increased 31% to $58.1 million, driven by 25% growth in transactional revenue, SaaS revenue, and inclusion of additional SaaS revenue from acquisition of HooYu.

Total GAAP operating expenses for fiscal 2022 were $132.6 million, an increase of 24% compared to total operating expenses of $106.5 million in fiscal 2021. This increase is due to additional investments made throughout the year to fuel our growth in the identity business and additional costs associated with the acquisition of ID R&D and the inclusion of additional headcount and expenses from the acquisition of HooYu. GAAP net income for fiscal 2022 was $3 million, or $0.07 per share, compared to GAAP net income of $8 million, or $0.18 per share for fiscal 2021. Non-GAAP net income increased 16% for the year to $39.6 million, or $0.87 per share, compared to non-GAAP net income of $34.2 million, or $0.76 per share in fiscal 2021.

Please refer to the reconciliation of GAAP to non-GAAP presentation in our press release. Fully diluted share count for fiscal 2022 was 45.8 million for both GAAP and non-GAAP EPS. Now turning to the balance sheet. We generated $10.3 million in cash flow from operations during the quarter, and $26.4 million for the full year, bringing our total cash and investments to $101 million as of September 30th, 2022. As noted recently, we continue to generate meaningful cash flow from operations. Our cash and investments at the end of March 31, 2023, increased by $13.5 million to $114.5 million. Moving on to guidance. We are reiterating the fiscal 2023 guidance we provided earlier this month.

We expect revenue for the fiscal year ending September 30, 2023, to be in the range of $163 million-$165 million, an increase of approximately 14% year-over-year from the midpoint of the guidance range. In addition, Mitek expects its full year fiscal 2023 non-GAAP operating margin to be in the range of 29.5%-30.5%. In closing, we are pleased with our results, which included record revenue for fiscal 2022, as well as record non-GAAP net income. We look forward to continuing to deliver industry-leading fraud prevention identity service to our valued global customers. Max, operator, that concludes our prepared remarks. Please open the line for questions.

Operator (participant)

We will now-

Fuad Ahmad (Interim CFO)

Thank you.

Operator (participant)

Excuse me. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Mike Grondahl with Northland Securities. Please go ahead.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Hey, guys. In both mobile check and mobile ID, could you talk a little bit about transaction activity and trends and pricing? Just trying to get a, you know, a feel for volume and price trends in both areas.

Max Carnecchia (CEO)

The—for the period that we're talking about here, FY 2022, in both Mobile Deposit as well as Mobile Verify, excuse me, transaction volumes increased, right? We continue to see increased transaction volumes from existing customers, and then the addition of new customers for the identity verification. For Mobile Deposit or, yes, for Mobile Deposit similarly, although as you know, Mike, that Mitek's business can be a little lumpy in, you know, when customers reorder and when those orders actually hit and refill the tank. I think in the case of Mobile Deposit, we know that we've continuously, you know, tried to push, you know, take price and be able to push price increases.

We've been methodical about that. I don't think it's, you know, it's no surprise to, you know, our partners, customers, you know, push back on that pretty hard, but we've been able to do it consistently. You know, that has continued. You see that reflected in addition to the adoption of, you know, mobile banking and increased usage of mobile check deposit. You're seeing the, you know, the other side of that, which is the increase of pricing.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Got it. Are you breaking out the number of banks you have signed up for Check Fraud Defender, or the revenue in the fourth quarter of 2022?

Max Carnecchia (CEO)

No, we're not, and you probably won't see us do that for a while. I mean, we've continuously, you know, increased the number of customers, but it's coming off a very small base. You know, we're watching some customers adopt and jump straight into the network and, you know, use the online offerings. Some are starting with a small on-premise implementation to, you know, kind of get their arms wrapped around it. I think, you know, we'll talk about it when we drop the Qs as well.

You know, we continue to see just a big interest in that product. The pipelines are strong. We do testing with customers, a pretty elaborate test with customers, and we've got a number of those underway. I think as we've talked before, Mike, just to, you know, check fraud has exploded in the course of the last 18 months. This is a very big topic for retail banks.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Sure. Yeah, no, you know, we're trying to track it, so the number of banks or revenue, I guess, so we'll keep bugging you. Lastly, what should our expectations be for the timing on the 10-K and then, December and March?

Fuad Ahmad (Interim CFO)

Yes, Mike. I think we've released our preliminary numbers now, not audited. We'll follow it up with a 10-K over the next one week to 10 days. We're talking about weeks. We just need to make sure that we get everything buttoned out. We felt comfortable releasing our numbers today to you guys. In terms of the Q, that process will continue once the K is filed. We feel that that'll be few weeks. I can't be more precise than that at this point. It's weeks, not months. We'll follow it up.

The idea for us, you know, our expectation is, you know, to start becoming current on our filings, you know, soon after that, in its entirety, including Q3. That's the expectations right now. I can't be more precise on the quarterly numbers as of today.

Max Carnecchia (CEO)

We are looking forward to getting back on the regular schedule.

Mike Grondahl (Head of Equity Research and Senior Research Analyst)

Sounds good. Sounds good. Hey, thanks, guys.

Max Carnecchia (CEO)

You got it, Mike.

Operator (participant)

The next question is from Jake Roberge with William Blair. Please go ahead.

Jake Roberge (Equity Research Analyst)

Hey, thanks for taking my questions. Max, could you just talk about how the macro is impacting each of your business units more specifically? From your comments, it seems like ID verification may be impacted a little bit more than Mobile Deposit, but would love to hear kind of the puts and takes that you're seeing in each business as it relates to the macro.

Max Carnecchia (CEO)

I don't think, you know, in the timeline that we're talking about here, FY 2022 and September-end quarter, there's probably not a lot to talk about from a macro impact. A little bit on the Identity. We had a very relative to our competitors in the identity space. We had a very little exposure to crypto, and it was that June of 2022, July, and then kind of the crypto winter that followed from there. We had a handful of crypto customers who watched them, you know, retrace pretty hard, but nothing more, kind of pointing out. Since then, when we get into the Qs, definitely the world has changed.

In some regards, we just talked about Check Fraud Defender and all the things that are happening with check fraud. I think that's been a positive, you know, on our Deposits business. On the Identity business, if you're a interest-sensitive business, like a, you know, mortgage refinancing or HELOCs and things like that, you know, we've seen this be tough on those businesses. More to come as we drop those Qs, though, Jake.

Jake Roberge (Equity Research Analyst)

Okay, helpful. Just wanted to touch on generative AI. It seems to me like there could be some secular tailwinds around AI and how that could impact the fraud and identity universe. Would love to get your thoughts on that, and then how you could plan to integrate the technology into your core platform.

Max Carnecchia (CEO)

Sure. you know, so much ink has been spilled on Gen AI. I wanna be, you know, I wanna be mindful that I don't know that I have a lot to add, for generally, it's clearly gonna be transformative. In our own business, we see it through two lenses. The first is, you know, what we're being able to do using the technology. I mean, we've got a very long and robust history with machine learning and AI, this just builds on top of, you know, a very deep base of that knowledge and experience our engineers and computer scientists have.

Our ability to use that in model building, model testing, and that's already underway. I mean, we see it with our biometrics teams. We're seeing it with the core identity teams around documents, obviously the faces, the voices. In that regard, I think there's some very interesting things for us to increase pace, velocity of development, you know, new ideas that can be tested, you know, much more cheaply or much more quickly. That's for us internally and things that then result in, you know, customer-facing offerings. I think the bigger challenge, just generally, not just for banks, but for anybody out there, right?

These same tools can be used as weapons, and we anticipate we're already seeing, you know, the deepfakes and the kind of things that can happen with voices and faces and every other, you know, image and video, all the stuff that you're seeing every day, you know, that can be applied towards trying to create identity fraud with banks, with other financial institutions. I think it just puts a bigger focus and more meaning on, you know, having the right defenses and partnering with the right organization like MiVIP.

Jake Roberge (Equity Research Analyst)

Yeah, I agree. Very, very helpful on that, and interesting opportunity as we move forward. If I could just sneak one more in. Understand you've been working a lot with your consultants and auditors, what does your dialogue with the Nasdaq look like throughout the process, and what type of feedback have they been providing you on regaining compliance just over the past few weeks since we passed over that June 12 timeline?

Max Carnecchia (CEO)

Sure. Well, you know, Jake, obviously, Nasdaq's the market that we sit on, the SEC is the regulator, and, you know, being current with the SEC is a requirement for the Nasdaq. The Nasdaq has a very rigorous and structured process under which, you know, we're currently working. I think we're working in a very positive and constructive way with them. We're late, right? We've brought in advisors, as you mentioned. At this point, we have high confidence based on the performance of our business, the fact that we're, you know, cash flow positive, we've got cash in the bank, we continue to grow.

There are no allegations of misconduct here. We have high confidence that we will regain that filing status. Ultimately, the Nasdaq is the arbiter, the ultimate arbiter of that. Yeah, working hard towards it every day.

Jake Roberge (Equity Research Analyst)

Very helpful. Thank you. Thanks for taking my questions.

Operator (participant)

The next question is from Stephanie Moore with Jefferies. Please go ahead.

Stephanie Moore (SVP of Equity Research)

Hi, good afternoon. Thanks for the update. I wanted to touch on your target for your ID segment and the target to turn a profit in 2024, the second half of 2024. Could you maybe talk a little bit about, you know, what you need to see for that target to be achieved? What needs to happen maybe for that to happen earlier, or on the flip side, you know, what could delay you from actually achieving this target, would be helpful. Thanks.

Max Carnecchia (CEO)

Sure. Well, thanks for the question, Stephanie. For those who maybe are a little newer to the story, you know, we've been working, we've got a very profitable unit with Deposits. We, you know, we wanna get our Identity business to that as well. We've stated that by the end of fiscal 2024, we'd like to be able to get to breakeven with that business, with the Identity business, looked at in isolation. We believe we're on track. That's still the current intent here. The things that could make that happen sooner is, you know, the top line growth happening faster.

The things that could, you know, maybe take longer is if we, you know, if we didn't get the top line that we're currently forecasting and that we're guiding to here in the current guidance. You know, when I kind of think about as we've laid those markers down and as we've worked to operate the business, both in our budgeting and then day-to-day discipline of living to those budgets. Probably the biggest thing is, you know, the world's changed pretty considerably in the course of the last five quarters relative to just uncertainty in the macroeconomic circumstance. I think that's probably the biggest, you know, unknown or biggest question mark.

Stephanie Moore (SVP of Equity Research)

Great. No, that's really helpful and appreciate it. I know that the last time we spoke a couple weeks ago, I think you touched a little bit about maybe within the ID business, a slight shift in strategy where you're offering your customers more of an end-to-end platform, kind of managing their entire, you know, the life cycle. Could you maybe talk a little bit, you know, I'd love to hear, because I think that's a, it's a really interesting point.

If you could kind of speak to any, you know, cross-sell opportunities you think this opens up, or pricing, or why this is, you know, you've kind of come to terms that this is in the incremental kind of right strategy, you know, versus maybe what you were originally thinking about as you were moving into ID space? I'd love to hear kind of the opportunity there. Thanks.

Max Carnecchia (CEO)

Oh, sure thing. Well, I think this is, you know, this is not some sudden, you know, change or anything like that. I mean, we've been working towards this for the better part of three years. It was the underbidding of the acquisition of ID R&D from a, you know, world-leading biometrics capability and liveness. You know, it was really the foundational associated with the HooYu acquisition and capturing a platform, an end-to-end, easy to manage, no-code/low-code platform for orchestrating multiple signals, not just for onboarding new customers and opening new accounts, but those in life, the life cycle use cases of persistent identity for knowing your customer and being able to do money laundering checks, well after somebody signs up for a new account or a, you know, a new card or something.

That's been the strategy here going back for years. I think we've been able to fine-tune it as we go. That's, that's where the market is, that's where the market's going. I think we're very fortunate to have not just captured incredible capabilities, but the talent and the teams that go with that. You'll see us continue to leverage that and continue to evolve that strategy so that it's, you know, beyond and, you know, not just beyond Identity, but identity and fraud. You're starting to see that with the first, the first signals that we're getting as a result of our Deposits business, and being able to intersect our Deposits business with Check Fraud Defender as a fraud signal with our Identity business.

Stephanie Moore (SVP of Equity Research)

Great. Really appreciate the time. That's all for me. Thank you.

Max Carnecchia (CEO)

Thanks, Stephanie.

Operator (participant)

Again, if you have a question, please press Star, then one. The next question is from Allen Klee with Maxim Group. Please go ahead.

Allen Klee (Managing Director and Senior Research Analyst)

Good afternoon. Can you give us some color on how you think about the relative growth rates of the Deposits versus the Identity business in fiscal 2023?

Max Carnecchia (CEO)

Sure thing, Alan. We're probably not gonna break the guidance down by line of business, but I'm happy to give you a sense of it. You know, we've expected that, and I think we're on record, and, you know, it's been a while since we've talked to the record, but we're on record relative to the deposits with Check Fraud Defender and many of the new things that have been introduced, that we see that business as being a high single digit, low double digit growth business. Obviously, we just talked about fiscal year 2022 and 14% growth, so very much on the high end of that range. I think we stand behind that. We anticipate that, you know, the traditional check business will slowly, you know, modulate relative to its growth.

It'll continue to grow, just it maybe won't grow as fast as it did in 2021 and 2022, and that'll be offset by the continued uptake of Check Fraud Defender. That's on the Deposit side. On the identity side, you know, we definitely see the market for Identity being a little different, not just for us, but, you know, just the market itself being a little different today than it was a year and a half ago. The idea that we can deliver, you know, high teens growth in that business in FY 2023, I think that's a good number, maybe a good range to have in your mind.

Allen Klee (Managing Director and Senior Research Analyst)

Thank you. When we look at operating expenses, how do you think about to the extent that you're kind of positioned that you've already spent for some future growth, or do you think that this continues to kinda grow in track with revenues?

Max Carnecchia (CEO)

Yeah, I think, without getting into very specific to maybe what has something to add here, but, you know, as we get bigger, you know, with scale, we should be able to increase our leverage. We've done a lot to integrate, you know, both the ID R&D and the HooYu teams, product systems, starting to get, you know, some of the, some of the synergies and starting to see that kind of make its way through P&L. As we continue to grow the business, we expect that we're gonna be able to take more and more to the bottom line and be able to expand operating margin.

Fuad Ahmad (Interim CFO)

Just to kind of add a little bit, I think you see that in our guidance for 2023, like our operating, non-GAAP, operating margin guidance is 29.5%-35%, and on the high end, it is higher than, you know, where we ended 2022 at. We're still, you know, obviously, growing the business and consolidating and, you know, going through a consolidation of the HooYu business and the synergies that will come from that. They'll have to be included in it. Despite all of that, we're projecting a slightly higher non-GAAP operating margin for 2022.

Allen Klee (Managing Director and Senior Research Analyst)

Thank you. Last question is, do you think when, once you've caught up on your financials, that you might be able to release your Qs and Ks on the same day that you report your earnings?

Fuad Ahmad (Interim CFO)

At this point, I wouldn't set that expectation. I think we will do that sequentially. That's, you know, that's just the way the auditor processes work. They'll complete the all their work for fiscal 2022, and then they'll, you know, move to 2023. We'll do that sequentially. As I said earlier on the call, you know, we're talking about a week to 10 days for the K, and then weeks after that for the Qs. You know, allow the auditors finish their work and complete it, and then we'll release those. With the expectations that we get back to the normal cadence, we're, you know, starting in Q3 and thereafter.

Allen Klee (Managing Director and Senior Research Analyst)

Okay. Thank you very much.

Fuad Ahmad (Interim CFO)

Thanks, Allen.

Operator (participant)

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

Todd Kehrli (President)

Thank you, operator, and thank you everyone for joining us today. We look forward to updating you again next quarter. Our call has concluded. Have a wonderful day.

Operator (participant)

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