Mitek Systems Inc (MITK) 2013 Q3 法說會逐字稿

Greetings and welcome to the Mitek third-quarter fiscal 2013 financial results conference call. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your post, Mr. Peter Salkowski, Investor Relations for Mitek. Thank you, Mr. Salkowski. You may begin.

Thanks, Scott. Good afternoon and thank you for joining us. Before I turn the call over to Jim DeBello and Russ Clark, I'd like to cover a few quick items. This afternoon Mitek issued a news release announcing its fiscal third-quarter of 2013 financial results. That news release is available on the Company's website at www.MitekSystems.com. As a reminder, this call is being broadcast live over the Internet to all interested parties, and the audio of this call will be archived on the Investor Relations page of the Company's website.

Before we begin I'd like to remind everyone that on the call we 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 our 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 any of our other SEC filings for a more complete description of these risks. Our statements on this call it are made as of today, July 25, 2013, 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 for any reason.

Additionally, throughout this call we will be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on the 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 this release.

And with that, like to turn the call over to Jim DeBello, President and Chief Executive Officer of Mitek. Jim?

Thanks, Peter, and good afternoon, everyone. I'd like to begin my prepared remarks by expressing how excited we are that during fiscal third quarter, Mitek's Mobile Deposit surpassed 1,000 signed banks. Achieving this milestone is a great accomplishment for the Company and represents an exceptional endorsement of the quality of our Mobile Deposit product.

Mobil deposit has transformed the way in which consumers interact with their financial institutions. Among top banks the ratio of mobile to online users surpassed 40%. In the upcoming years mobile banking should surpass online banking, a phenomenon that we believe has been strongly influenced by the popularity of Mitek's Mobile Deposit.

While there were some naysayers back in the early days when we invented and launched Mobile Deposit, it is now the number 1 feature sought by mobile banking users. And we are leveraging the success of Mobile Deposit by providing financial institutions enterprise-level mobile imaging solutions to take advantage of the mobile banking phenomenon. We expect Mobile Photo Bill Pay to follow a path similar to Mobile Deposit, starting off slowly and then ramping, ultimately transforming the bill paying process for consumers.

Mitek's solutions are fun. They are easy to use and convenient for the consumer. And they are applicable to adjacent industries, such as insurance. An example of the scalability of our products is the Mobile Insurance quotation solution that we're providing to 2 of the top 5 insurance carriers in the nation.

Revenue from products across our mobile imaging platform contributed to solid fiscal third-quarter results and one of our best revenue-producing quarters yet.

Turning our focus now to the events that occurred in our fiscal third quarter, I'll begin by focusing on product-specific accomplishments for Mobile Deposit and Mobile Photo Bill Pay. I will then discuss the launch of MiSnap, an innovative technology that enhances the user experience across all of our products; and I'll conclude my prepared remarks by summarizing several events that recently occurred and that we believe better position Mitek for future growth, including hiring a new Chief Marketing Officer, the issuance of 2 new patents, and the strengthening of our balance sheet. Of course, Russ will provide greater detail on all of the third-quarter financials in just a few minutes.

Looking more closely now at the performance of Mobile Deposit, we now have 1,059 financial institutions signed for Mobile Deposit. Of these, 559 financial institutions have commercially deployed the product. Sequentially, that's an increase of 170 signed and 114 live during the quarter. Mitek's Mobile Deposit technology is deployed by all of the top 10 retail banks in the US.

A recent Time Magazine article described the ubiquity of mobile banking apps, highlighting the ability to deposit a check or pay a bill using the camera in a smartphone or a tablet. In addition, an American Banker article identified remote deposit capture as mobile banking users' number 1 most desired app feature.

Checking accounts are often the first step in a bank's long-term relationship with a customer. Speaking on Wells Fargo's recent earnings call, CEO John Stumpf revealed, quote, I love checking accounts. I dream of them. When I wake up in the morning and I get here, the first thing I look at is the checking account report from the day before. End quote.

Our technology here at Mitek improves the checking account experience by transforming a process that was once mundane into an experience that is easier and more fun. By offering Mobile Deposit, banks can increase customer retention and enhance their bottom line. More importantly, Mitek's technology strengthens the banks' relationships with their customers.

New use cases for Mobile Deposit continue to emerge all the time. In our previous call we discussed a major food service distributor that saved an estimated $4 million by deploying Mobile Deposit among its fleet of delivery trucks. Another more recent use case for Mobile Deposit is with the Leukemia & Lymphoma Society incorporating Mitek's science into their fundraising. Now, through their app, participants can snap a picture of a check using Mitek's Mobile Deposit and donate directly to the nonprofit, thereby increasing the convenience and effectiveness of fundraising campaigns.

The success associated with Mobile Deposit is apparent in the number of financial institutions that offer the product to their customers, as well as an increasing number of innovative use cases -- perhaps none more inspiring than the Leukemia & Lymphoma Society. Enhancing the user experience is a unifying theme of Mitek's multi-product platform. This platform includes Mobile Photo Bill Pay, which I would like to discuss next.

We are seeing incremental traction with Mobile Photo Bill Pay similar to the early growth experienced with Mobile Deposit. Signed and live banks for Mobile Photo Bill Pay, as of today's call, increased to 10 and 4, respectively. During the quarter, BBVA Compass, one of the nation's top 25 retail banks, successfully launched the solution.

For those on the call not familiar with this product, a customer can use Mobile Photo Bill Pay to pay a bill or add a payee to their online system directly from their mobile app, by simply taking a picture of their payment coupon. Mitek's technology auto-populates the payment fields, thereby eliminating the need for keystrokes by the customer and inherently reducing friction.

While in the early stages, the data is promising for Mobile Photo Bill Pay. In one survey it was reported that the banks that have deployed Mobile Photo Bill Pay are experiencing greater usage of the product than for their standard mobile device bill pay product, which requires manual entry. We attribute this to the ease at which a biller's information can be captured by the camera.

Also interesting -- the survey noted repeat usage for a vast majority of Mobile Photo bill payments, whereby the user takes a new picture to pay an existing biller every month. I call this behavior the path of least resistance for consumers, who frequently revert to the easiest method to complete a daily task.

With regards to the market for our mobile imaging products, a Kleiner Perkins 2013 Internet Trends report estimates that there are 16 billion paper bills sent per year in the US. Combine that with the 25 billion checks the US federal government reported are written annually, and we're looking at over 40 billion bills and checks. Quite a sizeable market.

BBVA Compass added Mobile Photo Bill Pay to their banking app in June for customers who want to manage their finances whenever and wherever it is convenient. BBVA Compass believes that providing customers this capability gives them a competitive advantage in attracting new customers.

Another innovative solution enabled by Mitek's mobile imaging platform is Mobile Balance Transfer, which the San Diego County Credit Union launched in May. San Diego County Credit Union is the 20th largest credit union in the US. Balance transfer provides their users the ability to snap a picture of their existing credit card payment coupon. The app then reads and interprets the information; presents a competitive credit card offer from another credit union; and, if accepted by the user, transfers their existing balance to the new San Diego County Credit Union-issued card. The leaders at the credit union immediately recognized the product as a way to acquire new credit card customers and increase average balances for existing customers.

In addition to investing in new products, we are also investing in technology that enhances the user experience. For example, we recently enhanced our mobile imaging platform by launching MiSnap, an automatic capture technology. With MiSnap, instead of snapping just one image, users simply hover their camera over the check or bill, and our technology automatically captures all of the necessary information. Now, behind the scenes the software is taking 30 images per second and performing over 1,000 calculations to optimize the quality of the image, resulting in a process that is easier for the user, produces a higher-quality image, and enriches the overall experience.

MiSnap is an example of the science behind our multi-product mobile imaging platform. At Mitek we like to say that we speak two languages-- math and mobile. That is to say, the technology behind our products goes far deeper than snapping the picture. In fact, one of our design goals is to make the user experience as simple as possible while leveraging leading-edge algorithms and machine learning capabilities that maximize success.

Our scientists have created algorithms that analyze lighting conditions, apply custom formulas to optimize focus, detect the four corners of the document, remove excess skew or warping, and apply multiple different binarization algorithms to convert images from 3D color to 2-dimensional black and white.

Furthermore, these algorithms have interrelationships, meaning the logic engines are carefully tuned for each intended purpose. All of this occurs before reading the first character from the check, bill, or driver's license. While the technology is complex, to the user the experience is fun and easy.

Our advanced technology, which is backed by patented intellectual property, has time and again been a major selling point for our customers. In fact, our proprietary technology was recently awarded its 15th and 16th patents. Our 15th patent describes the process for measuring signature simplicity. And our 16th patent covers the process used in Mitek's Mobile Balance Transfer solution, which, as I previously discussed, is already live with the San Diego County Credit Union. This brings Mitek's patent portfolio to 38, of which 16 are issued and 22 pending.

Earlier this month, Mitek hired Scott Carter as our chief marketing officer. Scott brings over 20 years of experience in payments, financial services, and related industries to this newly-created position here at Mitek. Scott came to Mitek from Experian, where he was Senior Vice President and Managing Director of Global Analytics and Fraud Solutions. In that role he was responsible for global functions in the areas of product management as well as executing organic and nonorganic growth strategies.

Here at Mitek Scott is responsible for driving growth through the advancement of our product portfolio, our branding strategies, and our go-to-market initiatives across the many industries in which mobile imaging is becoming strategic. Scott's expertise and deep understanding of risk management analytics and Big Data will be instrumental in growing Mitek's revenues, both domestically and abroad.

We believe Mitek's technology is disruptive and has been a major contributor to the growth of mobile banking. CNBC recently reported that the number of customers who only bank on an app jumped 50% in a year's time. Another report forecasts global banking usage will exceed 100 million users within the next 4 years.

While these domestic mobile banking numbers are impressive, we see the mobile phenomenon extending across all industries as well as globally. Lifestyles are increasingly revolving around the ability to access information anytime, any way, and anywhere the user wants. As a result, we believe Mitek's products, which provide a superior user experience enabled by our cutting-edge mobile imaging science, will be pivotal for all companies that need to tap into this new lifestyle, attract their next generation of consumers, and engage in deeper, more profitable customer relationships.

With Mobile Deposit surpassing a significant milestone and becoming table stakes for all financial institutions, Mobile Photo Bill Pay gaining in popularity, and other new products gaining traction, we're very excited here at Mitek about the future of our global imaging platform strategy.

And with that, I'll now turn the call over to Russ to provide more details regarding our fiscal third-quarter financial results. Russ?

Thanks, Jim, and hello, everyone. As I review the numbers, all figures on a GAAP basis unless specifically described as non-GAAP. We have provided a full reconciliation from GAAP to non-GAAP with the earnings release which is posted on our website. And now for the fiscal third-quarter results.

Total revenue for the third quarter of fiscal 2013 was $3.9 million compared to total revenue of $3.2 million for the year-ago period. Third-quarter revenue was comprised of approximately $2.7 million in software revenue and $1.2 million in maintenance and PS revenue. This compares to year-earlier software revenue of $2.5 million in maintenance and PS of $700,000.

It is important to note that maintenance revenue alone exceeded $1 million in fiscal Q3 and has grown from around $600,000 in the year-ago period. This maintenance base gives us a foundation upon which to continue to build recurring revenue.

For the fiscal third quarter, Mitek generated a large portion of its revenue from Mobile Deposit, but Mobile Insurance Quotation and Mobile Photo Bill Pay also contributed to the revenue mix. In addition to initial orders from Mobile Deposit, in the fiscal third quarter of 2013 we had 5 reorders.

As was mentioned during our fiscal second-quarter earnings call, we signed a contract with a second top-5 insurance carrier to provide our innovative mobile imaging technology to its customers. The signing resulted in platform revenue being recognized in the fiscal third quarter, and we expect to begin recognizing transactional revenue from this customer once they complete their implementation and go live.

Total operating expenses were $5.9 million compared to $5.2 million in the year-ago period. The year-over-year increase in OpEx was primarily driven by higher investments in personnel to grow the business as well as litigation costs. Noncash stock compensation expense during the third quarter of fiscal 2013 was $686,000 compared to $831,000 in the year-ago period.

Now, breaking down Q3 expenses by category, total cost of revenue in Q3 was $469,000, comprised of $229,000 related to maintenance and PS and $240,000 related to software. This compares to total cost of revenue of $359,000 in the year-ago period.

Gross margin for Q3 was 88%, which is consistent with the gross margin of 89% in the year-ago period. Selling and marketing expenses were $1.5 million or 38% of total revenue, compared to $1.1 million or 34% of total revenue in the year-ago period. As we discussed previously, we have hired additional personnel to support our direct sales efforts as we continue to extend the product portfolio and go to market directly for our Bill Pay and Insurance Quotation products.

R&D expenses were $2 million or 51% of total revenue in Q3, compared to $2.1 million or 67% of total revenue in the year-ago period. Assembling the team to enhance the user experience with our existing products while building innovative new products continues to be an area of focus for us.

G&A expenses were $2 million or 52% of total revenue during the third fiscal quarter, compared to $1.6 million or 51% in the year-ago period. The year-over-year increase in G&A was primarily driven by litigation expenses. Our litigation expenses were around $750,000 during the fiscal third quarter. With fact discovery expected to be completed during the fiscal fourth quarter, we expect a similar level of litigation expense for that quarter. Expert testimony will then follow and is expected to continue into early calendar 2014. The court has not yet set a trial date for this case.

GAAP net loss was $2.1 million or $0.08 per share, compared to a net loss of $2 million or $0.08 per share in the year-ago period. Non-GAAP net loss in the fiscal third quarter was $1.4 million or $0.05 per share, compared to non-GAAP net loss of $1.2 million, or $0.05 per share in the year-ago period.

Non-GAAP net loss excludes stock compensation expense, and our EPS share count for the fiscal third quarter was approximately 27.1 million basic and fully-diluted shares. As a result of the Company's secondary offering during the quarter, our share count for our fourth fiscal quarter of 2013 will increase by approximately 3.3 million shares in addition to any other activity during the quarter.

We expect total fiscal fourth quarter OpEx to be between $5.25 million and $5.75 million, excluding litigation expenses, as we continue to invest to grow the business.

Turning to the balance sheet, as of June 30, 2013, cash, cash equivalents, and investments totaled $29.5 million compared to $14.6 million at September 30, 2012. The increase in cash was driven by the secondary offering, which brought in approximately $13.9 million late in the quarter. An additional $2.1 million was generated in early July due to the full execution of the overallotment option.

Strong collections efforts and the closing of transactions earlier in the quarter have resulted in the accounts receivable balance of $572,000 and DSOs of only 13 days for the fiscal third quarter. While we are very pleased with our collections results for last 3 quarters, I would like to point out that DSOs have been around 90 days historically.

Management plans to invest in all areas of the Company, including sales, marketing, engineering, and science as we enhance our existing products; develop new products that leverage our intelligent mobile imaging technology; drive increased usage of Mobile Deposit; and increase our market penetration for Mobile Photo Bill Pay and Insurance Quotation.

That concludes our prepared remarks. Operator, please open the line for questions.

(Operator Instructions) Patrick Cebrzynski, William Blair & Company.

It is Bhavan. Nice job there. Just a few quick questions from me. The first one was, you usually provide a usage number, Jim, sequentially. Could you give us an update on that?

Sure, Bhavan. It is Russ. We are reporting around a week earlier than we have typically done in the past. And our process for gathering usage data from our channel partners and end users takes some time as we go out and poll for usage. So we don't have a complete data set as we sit here today, which is why we didn't include that metric in the script or release.

What I can tell you is that of the customers who have reported, we were in excess of 25% sequential growth again. But again, just with a caution -- that is not a complete data set as of today.

Fair enough. And then, obviously, the trends all point in the right direction. You hear that from some of your larger customers, like BofA and JPMorgan. And as you have said, you got some stability and visibility in the maintenance line, too. You've provided some color on OpEx for next quarter; have you guys thought about giving guidance or sort of a directional guide for revenue, too, or are you going to wait on that?

At this point we are still in the waiting mode. I think you pointed to the relevant factors there. We do think about it all the time. We do talk to investors about it all the time. As you mentioned, we are leveraging off of $1 million in recurring maintenance revenue as a starting point.

However, the bulk of the rest of the revenue is dependent on the timing of closing initial orders for Mobile Deposit, reorders from Mobile Deposit, and getting platform fees for new customers that we would sign for Bill Pay and Insurance Quotation. So $1 million in recurring revenue -- very happy to hit that milestone, but the other $2.9 million we did in the quarter is all going to be dependent on timing of events. So we're still in a hold mode on guidance for revenue at this point.

Okay. And then you mentioned -- Jim mentioned the Leukemia offering. Two questions around that. One, is that through the cloud-based image capture, or is this an app where they license the technology?

And then the second question is, how many of these non-financial institutions or and third-party developers to you have leveraging the imaging technology? Because this is obviously broader than -- it's check deposit, but it is broader than just the PIN services.

Bhavan, this is Jim. It's always amazed me, as this has grown like an amoeba, really, into new markets and opportunities. We began by focusing on merchant capture. And what took off really was retail capture. And suddenly we found brokerage capture and then prepay capture for checks.

Now we are moving very aggressively into treasury and merchant capture for field service organizations. And we mentioned the large food distributor last time. So this new development of a fundraising campaign shows yet another application and use for Mobile Deposit.

This is being conducted through our channel partners. We have continued to work exclusively with our channel partners for Mobile Deposit. And we continue to be always impressed with their creativity and their ability to expand the use of Mobile Deposit among different industries and different use cases.

Got it. And so as you look at the direct sales force that you are adding, that you have added and continue to add, and you look at the opportunities there, those remain outside of Mobile Deposit that is directionally just contractually committed to the channel partners?

That is correct. What we have done, Bhavan, is that we have created a very effective sales team to go out and contact top 25, the top 50 category banks who are able to and want to work directly with Mitek as a mobile imaging strategy provider. Understand that our platform really provides the ability to have multiple use cases, bill pay being just one of them; balance transfer, yet another.

And so we have noticed a trend. As banks have exceeded their expectation in deploying Mobile Deposit, many of them want to move very quickly for them into expanding the use of the camera as a keyboard to facilitate that frictionless consumer relationship.

At the top of my remarks I talked about John Stumpf at Wells Fargo and how he thinks about checking accounts. But they are also thinking about lots of other services and how to really capture that next-generation consumer. That consumer is a mobile consumer who lives their lifestyle around that phone or that tablet. And to type things and is difficult and cumbersome.

So we've noticed that with the addition of Mobile Deposit, it has facilitated an easier consumer experience. And the same thing is happening with Mobile Photo Bill Pay. So we truly believe that this core mobile imaging platform is extensible; can provide multiple use cases; and with having a direct relationship with the top banks, we are able to facilitate their needs and their customer relationships more quickly.

Great. And then Jim, one last one before I turn it over to other folks here. Any update on the competitive environment? Any change in the competitive environment? Or does it still feel like a -- fairly greenfield from a competitive perspective?

Bhavan, We truly feel it is a greenfield, particularly for deposit. We now have surpassed 1,000 banks. We continue to convince them it has become table stakes.

And for bill pay, we are the only ones providing that with customers who are live in the marketplace today. And so we see the gestation cycle in banks as they evaluate the product. It's about the same; maybe a little compressed, only because consumers are now familiar with capturing a document by using their camera on their phone or tablet. But nonetheless, we feel we are right on track to be a unique provider of mobile imaging solutions.

And part and parcel of that, as you know, Bhavan, is to protect the IP with a very broad patent portfolio. So we continue to invest not only in the technology and the user experience, but we also continue to invest in some of the defense, some of the patent protection.

We look at this as providing -- this Company and our responsibility as management is to provide a strong offense with a great sales motion, with great products and consumer experience, but also back that up with a great defense. And that means good strength in our patent portfolio. And we are executing on that now.

Great. Thanks, Jim. Thanks, guys.

(Operator Instructions). Mike Grondahl, Piper Jaffray.

Can you repeat the number of live bill pay customers?

4.

4, okay. And is there -- if you look at Bill Pay revenue and just broke it out between initial signing and transaction volume, what does the mix look like?

Mike, it is Russ. The vast majority of Bill Pay revenue contributions to date have been for platform fees. So maybe as a reminder, we typically charge a platform fee upfront, with annual maintenance on top of that, and then transactional usage fees as you go. So we do sometimes have minimums in those agreements. So there is a small amount of transactional revenue related to those transactional revenue streams, but the platform fees have been the lion's share of the revenue contribution to date.

Okay. And could you maybe highlight for us -- you have 1,000 banks on Mobile Deposit signed up. Do the banks tell you, we want to use that, get comfortable with that for 6 months and a year, and then we'll consider Bill Pay? What is that dialogue like?

Mike, this is Jim. We really believe every Mobile Deposit customer is a candidate to be a Mobile Photo Bill Pay customer. So the motion in the marketplace has been to deploy Mobile Deposit first. Banks have repeatedly said this to us, that they have exceeded their expectations in terms of number of adopters and usage. And that continues, as Russ has evidenced, by greater than 25% growth for those institutions that have reported to us.

We see the same thing occurring with Mobile Photo Bill Pay. At first there are early adopters. And we have that now with the number 5 and number 20th largest banks in the country, and 2 community banks who are very innovative. So we expect that momentum to continue. It will take time, as you know, as it occurred with Mobile Deposit. Banks have long sales cycles and deep evaluation processes. But so far the results are very, very positive from the marketplace.

Got you. And then the Mobile Deposit transaction data that you've given in previous quarters, but because of year earlier reporting this year, do you think you will put that in the 10-Q, just so we can see that? Or what is your thought process there?

That's an interesting question, Mike. So, again, it is data that we track every quarter. And we have built a history of reporting it. So here over the next several days and weeks, we will continue to accumulate that data. Putting it in the Q, I guess we haven't done that historically. So I think probably the next earnings call would be the next point in time to potentially talk about those metrics.

Okay, great. Thanks, guys.

Mayank Tandon, Needham & Company.

I just had a few housekeeping questions first. I'm sorry if you already went through them, but Jim and Russ, did you talk about the number of Mobile Photo Bill Pay customers that you have? I think you mentioned 4 live. How many total customers do you have signed up today?

Mayank, we secured 10 licensed agreements with a variety of institutions, 4 of which are live today. So 10 and 4.

Okay, so that is up from 7 and 2 last quarter. Is that correct?

It has grown.

Okay. And then Russ, you mentioned the litigation expense. I'm sorry, I didn't quite catch that. What is the ongoing expense?

Mayank, it was around $750,000 for Q3. We are right now, in our fiscal Q4, in the heart of discovery. And we expect expenses to be consistent with that run rate for our fiscal Q4.

And litigation expense is actually included in your non-GAAP number, correct?

It is not. Our non-GAAP reconciliation -- let me clarify when I say it's not. We do not add it back. So the only add-back in our non-GAAP reconciliation is noncash stock compensation.

Right. That's what I thought. Okay. Fair enough.

And then, Jim, in terms of pricing trends, could you maybe give us some sense of what other trends you are seeing in the market? Have you seen any compression of late, or is pricing holding up, both on the mobile check deposit side and also for Mobile Bill Pay? What is your sense of pricing trends there?

Our observations from the contracts that we have, and it is based on contractual pricing arrangements, that is consistent and stable. So we have not seen any price compression. As you know, we have a standard pricing policy with our issuers, processors, and distributors. It's based on a model which allows them to buy in volume, and that dictates the price. So that hasn't changed at all.

With regard to Mobile Photo Bill Pay, that is a new product. We have established price points that we think are competitive in the marketplace for the needs and the service that it provides for consumers. And so far in the early contracts we have been able to consistently meet those, which are slightly higher than what we are securing for Mobile Deposit.

Would it be fair to say, then, that the pricing in both those segments is consistent with what you've discussed previously when you have tried to for investors, again, just by the TAMs in each of these markets?

It is consistent with what we talked about earlier. But I must say, it is early, still, and we have a very small set of data to begin with. But nonetheless, we think it is a very valuable product that provides a unique what I call painkiller for consumers who have to pay bills on a monthly basis.

So we think it adds value to the banks. There's been independent studies conducted about online bill pay and specifically mobile bill pay, and the results have told us that consumers of these type of products -- and specifically of the new product, photo bill pay -- carry higher balances. So it is a valuable customer.

Number two is, for the banks, they also cross-purchase other services from the institution. So it's a very valuable customer to have. And that's why we think it adds tremendous value to the bank itself. And we can charge a premium.

Great. Thank you for the color.

Leonard DeProspo, Janney Montgomery.

I just wanted to ask about the recurring revenues. It sounded like they were $1 million this quarter, or about 25%, 26% of overall revenues. Does that sound correct?

That is right. Again, I made some comments on the maintenance line. We report maintenance and professional services together. That was about $1.2 million. But $1 million of that was recurring maintenance revenue.

Okay. That was my question. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of our allotted time for questions and answers. I would like to turn the floor back over to Mr. Peter Salkowski, Investor Relations, for any closing remarks.

Thank you. I'd like to remind everyone that Jim DeBello will be presenting and conducting one-on-one meetings at the Needham Software Services Conference in New York City on August 6. If you're interested in meeting with Jim at the conference, please contact Needham. In addition, Russ Clark will be presenting at the Southern California Investor Conference being held in Newport Beach on August 8. Both of those presentations will be webcast, and the links will be a available on the Mitek Systems Web pages.

Thank you very much for joining us today. We appreciate your interest in our Company, and we hope you all have a good day. Thank you. Take care.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you very much for your participation and have a wonderful evening.