Mitek Systems, a company known for its mobile check deposit technology, is at a crossroads. The recent departure of CEO Max Carnecchia, while presented as a mutual agreement for a leadership transition, has sparked concern among investors.

At first glance, Mitek's Q2 2024 earnings call echoes a familiar narrative. The company reaffirmed its fiscal year revenue forecast of $180 million to $185 million, with an anticipated non-GAAP operating margin of 30% to 31%. However, these figures conceal a tantalizing prospect: a potential goldmine that might have been overshadowed by the CEO transition.

Mitek's journey, from its groundbreaking role in mobile check capture (Mitek 1.0) to its present standing as a frontrunner in identity verification and fraud management (Mitek 3.0), has been propelled by an unwavering commitment to harnessing state-of-the-art AI technology. This evolution has given rise to innovative solutions like Check Fraud Defender (CFD), MiVIP, and MiPass, each meticulously designed to combat the increasingly intricate realm of digital fraud.

Although these products are already making their mark, particularly CFD with its swift customer uptake, the true capabilities of this "fraud-busting" trio remain largely unexplored. This is where the "hidden goldmine" metaphor comes into focus.

Let's examine the evidence. Firstly, we have the alarming surge in check fraud, reaching unprecedented levels and now on par with credit card fraud in the United States. This has fueled CFD's success, with customer numbers skyrocketing from a mere handful at the end of fiscal 2023 to over 20 by March 2024. Mitek aspires to secure over 50 CFD customers by the end of fiscal 2024, signaling a phenomenal growth trajectory.

The key takeaway here is that Mitek presently serves nearly 8,000 banking institutions. Assuming a conservative 50% adoption rate of CFD among its current customer base, the potential revenue impact is staggering. This basic calculation points towards a prospective annual revenue stream of $200 million solely from CFD, mirroring the company's current overall revenue.

"Scott Carter, Mitek's Chairman, underscored the potential of CFD during the Q2 2024 earnings call, stating, "CFD is just remarkable. I had a chance when I was in the Executive Chairman role last year... I went out and talked to C level executives. And I was told that there's no one else that can pull this together but you are. Check fraud is a massive problem... We have a very unique set of capabilities that no one else could possibly replicate.""

Then there's MiVIP, Mitek's identity orchestration platform, and MiPass, its multimodal biometric solution. While both are poised for substantial expansion, their current revenue contribution is relatively minor.

However, the escalating menace of deepfakes and the increasing demand for robust biometric authentication solutions signal a vast untapped potential. The global biometric authentication market is projected to expand at a CAGR exceeding 10% between 2024 and 2032, reaching an astounding $60 billion in annual spending by 2032.

Mitek, with its established market presence and sophisticated biometric technology, is uniquely positioned to capture a significant share of this rapidly growing market. Imagine MiVIP and MiPass becoming the industry standard for identity verification and authentication—a scenario that's not entirely implausible given the increasing sophistication of digital fraud.

Potential Revenue Growth from Fraud Prevention Products

The following chart illustrates a hypothetical scenario of the combined revenue potential of CFD, MiVIP, and MiPass over the next seven years.

Under a "best-case" adoption scenario, the combined revenue potential of CFD, MiVIP, and MiPass could reach $250 million to $300 million annually within the next five to seven years. This represents a potential revenue surge of 150% to 180% from current levels.

Admittedly, this is a hypothetical scenario, and achieving such broad adoption depends on numerous factors. However, the prevailing trends, Mitek's technological prowess, and the escalating need to combat digital fraud suggest that the company might be overlooking a substantial opportunity, a growth potential that could far surpass current market valuations.

The crucial question is: will Mitek's new CEO be able to tap into this potential and unlock the true value of this fraud-busting trifecta? Only time will tell. But for investors willing to look deeper, Mitek might just be the hidden gem waiting to be discovered.

"Fun Fact: Mitek Systems' technology was responsible for processing the very first mobile check deposit back in 2008. This groundbreaking innovation paved the way for the widespread acceptance of mobile banking, revolutionizing the way we manage our finances today."