MITK - Mitek Reports Record Revenue and Earnings for Fiscal 2023

March, 19 2024 04:08 PM Mitek Systems Inc.

Total Revenue for Fiscal 2023 Increased 19% Year Over Year;
Company Reiterates Guidance for Fiscal 2024

Mitek Systems, Inc. (NASDAQ: MITK, www.miteksystems.com , “Mitek” or the “Company”), a global leader in digital identity and fraud prevention, today reported financial results for its fourth quarter and full fiscal year ended September 30, 2023, and reiterated its previously provided guidance for its 2024 fiscal year ending September 30, 2024.

Fiscal 2023 Full Year Financial Highlights

Total revenue increased 19% to a record $172.6 million.
GAAP operating income increased 28% to $15.6 million, an operating margin of 9%.
GAAP net income increased 117% to $8.0 million, or $0.17 per diluted share.
Non-GAAP operating income increased 20% to $53.2 million, a Non-GAAP operating margin of 31%.
Non-GAAP net income increased 10% to a record $44.4 million, or $0.95 per diluted share.
Cash flow from operations increased 50% to $31.6 million.
Total cash and investments increased 34% to $134.9 million at September 30, 2023.

Fiscal Fourth Quarter 2023 Financial Highlights

Total revenue decreased 5% year over year to $37.7 million.
GAAP operating loss was $3.3 million, an operating margin of negative 9%, compared to operating income of $3.8 million, or an operating margin of 10%, for fiscal fourth quarter 2022.
GAAP net loss was $1.4 million, or $0.03 per diluted share compared to a net income of $0.4 million, or $0.01 per diluted share for fiscal fourth quarter 2022.
Non-GAAP operating income was $5.3 million, an operating margin of 14%, compared to Non-GAAP operating income of $11.8 million, or a Non-GAAP operating margin of 30% a year ago.
Non-GAAP net income decreased 30% year over year to $6.9 million, or $0.15 per diluted share.
Cash flow from operations decreased 32% year over year to $3.5 million.

Mitek CEO Max Carnecchia’s Comments

"In fiscal 2023, we delivered record revenue and profitability, driven by our commitment to innovation. With Deposit revenue up 20% and Identity revenue up 17% year over year, we've achieved remarkable growth. Our strong cash flow has further bolstered our balance sheet, while our net revenue retention rate was approximately 117% for the fiscal year, showcasing the value of our solutions and dedication to customer success. Having achieved product market fit, with established proof points for growth in our new products, including Check Fraud Defender, MiVIP, MiPass and ID R&D products, we have several growth drivers in place leveraging advanced AI and machine learning to meet evolving customer needs, while enhancing trust and convenience in digital interactions."

Fiscal 2024 Full Year Guidance

Mitek is reiterating its previously provided guidance for its fiscal year ending September 30, 2024, as follows:

Mitek expects full-year revenue to be in the range of $180.0 million to $185.0 million, a 6% growth rate at the midpoint of the range. In fiscal 2023, Mitek signed a large multi-year mobile deposit reorder with one customer that locked in favorable pricing over a four-year period. Due to the unique terms of this contract, Mitek recognized additional license revenue relating to future years of approximately $7.0 million in fiscal 2023. If the Company backs out the future year revenue from our fiscal 2023 revenue and attributes the portion of the $7.0 million that would have been recognized in fiscal 2024 to the midpoint of its fiscal 2024 revenue guidance, the fiscal 2024 revenue guidance would represent growth of approximately 12.0% at the midpoint.
Mitek expects its non-GAAP operating margin for fiscal 2024 to be between 30.0% and 31.0%.

Conference Call Information

Mitek management will host a conference call and live webcast for analysts and investors today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss the Company’s financial results for the fourth quarter and fiscal year ending September 30, 2023. To access the live call, dial 877-270-2148 (US and Canada) or +1 412-902-6510 (International) and ask to join the Mitek call. A live and archived webcast of the conference call will also be accessible on the Investor Relations section of the Company’s website at www.miteksystems.com . A phone replay will be available approximately two hours following the end of the call, and it will remain available for one week. The phone call replay can be accessed by dialing 877-344-7529 (US or Canada) or 1-412-317-0088 (International) and entering the passcode: 8245693.

About Mitek Systems, Inc.

Mitek (NASDAQ: MITK) is a global leader in digital access, founded to bridge the physical and digital worlds. Mitek’s advanced identity verification technologies and global platform make digital access faster and more secure than ever, providing companies new levels of control, deployment ease and operation, while protecting the entire customer journey. Trusted by 99% of U.S. banks for mobile check deposits and 7,900 of the world’s largest organizations, Mitek helps companies reduce risk and meet regulatory requirements. Learn more at www.miteksystems.com . [(MITK-F)]

Follow Mitek on LinkedIn and YouTube , and read Mitek’s latest blog posts here .

Notice Regarding Forward-Looking Statements

Statements contained in this news release relating to the Company or its management’s intentions, hopes, beliefs, expectations or predictions of the future, including, but not limited to, statements relating to the Company’s fiscal 2024 guidance, its intent to use its growth drivers in place that leverage advanced AI and machine learning to meet evolving customer needs and its intent to enhance trust and convenience in digital interactions, are forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties, including, but not limited to, risks related to the Company’s ability to withstand negative conditions in the global economy, a lack of demand for or market acceptance of the Company’s products, the impact of the Company’s acquisition of HooYu Ltd. including any operational or cultural difficulties associated with the integration of the businesses of Mitek and HooYu Ltd., the Company’s ability to continue to develop, produce and introduce innovative new products in a timely manner, the Company’s ability to capitalize on a growing market, quarterly variations in revenue, the profitability of certain sectors of the Company, the performance of the Company’s growth initiatives, the outcome of any pending or threatened litigation, and the timing of the implementation and launch of the Company’s products by the Company’s signed customers.

Additional risks and uncertainties faced by the Company are contained from time to time in the Company’s filings with the U.S. Securities and Exchange Commission (SEC), including, but not limited to, the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022, as filed with the SEC on July 31, 2023 and its quarterly reports on Form 10-Q and current reports on Form 8-K, which you may obtain for free on the SEC’s website at www.sec.gov . Collectively, these risks and uncertainties could cause the Company’s actual results to differ materially from those projected in its forward-looking statements and you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company disclaims any intention or obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Note Regarding Use of Non-GAAP Financial Measures

This news release contains non-U.S. generally accepted accounting principles (“GAAP”) financial measures for non-GAAP net income and non-GAAP net income per share that exclude amortization and acquisition-related costs, intellectual property litigation costs, executive transition costs, stock compensation expense, non-recurring audit fees, restructuring costs, amortization of debt discount and issuance costs, income tax effect of pre-tax adjustments, and the cash tax difference. These financial measures are not calculated in accordance with GAAP and are not based on any comprehensive set of accounting rules or principles. In evaluating the Company’s performance, management uses certain non-GAAP financial measures to supplement financial statements prepared under GAAP. Management believes these non-GAAP financial measures provide a useful measure of the Company’s operating results, a meaningful comparison with historical results and with the results of other companies, and insight into the Company’s ongoing operating performance. Further, management and the Board of Directors of the Company utilize these non-GAAP financial measures to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Management believes these non-GAAP financial measures, when read in conjunction with the Company’s GAAP financial statements, are useful to investors because they provide a basis for meaningful period-to-period comparisons of the Company’s ongoing operating results, including results of operations against investor and analyst financial models, which helps identify trends in the Company’s underlying business and provides a better understanding of how management plans and measures the Company’s underlying business.

The Company has not provided a reconciliation of its forward outlook for non-GAAP operating margin with its forward-looking GAAP operating margin in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to quantify share-based compensation expense, which is excluded from our non-GAAP operating margin, as it requires additional inputs such as the number of shares granted and market prices that are not ascertainable due to the volatility of the Company’s share price. Additionally, a significant portion of the Company’s operations are in foreign countries and the transactional currencies are primarily Euros and British pound sterling and the Company is not able to predict fluctuations in those currencies without unreasonable efforts.

Key Business Metrics

We monitor net revenue retention to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.

To calculate net revenue retention, the Company first calculates total revenue (including expansion revenue) and reduce that amount by revenue churn (e.g. contract expirations, cancellations, downgrades, or other reductions). To calculate net revenue retention rate, the Company specifies a measurement period consisting of the trailing 12 months from its current period end. The Company then calculates its net revenue retention rate as the quotient obtained by dividing its total revenue in the second year of the measurement period by its revenue in the first year of the measurement period (i.e. the numerator excludes revenue generated by customers newly acquired in the second year of measurement). The net revenue retention rate is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and the Company presents its net revenue retention rate for historical periods reflecting these adjustments.

MITEK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands except share data)





September 30, 2023

September 30, 2022
ASSETS



Current assets:



Cash and cash equivalents
$
58,913


$
32,059

Short-term investments

74,700



58,268

Accounts receivable, net

32,132



35,922

Contract assets, current portion

18,355



7,037

Prepaid expenses

3,513



1,946

Other current assets

2,396



2,622

Total current assets

190,009



137,854

Long-term investments

1,304



10,633

Property and equipment, net

2,829



3,493

Right-of-use assets

4,140



5,155

Goodwill and intangible assets

188,222



191,388

Deferred income tax assets

11,645



10,110

Contract assets, non-current portion

5,579



4,218

Other non-current assets

1,647



1,628

Total assets

405,375



364,479

LIABILITIES AND STOCKHOLDERS’ EQUITY



Current liabilities:



Accounts payable
$
7,589


$
4,974

Accrued payroll and related taxes

10,554



10,393

Accrued interest payable

305



202

Income tax payables

4,329



206

Deferred revenue, current portion

17,360



21,350

Lease liabilities, current portion

1,902



2,110

Acquisition-related contingent consideration

7,976



5,920

Restructuring accrual

—



901

Other current liabilities

1,482



2,402

Total current liabilities

51,497



48,458

Convertible senior notes

135,516



127,970

Deferred revenue, non-current portion

957



1,775

Lease liabilities, non-current portion

2,867



4,106

Deferred income tax liabilities, non-current portion

6,476



9,578

Other non-current liabilities

2,874



1,613

Total liabilities

200,187



193,500

Stockholders’ equity:



Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding

—



—

Common stock, $0.001 par value, 120,000,000 shares authorized, 45,591,199 and 44,680,429 issued and outstanding, as of September 30, 2023 and September 30, 2022, respectively

46



44

Additional paid-in capital

228,691



216,493

Accumulated other comprehensive loss

(14,237
)


(28,219
)
Accumulated deficit

(9,312
)


(17,339
)
Total stockholders’ equity

205,188



170,979

Total liabilities and stockholders’ equity
$
405,375


$
364,479

MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(amounts in thousands except per share data)









Three Months Ended September 30,

Twelve Months Ended September 30,


2023



2022



2023



2022

Revenue







Software and hardware
$
15,291


$
19,818


$
88,374


$
72,928

Services and other

22,365



19,808



84,178



71,876

Total revenue

37,656



39,626



172,552



144,804

Operating costs and expenses







Cost of revenue—software and hardware (exclusive of depreciation & amortization)

597



380



1,413



1,576

Cost of revenue—services and other (exclusive of depreciation & amortization)

5,675



4,837



21,538



18,432

Selling and marketing

11,117



9,951



40,551



38,841

Research and development

6,484



8,278



28,988



30,192

General and administrative

13,212



7,993



43,338



26,591

Amortization and acquisition-related costs

3,744



4,395



19,046



15,172

Restructuring costs

114



(7
)


2,114



1,800

Total operating costs and expenses

40,943



35,827



156,988



132,604

Operating income (loss)

(3,287
)


3,799



15,564



12,200

Interest expense

2,401



2,107



9,063



8,232

Other income (expense), net

2,121



(365
)


3,840



(366
)
Income (loss) before income taxes

(3,567
)


1,327



10,341



3,602

Income tax benefit (provision)

2,123



(976
)


(2,314
)


92

Net income (loss)
$
(1,444
)

$
351


$
8,027


$
3,694

Net income (loss) per share—basic
$
(0.03
)

$
0.01


$
0.18


$
0.08

Net income (loss) per share—diluted
$
(0.03
)

$
0.01


$
0.17


$
0.08

Shares used in calculating net income (loss) per share—basic

45,997



44,693



45,533



44,595

Shares used in calculating net income (loss) per share—diluted

47,050



45,311



46,461



45,780

MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)



For the twelve months ended September 30,


2023



2022

Operating activities:



Net income
$
8,027


$
3,694

Adjustments to reconcile net income to net cash provided by operating activities:



Stock-based compensation expense

10,463



13,346

Amortization of intangible assets

16,992



13,547

Depreciation and amortization

1,727



1,401

Amortization of investment premiums & other

(722
)


1,684

Accretion and amortization on debt securities

7,546



7,053

Net changes in estimated fair value of acquisition-related contingent consideration

2,056



(1,358
)
Deferred taxes

(5,496
)


(8,988
)
Changes in assets and liabilities, net of acquisitions:



Accounts receivable

4,316



(19,004
)
Contract assets

(12,471
)


(3,095
)
Other assets

(1,124
)


417

Accounts payable

2,535



2,183

Accrued payroll and related taxes

18



(2,195
)
Income taxes payable

5,577



422

Deferred revenue

(5,217
)


9,950

Restructuring accrual

(977
)


991

Other liabilities

(1,664
)


1,071

Net cash provided by operating activities

31,586



21,119

Investing activities:



Purchases of investments

(71,733
)


(47,818
)
Sales and maturities of investments

66,250



173,316

Acquisitions, net of cash acquired

(267
)


(122,672
)
Purchases of property and equipment, net

(1,034
)


(1,126
)
Net cash provided by (used in) investing activities

(6,784
)


1,700

Financing activities:



Proceeds from the issuance of equity plan common stock

1,737



1,725

Repurchases and retirements of common stock

—



(15,176
)
Payment of acquisition-related contingent consideration

—



(7,656
)
Principal payments on other borrowings

(36
)


(36
)
Net cash provided by (used in) financing activities

1,701



(21,143
)
Foreign currency effect on cash and cash equivalents

351



71

Net increase in cash and cash equivalents

26,854



1,747

Cash and cash equivalents at beginning of period

32,059



30,312

Cash and cash equivalents at end of period
$
58,913


$
32,059

MITEK SYSTEMS, INC.
DISAGGREGATION OF REVENUE
(Unaudited)
(amounts in thousands)



Twelve Months Ended September 30,


2023



2022

Major product category



Deposits software and hardware
$
78,212


$
64,548

Deposits services and other

25,922



22,013

Deposits revenue

104,134



86,561

Identity verification software and hardware

10,162



8,380

Identity verification services and other

58,256



49,863

Identity verification revenue

68,418



58,243

Total revenue
$
172,552


$
144,804

MITEK SYSTEMS, INC.
NON-GAAP NET INCOME RECONCILIATION
(Unaudited)
(amounts in thousands except per share data)





Three Months Ended September 30,

Twelve Months Ended September 30,


2023



2022



2023



2022

Net income (loss)
$
(1,444
)

$
351


$
8,027


$
3,694

Non-GAAP adjustments:







Acquisition-related costs and expenses ⁽²⁾

3,744



4,395



19,046



15,533

Intellectual property litigation costs

250



348



1,369



1,446

Executive transition costs

7



—



679



—

Stock compensation expense

2,673



3,278



10,463



13,346

Non-recurring audit fees

1,815



—



4,001



—

Restructuring costs

114



(7
)


2,114



1,800

Amortization of debt discount and issuance costs

1,937



1,813



7,546



7,053

Income tax effect of pre-tax adjustments

(1,002
)


(2,457
)


(10,115
)


(9,799
)
Cash tax difference ⁽¹⁾

(1,175
)


2,165



1,235



7,440

Non-GAAP net income
$
6,919


$
9,886


$
44,365


$
40,513

Non-GAAP income per share—basic
$
0.15


$
0.22


$
0.97


$
0.91

Non-GAAP income per share—diluted
$
0.15


$
0.22


$
0.95


$
0.88

Shares used in calculating non-GAAP net income per share—basic

45,997



44,693



45,533



44,595

Shares used in calculating non-GAAP net income per share—diluted

47,050



45,311



46,461



45,780

(1)

The Company’s non-GAAP net income is calculated using a cash tax rate of 20% in fiscal 2023 and 5% in fiscal 2022. The estimated cash tax rate is the estimated annual tax payable on the Company’s tax returns as a percentage of estimated annual non-GAAP pre-tax net income. The Company uses an estimated cash tax rate to adjust for the historical variation in the effective book tax rate associated with the reversal of valuation allowances. The fiscal 2022 cash tax rate includes a beneficial impact of reduced taxes payable due to the utilization of research and development tax credits and the utilization of loss carryforward. The Company believes that the cash tax rate provides a more transparent view of the Company’s operating results. The Company’s effective tax rate used for the purposes of calculating GAAP net income for fiscal 2023 and 2022 was 22% and negative 3%, respectively.



(2)

Included in acquisition-related costs and expenses in fiscal 2022 is $0.3 million of foreign exchange and investment losses incurred in connection with the acquisition of HooYu Ltd. which is included in other income (expense), net in the consolidated statements of operations.

MITEK SYSTEMS, INC.
NON-GAAP OPERATING INCOME RECONCILIATION
(Unaudited)
(amounts in thousands)





Three Months Ended September 30,

Twelve Months Ended September 30,


2023



2022



2023



2022

GAAP operating income
$
(3,287
)

$
3,799


$
15,564


$
12,200

Non-GAAP adjustments:







Acquisition-related costs and expenses

3,744



4,395



19,046



15,533

Intellectual property litigation costs

250



348



1,369



1,446

Executive transition costs

7



—



679



—

Stock compensation expense

2,673



3,278



10,463



13,346

Non-recurring audit fees

1,815



—



4,001



—

Restructuring costs

114



(7
)


2,114



1,800

Non-GAAP operating income
$
5,316


$
11,813


$
53,236


$
44,325









Total Revenue
$
37,656


$
39,626


$
172,552


$
144,804

Non-GAAP operating margin

14
%


30
%


31
%


31
%

View source version on businesswire.com: https://www.businesswire.com/news/home/20240319563820/en/

Investor Contact:
Todd Kehrli or Jim Byers
MKR Investor Relations, Inc.
mitk@mkr-group.com

Company Name:	Mitek Systems Inc.
Stock Symbol:	MITK
Market:	NASDAQ
Website:	miteksystems.com

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