Mitek Systems Inc 10-Q for FY2020 Q2

Mitek Systems Inc (MITK)

10-Q 2020-05-07 For: 2020-03-31

Added on April 08, 2026

About this 10-Q

Mitek Systems Inc filed this 10-Q on May 7, 2020, covering the quarter ended March 31, 2020 (FY2020 Q2).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $23.19M; up 16.1% from $19.98M a year earlier
Net income: $908K; compared with a net loss of $716K a year earlier
Diluted EPS: $0.02; compared with -$0.02 a year earlier

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Delaware						87-0418827
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

600 B Street, Suite 100
San Diego, California						92101
(Address of principal executive offices)						(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	MITK	The NASDAQ Capital Market


	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets at March 31, 20 20 (Unaudited) and September 30, 2019	1
	Consolidated Statements of Operations and Other Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended March 31, 20 20 and 20 19	2
	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Six Months Ended March 31, 20 20 and 201 9	3
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended March 31, 20 20 and 201 9	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	37
Item 6.	Exhibits	38
	Signatures	39


	March 31, 2020 (Unaudited)		September 30, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	16,928	$	16,748
Short-term investments	19,018		16,502
Accounts receivable, net	13,727		14,938
Contract assets	2,704		2,350
Prepaid expenses	1,604		1,487
Other current assets	1,466		2,105
Total current assets	55,447		54,130
Long-term investments	6,546		1,552
Property and equipment, net	3,910		4,231
Right-of-use assets	5,999		—
Intangible assets, net	21,335		24,405
Goodwill	33,554		32,636
Deferred income tax assets, net	16,128		16,596
Other non-current assets	5,059		2,347
Total assets	$	147,978	$	135,897
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,925	$	3,555
Accrued payroll and related taxes	5,567		6,410
Deferred revenue, current portion	8,760		5,612
Lease liabilities, current portion	1,395		—
Acquisition-related contingent consideration	575		1,036
Restructuring accrual	333		1,526
Other current liabilities	853		1,909
Total current liabilities	20,408		20,048
Deferred revenue, non-current portion	1,213		736
Lease liabilities, non-current portion	6,117		—
Deferred income tax liabilities	5,578		5,555
Other non-current liabilities	754		2,225
Total liabilities	34,070		28,564
Stockholders’ equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding	—		—
Common stock, $0.001 par value, 60,000,000 shares authorized, 41,075,875 and 40,367,456 issued and outstanding, as of March 31, 2020 and September 30, 2019, respectively	41		40
Additional paid-in capital	138,021		132,160
Accumulated other comprehensive loss	(3,814)		(4,061)
Accumulated deficit	(20,340)		(20,806)
Total stockholders’ equity	113,908		107,333
Total liabilities and stockholders’ equity	$	147,978	$	135,897


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
Revenue
Software and hardware	$	11,453	$	10,585	$	22,968	$	20,580
Services and other	11,739		9,398		22,291		17,086
Total revenue	23,192		19,983		45,259		37,666
Operating costs and expenses
Cost of revenue—software and hardware	864		907		1,635		1,752
Cost of revenue—services and other	2,322		2,084		4,484		4,117
Selling and marketing	7,448		6,752		14,778		13,960
Research and development	4,819		5,290		9,429		9,778
General and administrative	5,210		4,827		10,498		10,669
Acquisition-related costs and expenses	1,579		1,773		3,187		3,600
Restructuring costs	(114)		—		(114)		—
Total operating costs and expenses	22,128		21,633		43,897		43,876
Operating income (loss)	1,064		(1,650)		1,362		(6,210)
Other income, net	32		140		335		154
Income (loss) before income taxes	1,096		(1,510)		1,697		(6,056)
Income tax benefit (provision)	(188)		794		(229)		2,149
Net income (loss)	$	908	$	(716)	$	1,468	$	(3,907)
Net income (loss) per share—basic	$	0.02	$	(0.02)	$	0.04	$	(0.10)
Net income (loss) per share—diluted	$	0.02	$	(0.02)	$	0.03	$	(0.10)
Shares used in calculating net income (loss) per share—basic	41,022		38,926		40,817		38,583
Shares used in calculating net income (loss) per share—diluted	42,028		38,926		42,030		38,583
Other comprehensive income (loss)
Net income (loss)	$	908	$	(716)	$	1,468	$	(3,907)
Foreign currency translation adjustment	(1,064)		(1,203)		189		(2,027)
Unrealized gain on investments	56		6		58		19
Other comprehensive income (loss)	$	(100)	$	(1,913)	$	1,715	$	(5,915)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended March 31, 2020
	Common Stock Outstanding Shares	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balance, December 31, 2019	40,865	$	41	$	134,535	$	(20,246)	$	(2,806)	$	111,524
Exercise of stock options	161	—		572		—		—		572
Settlement of restricted stock units	112	—		—		—		—		—
Issuance of common stock under employee stock purchase plan	75	—		606		—		—		606
Stock-based compensation expense	—	—		2,308		—		—		2,308
Repurchases and retirements of common stock	(137)	—		—		(1,002)		—		(1,002)
Components of other comprehensive loss:
Net income	—	—		—		908		—		908
Currency translation adjustment	—	—		—		—		(1,064)		(1,064)
Change in unrealized gain (loss) on investments	—	—		—		—		56		56
Total other comprehensive loss										(100)
Balance, March 31, 2020	41,076	$	41	$	138,021	$	(20,340)	$	(3,814)	$	113,908


	Three Months Ended March 31, 2019
	Common Stock Outstanding Shares	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balance, December 31, 2018	38,639	$	39	$	120,199	$	(23,273)	$	(1,397)	$	95,568
Exercise of stock options	502	—		1,570		—		—		1,570
Settlement of restricted stock units	139	—		—		—		—		—
Issuance of common stock under employee stock purchase plan	68	—		491		—		—		491

Stock-based compensation expense	—	—		2,353		—		—		2,353


Components of other comprehensive loss:
Net loss	—	—		—		(716)		—		(716)
Currency translation adjustment	—	—		—		—		(1,203)		(1,203)
Change in unrealized gain (loss) on investments	—	—		—		—		6		6
Total other comprehensive loss										(1,913)
Balance, March 31, 2019	39,348	$	39	$	124,613	$	(23,989)	$	(2,594)	$	98,069


	Six Months Ended March 31, 2020
	Common Stock Outstanding Shares	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balance, September 30, 2019	40,367	$	40	$	132,160	$	(20,806)	$	(4,061)	$	107,333
Exercise of stock options	185	—		645		—		—		645
Settlement of restricted stock units	586	1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	75	—		606		—		—		606
Stock-based compensation expense	—	—		4,611		—		—		4,611
Repurchases and retirements of common stock	(137)	—		—		(1,002)		—		(1,002)
Components of other comprehensive loss:
Net income	—	—		—		1,468		—		1,468
Currency translation adjustment	—	—		—		—		189		189
Change in unrealized gain (loss) on investments	—	—		—		—		58		58
Total other comprehensive loss										1,715
Balance, March 31, 2020	41,076	$	41	$	138,021	$	(20,340)	$	(3,814)	$	113,908


	Six Months Ended March 31, 2019
	Common Stock Outstanding Shares	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balance, September 30, 2018	37,961	$	38	$	116,944	$	(21,002)	$	(586)	$	95,394
Exercise of stock options	637	—		2,156		—		—		2,156
Settlement of restricted stock units	682	1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	68	—		491		—		—		491

Stock-based compensation expense	—	—		5,023		—		—		5,023

Cumulative-effect adjustment from the adoption of ASU 2014-09	—	—		—		920		—		920
Components of other comprehensive loss:
Net loss	—	—		—		(3,907)		—		(3,907)
Currency translation adjustment	—	—		—		—		(2,027)		(2,027)
Change in unrealized gain (loss) on investments	—	—		—		—		19		19
Total other comprehensive loss										(5,915)
Balance, March 31, 2019	39,348	$	39	$	124,613	$	(23,989)	$	(2,594)	$	98,069


	March 31, 2020		September 30, 2019
Contract assets, current	$	2,704	$	2,350
Contract assets, non-current	3,798		581
Contract liabilities (deferred revenue), current	8,760		5,612
Contract liabilities (deferred revenue), non-current	$	1,213	$	736


Balance at September 30, 2019	$	1,526
Accrual reversed	(114)
Payments	(1,098)
Foreign currency effect on the restructuring accrual	19
Balance at March 31, 2020	$	333


March 31, 2020:	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Available-for-sale securities:
U.S. Treasury, short-term	$	6,235	$	76	$	—	$	6,311
Asset-backed securities, short-term	1,657		2		—		1,659
Corporate debt securities, short-term	11,063		1		(16)		11,048
U.S. Treasury, long-term	1,006		17		—		1,023
Asset-backed securities, long-term	3,086		—		(6)		3,080
Corporate debt securities, long-term	2,453		4		(14)		2,443
Total	$	25,500	$	100	$	(36)	$	25,564


September 30, 2019:	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Available-for-sale securities:
U.S. Treasury, short-term	$	4,240	$	2	$	—	$	4,242
Corporate debt securities, short-term	12,258		2		—		12,260
U.S. Treasury, long-term	1,102		—		(1)		1,101
Corporate debt securities, long-term	451		—		—		451
Total	$	18,051	$	4	$	(1)	$	18,054


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
Major product category
Deposits software and hardware	$	10,317	$	9,215	$	20,600	$	18,265
Deposits services and other	4,305		3,693		8,673		6,513
Deposits revenue	14,622		12,908		29,273		24,778
Identity verification software and hardware	1,136		1,370		2,368		2,315
Identity verification services and other	7,434		5,705		13,618		10,573
Identity verification revenue	8,570		7,075		15,986		12,888
Total revenue	$	23,192	$	19,983	45,259		37,666


March 31, 2020:	Weighted Average Amortization Period	Cost		Accumulated Amortization		Net
Completed technologies	6.4 years	$	20,341	$	8,573	$	11,768
Customer relationships	4.8 years	17,628		8,234		9,394
Trade names	4.5 years	618		445		173
Total intangible assets		$	38,587	$	17,252	$	21,335


September 30, 2019:	Weighted Average Amortization Period	Cost		Accumulated Amortization		Net
Completed technologies	6.4 years	$	20,341	$	7,104	$	13,237
Customer relationships	4.8 years	17,628		6,701		10,927
Trade names	4.5 years	618		377		241
Total intangible assets		$	38,587	$	14,182	$	24,405


	Estimated Future Amortization Expense
2020—remaining	$	3,121
2021	6,020
2022	5,633
2023	3,696
2024	1,741
2025	1,124

Total	$	21,335


March 31, 2020:	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Short-term investments:
U.S. Treasury	$	6,311	$	6,311	$	—	$	—
Asset-backed securities	1,659		—		1,659		—
Corporate debt securities
Financial	4,799		—		4,799		—
Industrial	1,371		—		1,371		—
Commercial paper
Financial	1,399		—		1,399		—
Industrial	3,479		—		3,479		—
Total short-term investments at fair value	19,018		6,311		12,707		—
Long-term investments:
U.S. Treasury	1,023		1,023		—		—
Asset-backed securities	3,080		—		3,080		—
Corporate debt securities
Financial	1,487		—		1,487		—
Industrial	956		—		956		—
Total assets at fair value	$	25,564	$	7,334	$	18,230	$	—
Liabilities:
Acquisition-related contingent consideration	575		—		—		575
Total liabilities at fair value	$	575	$	—	$	—	$	575


Balance at September 30, 2019	$	1,601


Payment of contingent consideration	(1,049)

Foreign currency effect on contingent consideration	23
Balance at March 31, 2020	$	575


Balance at September 30, 2019	$	32,636
Other adjustments(1)	806
Foreign currency effect on goodwill and other	112
Balance at March 31, 2020	$	33,554


	Six Months Ended March 31, 2020	Six Months Ended March 31, 2019
Risk-free interest rate	1.35%	2.88% – 3.08%
Expected life (years)	5.78	5.46
Expected volatility	48%	57%
Expected dividends	None	None


	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at September 30, 2019	1,686,902	$	7.00	5.4	$	4,882
Granted	92,610	$	9.49
Exercised	(184,849)	$	3.49
Canceled	(16,146)	$	10.40
Outstanding at March 31, 2020	1,578,517	$	7.52	5.3	$	2,557
Vested and Expected to Vest at March 31, 2020	1,578,517	$	7.52	5.3	$	2,557
Exercisable at March 31, 2020	1,124,765	$	6.76	3.9	$	2,545


	Number of Shares	Weighted-Average Fair Market Value Per Share
Outstanding at September 30, 2019	2,352,487	$	8.26
Granted	1,317,057	$	7.16
Settled	(585,782)	$	7.57
Canceled	(204,189)	$	8.41
Outstanding at March 31, 2020	2,879,573	$	7.89


	Operating leases
2020—remaining	$	670
2021	2,053
2022	1,700
2023	1,703
2024	1,373
2025	285
Thereafter	630
Total lease payments	8,414
Less: amount representing interest	(902)
Present value of future lease payments	7,512


	Operating leases
2020	$	1,641
2021	2,157
2022	1,777
2023	1,550
2024	1,151
2025	36
Thereafter	—
Total minimum lease payments	$	8,312


	Three Months Ended March 31,
					Percentage of Total Revenue						Increase (Decrease)
	2020		2019		2020		2019		$		%
Revenue
Software and hardware	$	11,453	$	10,585	49	%	53	%	$	868	8	%
Services and other	11,739		9,398		51	%	47	%	2,341		25	%
Total revenue	$	23,192	$	19,983	100	%	100	%	$	3,209	16	%
Cost of revenue	3,186		2,991		14	%	15	%	195		7	%
Selling and marketing	7,448		6,752		32	%	34	%	696		10	%
Research and development	4,819		5,290		21	%	26	%	(471)		(9)	%
General and administrative	5,210		4,827		22	%	24	%	383		8	%
Acquisition-related costs and expenses	1,579		1,773		7	%	9	%	(194)		(11)	%
Restructuring costs	(114)		—		—	%	—	%	(114)		(100)	%
Other income, net	32		140		—	%	1	%	(108)		(77)	%
Income tax benefit (provision)	(188)		794		(1)	%	4	%	(982)		(124)	%
Net income (loss)	$	908	$	(716)	4	%	(4)	%	$	1,624	227	%


Exhibit No.	Description	Incorporated by Reference from Document

2.1**	Share Purchase Agreement, dated October 16, 2017, by and among Mitek Systems, Inc., Mitek Systems Holdings B.V., and the shareholders of ICAR Vision Systems, S.L.	(1)

2.2**	Share Purchase Agreement, dated May 23, 2018, by and among Mitek Systems, Inc., the shareholders of A2iA Group II, S.A.S. and Andera Partners, S.C.A., as representative of the Sellers.	(2)

3.1	Restated Certificate of Incorporation of Mitek Systems, Inc., as amended.	(3)

3.2	Second Amended and Restated Bylaws of Mitek Systems, Inc.	(4)

3.3	Certificate of Designation of Series B Junior Participating Preferred Stock.	(5)

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.	*

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.	*

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	*

101	Financial statements from the Quarterly Report on Form 10-Q of Mitek Systems, Inc. for the quarter ended March 31, 2020, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Other Comprehensive Income (Loss), (iii) the Consolidated Statement of Stockholders' Equity, (iv) the Consolidated Statements of Cash Flows, (v) the Notes to Consolidated Financial Statements.	*


*						Filed herewith.
**						Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC upon request.
(1)						Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the SEC on October 20, 2017.
(2)						Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 23, 2018.
(3)						Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015.
(4)						Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 10, 2014.
(5)						Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 23, 2018.