Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  Mitek Systems, Inc.    MITK

MITEK SYSTEMS, INC.

(MITK)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector news

MITEK : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

share with twitter share with LinkedIn share with facebook
08/05/2020 | 04:10pm EDT
This Quarterly Report on Form 10-Q (this "Form 10-Q"), contains "forward-looking
statements" that involve risks and uncertainties, as well as assumptions that,
if they never materialize or they prove incorrect, could cause our results to
differ materially and adversely from those expressed or implied by such
forward-looking statements. The forward-looking statements are contained
principally in Part I, Item 2-"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Part II, Item 1A-"Risk Factors," but
appear throughout this Form 10-Q. Forward-looking statements may include, but
are not limited to, statements relating to our outlook or expectations for
earnings, revenues, expenses, asset quality, volatility of our common stock,
financial condition or other future financial or business performance,
strategies, expectations, or business prospects, the duration and impact of the
novel COVID-19 pandemic on our business, our customers, and markets generally,
or the impact of legal, regulatory, or supervisory matters on our business,
results of operations, or financial condition.
Forward-looking statements can be identified by the use of words such as
"estimate," "plan," "project," "forecast," "intend," "expect," "anticipate,"
"believe," "seek," "target", "will," "would," "could," "can," "may", or similar
expressions. Forward-looking statements reflect our judgment based on currently
available information and involve a number of risks and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in Part II, Item
1A-"Risk Factors" in this Form 10-Q and in our other filings with the U.S.
Securities and Exchange Commission (the "SEC"), including our Annual Report on
Form 10-K for the fiscal year ended September 30, 2019, filed with the SEC on
December 6, 2019 (the "Form 10-K"). Additionally, there may be other factors
that could preclude us from realizing the predictions made in the
forward-looking statements. We operate in a continually changing business
environment and new factors emerge from time to time. We cannot predict such
factors or assess the impact, if any, of such factors on our financial position
or results of operations. All forward-looking statements included in this Form
10-Q speak only as of the date of this Form 10-Q and you are cautioned not to
place undue reliance on any such forward-looking statements. Except as required
by law, we undertake no obligation to publicly update or release any revisions
to these forward-looking statements to reflect any events or circumstances after
the date of this Form 10-Q or to reflect the occurrence of unanticipated events.
In this Form 10-Q, unless the context indicates otherwise, the terms "Mitek,"
"the Company," "we," "us," and "our" refer to Mitek Systems, Inc., a Delaware
corporation and its subsidiaries.
Overview
Mitek is a leading innovator of mobile image capture and digital identity
verification solutions. We are a software development company with expertise in
computer vision, artificial intelligence, and machine learning. We are currently
serving more than 7,500 financial services organizations and leading marketplace
and financial technology ("fintech") brands across the globe. Our solutions are
embedded in native mobile apps and browsers to facilitate better online user
experiences, fraud detection and reduction, and compliant transactions.
Mitek's Mobile Deposit® solution is used today by millions of consumers in the
United States ("U.S.") and Canada for mobile check deposit. Mobile Deposit®
enables individuals and businesses to remotely deposit checks using their
camera-equipped smartphone or tablet. Our Mobile Deposit® solution is embedded
within the financial institutions' digital banking apps used by consumers and
has now processed over four billion check deposits. Mitek began selling Mobile
Deposit® in early 2008 and received its first patent for this product in August
2010.
Mitek's Mobile Verify® verifies a user's identity online enabling organizations
to build safer digital communities. Scanning an identity document helps enable
an enterprise to verify the identity of the person with whom they are conducting
business, to comply with growing governmental Anti-Money Laundering and Know
Your Customer regulatory requirements, and to improve the overall customer
experience for digital onboarding. To be sure the person submitting the identity
document is who they say they are, Mitek's Mobile Verify Face Comparison
provides an additional layer of online verification and compares the face on the
submitted identity document with the live selfie photo of the user.
The combination of identity document capture and data extraction process enables
the organization to prefill the end user's application, with far fewer key
strokes, thus reducing keying errors, and improving both operational efficiency
and the customer experience. Today, the financial services verticals (banks,
credit unions, lenders, payments processors, card issuers, fintech companies,
etc.) represent the greatest percentage of use of our solutions, but there is
accelerated adoption by marketplaces, sharing economy, and hospitality sectors.
Mitek uses artificial intelligence and machine learning to constantly improve
the product performance of Mobile Verify® such as speed and accuracy of
approvals of identification documents. The core of our user experience is driven
by Mitek MiSnap™, the leading image capture technology, which is incorporated
across our product lines. It provides a simple, intuitive, and superior
user-experience, making digital transactions faster, more accurate, and easier
for the consumer. Mobile Fill® automates application prefill of any form with
user data by simply snapping a picture of the driver's license or other similar
user identity document.
                                       26
--------------------------------------------------------------------------------


CheckReader™ enables financial institutions to automatically extract data from a
check image received across any deposit channel-branch, ATM, remote deposit
capture, and mobile. Through the automatic recognition of all fields on checks,
whether handwritten or machine print, CheckReader™ speeds the time to deposit
for financial institutions and enables them to comply with check clearing
regulations.
We market and sell our products and services worldwide through internal, direct
sales teams located in the U.S., Europe, and Latin America as well as through
channel partners. Our partner sales strategy includes channel partners who are
financial services technology providers and identity verification providers.
These partners integrate our products into their solutions to meet the needs of
their customers.
Third Quarter Fiscal 2020 Highlights
•Revenue for the three months ended June 30, 2020 was $25.4 million, an increase
of 16% compared to revenue of $21.9 million in the three months ended June 30,
2019.
•Net income was $1.3 million, or $0.03 per diluted share, during the three
months ended June 30, 2020, compared to net loss of $0.1 million, or $0.00 per
share, during the three months ended June 30, 2019.
•Cash provided by operating activities was $17.4 million for the nine months
ended June 30, 2020, compared to $7.9 million for the nine months ended June 30,
2019.
•We added new patents to our portfolio during fiscal 2020 bringing our total
number of issued patents to 64 as of June 30, 2020. In addition, we have 19
domestic and international patent applications pending as of June 30, 2020.
Restructuring
Subsequent to the acquisition of A2iA Group II, S.A.S. ("A2iA"), we evaluated
A2iA's operations and determined that the market for certain products was small
and lacking growth opportunity, were not core to our strategy, and were not
profitable for the Company. In order to streamline the organization and focus
resources going forward, we undertook a strategic restructuring of A2iA's Paris
operations in June 2019, which included, among other things, ceasing the sale of
certain A2iA products and offerings and a reduction in workforce.
Market Opportunities, Challenges & Risks
We believe that financial institutions, fintechs, and other companies see our
patented solutions as a way to provide a superior digital customer experience to
meet growing consumer demand for trust and convenience online and, at the same
time, assist them in meeting regulatory requirements. The value of digital
transformation to our customers is a possible increase in top line revenue and a
reduction in the cost of sales and services. As the use of new technology
increases, so does associated fraud and cyber-attacks. The negative outcomes of
fraud encompass financial losses, brand damage, and loss of loyal customers. We
predict growth in both our deposits and identity verification products based on
current trends in payments, online lending, more stringent regulations, growing
usage of sharing apps and online marketplaces, and the ever-increasing demand
for digital services.
Factors adversely affecting the pricing of, or demand for, our digital
solutions, such as competition from other products or technologies, any decline
in the demand for digital transactions, or negative publicity or obsolescence of
the software environments in which our products operate, could result in lower
revenues or gross margins. Further, because substantially all of our revenues
are from a few types of technology, our product concentration may make us
especially vulnerable to market demand and competition from other technologies,
which could reduce our revenues.
The sales cycle for our software and services can be lengthy and the
implementation cycles for our software and services by our channel partners and
customers can also be lengthy, often as long as six months and sometimes longer
for larger customers. If implementation of our products by our channel partners
and customers is delayed or otherwise not completed, our business, financial
condition, and results of operations may be adversely affected.
Revenues related to most of our on-premise licenses for mobile products are
required to be recognized up front upon satisfaction of all applicable revenue
recognition criteria. Revenue related to our software as a service ("SaaS")
products is recognized ratably over the life of the contract or as transactions
are used depending on the contract criteria. The recognition of future revenues
from these licenses is dependent upon a number of factors, including, but not
limited to, the term of our license agreements, the timing of implementation of
our products by our channel partners and customers, and the timing of any
re-orders of additional licenses and/or license renewals by our channel partners
and customers.
During each of the last few years, sales of licenses to one or more channel
partners have comprised a significant part of our revenue each year. This is
attributable to the timing of renewals or purchases of licenses and does not
represent a dependence on any single channel partner. If we were to lose a
channel partner relationship, we do not believe such a loss would adversely
affect our operations because either we or another channel partner could sell
our products to the end-users that had purchased products from the
                                       27
--------------------------------------------------------------------------------


channel partner we lost. However, in that case, we or another channel partner
must establish a relationship with the end-users, which could take time to
develop, if it develops at all.
We have a growing number of competitors in the mobile image capture and identity
verification industry, many of which have greater financial, technical,
marketing, and other resources. However, we believe our patented mobile image
capture and identity verification technology, our growing portfolio of products
and geographic coverage for the financial services industry, and our market
expertise gives us a distinct competitive advantage. To remain competitive, we
must continue to offer products that are attractive to the consumer as well as
being secure, accurate, and convenient. To help us remain competitive, we intend
to further strengthen performance of our portfolio of products through research
and development as well as partnering with other technology providers.
In the second quarter of fiscal 2020, concerns related to the spread of COVID-19
began to create global business disruptions as well as disruptions in our
operations and to create potential negative impacts on our revenues and other
financial results. COVID-19 was declared a pandemic by the World Health
Organization on March 11, 2020. In an effort to contain COVID-19 or slow its
spread, governments around the world have enacted various measures, including
orders to close all businesses not deemed "essential," isolate residents to
their homes or places of residence, and practice social distancing when engaging
in essential activities. We anticipate that these actions and the global health
crisis caused by COVID-19 will negatively impact business activity across the
globe. The extent to which COVID-19 will impact our business, operations, and
financial results is uncertain and difficult to predict and depends on numerous
evolving factors including the duration and severity of the outbreak. See Item
1A: "Risk Factors" for additional details.
In an effort to protect the health and safety of our employees, our workforce
has transitioned to working remotely and employee travel, including to our
international subsidiaries, has been severely curtailed. It is not clear what
the potential effects of any such alterations or modifications may have on our
business, including the effects on our customers or vendors, or on our financial
results. We will continue to actively monitor the situation and may take further
actions that alter our business operations as may be required by federal, state,
local, or foreign authorities, or that we determine are in the best interests of
our employees, customers, partners, and stockholders.
We anticipate in certain circumstances that the current stay-at-home orders and
impact of the COVID-19 pandemic may accelerate the adoption of digital
technologies and create future opportunities and uses for our products. However,
we cannot predict what the overall impact of the COVID-19 pandemic will be on
our business or financial condition as business and consumer activity
decelerates across the globe. We continue to seek new and innovative
opportunities to serve our customers' needs.
Results of Operations
Comparison of the Three Months Ended June 30, 2020 and 2019
The following table summarizes certain aspects of our results of operations for
the three months ended June 30, 2020 and 2019 (amounts in thousands, except
percentages):
                                                                            

Three Months Ended June 30,

                                                                            Percentage of Total Revenue                              Increase (Decrease)
                                       2020              2019                 2020                 2019               $                    %
Revenue
Software and hardware               $ 13,212$ 11,888                     52  %              54  %       $ 1,324                      11  %
Services and other                    12,201            10,018                     48  %              46  %         2,183                      22  %
Total revenue                       $ 25,413$ 21,906                    100  %             100  %       $ 3,507                      16  %
Cost of revenue                        3,496             3,168                     14  %              14  %           328                      10  %
Selling and marketing                  7,791             6,935                     31  %              32  %           856                      12  %
Research and development               5,111             4,663                     20  %              21  %           448                      10  %
General and administrative             5,884             5,074                     23  %              23  %           810                      16  %
Acquisition-related costs and
expenses                               1,697             1,761                      7  %               8  %           (64)                     (4) %
Restructuring costs                        -             3,214                      -  %              15  %        (3,214)                   (100) %
Other income, net                        145                98                      1  %               -  %            47                      48  %
Income tax benefit (provision)          (231)            2,712                     (1) %              12  %        (2,943)                   (109) %
Net income (loss)                   $  1,348$    (99)                     5  %               -  %       $ 1,447                          *

* Not meaningful.


                                       28
--------------------------------------------------------------------------------

Revenue

Total revenue increased $3.5 million, or 16%, to $25.4 million in the three
months ended June 30, 2020 compared to $21.9 million in the three months ended
June 30, 2019. Software and hardware revenue increased $1.3 million, or 11%, to
$13.2 million in the three months ended June 30, 2020 compared to $11.9 million
in the three months ended June 30, 2019. This increase is primarily due to an
increase in sales of our Mobile Deposit® and CheckReader™ software products.
This increase was partially offset by declining software revenue from our legacy
on-premise identity products which are being phased out. Services and other
revenue increased $2.2 million, or 22%, to $12.2 million in the three months
ended June 30, 2020 compared to $10.0 million in the three months ended June 30,
2019. This increase is primarily due to continued growth in Mobile Verify®
transactional SaaS revenue of $2.2 million, or 42%, in the three months ended
June 30, 2020 compared to the same period in 2019.
Cost of Revenue
Cost of revenue includes personnel costs related to billable services and
software support, direct costs associated with our hardware products, hosting
costs, and the costs of royalties for third party products embedded in our
products. Cost of revenue increased $0.3 million, or 10%, to $3.5 million in the
three months ended June 30, 2020 compared to $3.2 million in the three months
ended June 30, 2019. As a percentage of revenue, cost of revenue was consistent
at 14% in each of the three months ended June 30, 2020 and 2019. The increase in
cost of revenue is primarily due to an increase in variable personnel, royalty,
and hosting costs associated with a higher volume of Mobile Verify® transactions
processed during the three months ended June 30, 2020 compared to the three
months ended June 30, 2019.
Selling and Marketing Expenses
Selling and marketing expenses include payroll, employee benefits, stock-based
compensation, and other headcount-related costs associated with sales,
marketing, and product management personnel. Selling and marketing expenses also
include non-billable costs of professional services personnel, advertising
expenses, product promotion costs, trade shows, and other brand awareness
programs. Selling and marketing expenses increased $0.9 million, or 12%, to $7.8
million in the three months ended June 30, 2020 compared to $6.9 million in the
three months ended June 30, 2019. As a percentage of revenue, selling and
marketing expenses decreased to 31% in the three months ended June 30, 2020 from
32% in the three months ended June 30, 2019. The increase in selling and
marketing expense is primarily due to higher personnel-related costs in the
three months ended June 30, 2020 compared to the same period in 2019.
Research and Development Expenses
Research and development expenses include payroll, employee benefits,
stock-based compensation, third party contractor expenses, and other
headcount-related costs associated with software engineering and mobile capture
science. Research and development expenses increased $0.4 million, or 10%, to
$5.1 million in the three months ended June 30, 2020 compared to $4.7 million in
the three months ended June 30, 2019. As a percentage of revenue, research and
development expenses decreased to 20% in the three months ended June 30, 2020
from 21% in the three months ended June 30, 2019. The increase in research and
development expenses is primarily due to higher personnel-related costs
resulting from our increased headcount in the three months ended June 30, 2020
compared to 2019.
General and Administrative Expenses
General and administrative expenses include payroll, employee benefits,
stock-based compensation, and other headcount-related costs associated with
finance, legal, administration, and information technology functions, as well as
third party legal, accounting, and other administrative costs. General and
administrative expenses increased $0.8 million, or 16%, to $5.9 million in the
three months ended June 30, 2020 compared to $5.1 million in the three months
ended June 30, 2019. As a percentage of revenue, general and administrative
expenses remained consistent at 23% in each of the three months ended June 30,
2020 and 2019. The increase in general and administrative expenses is primarily
due to higher intellectual property litigation related costs of $0.7 million and
higher personnel-related costs of $0.1 million during the three months ended
June 30, 2020 compared to the same period in 2019.
Acquisition-Related Costs and Expenses
Acquisition-related costs and expenses include amortization of intangible
assets, expenses recorded due to changes in the fair value of contingent
consideration, stock-based compensation, and other costs associated with
acquisitions. Acquisition-related costs and expenses decreased $0.1 million, or
4%, to $1.7 million in the three months ended June 30, 2020 compared to $1.8
million in the three months ended June 30, 2019. As a percentage of revenue,
acquisition-related costs and expenses decreased to 7% in the three months ended
June 30, 2020 from 8% in the three months ended June 30, 2019. The decrease in
acquisition-related costs and expenses is due to a decrease in the amortization
of intangible assets as a result of certain intangible assets which had become
fully amortized prior to the three months ended June 30, 2020.
                                       29
--------------------------------------------------------------------------------


Restructuring Costs
Restructuring costs consist of employee severance obligations and other related
costs. Restructuring costs were $3.2 million in the three months ended June 30,
2019 and related to the restructuring plan implemented in June 2019.
Other Income, Net
Other income, net includes interest income net of amortization and net realized
gains or losses on our marketable securities portfolio and foreign currency
transactional gains or losses. Other income, net increased $47,000, to $145,000
in the three months ended June 30, 2020 compared to $98,000 in the three months
ended June 30, 2019. This increase is primarily due to an increase in interest
income as a result of higher cash and investment balances during the three
months ended June 30, 2020 compared to the same period in 2019.
Income Tax Benefit (Provision)
For the three months ended June 30, 2020, we recorded an income tax provision of
$0.2 million, which yielded an effective tax rate of 15%. For the three months
ended June 30, 2019, we recorded an income tax benefit of $2.7 million, or an
effective tax rate of 96%. The difference between the U.S. federal statutory tax
rate and our effective tax rate for the three months ended June 30, 2020 and
2019 was primarily due to excess tax benefits resulting from the exercise of
stock options and vesting of restricted stock, the impact of foreign and state
taxes, and the impact of federal and state research and development credits on
its tax provision.
Comparison of the Nine Months Ended June 30, 2020 and 2019
The following table summarizes certain aspects of our results of operations for
the nine months ended June 30, 2020 and 2019 (amounts in thousands, except
percentages):
                                                                            

Nine Months Ended June 30,

                                                                            Percentage of Total Revenue                               Increase (Decrease)
                                       2020              2019                 2020                 2019                $                    %
Revenue
Software and hardware               $ 36,180$ 32,468                     51  %              55  %       $  3,712                      11  %
Services and other                    34,492            27,104                     49  %              45  %          7,388                      27  %
Total revenue                       $ 70,672$ 59,572                    100  %             100  %       $ 11,100                      19  %
Cost of revenue                        9,615             9,037                     14  %              15  %            578                       6  %
Selling and marketing                 22,569            20,895                     32  %              35  %          1,674                       8  %
Research and development              14,540            14,441                     21  %              24  %             99                       1  %
General and administrative            16,382            15,743                     23  %              26  %            639                       4  %
Acquisition-related costs and
expenses                               4,884             5,361                      7  %               9  %           (477)                     (9) %
Restructuring costs                     (114)            3,214                      -  %               5  %         (3,328)                   (104) %
Other income, net                        480               252                      1  %               -  %            228                      90  %
Income tax benefit (provision)      $   (460)$  4,861                     (1) %               8  %       $ (5,321)                   (109) %
Net income (loss)                   $  2,816$ (4,006)                     4  %              (7) %       $  6,822                     170  %


Revenue
Total revenue increased $11.1 million or 19%, to $70.7 million in the nine
months ended June 30, 2020 compared to $59.6 million in the nine months ended
June 30, 2019. Software and hardware revenue increased $3.7 million, or 11%, to
$36.2 million in the nine months ended June 30, 2020 compared to $32.5 million
in the nine months ended June 30, 2019 primarily due to an increase in sales of
our Mobile Deposit®, ID_CLOUD™, and CheckReader™ software products. This
increase was partially offset by declining software revenue from our legacy
on-premise identity products which are being phased out. Services and other
revenue increased $7.4 million, or 27%, to $34.5 million in the nine months
ended June 30, 2020 compared to $27.1 million in the nine months ended June 30,
2019 primarily due to strong growth in Mobile Verify® transactional SaaS revenue
of $6.0 million in the nine months ended June 30, 2020 compared to the same
period in 2019, as well as an increase in maintenance revenue associated with
CheckReader™ and Mobile Deposit® software sales.
                                       30
--------------------------------------------------------------------------------


Cost of Revenue
Cost of revenue includes personnel costs related to billable services and
software support, direct costs associated with our hardware products, hosting
costs, and the costs of royalties for third party products embedded in our
products. Cost of revenue increased $0.6 million, or 6%, to $9.6 million in the
nine months ended June 30, 2020 compared to $9.0 million in the nine months
ended June 30, 2019. As a percentage of revenue, cost of revenue decreased to
14% in the nine months ended June 30, 2020 from 15% in the nine months ended
June 30, 2019. The increase in cost of revenue is primarily due to an increase
in variable personnel, royalty, and hosting costs associated with a higher
volume of Mobile Verify® transactions processed during the nine months ended
June 30, 2020 compared to the same period in 2019.
Selling and Marketing Expenses
Selling and marketing expenses include payroll, employee benefits, stock-based
compensation, and other headcount-related costs associated with sales,
marketing, and product management personnel. Selling and marketing expenses also
include non-billable costs of professional services personnel, advertising
expenses, product promotion costs, trade shows, and other brand awareness
programs. Selling and marketing expenses increased $1.7 million, or 8%, to $22.6
million in the nine months ended June 30, 2020 compared to $20.9 million in the
nine months ended June 30, 2019. As a percentage of revenue, selling and
marketing expenses decreased to 32% in the nine months ended June 30, 2020 from
35% in the nine months ended June 30, 2019. The increase in selling and
marketing expense is primarily due to higher personnel-related costs of $1.2
million and higher product promotion costs of $0.4 million in the nine months
ended June 30, 2020 compared to the same period in 2019.
Research and Development Expenses
Research and development expenses include payroll, employee benefits,
stock-based compensation, third party contractor expenses, and other
headcount-related costs associated with software engineering and mobile capture
science. Research and development expenses increased $0.1 million, or 1%, to
$14.5 million in the nine months ended June 30, 2020 compared to $14.4 million
in the nine months ended June 30, 2019. As a percentage of revenue, research and
development expenses decreased to 21% in the nine months ended June 30, 2020
from 24% in the nine months ended June 30, 2019. The increase in research and
development expenses is primarily due to higher personnel-related costs in the
nine months ended June 30, 2020 compared to the same period in 2019.
General and Administrative Expenses
General and administrative expenses include payroll, employee benefits,
stock-based compensation, and other headcount-related costs associated with
finance, legal, administration, and information technology functions, as well as
third party legal, accounting, and other administrative costs. General and
administrative expenses increased $0.6 million, or 4%, to $16.4 million in the
nine months ended June 30, 2020 compared to $15.7 million in the nine months
ended June 30, 2019. As a percentage of revenue, general and administrative
expenses decreased to 23% in the nine months ended June 30, 2020 from 26% in the
nine months ended June 30, 2019. The increase in general and administrative
expenses is primarily due to an increase in intellectual property litigation
costs of $1.7 million during the nine months ended June 30, 2020 compared to the
same period in 2019. This increase is partially offset by a decrease in third
party costs associated with our strategic process of $1.2 million.
Acquisition-Related Costs and Expenses
Acquisition-related costs and expenses include amortization of intangible
assets, expenses recorded due to changes in the fair value of contingent
consideration, stock-based compensation, and other costs associated with
acquisitions. Acquisition-related costs and expenses decreased $0.5 million, or
9%, to $4.9 million in the nine months ended June 30, 2020 compared to $5.4
million in the nine months ended June 30, 2019. As a percentage of revenue,
acquisition-related costs and expenses decreased to 7% in the nine months ended
June 30, 2020 from 9% in the nine months ended June 30, 2019. The decrease in
acquisition-related costs and expenses is primarily due to a decrease in the
amortization of intangible assets as a result of certain intangible assets which
had become fully amortized during the nine months ended June 30, 2020.
Restructuring Costs
Restructuring costs consist of employee severance obligations and other related
costs. Restructuring costs were negative $0.1 million in the nine months ended
June 30, 2020 and are due to a reversal of costs accrued for the restructuring
plan implemented in June 2019. Restructuring costs were $3.2 million in the nine
months ended June 30, 2019 and related to the restructuring plan implemented in
June 2019.
Other Income, Net
Other income, net includes interest income net of amortization and net realized
gains or losses on our marketable securities portfolio, foreign currency
transactional gains or losses, and interest expense. Other income, net increased
$0.2 million, to $0.5 million
                                       31
--------------------------------------------------------------------------------


of net income in the nine months ended June 30, 2020 compared to $0.3 million of
net income in the nine months ended June 30, 2019, primarily due to an increase
in interest income as a result of higher cash and investment balances.
Income Tax Benefit (Provision)
For the nine months ended June 30, 2020, we recorded an income tax provision of
$0.5 million, which yielded an effective tax rate of 14%. For the nine months
ended June 30, 2019, we recorded an income tax benefit of $4.9 million, or an
effective tax rate of 55%. The difference between the U.S. federal statutory tax
rate and our effective tax rate for the nine months ended June 30, 2020 and 2019
was primarily due to excess tax benefits resulting from the exercise of stock
options and vesting of restricted stock, the impact of foreign and state taxes,
and the impact of federal and state research and development credits on its tax
provision.

Liquidity and Capital Resources
On June 30, 2020, we had $52.2 million in cash and cash equivalents and
investments compared to $34.8 million on September 30, 2019, an increase of
$17.4 million, or 50%. The increase in cash and cash equivalents and investments
is primarily due to net cash provided by operating activities of $17.4 million,
net proceeds from the issuance of our common stock, par value $0.001 ("Common
Stock") under our equity plan of $1.6 million, favorable foreign currency gains
of $0.3 million, and proceeds from other borrowings of $0.2 million, partially
offset by repurchases and retirements of Common Stock of $1.0 million, payment
of acquisition-related contingent consideration of $0.5 million, capital
expenditures of $0.5 million and principal payments on other borrowings of $0.1
million.
Cash Flows from Operating Activities
Net cash provided by operating activities during the nine months ended June 30,
2020 was $17.4 million and resulted primarily from net income of $2.8 million,
net non-cash charges of $13.9 million, and favorable changes in operating assets
and liabilities of $0.7 million. The primary non-cash adjustments to operating
activities were stock-based compensation expense, amortization of intangible
assets, depreciation and amortization, and deferred taxes totaling $7.1 million,
$4.8 million, $1.1 million, and $0.7 million, respectively.
Net cash provided by operating activities during the nine months ended June 30,
2019 was $7.9 million and resulted primarily from net loss of $4.0 million
adjusted for non-cash charges of $8.3 million as well as favorable changes in
operating assets and liabilities of $3.6 million. The primary non-cash
adjustments to operating activities were stock-based compensation expense,
amortization of intangible assets, and depreciation and amortization totaling
$7.3 million, $5.3 million, and $1.0 million, respectively, and were partially
offset by a deferred tax benefit of $5.2 million.
Cash Flows from Investing Activities
Net cash used in investing activities was $15.5 million during the nine months
ended June 30, 2020, which consisted primarily of net purchases of investments
of $15.0 million and capital expenditures of $0.5 million.
Net cash used in investing activities was $4.3 million during the nine months
ended June 30, 2019, which consisted primarily of net purchases of investments
of $3.3 million and capital expenditures of $1.0 million.
Cash Flows from Financing Activities
Net cash provided by financing activities was $0.3 million during the nine
months ended June 30, 2020, which consisted of net proceeds from the issuance of
equity plan Common Stock of $1.6 million and proceeds from other borrowing of
$0.2 million, partially offset by repurchases and retirements of Common Stock of
$1.0 million, payment of acquisition-related contingent consideration of $0.5
million, and principal payments on other borrowings of $0.1 million.
Net cash provided by financing activities was $3.6 million during the nine
months ended June 30, 2019, which consisted of net proceeds from the issuance of
equity plan Common Stock of $4.9 million, partially offset by payment of
acquisition-related contingent consideration of $1.0 million and principal
payments on other borrowings of $0.3 million.
Revolving Credit Facility
On May 3, 2018, the Company and ID Checker, Inc. (together, the "Co-Borrowers")
entered into a Loan and Security Agreement (the "Loan Agreement") with Silicon
Valley Bank ("SVB"). Pursuant to the Loan Agreement, we arranged for a $10.0
million secured revolving credit facility (the "Revolver") with a floating per
annum interest rate equal to the greater of the Wall Street Journal prime rate,
plus 0.25%, or 4.5%. The Co-Borrowers must maintain, at all times when any
amounts are outstanding under the Revolver, either (i) minimum unrestricted cash
at SVB and unused availability on the Revolver of at least $15.0 million and
(ii) Adjusted Quick Ratio of 1.75:1.00. In May 2019, the Company and SVB entered
into an amendment of the Loan Agreement to extend the maturity of the Revolver
to September 30, 2020. There were no borrowings outstanding under the Revolver
as of June 30, 2020.
                                       32
--------------------------------------------------------------------------------


Rights Agreement
On October 23, 2018, we entered into the Section 382 Rights Agreement (the
"Rights Agreement") and issued a dividend of one preferred share purchase right
(a "Right") for each share of Common Stock payable on November 2, 2018 to the
stockholders of record of such shares on that date. Each Right entitles the
registered holder, under certain circumstances, to purchase from us one
one-thousandth of a share of Series B Junior Preferred Stock, par value $0.001
per share (the "Preferred Shares"), of the Company, at a price of $35.00 per one
one-thousandth of a Preferred Share represented by a Right, subject to
adjustment. The description and terms of the Rights are set forth in the Rights
Agreement.
The Rights are not exercisable until the Distribution Date (as defined in the
Rights Agreement). Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
At any time prior to the time any Person becomes an Acquiring Person (as defined
in the Rights Agreement), the Board may redeem the Rights in whole, but not in
part, at a price of $0.0001 per Right (the "Redemption Price"). The redemption
of the Rights may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
The Rights will expire on the earlier of (i) the close of business on October
22, 2021, (ii) the time at which the Rights are redeemed, and (iii) the time at
which the Rights are exchanged.
Share Repurchase Program
On December 13, 2019, our Board of Directors authorized and approved a share
repurchase program for up to $10 million of the currently outstanding shares of
our Common Stock. The share repurchase program will expire December 16, 2020.
The purchases under the share repurchase program may be made from time to time
in the open market, through block trades, 10b5-1 trading plans, privately
negotiated transactions or otherwise, in each case, in accordance with
applicable laws, rules, and regulations. The timing and actual number of the
shares repurchased will depend on a variety of factors including price, market
conditions and corporate and regulatory requirements. We intend to fund the
share repurchases from cash on hand. The share repurchase program does not
commit us to repurchase shares of our Common Stock and it may be amended,
suspended, or discontinued at any time.
We made purchases of $1.0 million, or approximately 137,000 shares, during the
nine months ended June 30, 2019 at an average price of $7.33 per share. Total
purchases made under the share repurchase program were $1.0 million as of June
30, 2020.
CARES Act
On March 27, 2020, President Trump signed into law the "Coronavirus Aid, Relief
and Economic Security (CARES) Act." The CARES Act, among other things, includes
provisions relating to refundable payroll tax credits, deferment of employer
side social security payments, net operating loss carryback periods, alternative
minimum tax credit refunds, modifications to the net interest deduction
limitations and technical corrections to tax depreciation methods for qualified
improvement property. We continue to examine the impacts the CARES Act may have
on our business, including our net operating losses.
Other Liquidity Matters
On June 30, 2020, we had investments of $33.2 million, designated as
available-for-sale debt securities, which consisted of commercial paper,
corporate issuances, and asset-backed securities, carried at fair value as
determined by quoted market prices for identical or similar assets, with
unrealized gains and losses, net of tax, and reported as a separate component of
stockholders' equity. All securities whose maturity or sale is expected within
one year are classified as "current" on the consolidated balance sheets. All
other securities are classified as "long-term" on the consolidated balance
sheets. At June 30, 2020, we had $30.3 million of our available-for-sale
securities classified as current and $2.9 million of our available-for-sale
securities classified as long-term. At September 30, 2019, we had $16.5 million
of our available-for-sale securities classified as current and $1.6 million of
our available-for-sale securities classified as long-term.
We had working capital of $44.8 million at June 30, 2020 compared to $34.1
million at September 30, 2019.
Based on our current operating plan, we believe the current cash balance and
cash expected to be generated from operations will be adequate to satisfy our
working capital needs for the next twelve months from the date the financial
statements are filed.
Off Balance Sheet Arrangements
The Company had no off balance sheet arrangements as of June 30, 2020.
                                       33

--------------------------------------------------------------------------------



Changes in Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the U.S. The
preparation of the consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the related disclosure of contingent assets and
liabilities. We review our estimates on an on-going basis, including those
related to revenue recognition, stock-based compensation, income taxes and the
valuation of goodwill, intangibles and other long-lived assets. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities.
Actual results may differ from these estimates under different assumptions or
conditions. The critical accounting policies and estimates used in the
preparation of our consolidated financial statements are described in Item
7-"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in the Form 10-K for the year ended September 30, 2019. Significant
changes to our critical accounting policies and estimates as a result of
adopting ASU 2016-02, Leases (Topic 842), and its related amendments
(collectively "ASC 842") are as follows:
Leases
We adopted ASC 842 effective October 1, 2019 using the optional transition
method. Additional information about our lease policies and the related impact
of the adoption is included in Note 1 and Note 8 to the consolidated financial
statements.
There have been no other material changes to our critical accounting policies
and estimates from those disclosed in our Annual Report on Form 10-K for the
year ended September 30, 2019.

© Edgar Online, source Glimpses


share with twitter share with LinkedIn share with facebook
All news about MITEK SYSTEMS, INC.
09/30MITEK : recognized in 2020 Gartner Market Guide for ID Proofing and Affirmation
AQ
09/30Mitek recognized in 2020 Gartner Market Guide for ID Proofing and Affirmation
GL
09/24MITEK : and Digidentity Unlock Digital Access to GOV.UK Support for Millions of ..
AQ
09/23MITEK : partners with Nova Credit to help immigrants establish U.S. credit in mi..
AQ
09/23Mitek partners with Nova Credit to help immigrants establish U.S. credit in m..
GL
08/05MITEK : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ..
AQ
08/04Mitek provides technology at no cost to Gift Card Bank to deliver donations t..
GL
07/30MITEK SYSTEMS : Fiscal 3Q Earnings Snapshot
AQ
07/30MITEK SYSTEMS INC : Results of Operations and Financial Condition (form 8-K)
AQ
07/30Mitek Reports Record Revenue for Third Quarter Fiscal 2020
GL
More news