Summary
Mitek Systems started fiscal 2022 with a sharp increase in revenue and operating income. Revenue was $32.5 million for the quarter ended December 31, 2021, up 25.0% from the prior-year quarter. Operating income was $4.83 million, up 214.2%. Net income was $3.1 million, or $0.07 per diluted share, up 44.2% and 40.0% respectively. Operating margin was 14.9%, up 9.0 percentage points. The company serves more than 7,500 financial services organizations and fintech brands. Its identity verification and authentication technologies help banks, financial services organizations, and marketplace platforms verify identities during digital transactions. Its mobile deposit system enables secure deposit services. Thousands of organizations use its solutions for mobile check deposits, new account openings, and more. Mitek added patents during the quarter, bringing total issued patents to 78 as of December 31, 2021, with 17 domestic and international patent applications pending.
Cash flow told a different story. Operating cash flow was $2.3 million, down 74.2% from the prior-year quarter. Capital expenditures were $0.3 million, down 26.2%. Deferred revenue was $8.17 million, down 16.2%. The operating cash flow decline contrasts with the profit growth. Mitek repurchased $10.1 million, or approximately 598,636 shares, of its common stock during the quarter at an average price of $16.95 per share. From January 1, 2022 through January 19, 2022, it repurchased another $4.7 million, or 287,568 shares, at an average price of $16.29 per share. The company had no off balance sheet arrangements as of December 31, 2021.
The company completed the acquisition of ID R&D in May 2021. The purchase price was up to $49.0 million. On the closing date, ID R&D equityholders received $13.0 million in cash and 867,226 shares, or $13.9 million, of common stock. Additional payments of up to approximately $22.1 million in cash and stock are tied to financial milestones during fiscal 2022 and fiscal 2023. Mitek markets and sells its products worldwide through internal direct sales teams in the U.S., Europe, and Latin America, as well as through channel partners. These partners include financial services technology providers and identity verification providers. Management predicts growth in both deposits and identity verification products, citing trends in payments, online lending, more stringent regulations, sharing apps, online marketplaces, and demand for digital services. Management also expects current cash and cash equivalents and cash generated from operations to cover working capital needs for at least the next eighteen months.
Risks remain. The sales cycle for software and services can be lengthy, and implementation cycles can run as long as six months and sometimes longer for larger customers. Delays in implementation by channel partners and customers could hurt results. Mitek faces competition from companies with greater financial, technical, marketing, and other resources. Product concentration is a risk because substantially all revenue comes from a few types of technology. The COVID-19 pandemic continues to create uncertainty for operations, sales cycles, new business leads, and vendors. Channel partner concentration also matters, as sales of licenses to one or more channel partners have comprised a significant part of revenue each year. Fraud and cyber-attacks are rising, which could affect customers and demand. The negative outcomes of fraud include financial losses, brand damage, and loss of loyal customers. The 2026 Notes have a conversion price of approximately $20.85 per share, and the warrant transactions can create dilution if the average share price exceeds $26.53 for any fiscal quarter.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $32.5M | $33.3M | -2.4% | $26.0M | +25.0% |
| Research & development | $7.6M | $8.2M | -7.7% | $6.2M | +23.4% |
| Sales & marketing | $8.4M | $8.4M | -0.1% | $7.4M | +14.3% |
| General & administrative | $6.0M | $6.1M | -1.9% | $5.1M | +17.9% |
| Total operating expenses | $27.6M | $29.3M | -5.8% | $24.4M | +13.1% |
| Operating income (loss) | $4.8M | $3.9M | +23.0% | $1.5M | +214.2% |
| Operating margin | 14.9% | 11.8% | +3.1 pp | 5.9% | +8.9 pp |
| Net income (loss) | $3.1M | $1.8M | +72.9% | $2.2M | +44.2% |
| Net margin | 9.6% | 5.4% | +4.2 pp | 8.3% | +1.3 pp |
| Diluted EPS | $0.07 | $0.04 | +$0.03 | $0.05 | +$0.02 |
Risks
MD&A states substantially all revenues are from a few types of technology, making Mitek especially vulnerable to market demand and competition from other technologies, which could reduce revenues or gross margins. This is re-emphasized alongside first quarter revenue up 25.0% to $32.5 million.
MD&A notes the sales cycle for software and services can be lengthy and implementation cycles for channel partners and customers can be as long as six months or longer for larger customers, so delays could adversely affect business, financial condition, and results of operations.
MD&A says sales of licenses to one or more channel partners have comprised a significant part of revenue in each of the last few years, and losing a channel partner relationship could require establishing new end-user relationships that may take time or not develop.
MD&A states Mitek has a growing number of competitors in mobile image capture and identity verification, many with greater financial, technical, marketing, and other resources, requiring continued product investment to remain competitive.
MD&A highlights continuing uncertainty from COVID-19, including effects on operational and financial performance, long-term revenue growth and profitability, sales cycles, new business leads, and vendors, despite remote work productivity.
MD&A describes the 0.75% convertible senior notes due 2026, related note hedge and warrant transactions, and states the convertible feature will be dilutive to earnings per share when average stock price exceeds the conversion price, with incremental dilution if average share price is over $26.53.
MD&A describes the May 2021 ID R&D acquisition with up to approximately $22.1 million in additional cash and stock payments upon achievement of financial milestones during fiscal 2022 and fiscal 2023, creating integration and contingent consideration risk.
Operating cash flow decreased 74.2% to $2.3 million in the quarter ended December 31, 2021 from $8.7 million in the prior-year quarter, while current deferred revenue decreased 16.2% to $8.17 million from $9.74 million, which MD&A links to liquidity and capital resources.
Summary, forecast, risks and KPIs are extracted from MITEK SYSTEMS INC's SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.