MITEK SYSTEMS INC Q2 FY2026 earnings

Mitek Systems closed the second quarter of fiscal 2026 with record revenue. Total revenue for the three months ended March 31, 2026 was $54.8 million, up 5.6% from $51.9 million a year earlier. Year-to-date revenue reached $99.1 million, an increase of 11.1%. The mix kept tilting toward recurring work. SaaS revenue grew 18% year over year, and Fraud and Identity revenue grew 28%, while software license revenue slipped 3% on lower Mobile Deposit sales. Management attributed the SaaS gain to customers routing more transactions through Mitek to counter AI-driven fraud.

Profitability improved faster than the top line. Operating income for the quarter was $13.5 million, up 19.2% from $11.4 million a year ago, and the operating margin widened to 24.7% from 21.9%. Net income was $9.5 million, up 4.2% from $9.2 million, while diluted earnings per share held flat at $0.20. The year-to-date picture is sharper. Operating income of $19.0 million rose 129.0%, net income of $12.3 million rose 171.1%, and diluted EPS of $0.25 was up from $0.10. Year-to-date operating margin was 19.2%, compared with 9.3% a year earlier.

On a non-GAAP basis, adjusted EBITDA was $22.3 million against $20.3 million a year earlier, a 40.7% margin versus 39.0%. Non-GAAP net income was $18.5 million, or $0.38 per diluted share, compared with $16.7 million and $0.36. Non-GAAP gross margin slipped to 85.0% from 87.7%, a reminder that hosted services and service-intensive customer work carry heavier costs, and cost of revenue rose 31% in the quarter.

Cash generation is the weak spot. Operating cash flow was an outflow of $0.9 million in the quarter, down from an inflow of $13.7 million a year earlier, and the six-month figure of $7.1 million was down 50.6% from $14.3 million. Capital expenditures rose to $1.55 million in the quarter from $0.23 million, and the six-month total was $3.0 million against $0.6 million. The swing traces to working capital. Accounts receivable increased $26.9 million because large deals closed late in the quarter, with collections expected in the fiscal third quarter. Free cash flow over the trailing twelve months was $44.5 million, down from $47.1 million, while net cash provided by operating activities on the same basis was $48.1 million, compared with $48.4 million.

The balance sheet changed a lot. Cash and investments totaled $77.6 million at March 31, 2026, down $118.9 million from $196.5 million at September 30, 2025. Repaying $155.3 million of convertible notes and buying back $17.8 million of stock over the six months drove most of that decline, partly offset by a $50.0 million term loan. Working capital was $96.6 million, up from $39.5 million. Backlog kept growing: deferred revenue of $36.1 million was up 23.0%, and remaining performance obligations of $115.2 million were up 42.2%. The term loan carries a net leverage covenant of 2.50 to 1.00, and the company reported compliance.

Guidance implies slower growth ahead. For the full fiscal year ending September 30, 2026, Mitek raised total revenue guidance to $189 million to $198 million, roughly 8% growth at the midpoint, and an adjusted EBITDA margin of 30% to 33%. For the fiscal third quarter ending June 30, 2026, revenue guidance is $49 million to $53 million, alongside total non-GAAP operating expense of $25 million to $26 million.

Costs and execution carry the main risks. General and administrative expenses rose 21% in the quarter, helped along by higher bad debt expense after one customer defaulted on a payment plan. Research and development fell 23% and selling and marketing fell 9% as the company shifted headcount and capitalized more internal-use software. The filing also flags quarterly revenue variability, demand for its products, and the timing of customer implementations, and a large part of the cost base is denominated in euros and British pounds.