Summary
Mitek Systems reported record revenue for its fiscal 2022 third quarter ended June 30, 2022. Total revenue was $39.3 million, up 24% from $31.8 million in the prior-year quarter. Year-to-date revenue through June 30, 2022 was $106.5 million, up 23.1% from $86.5 million in the same nine-month period a year earlier. The company launched MiVIP, the Mitek Verified Identity Platform, during the quarter. Management said the platform combines Mitek's identity technologies and the HooYu acquisition to give customers more control over the customer identity journey. Mitek serves more than 7,500 organizations. It added patents during the quarter, bringing total issued patents to 82 as of June 30, 2022, with 18 domestic and international patent applications pending. The top line grew across both software and hardware and services, helped by Mobile Deposit, CheckReader, IDLive, and Mobile Verify products. The HooYu acquisition, completed in March 2022, also contributed to services revenue.
Profitability weakened even as revenue rose. Operating income was $2.24 million, down 58.7% from $5.43 million in the prior-year quarter. Operating margin was 5.7%, down 11.4 percentage points from 17.1%. Net income was $0.81 million, down 72.8% from $2.98 million. Diluted EPS was $0.02, down from $0.07. For the nine months ended June 30, 2022, operating income was $10.58 million, up 13.1% from $9.35 million. But year-to-date net income was $4.95 million, down 19.8% from $6.17 million, and year-to-date diluted EPS was $0.11, down from $0.14. Year-to-date operating margin was 9.9%, down 0.9 percentage points from 10.8%. Non-GAAP net income was $10.2 million, or $0.23 per diluted share. The gap between GAAP and non-GAAP results reflects acquisition-related costs, stock compensation, restructuring, and other adjustments. The company recorded a restructuring plan in June 2022 to align resources and improve profitability in its identity business. Interest expense on the 0.75% convertible senior notes due 2026 also weighed on GAAP results.
Cash generation declined. Operating cash flow was $6.33 million in the quarter, down 29.3% from $8.96 million in the prior-year quarter. Year-to-date operating cash flow was $16.01 million, down 36.0% from $25.02 million. Capital expenditures were $0.30 million in the quarter, down 3.6% from $0.31 million, and $0.93 million year to date, down 3.8% from $0.97 million. Deferred revenue, current portion, was $13.22 million, up 11.1% from $11.90 million a year earlier. The company completed the HooYu acquisition in March 2022 for £97.8 million in cash and paid a $9.5 million ID R&D earnout in May and June 2022. It also repurchased $14.8 million of common stock, or about 886,204 shares, during the nine months ended June 30, 2022. The 2026 Notes bear interest at 0.75% per year and mature on February 1, 2026.
Risks remain. Mitek faces competition from larger and better-funded identity verification and mobile image capture providers. Its revenue is concentrated in a few technology types, and sales and implementation cycles can run six months or longer. A small number of channel partners have historically driven a significant part of revenue. The COVID-19 pandemic continues to create uncertainty for sales cycles, customer demand, and vendor operations. The HooYu integration adds operational and cultural risk. The company also cites litigation, macroeconomic conditions, and the timing of customer launches as factors that could affect results. The release did not include formal guidance for the next quarter or the full fiscal year, so the quarter stands on its own. Management's focus is on scaling MiVIP, integrating HooYu, and controlling costs after the June restructuring.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $39.3M | $34.7M | +13.3% | $31.8M | +23.8% |
| Research & development | $9.6M | $8.2M | +16.7% | $6.9M | +38.4% |
| Sales & marketing | $11.2M | $9.2M | +21.8% | $8.1M | +37.9% |
| General & administrative | $6.6M | $6.1M | +8.5% | $5.6M | +17.0% |
| Total operating expenses | $37.1M | $29.9M | +24.1% | $26.3M | +40.8% |
| Operating income (loss) | $2.2M | $4.8M | -53.6% | $5.4M | -58.7% |
| Operating margin | 5.7% | 13.9% | -8.2 pp | 17.1% | -11.4 pp |
| Net income (loss) | $811.0K | $1.9M | -57.6% | $3.0M | -72.8% |
| Net margin | 2.1% | 5.5% | -3.4 pp | 9.4% | -7.3 pp |
| Diluted EPS | $0.02 | $0.04 | -$0.02 | $0.07 | -$0.05 |
Risks
The company identified multiple material weaknesses in internal control over financial reporting, including new weaknesses in the financial statement close process, business combination accounting, and revenue recognition, and existing weaknesses in contingent consideration and income tax accounts that continue at June 30, 2022. One weakness resulted in a restatement to the second quarter of fiscal 2022.
A June 2022 restructuring plan produced $1.8 million of restructuring costs in the quarter and nine months ended June 30, 2022, with no comparable prior-year costs, as the company seeks to evolve its organization and achieve profitability for its identity business. This occurred alongside a 72.8% quarter-over-quarter decline in net income and a 58.7% decline in operating income.
The company has employees in Russia, and Russian military action against Ukraine plus enhanced sanctions may disrupt vendor relationships, service delivery, and projects in the region, potentially requiring work to shift to other countries.
The sales cycle for the company's software and services can be lengthy, and implementation by channel partners and customers can take as long as six months or longer for larger customers, so delays could adversely affect results.
The mobile image capture and identity verification industry has a growing number of competitors, many with greater financial, technical, and marketing resources, and substantially all revenue comes from a few types of technology, creating product concentration risk.
Sales of licenses to one or more channel partners have comprised a significant part of revenue each year, and losing a channel partner relationship could require establishing new end-user relationships, which may take time or may not develop.
Increasing investor and regulatory focus on ESG factors, including SEC proposed climate-related risk reporting rules, could impose additional costs and enforcement risk if existing climate disclosures are alleged to be misleading or deficient.
Summary, forecast, risks and KPIs are extracted from MITEK SYSTEMS INC's SEC filings for Q3 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.