Summary
Mitek Systems reported fiscal 2023 third-quarter revenue of $43.07 million, up 9.9% from the prior-year quarter. Operating income was $1.79 million, up 100.7%, and operating margin was 4.2%, up 1.9 percentage points. The bottom line was weaker. Net loss was $0.43 million, and the loss widened from the prior-year quarter. Diluted EPS was -$0.01, swinging to a loss. Revenue growth came from both software and hardware and services and other. Software and hardware revenue rose on higher sales of Mobile Deposit and IDLive products, partially offset by declines in CheckReader and legacy identity verification products. Services and other revenue increased on higher SaaS revenue from the HooYu acquisition and higher hosted mobile deposit transactional revenue, partially offset by lower transactional SaaS revenue. The quarter's revenue growth did not translate into positive net income because of higher expenses. Cost of revenue decreased 1%, and selling and marketing expenses fell 8%. Research and development expenses declined 11%. General and administrative expenses jumped 76% on higher audit and accounting fees, third-party professional fees, and software and IT costs. Amortization and acquisition-related costs rose 38%, and restructuring costs dropped 99%. Interest expense rose 14%, and other income, net rose 939%. The company recorded an income tax provision, compared with a benefit in the prior-year quarter. The combination of these items pushed the company to a net loss despite higher operating income.
Year-to-date results show stronger momentum. Revenue for the nine months ended June 30, 2023 was $134.90 million, up 28.3%. Operating income was $18.85 million, up 124.3%, and operating margin was 14.0%, up 6.0 percentage points. Net income was $9.47 million, up 183.2%. Diluted EPS was $0.20, up 185.7%. The year-to-date period benefited from a significant Mobile Deposit multiyear contract recognized in the first quarter of fiscal 2023, as well as growth in SaaS revenue from the HooYu acquisition and higher hosted mobile deposit transactional revenue. Software and hardware revenue grew 38% year to date, while services and other revenue grew 19%. Cost of revenue increased 13%, selling and marketing rose 2%, research and development rose 3%, general and administrative jumped 62%, and amortization and acquisition-related costs rose 42%. Restructuring costs rose 11%, interest expense rose 9%, and other income, net swung to income from a small expense. The company also continued to invest in its patent portfolio, adding new patents to bring total issued patents to 96 as of June 30, 2023, with 18 domestic and international patent applications pending.
Cash generation was a highlight. Operating cash flow was $16.55 million in the quarter, up 161.6%. For the nine months, operating cash flow was $28.11 million, up 75.6%. Capital expenditures were $0.28 million in the quarter, down 3.7%, and $0.66 million year to date, down 29.4%. Deferred revenue, current portion only, was $12.79 million, down 6.3% from the prior-year quarter. The company serves more than 7,900 financial services organizations and leading marketplace and fintech brands. Management's outlook is framed by growth opportunities in digital deposits and identity verification, driven by trends in payments, online lending, more stringent regulations, and demand for digital services. The company also completed the acquisition of ID R&D in May of 2021 and the acquisition of HooYu in March of 2022, which expanded its biometric and KYC capabilities. Liquidity improved, with cash and investments increasing and working capital rising from the prior fiscal year end.
Risks and challenges remain. The company restated previously issued financial statements for the interim periods ended March 31, 2022 and June 30, 2022. It also fell out of compliance with covenants on its 0.75% convertible senior notes due 2026 because of late SEC filings, which triggered special interest. The notes bear interest at 0.75% and mature on February 1, 2026. The company filed its Form 10-K on July 31, 2023, its Q1 Form 10-Q on September 6, 2023, and its Q2 Form 10-Q on September 29, 2023. As of October 26, 2023, the company is back in compliance. Management cites competition, lengthy sales and implementation cycles, product concentration, and channel partner concentration as ongoing risks. Fraud and cyber-attacks, regulatory compliance demands, and the need to keep pace with digital transformation also shape the outlook. The company faces execution risk as it integrates acquisitions and manages expenses. The share repurchase program expired on June 30, 2022, and no purchases were made after that date. The company also has a Notes Hedge and Warrant Transactions related to the 2026 Notes, which could affect dilution.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $43.1M | $46.1M | -6.6% | $39.3M | +9.5% |
| Research & development | $7.5M | $7.4M | +1.2% | $9.6M | -22.4% |
| Sales & marketing | $10.3M | $9.6M | +7.0% | $11.2M | -8.2% |
| General & administrative | $11.6M | $10.1M | +15.2% | $6.6M | +75.9% |
| Total operating expenses | $41.3M | $37.4M | +10.3% | $37.1M | +11.3% |
| Operating income (loss) | $1.8M | $8.7M | -79.4% | $2.2M | -20.1% |
| Operating margin | 4.2% | 18.8% | -14.7 pp | 5.7% | -1.5 pp |
| Net income (loss) | -$428.0K | $5.2M | -108.3% | $811.0K | -152.8% |
| Net margin | -1.0% | 11.2% | -12.2 pp | 2.1% | -3.0 pp |
| Diluted EPS | -$0.01 | $0.11 | -$0.12 | $0.02 | -$0.03 |
Risks
The Company concluded that its previously issued financial statements for the interim periods March 31, 2022 and June 30, 2022 should be restated to correct historical errors, as described in Note 13.
As of June 30, 2023, the Company was not in compliance with certain covenants in the Indenture for its 0.75% Convertible Senior Notes due 2026 because it had not timely filed its Form 10-K and Forms 10-Q, which caused the notes to accrue additional special interest of 0.25% for the first 90 days and 0.50% for the next 90 days after the Date of Noncompliance. As of October 26, 2023, the Company is in compliance with the covenants as all required reports have been filed.
SaaS KPIs
All quarters →Financial services organizations served
Summary, forecast, risks and KPIs are extracted from MITEK SYSTEMS INC's SEC filings for Q3 FY2023 (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.