Summary
Mitek closed fiscal 2022 with solid top-line growth and a much weaker bottom line. Fourth-quarter revenue rose 16.5% to $38.76 million, and full-year revenue reached $143.94 million, up 20.2%. Profit moved the opposite way. The fourth quarter swung to a net loss of $0.31 million, and diluted earnings per share was -$0.01. For the full year, net income was $3.03 million, or $0.07 per diluted share. The gap between revenue growth and profit reflects a cost base that expanded faster than sales after two acquisitions, and a fourth quarter that carried the weight of integration and restructuring work.
Operating income fell in both periods. Fourth-quarter operating income was $2.94 million, down 25.1%, and full-year operating income was $11.34 million, down 14.6%. Operating margin slipped 4.2 percentage points in the quarter to 7.6% and 3.2 percentage points for the year to 7.9%. The customer base held up. Mitek served more than 7,800 financial institutions, and as of September 30, 2022 it held 80 issued patents with 16 patent applications outstanding. Backlog indicators improved. Current deferred revenue rose 29.0% to $13.39 million, and remaining performance obligations were $15.20 million.
Cash generation slowed. Fourth-quarter operating cash flow was $10.34 million, down 16.1%, and full-year operating cash flow was $26.35 million, down 29.4%. Capital expenditures were $0.20 million in the quarter, down 53.2%, and $1.13 million for the year, down 18.8%. Liquidity is the more pressing issue. Cash and cash equivalents and investments totaled $101.0 million on September 30, 2022, down from $227.4 million on September 30, 2021, a decrease of $126.5 million, or 56%. Acquisitions, net of cash acquired, used $127.9 million, partly offset by $1.7 million of net proceeds from stock issued under the 2020 Plan. Working capital fell to $88.6 million from $164.8 million. Management said it believes current cash and cash equivalent balance and cash expected to be generated from operations will be adequate to satisfy working capital needs for the next twelve months.
The HooYu acquisition closed in March 2022 for $129.1 million of aggregate consideration, adding UK KYC technology alongside the earlier ID R&D deal. Mitek also wrapped up its share repurchase program. Total purchases under that program reached $15.0 million, including $14.8 million, or roughly 886,204 shares, bought during fiscal 2022 at an average price of $16.73.
Risks now center on the balance sheet and the reporting process. Mitek disclosed that as of January 13, 2023 it was not in compliance with certain covenants in the Indenture for its 0.750% convertible senior notes due 2026 because it did not timely file reports with the SEC. The notes began accruing additional special interest of 0.25% per annum of outstanding principal for the 90 days after that date and 0.50% per annum for the 91st through 180th day. The notes carry $155.3 million in aggregate principal, were issued with net proceeds of $149.7 million, mature on February 1, 2026, and carry an initial conversion price of about $20.85 per share, a 37.5% premium to the $15.16 last reported sale price on February 2, 2021. A June 2022 restructuring trimmed headcount. With operating margin lower, operating cash flow down and the cash and investments balance 56% smaller, the company has less cushion to absorb integration costs and covenant penalties.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $37.4M | $39.3M | -4.9% | $33.3M | +12.5% |
| Research & development | $4.7M | $9.6M | -50.7% | $8.2M | -42.5% |
| Sales & marketing | $10.0M | $11.2M | -11.0% | $8.4M | +18.1% |
| General & administrative | $8.0M | $6.6M | +20.9% | $6.1M | +31.0% |
| Total operating expenses | $36.7M | $37.1M | -1.2% | $29.3M | +24.9% |
| Operating income (loss) | $762.0K | $2.2M | -66.0% | $3.9M | -80.6% |
| Operating margin | 2.0% | 5.7% | -3.7 pp | 11.8% | -9.8 pp |
| Net income (loss) | -$1.9M | $811.0K | -336.3% | $1.8M | -206.0% |
| Net margin | -5.1% | 2.1% | -7.2 pp | 5.4% | -10.6 pp |
| Diluted EPS | -$0.04 | $0.02 | -$0.06 | $0.04 | -$0.08 |
Risks
Mitek identified material weaknesses in its internal control over financial reporting for fiscal 2022 and 2021. Failure to remediate could impair timely and accurate financial reporting, lead to restatements, and negatively affect investor confidence.
On June 13, 2023, Mitek received a Staff Delisting Determination after failing to file its Form 10-K and Q1 and Q2 Form 10-Qs by the compliance deadline. A delisting could impair capital access, reduce liquidity, and trigger defaults under outstanding indebtedness.
As of January 13, 2023, Mitek was not in compliance with certain Indenture covenants because it did not timely file SEC reports. The 2026 Notes began accruing special interest of 0.25% and then 0.50% per annum, and a default could accelerate repayment.
USAA patent lawsuits against PNC, BBVA, and Truist have resulted in large damages awards and indemnification demands to Mitek. Ongoing appeals, IPRs, and potential customer indemnity obligations could require significant expense and management attention.
Mitek expects additional expenses integrating ID R&D and HooYu, and actual results could differ materially from expectations. Amortization and acquisition-related costs increased 70% to $15.2 million for the twelve months ended September 30, 2022 compared to 2021.
Mitek maintains a significant amount of cash at Silicon Valley Bank, a division of First Citizens Bank, exceeding insured limits. SVB failed in March 2023, and future access to uninsured funds in similar situations is not guaranteed.
Adverse economic conditions, recession, inflation, and reduced spending on information technology solutions, especially among small and medium sized business customers, may adversely impact revenue and profitability.
Mitek has lengthy sales cycles of six months or more, and a significant portion of sales historically occur in the last few weeks of a quarter. This creates forecasting difficulties and could cause operating results to vary significantly from period to period.
Mitek faces competition from companies with greater financial, technical, and marketing resources. Competitors could force price reductions, reduced margins, or loss of market share.
The decline in check use, growth of check alternatives like Zelle and Venmo, and slowing growth of active mobile banking users may negatively impact Mitek's Mobile Deposit business.
Evolving domestic and international data privacy regulations, including GDPR and EU-US data transfer uncertainty, may restrict Mitek's and its customers' ability to process personal and biometric data and increase compliance costs.
Mitek is highly dependent on key personnel, and limited shares available under equity plans, 1,477,769 as of September 30, 2022, may limit its ability to grant equity incentives and retain employees.
A potential proxy contest for director elections could require significant legal fees, disrupt operations, divert resources, and trigger change-of-control payments under certain employment agreements and equity plans.
Mitek's operations in non-U.S. markets and acquisitions of ID Checker, ICAR, A2iA, ID R&D, and HooYu increase exposure to FCPA and anti-corruption liability, foreign tax regulations, and international data transfer risks.
Mitek derives substantially all of its revenue from a few types of technologies. If its core mobile imaging products do not achieve or continue to achieve market acceptance, revenue growth would be adversely affected.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from MITEK SYSTEMS INC's SEC filings for Q4 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 2, 2026.