Summary
Mitek Systems closed fiscal 2023 with a weak fourth quarter. Revenue for the quarter ended September 30, 2023 fell 5.0% to $37.66 million. Operating income swung to a loss of $3.29 million, down 186.5%. Net income swung to a loss of $1.44 million, down 511.4%. Diluted EPS was -$0.03, down 400.0%. Operating margin was -8.7%, down 18.3 percentage points. The quarterly pressure contrasts with the full year. For the twelve months ended September 30, 2023, revenue rose 19.2% to $172.55 million. Operating income increased 27.6% to $15.56 million. Net income rose 117.3% to $8.03 million. Diluted EPS was $0.17, up 112.5%. Operating margin was 9.0%, up 0.6 percentage points.
Cash generation and backlog metrics also weakened on a year-over-year quarterly basis. Operating cash flow for the quarter was $3.47 million, down 32.0%. For the full year, operating cash flow was $31.59 million, up 49.6%. Capital expenditures for the quarter were $0.38 million, up 91.9%. For the full year, capital expenditures were $1.03 million, down 8.2%. Deferred revenue at September 30, 2023 was $17.36 million, down 18.7% from the prior-year quarter. Remaining performance obligations were $18.30 million, down 20.8%. Those declines point to softer bookings and less visibility into future revenue.
The cost structure moved in ways that help explain the quarterly loss. General and administrative expenses rose sharply, driven by higher third-party and professional fees, audit and accounting fees, software and IT costs, legal costs, executive transition costs, and an allowance for uncollectible receivables. Selling and marketing expenses increased on higher product promotion, travel, and personnel costs. Research and development expenses declined on lower personnel-related costs. Amortization and acquisition-related costs rose because of HooYu intangible amortization and an increase in the fair value of the ID R&D contingent consideration liability. Restructuring costs from workforce reductions in November and June 2022 also weighed on results.
Operationally, Mitek still serves more than 7,900 financial services organizations. The company added patents during fiscal 2023, bringing total issued patents to 100 as of September 30, 2023, with 20 patent applications outstanding. Acquisitions of ID R&D and HooYu expanded its biometric and KYC capabilities. Full-year revenue growth came from Mobile Deposit and IDLive software products, an existing customer multiyear Mobile Deposit contract recognized in the first quarter of fiscal 2023, and services growth from HooYu. The company also completed strategic restructurings in November and June 2022 that included workforce reductions.
Risks remain elevated. Mitek was not in compliance with certain covenants in the indenture for its 2026 notes after late filings, which triggered additional special interest. As of February 15, 2024, the company was again not in compliance because it had not timely filed its Form 10-Q for the quarter ended December 31, 2023. The filing also cites forward-looking statements and risk factors that could cause actual results to differ materially. The fourth-quarter loss, lower deferred revenue, and lower RPO show that the company faces execution and demand challenges even as full-year revenue and profit grew.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $37.7M | $43.1M | -12.6% | $37.4M | +0.6% |
| Research & development | $6.5M | $7.5M | -13.1% | $4.7M | +36.9% |
| Sales & marketing | $11.1M | $10.3M | +8.0% | $10.0M | +11.4% |
| General & administrative | $13.2M | $11.6M | +14.0% | $8.0M | +65.9% |
| Total operating expenses | $40.9M | $41.3M | -0.8% | $36.7M | +11.7% |
| Operating income (loss) | -$3.3M | $1.8M | -283.4% | $762.0K | -531.4% |
| Operating margin | -8.7% | 4.2% | -12.9 pp | 2.0% | -10.8 pp |
| Net income (loss) | -$1.4M | -$428.0K | -237.4% | -$1.9M | +24.6% |
| Net margin | -3.8% | -1.0% | -2.8 pp | -5.1% | +1.3 pp |
| Diluted EPS | -$0.03 | -$0.01 | -$0.02 | -$0.04 | +$0.01 |
Risks
The company identified material weaknesses in internal control over financial reporting in fiscal 2023 and 2022, and remediation may not be effective. Failure to maintain effective controls could impair timely and accurate financial reporting and lead to litigation or investigations.
Failure to timely file the FY2023 Form 10-K and Q1 2024 Form 10-Q led to a Nasdaq delisting determination and Panel monitor. The company is also ineligible to use Form S-3, which may impair its ability to raise capital on favorable terms or in a timely manner.
Late SEC filings caused covenant noncompliance under the 0.75% convertible senior notes due 2026 Indenture, triggering special interest. As of February 15, 2024, the company was again not in compliance due to delayed filing of the Form 10-Q for the quarter ended December 31, 2023.
USAA patent lawsuits against banks using Mitek remote deposit capture technology have led to indemnification demands from NCR Corporation and others. Adverse outcomes could require Mitek to indemnify customers, pay damages, or be prevented from selling affected products.
Substantially all revenue comes from a few technologies, including Mobile Deposit and identity verification products. Declining check use, check alternatives such as Zelle and Venmo, and a plateau in active mobile banking user growth could reduce demand.
The company expects additional expenses integrating ID R&D and HooYu, whose prior non-public operations may not meet Sarbanes-Oxley or GAAP requirements. Failure to realize anticipated benefits could materially affect future operating results and financial condition.
Evolving data privacy rules, including GDPR, CCPA, CPRA, and EU-U.S. data transfer restrictions, may limit Mitek's and its customers' ability to collect, process, and use biometric or personal data, increasing compliance costs and potentially reducing demand for identity solutions.
Mitek faces competition from larger companies with greater resources in mobile imaging software, which may lead to price reductions, reduced margins, or loss of market share. If competitors offer deep discounts, Mitek may need to lower prices or offer favorable terms.
The company maintains significant cash and cash equivalents at Silicon Valley Bank, a division of First Citizens Bank, exceeding insured limits. SVB failed in March 2023 and although accounts were made whole, future access to uninsured funds in another bank failure is not guaranteed.
Mitek depends on key management and technical personnel and has no employment agreements providing specific terms or key man insurance. As of September 30, 2023, only 1,425,042 shares remained available for future equity awards, which may limit its ability to attract and retain employees.
The company's annual and quarterly results have fluctuated greatly and may continue to do so. In FY2023 Q4, revenue fell 5.0% versus the prior-year quarter and operating income swung to a $3.29 million loss, which could cause substantial fluctuations in the common stock price.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from MITEK SYSTEMS INC's SEC filings for Q4 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.