Business Wire | Jul 29, 2021 04:06PM EDT

Mitek Reports Record Revenue Up 25% Year Over Year and Rapid Adoption of Its Check Fraud Consortium

Jul. 29, 2021

SAN DIEGO--(BUSINESS WIRE)--Jul. 29, 2021--Mitek (NASDAQ: MITK, www.miteksystems.com), a global leader in mobile capture and digital identity verification solutions, today reported financial results for its third quarter of fiscal 2021 ended June 30, 2021. Total third quarter revenue increased 25% year over year, fueled by increased demand for both identity verification solutions and mobile deposit as commerce continues its shift to digital channels.

Fiscal Third Quarter 2021 Financial Highlights

* Total revenue increased 25% year over year to a record $31.8 million. * GAAP net income was $3.0 million, or $0.07 per diluted share. * Non-GAAP net income increased 56% year over year to $10.6 million, or $0.23 per diluted share. * Cash flow from operations was $9.0 million. * Total cash and investments were $215.5 million at the end of the quarter.

Transactional identity verification revenue continued its solid performance growing 33% year over year, and deposit solutions grew 23% year over year as consumer adoption further expands.

"We are pleased to report an all-time record revenue quarter with strong growth from both our identity and deposits businesses," said Mitek CEO Max Carnecchia. "Mitek's consistent, strong and rapid growth reflects the team's commitment to helping our customers and partners accelerate their digital transformation and fight against fraud. With both the acquisition of ID R&D and the introduction of Check Fraud Defender this quarter, we continue our commitment to building trust in the digital world."

Mitek acquired ID R&D, the leading provider of AI-based voice and face biometrics and liveness detection, during the quarter to lead the fight against biometric identity fraud.

The company also introduced Check Fraud Defender, the first AI-powered, cloud-hosted consortium for financial institutions. Twenty percent of the top 25 US banks have already licensed Check Fraud Defender technology and are experiencing up to a 90% savings in manual review time following its initial deployment. Nearly 100 percent of U.S. banks trust Mitek technology today, making it uniquely qualified to provide this service which enables financial institutions to cooperate in the fight against skyrocketing check fraud.

Mitek's technology ensures that more businesses can transact digitally and secure their platforms through easy, fast and continuous identity verification. Almost all aspects of modern life now use digital channels, so the need to establish trust in the digital identities of customers, citizens, partners, and employees is rapidly rising. Mitek continues as the clear market leader in remote check deposit solutions, with thousands of financial organizations using its solutions, and approximately five billion transactions processed.

Conference Call Information

Mitek management will host a conference call and live webcast for analysts and investors today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss the company's financial results.

To access the live call, dial 800-367-2403 (US and Canada) or +1 334-777-6978 (International) and give the participant passcode 2203805.

A live and archived webcast of the conference call will be accessible on the Investor Relations section of the company's website at www.miteksystems.com. In addition, a phone replay will be available approximately two hours following the end of the call, and it will remain available for one week. To access the call replay dial-in information, please click here.

About Mitek

Mitek (NASDAQ: MITK) is a global leader in mobile capture and digital identity verification built on the latest advancements in computer vision and artificial intelligence. Mitek's identity verification solutions enable organizations to verify an individual's identity during digital transactions to reduce risk and meet regulatory requirements, while increasing revenue from digital channels. More than 7,500 organizations use Mitek to enable trust and convenience for mobile check deposit, new account opening and more. Mitek is based in San Diego, Calif., with offices across the U.S. and Europe. Learn more at www.miteksystems.com. [(MITK-F)]

Follow Mitek on LinkedIn, Twitter and YouTube, and read Mitek's latest blog posts here.

Notice Regarding Forward-Looking Statements

Statements contained in this news release relating to the company's or management's intentions, hopes, beliefs, expectations or predictions of the future, including, but not limited to, statements relating to the company's long-term prospects and market opportunities are forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties, including, but not limited to, risks related to the company's ability to withstand negative conditions in the global economy, the extent to which the COVID-19 outbreak and measures taken in response thereto impact our business, results of operations and financial condition, a lack of demand for or market acceptance of the company's products, the company's ability to continue to develop, produce and introduce innovative new products in a timely manner or the outcome of any pending or threatened litigation and the timing of the implementation and launch of the company's products by the company's signed customers.

Additional risks and uncertainties faced by the company are contained from time to time in the company's filings with the U.S. Securities and Exchange Commission (SEC), including, but not limited to, the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2020, and its quarterly reports on Form 10-Q and current reports on Form 8-K, which you may obtain for free on the SEC's website at www.sec.gov. Collectively, these risks and uncertainties could cause the company's actual results to differ materially from those projected in its forward-looking statements and you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company disclaims any intention or obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Note Regarding Use of Non-GAAP Financial Measures

This news release contains non-GAAP financial measures for non-GAAP net income and non-GAAP net income per share that exclude stock compensation expenses, intellectual property litigation costs, executive transition costs, acquisition-related costs and expenses, amortization of debt discount and issuance costs, income tax effect of pre-tax adjustments, and the cash tax difference. These financial measures are not calculated in accordance with generally accepted accounting principles (GAAP) and are not based on any comprehensive set of accounting rules or principles. In evaluating the company's performance, management uses certain non-GAAP financial measures to supplement financial statements prepared under GAAP. Management believes these non-GAAP financial measures provide a useful measure of the company's operating results, a meaningful comparison with historical results and with the results of other companies, and insight into the company's ongoing operating performance. Further, management and the Board of Directors utilize these non-GAAP financial measures to gain a better understanding of the company's comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Management believes these non-GAAP financial measures, when read in conjunction with the company's GAAP financial statements, are useful to investors because they provide a basis for meaningful period-to-period comparisons of the company's ongoing operating results, including results of operations against investor and analyst financial models, which helps identify trends in the company's underlying business and provides a better understanding of how management plans and measures the company's underlying business.

MITEK SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(amounts in thousands except share data)

June 30, September 2021 30, 2020

ASSETS

Current assets:

Cash and cash equivalents $ 40,549 $ 19,986

Short-term investments 138,302 40,035

Accounts receivable, net 18,583 15,612

Contract assets 3,610 5,187

Prepaid expenses 1,988 1,338

Other current assets 2,163 1,968

Total current assets 205,195 84,126

Long-term investments 36,643 1,963

Property and equipment, net 3,594 3,610

Right-of-use assets 7,602 5,407

Intangible assets, net 28,557 19,289

Goodwill 67,050 35,669

Deferred income tax assets 13,773 13,484

Convertible senior notes hedge 54,334 -

Other non-current assets 5,650 5,606

Total assets $ 422,398 $ 169,154

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 2,637 $ 3,909

Accrued payroll and related taxes 9,532 8,882

Deferred revenue, current portion 11,896 7,973

Lease liabilities, current portion 1,928 1,819

Acquisition-related contingent consideration 9,950 753

Other current liabilities 1,660 1,020

Total current liabilities 37,603 24,356

Convertible senior notes 119,625 -

Embedded conversion derivative 54,334 -

Deferred revenue, non-current portion 614 1,597

Lease liabilities, non-current portion 7,182 5,327

Deferred income tax liabilities 7,981 4,649

Other non-current liabilities 6,535 982

Total liabilities 233,874 36,911

Stockholders' equity:

Preferred stock, $0.001 par value, 1,000,000 shares - - authorized, none issued and outstanding

Common stock, $0.001 par value, 60,000,000 sharesauthorized, 44,018,619 and 41,779,853 issued and 44 42 outstanding, as of June 30, 2021 and September 30,2020, respectively

Additional paid-in capital 195,942 146,518

Accumulated other comprehensive income (loss) 361 (323 )

Accumulated deficit (7,823 ) (13,994 )

Total stockholders' equity 188,524 132,243

Total liabilities and stockholders' equity $ 422,398 $ 169,154

MITEK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(amounts in thousands except per share data)

Three Months Ended June 30,

Nine Months Ended June 30,

2021

2020

2021

2020

Revenue

Software and hardware

$

16,973

$

13,212

$

42,288

$

36,180

Services and other

14,805

12,201

44,238

34,492

Total revenue

31,778

25,413

86,526

70,672

Operating costs and expenses

Cost of revenue-software and hardware

293

623

2,208

2,258

Cost of revenue-services and other

3,117

2,873

9,132

7,357

Selling and marketing(1)

8,133

7,011

24,048

20,345

Research and development(1)

6,946

5,891

19,801

16,764

General and administrative

5,633

5,884

16,409

16,382

Acquisition-related costs and expenses

2,224

1,697

5,576

4,884

Restructuring costs

-

-

-

(114

)

Total operating costs and expenses

26,346

23,979

77,174

67,876

Operating income

5,432

1,434

9,352

2,796

Interest expense

2,223

-

3,543

-

Other income, net

80

145

549

480

Income before income taxes

3,289

1,579

6,358

3,276

Income tax provision

(304

)

(231

)

(187

)

(460

)

Net income

$

2,985

$

1,348

$

6,171

$

2,816

Net income per share-basic

$

0.07

$

0.03

$

0.14

$

0.07

Net income per share-diluted

$

0.07

$

0.03

$

0.14

$

0.07

Shares used in calculating net income per share-basic

43,773

41,483

43,145

41,251

Shares used in calculating net income per share-diluted

45,194

42,428

44,646

42,239

MITEK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(amounts in thousands except per share data)

Three Months Ended June Nine Months Ended June 30, 30,

2021 2020 2021 2020

Revenue

Software and hardware $ 16,973 $ 13,212 $ 42,288 $ 36,180

Services and other 14,805 12,201 44,238 34,492

Total revenue 31,778 25,413 86,526 70,672

Operating costs and expenses

Cost of revenue-software and 293 623 2,208 2,258 hardware

Cost of revenue-services and 3,117 2,873 9,132 7,357 other

Selling and marketing^(1) 8,133 7,011 24,048 20,345

Research and development^(1) 6,946 5,891 19,801 16,764

General and administrative 5,633 5,884 16,409 16,382

Acquisition-related costs and 2,224 1,697 5,576 4,884 expenses

Restructuring costs - - - (114 )

Total operating costs and 26,346 23,979 77,174 67,876 expenses

Operating income 5,432 1,434 9,352 2,796

Interest expense 2,223 - 3,543 -

Other income, net 80 145 549 480

Income before income taxes 3,289 1,579 6,358 3,276

Income tax provision (304 ) (231 ) (187 ) (460 )

Net income $ 2,985 $ 1,348 $ 6,171 $ 2,816

Net income per share-basic $ 0.07 $ 0.03 $ 0.14 $ 0.07

Net income per share-diluted $ 0.07 $ 0.03 $ 0.14 $ 0.07

Shares used in calculating 43,773 41,483 43,145 41,251 net income per share-basic

Shares used in calculating 45,194 42,428 44,646 42,239 net income per share-diluted

(1)

June 30, 2020 consolidated statements of operations reflect reclassifications to conform to the current year presentation.

(1) June 30, 2020 consolidated statements of operations reflect reclassifications to conform to the current year presentation.

MITEK SYSTEMS, INC.

NON-GAAP NET INCOME RECONCILIATION

(Unaudited)

(amounts in thousands except per share data)

Three Months Ended June 30,

Nine Months Ended June 30,

2021

2020

2021

2020

Net income

$

2,985

$

1,348

$

6,171

$

2,816

Non-GAAP adjustments:

Acquisition-related costs and expenses

2,224

1,697

5,576

4,884

Intellectual property litigation costs

128

998

645

2,032

Executive transition costs(1)

428

-

428

-

Stock compensation expense

2,867

2,501

8,582

7,112

Restructuring costs

-

-

-

(114

)

Amortization of debt discount and issuance costs

1,933

-

3,080

-

Income tax effect of pre-tax adjustments

(1,743

)

(1,195

)

(4,211

)

(3,200

)

Cash tax difference(2)

1,776

1,426

3,781

3,660

Non-GAAP net income

10,598

6,775

24,052

17,190

Non-GAAP income per share-basic

$

0.24

$

0.16

$

0.56

$

0.42

Non-GAAP income per share-diluted

$

0.23

$

0.16

$

0.54

$

0.41

Shares used in calculating non-GAAP net income per share-basic

43,773

41,483

43,145

41,251

Shares used in calculating non-GAAP net income per share-diluted

45,194

42,428

44,646

42,239

MITEK SYSTEMS, INC.

NON-GAAP NET INCOME RECONCILIATION

(Unaudited)

(amounts in thousands except per share data)

Three Months Ended June Nine Months Ended June 30, 30,

2021 2020 2021 2020

Net income $ 2,985 $ 1,348 $ 6,171 $ 2,816

Non-GAAP adjustments:

Acquisition-related costs and 2,224 1,697 5,576 4,884 expenses

Intellectual property 128 998 645 2,032 litigation costs

Executive transition costs^ 428 - 428 - (1)

Stock compensation expense 2,867 2,501 8,582 7,112

Restructuring costs - - - (114 )

Amortization of debt discount 1,933 - 3,080 - and issuance costs

Income tax effect of pre-tax (1,743 ) (1,195 ) (4,211 ) (3,200 )adjustments

Cash tax difference^(2) 1,776 1,426 3,781 3,660

Non-GAAP net income 10,598 6,775 24,052 17,190

Non-GAAP income per $ 0.24 $ 0.16 $ 0.56 $ 0.42 share-basic

Non-GAAP income per $ 0.23 $ 0.16 $ 0.54 $ 0.41 share-diluted

Shares used in calculatingnon-GAAP net income per 43,773 41,483 43,145 41,251 share-basic

Shares used in calculatingnon-GAAP net income per 45,194 42,428 44,646 42,239 share-diluted

(1)

Comprised of costs associated with the transition of the company's former chief financial officer. Our non-GAAP financial measures exclude these transition costs as we believe that such expense is inconsistent with the normally recurring operations of our company and the inclusion of these costs makes it difficult to make period-to-period comparisons of our operating performance.

(2)

The company's non-GAAP net income is calculated using a cash tax rate of 3% and 0% in fiscal years 2021 and 2020, respectively. The estimated cash tax rate is the estimated tax payable on the company's tax returns as a percentage of estimated annual non-GAAP pre-tax net income. The company uses an estimated cash tax rate to adjust for the historical variation in the effective book tax rate associated with the reversal of valuation allowances, the utilization of research and development tax credits, and the utilization of loss carryforwards which currently have an overall effect of reducing taxes payable. The company believes that the cash tax rate provides a more transparent view of the company's operating results. The company's effective tax rate used for the purposes of calculating GAAP net income for the three months ended June 30, 2021 and 2020 was 9% and 15%, respectively. The company's effective tax rate used for the purposes of calculating GAAP net income for the nine months ended June 30, 2021 and 2020 was 3% and 14%, respectively.

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CONTACT: Investor Contact: Todd Kehrli or Jim Byers MKR Group, Inc. mitk@mkr-group.com