Financial Data and Key Metrics Changes - Mitek reported record Q1 revenue of $22.1 million, representing a 25% year-over-year growth [9][30] - Non-GAAP net income increased to $5 million or $0.12 per diluted share, up 377% year-over-year [9][37] - Cash flow from operations was $5.2 million, with total cash and investments reaching $39.9 million [9][38] Business Line Data and Key Metrics Changes - Deposits revenue increased by 23% to $14.7 million, while identity verification revenue grew by 28% to $7.4 million [32][30] - Transactional SaaS revenue grew 39% year-over-year to $6.1 million [31][30] - Software and hardware revenue was $11.5 million, an increase of 15% year-over-year [30] Market Data and Key Metrics Changes - The identity verification solutions saw a 39% growth in transactional SaaS revenue and transactions [18] - Over 6,500 financial institutions are using Mitek's deposit products, indicating strong market penetration [25] Company Strategy and Development Direction - Mitek is focused on expanding partnerships in the identity verification market, particularly in financial services and the gig economy [9][24] - The company aims to innovate and deliver the most accurate identity verification solutions, with ongoing investments in technology [24] - Mitek is positioned to leverage its unique offerings and market leadership to drive future growth [9][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing momentum in the identity verification market and the potential for further growth [9][28] - The company reiterated its full-year revenue guidance of $98 million to $102 million, representing a growth of approximately 16% to 21% year-over-year [39] Other Important Information - Mitek is involved in ongoing patent litigation, which could impact its operations and market perception [10][16] - The company is actively defending its technology and patents, which it believes are essential for maintaining its competitive edge [16][54] Q&A Session Summary Question: Impact of U.S. bank promotions on new business - Management noted that many banks are running programs to drive check traffic to mobile channels, but there is no direct cause and effect observed in quarterly results [44][45] Question: Changes in competitive dynamics post-rulings - Management indicated no change in competitive dynamics and emphasized their commitment to protecting their technology and patents [50][54] Question: Initial contract sizes and follow-on growth rates - Management explained that initial contracts vary by institution and typically start small, with gradual growth as implementations progress [56][60] Question: Impact of jury awards on mobile deposit offerings - Management confirmed that the jury awards do not affect the continued use of their mobile deposit offerings [63] Question: Guidance for the year despite strong Q1 performance - Management stated that it is early in the year, and they prefer to maintain conservative guidance despite a strong quarter [66] Question: Update on buyback program - Management confirmed that the buyback program was announced just before entering a blackout period, and any activity will be reported in quarterly filings [67] Question: Clarification on patent legal actions - Management clarified that the declaratory judgment action is aimed at providing clarity regarding their patents without seeking damages [69] Question: Profitability expectations for the identity segment - Management anticipates the identity segment could turn profitable by the end of 2021, with gradual improvements in gross margins over time [72]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-35231 MITEK SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 87-0418827 (State or other jurisdiction of incorporati ...

Investor presentation : MITK Q4 FY19 © 2019 Mitek Systems Inc. 1 ● ● Safe harbor statement ● ● Forward-looking statements contained in this presentation involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. Forward-looking statements may include, but are not limited to, statements relating to our outlook or expectations for earni ...

Mitek Systems, Inc. (NASDAQ:MITK) Q4 2019 Earnings Conference Call November 7, 2019 4:30 PM ET Company Participants Todd Kehrli - Investor Relations, MKR Group, Inc. Max Carnecchia - Chief Executive Officer Jeff Davison - Chief Financial Officer Conference Call Participants Bhavan Suri - William Blair & Company Operator Good day and welcome to the Mitek Systems Fourth Quarter and Fiscal 2019 Financial Results Conference Call. Today???s conference is being recorded. At this time, I would like to turn the con ...

PART I. FINANCIAL INFORMATION This part presents the company's unaudited financial statements, management's analysis, and disclosures on market risk and internal controls [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) This section presents the unaudited consolidated financial statements for the period ended June 30, 2019, and accompanying notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets%20at%20June%2030%2C%202019%20(Unaudited)%20and%20September%2030%2C%202018) This section details the company's assets, liabilities, and stockholders' equity at the end of the reporting periods Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | June 30, 2019 (Unaudited) | September 30, 2018 | | :-------------------------- | :------------------------ | :------------------- | | Total assets | $135,870 | $127,150 | | Total liabilities | $32,546 | $31,756 | | Total stockholders' equity | $103,324 | $95,394 | | Cash and cash equivalents | $16,092 | $9,028 | | Short-term investments | $11,892 | $8,448 | | Accounts receivable, net | $14,566 | $16,821 | | Total current assets | $47,481 | $37,628 | | Total current liabilities | $21,994 | $20,407 | [Consolidated Statements of Operations and Other Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Income%20(Loss)%20(Unaudited)%20for%20the%20Three%20and%20Nine%20Months%20Ended%20June%2030%2C%202019%20and%202018) This section presents the company's revenues, expenses, and net loss for the reported three and nine-month periods Consolidated Statements of Operations Highlights (Amounts in thousands, except per share data) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Nine Months Ended June 30, 2019 | Nine Months Ended June 30, 2018 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $21,906 | $16,109 | $59,572 | $42,522 | | Operating loss | $(2,909) | $(2,863) | $(9,119) | $(6,440) | | Net loss | $(99) | $(2,784) | $(4,006) | $(9,680) | | Net loss per share—basic and diluted | $(0.00) | $(0.08) | $(0.10) | $(0.28) | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)%20for%20the%20Three%20and%20Nine%20Months%20Ended%20June%2030%2C%202019%20and%202018) This section outlines the changes in the company's equity accounts during the reported periods Consolidated Stockholders' Equity Highlights (Amounts in thousands) | Metric | June 30, 2019 | September 30, 2018 | | :-------------------------- | :------------ | :----------------- | | Common Stock | $40 | $38 | | Additional paid-in capital | $129,145 | $116,944 | | Accumulated deficit | $(24,088) | $(21,002) | | Total stockholders' equity | $103,324 | $95,394 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)%20for%20the%20Nine%20Months%20Ended%20June%2030%2C%202019%20and%202018) This section details the cash inflows and outflows from operating, investing, and financing activities Consolidated Cash Flow Highlights (Amounts in thousands) | Metric | Nine Months Ended June 30, 2019 | Nine Months Ended June 30, 2018 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $7,888 | $4,372 | | Net cash used in investing activities | $(4,320) | $(8,242) | | Net cash provided by financing activities | $3,632 | $246 | | Net increase (decrease) in cash and cash equivalents | $7,064 | $(3,655) | | Cash and cash equivalents at end of period | $16,092 | $8,634 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures and explanations of the company's significant accounting policies and financial statement items [1. Nature of Operations and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business, basis of presentation, and key accounting policies - Mitek Systems, Inc is a software development company specializing in mobile capture and digital identity verification solutions, leveraging artificial intelligence and machine learning[25](index=25&type=chunk) - Key products include Mobile Deposit®, Mobile Verify®, MiSnap™, Mobile Fill®, CheckReader™, and ID_CLOUD™[26](index=26&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The company markets its products worldwide through direct sales and channel partners, holding **51 patents** and **19 pending patent applications** as of June 30, 2019[33](index=33&type=chunk)[34](index=34&type=chunk) - The company adopted ASC 606 on October 1, 2018, using the modified retrospective method, resulting in a **$920 thousand** adjustment to accumulated deficit[67](index=67&type=chunk)[73](index=73&type=chunk) [2. Revenue Recognition](index=21&type=section&id=2.%20REVENUE%20RECOGNITION) This note details the company's revenue recognition policies and disaggregates revenue by product category - Revenue is disaggregated into 'Deposits' and 'Identity verification' categories, further broken down by software/hardware and services/other[91](index=91&type=chunk) Disaggregated Revenue by Major Product Category (Amounts in thousands) | Major Product Category | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Nine Months Ended June 30, 2019 | Nine Months Ended June 30, 2018 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Deposits software and hardware | $10,521 | $8,498 | $28,786 | $20,379 | | Deposits services and other | $4,528 | $2,171 | $11,041 | $6,002 | | **Deposits revenue** | **$15,049** | **$10,669** | **$39,827** | **$26,381** | | Identity verification software and hardware | $1,367 | $1,960 | $3,682 | $6,058 | | Identity verification services and other | $5,490 | $3,480 | $16,063 | $10,083 | | **Identity verification revenue** | **$6,857** | **$5,440** | **$19,745** | **$16,141** | | **Total revenue** | **$21,906** | **$16,109** | **$59,572** | **$42,522** | - Contract assets increased to **$2.11 million** and contract liabilities increased to **$6.998 million** at June 30, 2019[92](index=92&type=chunk) - Capitalized sales commissions increased from **$1.0 million** to **$1.6 million** at June 30, 2019, with **$0.4 million** amortized during the nine-month period[93](index=93&type=chunk)[94](index=94&type=chunk) [3. Business Combinations](index=23&type=section&id=3.%20BUSINESS%20COMBINATIONS) This note provides details on the acquisitions of A2iA Group II, S.A.S. and ICAR Vision Systems, S.L - On May 23, 2018, Mitek acquired A2iA for **$26.8 million** cash and **2,514,588 shares** of common stock to extend its leadership in mobile deposit and identity verification[95](index=95&type=chunk)[96](index=96&type=chunk) - On October 16, 2017, Mitek acquired ICAR for **$3.0 million** cash and **584,291 shares** of common stock, with up to **$5.3 million** in potential earnouts[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) Estimated Fair Values of Acquired Assets and Liabilities (Amounts in thousands) | Metric | A2iA | ICAR | Total | | :-------------------------- | :----- | :----- | :------ | | Current assets | $3,929 | $2,036 | $5,965 | | Property, plant, and equipment | $307 | $83 | $390 | | Intangible assets | $28,610| $6,407 | $35,017 | | Goodwill | $24,991| $6,936 | $31,927 | | Other non-current assets | $1,177 | $87 | $1,264 | | Current liabilities | $(2,688)| $(1,652)| $(4,340) | | Deferred income tax liabilities | $(7,503)| $(1,602)| $(9,105) | | Other non-current liabilities | $(7) | $(828) | $(835) | | **Net assets acquired** | **$48,816**| **$11,467**| **$60,283**| Estimated Fair Values and Useful Lives of Intangible Assets Acquired (Amounts in thousands, except for years) | Intangible Asset | Amortization Period | Amount Assigned (A2iA) | Amount Assigned (ICAR) | | :----------------------- | :------------------ | :--------------------- | :--------------------- | | Completed technologies | 5.0 - 7.0 years | $13,015 | $4,956 | | Customer relationships | 2.0 - 5.0 years | $15,360 | $1,298 | | Trade names | 3.0 - 5.0 years | $235 | $153 | | **Total** | | **$28,610** | **$6,407** | [4. Restructuring](index=26&type=section&id=4.%20RESTRUCTURING) This note describes the strategic restructuring of A2iA's Paris operations - In June 2019, Mitek initiated a restructuring of A2iA's Paris operations, incurring **$3.2 million** in costs to streamline the organization[110](index=110&type=chunk) [5. Investments](index=27&type=section&id=5.%20INVESTMENTS) This note details the company's available-for-sale securities and fair value measurements Available-for-Sale Securities (Amounts in thousands) | Security Type | June 30, 2019 Fair Market Value | September 30, 2018 Fair Market Value | | :-------------------------- | :------------------------------ | :--------------------------------- | | U.S. Treasury, short-term | $4,228 | $3,683 | | Corporate debt securities, short-term | $7,664 | $4,765 | | **Total** | **$11,892** | **$8,448** | - All investments are classified as available-for-sale debt securities with maturities of less than one year[112](index=112&type=chunk) Fair Value Hierarchy of Investments and Contingent Consideration (Amounts in thousands) | Category | June 30, 2019 Balance | Level 1 | Level 2 | Level 3 | | :-------------------------------- | :-------------------- | :------ | :------ | :------ | | **Assets:** | | | | | | Short-term investments | $11,892 | $4,228 | $7,664 | $— | | **Liabilities:** | | | | | | Acquisition-related contingent consideration | $1,180 | $— | $— | $1,180 | - Acquisition-related contingent consideration (Level 3) decreased from **$3.051 million** to **$1.180 million** due to payments of **$1.818 million**[115](index=115&type=chunk) [6. Goodwill and Intangible Assets](index=29&type=section&id=6.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note outlines the changes in goodwill and the composition of intangible assets - Goodwill balance decreased from **$34.407 million** to **$33.925 million** at June 30, 2019, primarily due to foreign currency effects[116](index=116&type=chunk) Intangible Assets, Net (Amounts in thousands) | Intangible Asset | June 30, 2019 Net | September 30, 2018 Net | | :----------------------- | :---------------- | :--------------------- | | Completed technologies | $14,580 | $17,271 | | Customer relationships | $12,214 | $15,277 | | Trade names | $286 | $399 | | **Total intangible assets**| **$27,080** | **$32,947** | - Amortization expense for acquired intangible assets was **$1.8 million** for Q3 2019 and **$5.3 million** for YTD Q3 2019[117](index=117&type=chunk) Estimated Future Amortization Expense for Intangible Assets (Amounts in thousands) | Fiscal Year | Estimated Future Amortization Expense | | :---------- | :------------------------------------ | | 2019 (remaining) | $1,775 | | 2020 | $6,486 | | 2021 | $6,216 | | 2022 | $5,815 | | 2023 | $3,816 | | 2024 | $1,806 | | Thereafter | $1,166 | | **Total** | **$27,080** | [7. Stockholders' Equity](index=30&type=section&id=7.%20STOCKHOLDERS'%20EQUITY) This note provides details on stock-based compensation, equity plans, and the Rights Agreement Stock-Based Compensation Expense (Amounts in thousands) | Category | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Nine Months Ended June 30, 2019 | Nine Months Ended June 30, 2018 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Cost of revenue | $55 | $25 | $155 | $54 | | Selling and marketing | $705 | $596 | $2,242 | $1,977 | | Research and development | $437 | $482 | $1,438 | $1,298 | | General and administrative | $1,071 | $877 | $3,456 | $2,598 | | **Total stock-based compensation expense** | **$2,268** | **$1,980** | **$7,291** | **$5,927** | - As of June 30, 2019, the company had **$18.8 million** of unrecognized compensation expense related to stock awards, expected to be recognized over approximately **2.5 years**[120](index=120&type=chunk) - The 2012 Incentive Plan had various stock options and RSUs outstanding, with **757,135 shares** reserved for future grants[121](index=121&type=chunk) - The Employee Stock Purchase Plan (ESPP) had **871,658 shares** reserved for future purchases as of June 30, 2019[122](index=122&type=chunk)[123](index=123&type=chunk) - A Rights Agreement was adopted to protect net operating loss carryforwards by deterring stock accumulations of more than **4.9%**[133](index=133&type=chunk)[137](index=137&type=chunk) [8. Income Taxes](index=33&type=section&id=8.%20INCOME%20TAXES) This note explains the components of the company's income tax benefit and effective tax rate - For the nine months ended June 30, 2019, the company recorded an income tax benefit of **$4.9 million**, resulting in an effective tax rate of **55%**[139](index=139&type=chunk)[140](index=140&type=chunk) - The effective tax rate for the current fiscal year was a blended rate of **22.5%** due to transitional tax rate rules[140](index=140&type=chunk) [9. Commitments and Contingencies](index=33&type=section&id=9.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses legal proceedings, indemnification requests, and credit facilities - ICAR is facing a claim of **€0.8 million** (or **$0.9 million**) for an alleged breach of a services agreement[141](index=141&type=chunk)[142](index=142&type=chunk) - Mitek has received indemnification requests related to patent infringement lawsuits filed by Lupercal, LLC against its customers[143](index=143&type=chunk) - The company is monitoring patent infringement lawsuits filed by USAA against Wells Fargo due to potential industry impact[144](index=144&type=chunk)[145](index=145&type=chunk) - Mitek incurred **$0.3 million** in legal fees for third-party claims against customers during the nine months ended June 30, 2019[146](index=146&type=chunk) - The company has a **$10.0 million** secured revolving credit facility with Silicon Valley Bank, with no borrowings outstanding[149](index=149&type=chunk)[205](index=205&type=chunk) [10. Revenue and Vendor Concentrations](index=34&type=section&id=10.%20REVENUE%20AND%20VENDOR%20CONCENTRATIONS) This note discusses significant customer revenue concentrations and international sales - For the nine months ended June 30, 2019, one customer accounted for **18%** of total revenue[150](index=150&type=chunk) - International sales constituted approximately **33%** of total revenue for the nine months ended June 30, 2019, up from **25%** in the prior year[154](index=154&type=chunk) - The company does not believe it is substantially dependent on any single channel partner or vendor[153](index=153&type=chunk)[155](index=155&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=36&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) This section provides management's perspective on the company's financial performance, condition, and operational results [Overview](index=36&type=section&id=Overview) This section provides a high-level summary of the company's business and key product offerings - Mitek is a leading innovator in mobile capture and digital identity verification, serving over **6,600** financial services and fintech organizations globally[160](index=160&type=chunk) - Key products include Mobile Deposit®, Mobile Verify®, MiSnap™, Mobile Fill®, CheckReader™, and ID_CLOUD™[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) [Third Quarter Fiscal 2019 Highlights](index=37&type=section&id=Third%20Quarter%20Fiscal%202019%20Highlights) This section summarizes the key financial and operational achievements for the third quarter of fiscal 2019 - Revenue for the three months ended June 30, 2019, increased **36%** to **$21.9 million**, compared to $16.1 million in the prior year[171](index=171&type=chunk) - Net loss was **$0.1 million** ($0.00 per share) for the three months ended June 30, 2019, significantly reduced from $2.8 million ($0.08 per share) in the prior year[171](index=171&type=chunk) - Cash provided by operating activities for the nine months ended June 30, 2019, was **$7.9 million**, up from $4.4 million in the prior year[171](index=171&type=chunk) - The company added new patents, bringing the total to **51 issued patents** and **19 pending applications** as of June 30, 2019[171](index=171&type=chunk) [Restructuring](index=38&type=section&id=Restructuring) This section discusses the strategic restructuring of the acquired A2iA operations - Following the A2iA acquisition, Mitek initiated a strategic restructuring of A2iA's Paris operations in June 2019 to streamline operations and reallocate resources[172](index=172&type=chunk) [Market Opportunities, Challenges & Risks](index=38&type=section&id=Market%20Opportunities%2C%20Challenges%20&%20Risks) This section analyzes the market landscape, including growth drivers and potential headwinds - The company sees accelerated demand for digital identity verification driven by the growth of digital transactions and onboarding[173](index=173&type=chunk)[174](index=174&type=chunk) - Mobile check deposit is a mainstream capability, and the company plans to leverage its solution to increase adoption of its identification products[175](index=175&type=chunk)[176](index=176&type=chunk) - Challenges include declining check usage, competition from alternative payment technologies, and product concentration risk[177](index=177&type=chunk)[228](index=228&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of operational results for the three and nine months ended June 30, 2019 and 2018 [Comparison of the Three Months Ended June 30, 2019 and 2018](index=38&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202019%20and%202018) This subsection analyzes the financial performance for the third fiscal quarter Key Financials for Three Months Ended June 30 (Amounts in thousands, except percentages) | Metric | 2019 | 2018 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Total revenue | $21,906| $16,109| $5,797 | 36% | | Software and hardware revenue | $11,888| $10,458| $1,430 | 14% | | Service and other revenue | $10,018| $5,651 | $4,367 | 77% | | Cost of revenue | $3,168 | $2,678 | $490 | 18% | | Selling and marketing expenses | $6,935 | $5,740 | $1,195 | 21% | | Research and development expenses | $4,663 | $4,161 | $502 | 12% | | General and administrative expenses | $5,074 | $3,239 | $1,835 | 57% | | Acquisition-related costs and expenses | $1,761 | $3,154 | $(1,393) | (44)% | | Restructuring costs | $3,214 | $— | $3,214 | 100% | | Other income (expense), net | $98 | $(1,351)| $1,449 | 107% | | Income tax benefit | $2,712 | $1,430 | $1,282 | 90% | - **Total revenue increased 36% YoY**, driven by a **14%** increase in software and hardware and a **77%** increase in service and other revenue[179](index=179&type=chunk) - Cost of revenue increased **18%** but decreased as a percentage of revenue from **17% to 14%**[180](index=180&type=chunk) - Selling and marketing expenses rose **21%** due to increased headcount and product promotion[181](index=181&type=chunk) - General and administrative expenses increased **57%** due to higher personnel, A2iA-related expenses, and legal costs[182](index=182&type=chunk) - Acquisition-related costs decreased **44%** due to lower executive separation and integration costs[183](index=183&type=chunk)[184](index=184&type=chunk) - **Restructuring costs of $3.2 million** were incurred in Q3 2019 related to the A2iA Paris operations[185](index=185&type=chunk) - Other income improved significantly due to the absence of a **$1.3 million** foreign currency loss from the prior year[186](index=186&type=chunk) - Income tax benefit increased **90%** due to excess tax benefits from stock options and R&D credits[187](index=187&type=chunk) [Comparison of the Nine Months Ended June 30, 2019 and 2018](index=40&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20June%2030%2C%202019%20and%202018) This subsection analyzes the financial performance for the first nine months of the fiscal year Key Financials for Nine Months Ended June 30 (Amounts in thousands, except percentages) | Metric | 2019 | 2018 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Total revenue | $59,572| $42,522| $17,050 | 40% | | Software and hardware revenue | $32,468| $26,437| $6,031 | 23% | | Service and other revenue | $27,104| $16,085| $11,019 | 69% | | Cost of revenue | $9,037 | $6,012 | $3,025 | 50% | | Selling and marketing expenses | $20,895| $15,863| $5,032 | 32% | | Research and development expenses | $14,441| $10,942| $3,499 | 32% | | General and administrative expenses | $15,743| $10,529| $5,214 | 50% | | Acquisition-related costs and expenses | $5,361 | $5,616 | $(255) | (5)% | | Restructuring costs | $3,214 | $— | $3,214 | 100% | | Other income, net | $252 | $(957) | $1,209 | 126% | | Income tax benefit (provision) | $4,861 | $(2,283)| $7,144 | 313% | - **Total revenue increased 40% YoY**, driven by **23%** growth in software and hardware and **69%** growth in service and other revenue[189](index=189&type=chunk) - Cost of revenue increased **50%** due to higher transaction volume and A2iA-related costs[190](index=190&type=chunk) - Selling and marketing expenses rose **32%** due to the A2iA acquisition and increased headcount[191](index=191&type=chunk) - Research and development expenses increased **32%** due to the A2iA acquisition and increased R&D personnel[192](index=192&type=chunk) - General and administrative expenses increased **50%** due to A2iA acquisition expenses, higher personnel costs, and litigation costs[193](index=193&type=chunk) - Acquisition-related costs decreased **5%** due to lower integration costs and changes in contingent consideration fair value[194](index=194&type=chunk) - **Restructuring costs of $3.2 million** were incurred in YTD Q3 2019[195](index=195&type=chunk) - Other income improved significantly due to the absence of a **$1.3 million** foreign currency loss from the prior year[196](index=196&type=chunk) - Income tax shifted from a **$2.3 million provision** to a **$4.9 million benefit**, primarily due to net loss and stock option tax benefits[197](index=197&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, cash flows, and working capital - Cash and investments increased by **$10.5 million (60%)** to **$28.0 million** at June 30, 2019[198](index=198&type=chunk) - Net cash provided by operating activities was **$7.9 million** for the nine months ended June 30, 2019[199](index=199&type=chunk) - Net cash used in investing activities was **$4.3 million**, mainly for net purchases of investments and capital expenditures[201](index=201&type=chunk) - Net cash provided by financing activities was **$3.6 million**, primarily from equity plan proceeds[203](index=203&type=chunk) - Working capital increased to **$25.5 million** at June 30, 2019, from $17.2 million at September 30, 2018[211](index=211&type=chunk) - The company believes its current cash and operating cash flows are adequate for working capital needs for the next twelve months[211](index=211&type=chunk) [Off Balance Sheet Arrangements](index=44&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section discloses any off-balance sheet arrangements - The company had no off-balance sheet arrangements as of June 30, 2019[212](index=212&type=chunk) [Changes in Critical Accounting Policies](index=44&type=section&id=Changes%20in%20Critical%20Accounting%20Policies) This section highlights significant changes to accounting policies - The company adopted ASC 606 (Revenue from Contracts with Customers) effective October 1, 2018, a significant change to its revenue recognition policy[214](index=214&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=44&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, specifically interest rate and foreign currency risk [Interest Rates](index=44&type=section&id=Interest%20Rates) This subsection describes the company's exposure to interest rate fluctuations - The investment portfolio, totaling **$11.9 million** in marketable securities, has maturities between one and 12 months[215](index=215&type=chunk) - A hypothetical **100 basis point** change in market interest rates would not materially impact the fair value of the investment portfolio[216](index=216&type=chunk) [Foreign Currency Risk](index=44&type=section&id=Foreign%20Currency%20Risk) This subsection describes the company's exposure to foreign currency exchange rate fluctuations - Operations in France, the Netherlands, and Spain expose the company to fluctuations between the U.S. dollar, Euro, and British pound sterling[217](index=217&type=chunk) - Translation adjustments are reported in accumulated other comprehensive loss[38](index=38&type=chunk)[217](index=217&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=45&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the company's disclosure controls, procedures, and changes in internal control over financial reporting [Disclosure Controls and Procedures](index=45&type=section&id=Disclosure%20Controls%20and%20Procedures) This subsection confirms the effectiveness of the company's disclosure controls - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[219](index=219&type=chunk) [Changes in Internal Control over Financial Reporting](index=45&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This subsection discusses any changes to internal controls - The company is implementing a new ERP system but does not expect it to adversely affect internal control over financial reporting[220](index=220&type=chunk) [Scope of Management's Report on Internal Control over Financial Reporting](index=45&type=section&id=Scope%20of%20Management's%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) This subsection clarifies the scope of the internal control report regarding recent acquisitions - During the third fiscal quarter of 2019, the company completed the implementation of internal control over financial reporting for A2iA[221](index=221&type=chunk) PART II. OTHER INFORMATION This part includes information on legal proceedings, risk factors, and other required disclosures [ITEM 1. LEGAL PROCEEDINGS](index=46&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 9 for details on legal proceedings, indicating no material developments - No material developments in historical legal proceedings have occurred since September 30, 2018[224](index=224&type=chunk) [ITEM 1A. RISK FACTORS](index=46&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines various risks that could materially and adversely affect the company's business and financial condition [Risks Associated With Our Business and Operations](index=46&type=section&id=Risks%20Associated%20With%20Our%20Business%20and%20Operations) This subsection details risks related to the company's business model, products, competition, and operational execution - **Substantial revenue derived from a few technologies**: Dependence on mobile imaging technology could adversely affect financial results if market acceptance fails - **Decline in check usage and slowing mobile banking growth**: The shift to check alternatives could negatively impact business - **Intellectual property infringement claims**: Costly litigation could arise, potentially requiring licenses, product redesigns, or discontinuation of sales - **Inadequate intellectual property protection**: Reliance on patents and trade secrets may not sufficiently protect technologies - **Intense competition**: Facing competitors with greater resources could lead to price reductions or loss of market share - **Need for continuous R&D**: Failure to timely develop enhancements and new technologies could hinder competitiveness - **Product defects or malfunctions**: Errors in complex software could harm reputation, sales, and profitability - **Forecasting difficulties**: Historical order flow patterns make forecasting challenging, potentially leading to adverse operating results - **New business/product risks**: Entry into new lines of business or offering new products may expose the company to new risks - **Adverse economic conditions**: Economic downturns could reduce spending on IT solutions and impact revenue - **Need for additional capital**: Insufficient capital resources for long-term growth may necessitate raising funds through dilutive financings - **Integration expenses for acquisitions**: Challenges in integrating ICAR and A2iA could impact financial results and operational efficiency - **Unsuccessful corporate strategy and restructuring**: The restructuring of A2iA's Paris operations may not yield anticipated benefits - **Volatility in operating results**: Quarterly and annual results fluctuate significantly, leading to stock price volatility - **Data security risks**: Products may not provide absolute security, leading to potential breaches, litigation, and reputational harm - **Inability to retain/recruit qualified personnel**: Dependence on key management and technical personnel is a significant risk - **Regulatory compliance**: Changing legislation (e.g, FCPA, GDPR) could increase expenses and affect business practices - **Foreign tax regulations**: Uncertainty and changes in foreign tax regulations could reduce earnings - **Fluctuations in foreign currency exchange and interest rates**: Exposure to currency fluctuations can affect net revenues and income - **Compliance with corporate governance changes**: Evolving laws increase expenses and divert management attention [Risks Related to Investing in Our Common Stock](index=56&type=section&id=Risks%20Related%20to%20Investing%20in%20Our%20Common%20Stock) This subsection details risks associated with owning the company's common stock - **Strategic alternatives exploration**: Past or future exploration of strategic alternatives can create uncertainty and disrupt operations - **Concentration of ownership**: Directors and executive officers beneficially own approximately **8.2%** of common stock, potentially limiting other stockholders' influence - **Future sales by insiders**: Resales of substantial shares by insiders could adversely impact the stock price - **Future common stock sales**: Potential issuance of shares could cause the market price to decline - **Potential proxy contest**: A proxy contest could lead to operational disruption and resource diversion - **Anti-takeover provisions**: Corporate documents and Delaware law could discourage or prevent a change in control - **Indemnification of officers and directors**: Provisions for indemnification may result in significant costs to the company - **Section 382 Rights Agreement**: This agreement deters accumulation of more than **4.9%** of common stock, potentially delaying takeovers - **Stock price volatility**: The common stock price has been volatile, leading to potential investment value decline - **No dividends**: The company does not intend to pay dividends, meaning stockholders will only benefit from stock price appreciation [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=59&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section states that there were no unregistered sales of the company's equity securities during the quarter - No unregistered sales of equity securities occurred during the quarter ended June 30, 2019, that were not previously disclosed[295](index=295&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=59&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section indicates that there were no defaults upon senior securities - There were no defaults upon senior securities[296](index=296&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that there are no mine safety disclosures - There are no mine safety disclosures[297](index=297&type=chunk) [ITEM 5. OTHER INFORMATION](index=59&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that there is no other information to disclose - There is no other information to disclose[298](index=298&type=chunk) [ITEM 6. EXHIBITS](index=60&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q - The exhibits include Share Purchase Agreements, Certificate of Incorporation, Bylaws, and certifications from the CEO and CFO[300](index=300&type=chunk) [Signatures](index=61&type=section&id=Signatures) This section contains the signatures of the certifying officers - The report is signed by Scipio Maximus Carnecchia, Chief Executive Officer, and Jeffrey C Davison, Chief Financial Officer, on August 6, 2019[306](index=306&type=chunk)[307](index=307&type=chunk)

Company Overview - Mitek is a global leader in mobile capture and digital identity verification solutions[5] - The company has over 6,400 customers and serves over 80 million consumers[9] - Mitek's platform processes over 3 billion checks[10] Financial Performance & Growth - Mitek experienced a 32% Compound Annual Growth Rate (CAGR) from FY12 to FY19[10] - FY18 revenue reached $63.6 million, a 40% year-over-year increase, with ID revenue growing by 69% and Deposits revenue growing by 28%[10, 46] - Q3 2019 revenue was $21.9 million, a 36% year-over-year increase[50] - Transactional SaaS revenue in Q3 2019 was $5.3 million, up 71% year-over-year[50] - The company's financial guidance for fiscal year 2019 (ending Sept 30, 2019) is $84 million to $85 million in revenue, representing approximately 32% to 34% growth[54] Market & Technology - Mitek is addressing a global $12 billion market for identity verification, which is growing at a 16% CAGR from 2019-2024[27, 28, 55] - The company's Mobile Deposit technology has enabled more than 3 billion mobile deposits, totaling $1.5 trillion in cumulative check value[18]

Financial Data and Key Metrics Changes - Mitek reported record revenue of $21.9 million for Q3 2019, representing a 36% year-over-year growth [9][26] - Software and hardware revenue increased by 14% year-over-year to $11.9 million, driven by the addition of A2iA and growth in Mobile Deposit revenue [26] - Services and other revenue, including transactional SaaS revenue, rose by 77% to $10 million, with SaaS revenue growing 71% year-over-year to $5.3 million [27][28] - GAAP net loss for the quarter was $100,000, or $0.00 per diluted share, while non-GAAP net income was $4.8 million, or $0.12 per diluted share [30][32] Business Line Data and Key Metrics Changes - Mobile Deposit remains the market leader with over 6,400 financial institutions using the product, with significant growth potential as mobile check deposits capture less than 20% of all retail checks [19] - Identity verification solutions saw a 71% year-over-year growth in transactional SaaS revenue, with SaaS transactions growing 76% year-over-year [21] - The company is rationalizing its platforms, focusing on Mobile Verify as the flagship identity product while discontinuing non-core products from A2iA [14][34] Market Data and Key Metrics Changes - The identity verification market is described as large and fast-growing, with significant opportunities for Mitek as businesses increasingly require secure customer onboarding [20] - The company is expanding its customer base, signing new clients across various sectors, including banking and e-commerce [21][22] Company Strategy and Development Direction - Mitek is focusing on consolidating its platforms to eliminate outdated technologies and improve operational efficiency [15] - The company aims to enhance its identity verification offerings and capitalize on the growing demand for digital identity solutions [13][20] - Mitek is also targeting new verticals, such as charities and digital banks, to expand its market reach [19][63] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in both the deposits and identity verification markets, despite some short-term revenue dissynergies from platform rationalization [11][38] - The company anticipates total revenue for fiscal 2019 to be between $84 million and $85 million, representing a growth of approximately 32% to 34% year-over-year [38] Other Important Information - A restructuring charge was taken in Q3 related to the separation of employees from A2iA, with plans to streamline operations and focus on core business areas [17][34] - The company expects to see annualized cost savings from the restructuring, although some costs will carry over into Q4 [53][56] Q&A Session Summary Question: Can you provide more details on the platform consolidation and which parts of the business are being rationalized? - Management indicated that the focus is on consolidating legacy systems acquired through previous acquisitions, particularly in the identity verification space, to streamline operations and enhance focus on Mobile Verify [44][45] Question: What is the company's strategy regarding the unbanked and under-banked markets? - Management sees significant opportunities in both the U.S. and developing economies, where government-issued identity documents are crucial for verifying identity [47] Question: What is driving the growth in the Mobile Verify business? - Growth is attributed to both new customer acquisitions and increased usage among existing customers, with improvements in the time-to-live for new implementations [48][49] Question: Can you elaborate on the competitive landscape for identity verification? - Management noted that competition varies by geography and that the market is still developing, with new entrants emerging [74][76] Question: When is the identity revenue expected to surpass the deposits revenue? - Management anticipates that identity revenue will equal deposits revenue within 18 to 24 months [78]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 (State or Other Jurisdiction of Incorporation or Organization) 600 B Street, Suite 100 San Diego, California 92101 (Address of Principal Executive Offices) (Zip Code) (I.R.S. Employer Identification No.) (619) 269-6800 (Registrant's Telephone Number, Including Area Code) ☐ TRANSITION REPORT PU ...

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2018 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-35231 MITEK SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 87-0418827 (State or Other Jurisdiction of Inco ...