Part I [Business](index=4&type=section&id=Item%201.%20Business) Mitek Systems specializes in mobile image capture and digital identity verification software, serving financial institutions globally with solutions for deposits and identity verification [Overview](index=4&type=section&id=Overview) Mitek specializes in mobile image capture and digital identity verification, serving over 7,500 financial institutions with key products like Mobile Deposit® and Mobile Verify® - Mitek is a software development company specializing in mobile image capture and digital identity verification, using computer vision, AI, and machine learning[19](index=19&type=chunk) - The company serves over **7,500 financial services organizations** and leading fintech brands globally[19](index=19&type=chunk) - Key products include Mobile Deposit® for remote check deposits and Mobile Verify® for online identity verification, which helps organizations meet AML and KYC regulatory requirements[21](index=21&type=chunk)[22](index=22&type=chunk) [Product and Technology Overview](index=4&type=section&id=Product%20and%20Technology%20Overview) Mitek operates as a single segment, developing and selling proprietary software for mobile image capture and identity verification, delivered via SDK and AI/ML platforms - The company operates as a single segment: development, sale, and service of proprietary software for mobile image capture and identity verification[26](index=26&type=chunk) - Mitek's technology is delivered via a software development kit (SDK) for mobile image capture and a software platform using AI and machine learning for data extraction and authentication[27](index=27&type=chunk) - Key products offered include Mobile Deposit®, Mobile Verify®, Mobile Fill®, Mobile Docs™, CheckReader™, XE™, and ID_CLOUD™[29](index=29&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Sales, Marketing, and Revenue](index=8&type=section&id=Sales%2C%20Marketing%2C%20and%20Revenue) Revenue is primarily from software licenses and transaction fees, with Deposits products accounting for 67% and Identity Verification for 33% in FY2020 - Revenue is primarily derived from software licenses (on-premise and SaaS) and transaction fees for its product suite, sold through direct sales teams and channel partners[37](index=37&type=chunk) - In fiscal 2020, one customer accounted for **16% of total revenue** ($15.8 million). This compares to two customers accounting for 17% and 10% in 2019, and 22% and 10% in 2018[39](index=39&type=chunk) Revenue Concentration and Mix (FY 2018-2020) | Metric | FY 2020 | FY 2019 | FY 2018 | | :--- | :--- | :--- | :--- | | **Deposits Revenue** | 67% | 67% | 65% | | **Identity Verification Revenue** | 33% | 33% | 35% | | **International Sales Revenue** | 24% | 31% | 27% | [Intellectual Property](index=8&type=section&id=Intellectual%20Property) Mitek protects its technology with 67 issued U.S. patents and 38 registered trademarks, with additional patent applications pending - As of September 30, 2020, Mitek holds **67 issued U.S. patents** with expiration dates from 2026 to 2037[42](index=42&type=chunk) - The company has 20 additional domestic and international patent applications pending and holds **38 registered trademarks**[42](index=42&type=chunk) [Competition and Market](index=8&type=section&id=Competition%20and%20Market) The market is intensely competitive, with Mitek leveraging its patented technology and user experience, despite facing long sales cycles and product concentration risks - The market is intensely competitive, with competition from customer-developed solutions, alternative identity verification methods, and other mobile capture technologies[50](index=50&type=chunk) - Mitek believes its competitive advantages include its mobile auto image capture user experience, patented science, scalability, and adaptable software architecture[52](index=52&type=chunk) - The company faces challenges from long sales cycles (often six months or longer) and product concentration, making it vulnerable to market shifts and competition[45](index=45&type=chunk)[46](index=46&type=chunk) [Research and Development](index=9&type=section&id=Research%20and%20Development) Mitek's R&D expenses increased to $22.9 million in FY2020, driven by a team of software engineers and scientists specializing in AI and computer vision - The R&D organization includes software engineers and scientists specializing in AI, computer vision, and user interface design[56](index=56&type=chunk)[57](index=57&type=chunk) R&D Expenses (FY 2018-2020) | Fiscal Year | R&D Expense (in millions) | | :--- | :--- | | 2020 | $22.9 | | 2019 | $21.9 | | 2018 | $18.1 | [Human Capital Resources](index=10&type=section&id=Human%20Capital%20Resources) As of September 30, 2020, Mitek had 360 employees globally, with a majority in sales, marketing, and services - As of September 30, 2020, the company had **360 employees**, with 166 in the U.S. and 194 internationally[59](index=59&type=chunk) - The workforce is composed of 189 in sales/marketing/services, 127 in R&D/support, and 44 in executive/finance/administration[59](index=59&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) Mitek faces risks from technology dependence, market shifts, intense competition, significant intellectual property litigation, cybersecurity threats, acquisition integration challenges, and international operational complexities - The company derives substantially all revenue from a few technologies, making it vulnerable to market shifts, competition, or a decline in check usage[63](index=63&type=chunk)[65](index=65&type=chunk) - Significant risk exists from patent infringement litigation. USAA has sued Wells Fargo and PNC Bank, whose systems use Mitek technology, resulting in large jury awards against Wells Fargo. Mitek has filed a declaratory judgment action against USAA to assert its products do not infringe[68](index=68&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - The company faces risks related to integrating its acquisitions of ICAR and A2iA, including managing different business practices, integrating systems, and potential unknown liabilities[90](index=90&type=chunk)[91](index=91&type=chunk) - Cybersecurity threats pose a risk, as a breach could lead to liability, litigation, and reputational harm due to the sensitive financial and personal data processed by Mitek's systems[101](index=101&type=chunk)[105](index=105&type=chunk) - International operations expose the company to risks including foreign currency fluctuations, compliance with laws like the FCPA and GDPR, and complex data transfer regulations between the EU and the U.S[107](index=107&type=chunk)[108](index=108&type=chunk)[112](index=112&type=chunk) - The COVID-19 pandemic could adversely impact business by disrupting customer operations, reducing technology spending, and affecting employee productivity, though the full extent remains uncertain[141](index=141&type=chunk)[143](index=143&type=chunk) [Unresolved Staff Comments](index=30&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[149](index=149&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) Mitek's main office is a 29,000 sq ft leased facility in San Diego, with additional international offices in Paris, Amsterdam, New York, Barcelona, and London - The main office is in San Diego, California, under a lease through June 30, 2024, with an average annual base rent of approximately **$1.2 million**[150](index=150&type=chunk) - Other international and domestic offices are located in Paris (France), Amsterdam (The Netherlands), New York (New York), Barcelona (Spain), and London (United Kingdom)[151](index=151&type=chunk) [Legal Proceedings](index=30&type=section&id=Item%203.%20Legal%20Proceedings) Mitek faces a €0.8 million claim against a subsidiary, manages customer indemnification demands from USAA patent lawsuits, and incurred $3.2 million in legal fees in FY2020 - A claim for **€0.8 million** was filed against subsidiary ICAR in Spain, but the company expects to be indemnified for any damages[153](index=153&type=chunk)[154](index=154&type=chunk) - The company is subject to indemnification demands from customers due to patent infringement lawsuits by USAA against Wells Fargo and PNC Bank concerning remote deposit capture technology[155](index=155&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk) - Mitek filed a declaratory judgment action against USAA in November 2019, seeking a ruling that its products do not infringe USAA's patents. The company also filed petitions with the U.S. Patent & Trademark Office to challenge the validity of the patents in question[159](index=159&type=chunk)[160](index=160&type=chunk) - Legal fees of **$3.2 million** were incurred in fiscal year 2020 related to third-party claims against customers[161](index=161&type=chunk) - Mitek filed a lawsuit against customer UrbanFT, Inc. to collect delinquent payments and obtain a declaratory judgment of non-infringement of UrbanFT's patents[162](index=162&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[164](index=164&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Mitek's common stock trades on NASDAQ under 'MITK', with 260 stockholders of record, and the company has never paid cash dividends, intending to retain earnings for operations - The company's common stock trades on the NASDAQ Capital Market under the ticker symbol "MITK"[166](index=166&type=chunk) - Mitek has never paid cash dividends and does not anticipate paying them in the foreseeable future, intending to retain earnings for business use[168](index=168&type=chunk) 5-Year Cumulative Total Return Comparison | Company/Index | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **MITK** | $100.00 | $259.87 | $297.81 | $221.00 | $302.51 | $399.37 | | **NASDAQ Composite** | $100.00 | $114.97 | $140.60 | $174.16 | $173.14 | $241.71 | | **NASDAQ-100 Tech Sector** | $100.00 | $129.99 | $173.93 | $202.63 | $223.52 | $299.87 | [Selected Financial Data](index=35&type=section&id=Item%206.%20Selected%20Financial%20Data) Mitek's revenue grew consistently from $34.7 million in 2016 to $101.3 million in 2020, returning to profitability with $7.8 million net income in 2020 Selected Financial Data (in thousands, except per share data) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $101,310 | $84,590 | $63,559 | $45,390 | $34,701 | | **Operating income (loss)** | $8,868 | $(4,590) | $(7,806) | $2,769 | $1,824 | | **Net income (loss)** | $7,814 | $(724) | $(11,807) | $14,092 | $1,959 | | **Net income (loss) per share—diluted** | $0.18 | $(0.02) | $(0.33) | $0.40 | $0.06 | | **Total assets** | $169,154 | $135,897 | $127,150 | $71,719 | $48,385 | | **Stockholders' equity** | $132,243 | $107,333 | $95,394 | $61,408 | $39,485 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Mitek's FY2020 revenue grew 20% to $101.3 million, achieving $7.8 million net income and $24.1 million operating cash flow, driven by digital transformation trends and strong liquidity [Fiscal Year 2020 Highlights](index=36&type=section&id=Fiscal%20Year%202020%20Highlights) Mitek's FY2020 revenues increased 20% to $101.3 million, resulting in a net income of $7.8 million and operating cash flow of $24.1 million - Revenues for fiscal 2020 were **$101.3 million**, a **20% increase** from $84.6 million in fiscal 2019[188](index=188&type=chunk) - Net income was **$7.8 million** ($0.18 per diluted share), a significant improvement from a net loss of $0.7 million ($0.02 per share) in fiscal 2019[188](index=188&type=chunk) - Cash provided by operating activities increased to **$24.1 million**, compared to $14.3 million in the prior year[188](index=188&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) In FY2020, total revenue grew 20% to $101.3 million, driven by Mobile Verify® SaaS and Mobile Deposit® sales, leading to an operating income of $8.9 million - The **25% increase** in FY2020 Services and other revenue was primarily driven by a **$7.7 million (36%) growth** in Mobile Verify® transactional SaaS revenue[204](index=204&type=chunk) - Restructuring costs were a credit of **$0.1 million** in FY2020 due to a reversal of prior accruals, compared to a $3.1 million expense in FY2019 related to the A2iA Paris operations restructuring[210](index=210&type=chunk) - FY2019 revenue increased **33%** over FY2018, primarily due to the inclusion of a full year of A2iA product sales and a **63% ($8.3 million) growth** in transaction SaaS revenue[215](index=215&type=chunk) Comparison of Operations (FY 2020 vs. FY 2019, in millions) | Line Item | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $101.3 | $84.6 | $16.7 | 20% | | Software and hardware | $54.2 | $46.8 | $7.3 | 16% | | Services and other | $47.2 | $37.7 | $9.4 | 25% | | **Cost of Revenue** | $13.2 | $12.3 | $0.9 | 8% | | **Operating Income (Loss)** | $8.9 | $(4.6) | $13.5 | N/A | | **Net Income (Loss)** | $7.8 | $(0.7) | $8.5 | N/A | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Mitek's liquidity significantly strengthened in FY2020, with cash and investments reaching $62.0 million, driven by $24.1 million in operating cash flow - Cash, cash equivalents, and investments increased by **78% to $62.0 million** at September 30, 2020, from $34.8 million at September 30, 2019[224](index=224&type=chunk) - In December 2019, the Board authorized a **$10.0 million share repurchase program**. During fiscal 2020, the company repurchased approximately **137,000 shares for $1.0 million**[236](index=236&type=chunk)[237](index=237&type=chunk) - The company's **$10.0 million secured revolving credit facility** with Silicon Valley Bank matured on September 30, 2020, and was not renewed. There were no borrowings outstanding at maturity[231](index=231&type=chunk) Cash Flow Summary (FY 2020 vs. FY 2019, in millions) | Cash Flow Activity | FY 2020 | FY 2019 | | :--- | :--- | :--- | | **Net cash from Operating Activities** | $24.1 | $14.3 | | **Net cash used in Investing Activities** | $(24.7) | $(10.5) | | **Net cash from Financing Activities** | $3.4 | $4.4 | [Critical Accounting Policies](index=46&type=section&id=Critical%20Accounting%20Policies) Mitek's critical accounting policies involve significant judgment in revenue recognition, goodwill impairment, business combinations, and income tax accounting - Revenue is recognized under ASC 606, requiring judgment in identifying distinct performance obligations, determining transaction prices (including variable consideration), and allocating prices based on standalone selling prices[247](index=247&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - Goodwill is tested for impairment annually by comparing the carrying value of the company's single reporting unit to its fair value, which is determined based on market capitalization[262](index=262&type=chunk)[263](index=263&type=chunk) - Accounting for business combinations involves critical estimates for the fair value of acquired tangible and intangible assets (like technology and customer relationships) and liabilities assumed[266](index=266&type=chunk)[267](index=267&type=chunk) - Accounting for income taxes requires significant judgment in determining the worldwide provision and assessing the realizability of deferred tax assets, for which a valuation allowance may be recorded[268](index=268&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Mitek is exposed to market risks from interest rate fluctuations on its $42.0 million investment portfolio and foreign currency exchange rates, particularly the Euro and British pound sterling - The company's primary market risk is from interest rate changes affecting its **$42.0 million portfolio** of cash equivalents and marketable securities. Due to short maturities, this risk is considered not material[273](index=273&type=chunk)[274](index=274&type=chunk) - Mitek is exposed to foreign currency risk from its operations in Europe, particularly from fluctuations in the Euro and British pound sterling against the U.S. dollar, which affects the translation of financial results[275](index=275&type=chunk) [Financial Statements and Supplementary Data](index=52&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the detailed financial statements and supplementary data which are included in Part IV, Item 15 of the Form 10-K - The company's financial statements and supplementary data are located in Part IV, Item 15 of the report[276](index=276&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=52&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[277](index=277&type=chunk) [Controls and Procedures](index=52&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that Mitek's disclosure controls and internal control over financial reporting were effective as of September 30, 2020 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[278](index=278&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of September 30, 2020[280](index=280&type=chunk) - A new Enterprise Resource Planning (ERP) system was implemented in fiscal 2019, and related internal controls were updated without adverse effect[281](index=281&type=chunk) [Other Information](index=53&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[283](index=283&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=54&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[286](index=286&type=chunk) [Executive Compensation](index=54&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[287](index=287&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=54&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[288](index=288&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=54&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[289](index=289&type=chunk) [Principal Accountant Fees and Services](index=54&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[290](index=290&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=55&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed as part of the Form 10-K, with financial statements beginning on page F-1 - The Financial Statements of Mitek Systems, Inc. and the Report of Independent Registered Public Accounting Firm are included starting on page F-1[293](index=293&type=chunk) - Financial statement schedules were omitted because the information is included in the financial statements or notes, or they are not applicable[294](index=294&type=chunk) [Form 10-K Summary](index=58&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for this item - None[298](index=298&type=chunk)

Investor presentation : MITK Q4 FY20 © 2020 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 ...

Financial Data and Key Metrics Changes - For fiscal year 2020, the company generated record revenue of $101.3 million, representing a growth of 20% year-over-year [8][39] - Non-GAAP net income for fiscal 2020 was $28.6 million or $0.67 per diluted share, up 66% year-over-year [8][40] - The company reported cash flow from operations of $24.1 million for the full year [41] Business Line Data and Key Metrics Changes - Deposits revenue increased 19% to $67.7 million, driven primarily by increased consumer adoption of mobile deposit [38] - Identity verification revenue increased 22% to $33.6 million, supported by a 36% growth in transactional revenue [38] - SaaS transactional revenue increased 36% year-over-year for fiscal 2020 [14] Market Data and Key Metrics Changes - The COVID-19 pandemic has accelerated the adoption of digital banking and mobile check deposits, leading to increased transaction levels in the deposits business [11][12] - The identity verification market is expected to grow significantly, with Gartner forecasting that by 2022, 80% of organizations will use document-centric identity proofing as part of their onboarding workflows [15][16] Company Strategy and Development Direction - The company is focused on enhancing its identity capabilities and product innovation, including advancements in biometric offerings and NFC-enabled solutions [19][18] - Mitek aims to navigate the pandemic effectively while delivering on customer priorities and long-term growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth of the identity verification market, despite current uncertainties [47][48] - The company is committed to exploring partnerships, acquisitions, and increased R&D to achieve product superiority [19] Other Important Information - Mitek has filed six new patent applications and was awarded 10 new patents during the last year, holding a total of 67 issued patents [27] - The company added a new board member, Kim Stevenson, who brings significant experience in cloud software [21] Q&A Session Summary Question: Growth driven by COVID in identity verification - Management acknowledged that COVID-19 has driven heavy transaction volumes, but there are uncertainties in the short term [46][47] Question: Competitive landscape in identity verification - Management noted that the market is attracting competition, and consolidation is expected as stronger players emerge [51][52] Question: Insights on mobile deposit trends - Management confirmed that mobile deposit usage has increased during COVID-19, with a shift in consumer behavior towards digital banking [56][60]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Mitek Systems, Inc.'s unaudited consolidated financial statements and related notes for the quarter and nine months ended June 30, 2020 [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Mitek Systems, Inc.'s unaudited consolidated financial statements for the quarter and nine months ended June 30, 2020, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes on accounting policies, revenue recognition, investments, and other financial disclosures [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of Mitek's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2020, and September 30, 2019 | Metric | June 30, 2020 (Unaudited) (in thousands) | September 30, 2019 (in thousands) | | :--------------------------------- | :--------------------------------------- | :------------------------------------ | | **ASSETS** | | | | Total current assets | $69,042 | $54,130 | | Total assets | $157,227 | $135,897 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total current liabilities | $24,267 | $20,048 | | Total liabilities | $37,844 | $28,564 | | Total stockholders' equity | $119,383 | $107,333 | | Total liabilities and stockholders' equity | $157,227 | $135,897 | - Total assets increased by **$21.33 million (15.7%)** from September 30, 2019, to June 30, 2020, driven by increases in current assets, particularly cash and cash equivalents and short-term investments[11](index=11&type=chunk) - Total stockholders' equity increased by **$12.05 million (11.2%)** from September 30, 2019, to June 30, 2020[11](index=11&type=chunk) [Consolidated Statements of Operations and Other Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Income%20%28Loss%29) This statement outlines Mitek's financial performance, including revenue, operating income, net income, and comprehensive income for the three and nine months ended June 30, 2020 and 2019 | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Nine Months Ended June 30, 2020 (in thousands) | Nine Months Ended June 30, 2019 (in thousands) | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :------------------------------------- | :------------------------------------- | | Total revenue | $25,413 | $21,906 | $70,672 | $59,572 | | Operating income (loss) | $1,434 | $(2,909) | $2,796 | $(9,119) | | Net income (loss) | $1,348 | $(99) | $2,816 | $(4,006) | | Net income (loss) per share—basic | $0.03 | $(0.00) | $0.07 | $(0.10) | | Net income (loss) per share—diluted | $0.03 | $(0.00) | $0.07 | $(0.10) | | Other comprehensive income (loss) | $2,581 | $722 | $4,296 | $(5,193) | - Total revenue increased by **16%** for the three months ended June 30, 2020, and by **19%** for the nine months ended June 30, 2020, compared to the respective prior periods[13](index=13&type=chunk) - The company reported net income of **$1.3 million** for the three months ended June 30, 2020, a significant improvement from a net loss of **$0.1 million** in the prior year period; for the nine months, net income was **$2.8 million**, up from a **$4.0 million** net loss[13](index=13&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement details changes in Mitek's stockholders' equity, including net income, stock-based compensation, and other comprehensive income, for the periods presented | Metric | June 30, 2020 (in thousands) | June 30, 2019 (in thousands) | | :--------------------------------- | :--------------------------- | :--------------------------- | | Total Stockholders' Equity (3 months) | $119,383 | $103,324 | | Total Stockholders' Equity (9 months) | $119,383 | $103,324 | | Additional Paid-In Capital (9 months) | $140,915 | $129,145 | | Accumulated Deficit (9 months) | $(18,992) | $(24,088) | | Accumulated Other Comprehensive Income (Loss) (9 months) | $(2,581) | $(1,773) | - Total stockholders' equity increased from **$107.3 million** at September 30, 2019, to **$119.4 million** at June 30, 2020, primarily due to net income and stock-based compensation expense[18](index=18&type=chunk) - The accumulated deficit improved from **$(20.8) million** at September 30, 2019, to **$(19.0) million** at June 30, 2020, reflecting the net income reported[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes Mitek's cash inflows and outflows from operating, investing, and financing activities for the nine months ended June 30, 2020 and 2019 | Metric | Nine Months Ended June 30, 2020 (in thousands) | Nine Months Ended June 30, 2019 (in thousands) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $17,375 | $7,888 | | Net cash used in investing activities | $(15,530) | $(4,320) | | Net cash provided by financing activities | $260 | $3,632 | | Net increase in cash and cash equivalents | $2,190 | $7,064 | | Cash and cash equivalents at end of period | $18,938 | $16,092 | - Net cash provided by operating activities significantly increased to **$17.4 million** for the nine months ended June 30, 2020, from **$7.9 million** in the prior year, primarily due to net income and non-cash adjustments[21](index=21&type=chunk) - Net cash used in investing activities increased to **$15.5 million**, mainly due to higher purchases of investments[21](index=21&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the consolidated financial statements, covering accounting policies, revenue, investments, and other disclosures [1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details Mitek's core business as a mobile image capture and digital identity verification solutions provider, leveraging AI and machine learning for financial services and other sectors; it also outlines the company's significant accounting policies, including revenue recognition, foreign currency translation, use of estimates, and recent accounting pronouncement adoptions and issuances - Mitek is a software development company specializing in computer vision, AI, and machine learning, serving over 7,500 financial services organizations and fintech brands globally[23](index=23&type=chunk) - Key products include Mobile Deposit® (over four billion check deposits processed), Mobile Verify® (digital identity verification with face comparison), MiSnap™ (image capture technology), and CheckReader™ (automated check data extraction)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The company adopted ASC 842 (Leases) on October 1, 2019, recognizing **$8.2 million** in lease liabilities and **$6.8 million** in right-of-use assets, which materially impacted the balance sheet but not the income statement or cash flows[63](index=63&type=chunk) [2. REVENUE RECOGNITION](index=19&type=section&id=2.%20REVENUE%20RECOGNITION) This note describes Mitek's revenue recognition policies under ASC 606, detailing how revenue is generated from software, hardware, and services, and the significant judgments involved in identifying performance obligations, determining transaction price, assessing variable consideration, and allocating transaction price; it also provides a disaggregation of revenue by major product category and information on contract balances and costs - Revenue is primarily generated from on-premise software licenses, transactional SaaS products, hardware sales, maintenance, and professional services[76](index=76&type=chunk)[77](index=77&type=chunk) Major Product Category Revenue (in thousands) | Major Product Category | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Nine Months Ended June 30, 2020 (in thousands) | Nine Months Ended June 30, 2019 (in thousands) | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :------------------------------------- | :------------------------------------- | | Deposits revenue | $16,948 | $15,049 | $46,221 | $39,827 | | Identity verification revenue | $8,465 | $6,857 | $24,451 | $19,745 | | Total revenue | $25,413 | $21,906 | $70,672 | $59,572 | - Identity verification revenue showed strong growth, increasing by **23.4%** for the three months and **23.8%** for the nine months ended June 30, 2020, compared to the prior year periods[83](index=83&type=chunk) Contract Balances (in thousands) | Contract Balances | June 30, 2020 (in thousands) | September 30, 2019 (in thousands) | | :--------------------------------- | :--------------------------- | :-------------------------------- | | Contract assets, current | $3,410 | $2,350 | | Contract assets, non-current | $4,338 | $581 | | Contract liabilities (deferred revenue), current | $9,089 | $5,612 | | Contract liabilities (deferred revenue), non-current | $1,240 | $736 | [3. RESTRUCTURING](index=21&type=section&id=3.%20RESTRUCTURING) This note details the strategic restructuring of A2iA's Paris operations initiated in June 2019, which involved ceasing sales of certain unprofitable products and a workforce reduction; the restructuring accrual decreased significantly during the nine months ended June 30, 2020, due to payments and reversals - Mitek undertook a strategic restructuring of A2iA's Paris operations in June 2019, ceasing sales of certain unprofitable products and reducing the workforce[86](index=86&type=chunk) Restructuring Accrual (in thousands) | Restructuring Accrual | Amount (in thousands) | | :--------------------------------- | :-------------------- | | Balance at September 30, 2019 | $1,526 | | Accrual reversed | $(114) | | Payments | $(1,165) | | Foreign currency effect | $(27) | | Balance at June 30, 2020 | $220 | [4. INVESTMENTS](index=22&type=section&id=4.%20INVESTMENTS) This note provides a summary of Mitek's investment portfolio, primarily consisting of available-for-sale debt securities like U.S. Treasury, asset-backed, and corporate debt securities; it details their fair market values, unrealized gains/losses, and classification as short-term or long-term; the note also explains the fair value measurement hierarchy (Level 1, 2, 3) and the valuation of acquisition-related contingent consideration Investment Fair Value (in thousands) | Investment Type | June 30, 2020 Fair Value (in thousands) | September 30, 2019 Fair Value (in thousands) | | :--------------------------------- | :-------------------------------------- | :--------------------------------------- | | Total Available-for-sale securities | $33,223 | $18,054 | | Short-term investments | $30,281 | $16,502 | | Long-term investments | $2,942 | $1,552 | - The fair value of available-for-sale securities increased by **$15.17 million (84%)** from September 30, 2019, to June 30, 2020[88](index=88&type=chunk) Acquisition-related contingent consideration (Level 3) (in thousands) | Acquisition-related contingent consideration (Level 3) | Amount (in thousands) | | :--------------------------------------------------- | :-------------------- | | Balance at September 30, 2019 | $1,601 | | Expenses recorded due to changes in fair value | $98 | | Payment of contingent consideration | $(1,049) | | Foreign currency effect | $36 | | Balance at June 30, 2020 | $686 | [5. GOODWILL AND INTANGIBLE ASSETS](index=25&type=section&id=5.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details Mitek's goodwill and intangible assets, which primarily resulted from prior acquisitions; goodwill is tested for impairment annually, and intangible assets are amortized over their useful lives, ranging from two to seven years; the note provides a breakdown of intangible assets by type and their estimated future amortization expense Goodwill and Intangible Assets (in thousands) | Metric | June 30, 2020 (in thousands) | September 30, 2019 (in thousands) | | :--------------------------------- | :--------------------------- | :-------------------------------- | | Goodwill balance | $34,249 | $32,636 | | Total intangible assets (Net) | $20,151 | $24,405 | | Amortization expense (9 months) | $4,800 | $5,300 | - Goodwill increased by **$1.61 million (4.9%)** from September 30, 2019, to June 30, 2020, due to other adjustments and foreign currency effects[95](index=95&type=chunk) Estimated Future Amortization Expense (in thousands) | Estimated Future Amortization Expense | Amount (in thousands) | | :------------------------------------ | :-------------------- | | 2020—remaining | $1,585 | | 2021 | $6,134 | | 2022 | $5,738 | | 2023 | $3,766 | | 2024 | $1,779 | | 2025 | $1,149 | | Total | $20,151 | [6. STOCKHOLDERS' EQUITY](index=26&type=section&id=6.%20STOCKHOLDERS'%20EQUITY) This note details Mitek's stock-based compensation programs, including RSUs, stock options, performance options, and the Employee Stock Purchase Plan (ESPP); it provides a breakdown of compensation expense by functional area, key assumptions for fair value calculations, and activity summaries for stock options, RSUs, and performance RSUs; the note also covers the 2020 Incentive Plan, Director Restricted Stock Unit Plan, share repurchase program, and the Section 382 Rights Agreement Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Nine Months Ended June 30, 2020 (in thousands) | Nine Months Ended June 30, 2019 (in thousands) | | :--------------------------------- | :-------------------------------------- | :-------------------------------------- | :------------------------------------- | :------------------------------------- | | Total stock-based compensation expense | $2,501 | $2,268 | $7,112 | $7,291 | - As of June 30, 2020, Mitek had **$19.8 million** of unrecognized compensation expense related to outstanding stock options and RSUs, expected to be recognized over approximately 2.5 years[100](index=100&type=chunk) - The company repurchased approximately 137,000 shares for **$1.0 million** during the nine months ended June 30, 2020, under a **$10 million** share repurchase program expiring December 16, 2020[113](index=113&type=chunk) [7. INCOME TAXES](index=31&type=section&id=7.%20INCOME%20TAXES) This note explains Mitek's accounting for income taxes, including the determination of the interim tax provision using an estimated annual effective tax rate and the factors causing differences from the U.S. statutory rate; it provides the income tax provision and effective tax rates for the three and nine months ended June 30, 2020 and 2019 Income Tax Benefit (Provision) and Effective Tax Rate | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax benefit (provision) | $(0.2) million | $2.7 million | $(0.5) million | $4.9 million | | Effective tax rate | 15% | 96% | 14% | 55% | - The effective tax rate for the nine months ended June 30, 2020, was **14%**, compared to **55%** in the prior year, primarily due to excess tax benefits from stock option exercises and RSU vesting, foreign/state taxes, and R&D credits[120](index=120&type=chunk)[188](index=188&type=chunk) [8. COMMITMENTS AND CONTINGENCIES](index=31&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines Mitek's commitments and contingencies, including lease obligations, various legal proceedings, and its revolving credit facility; it details the company's operating lease liabilities and future payments, ongoing lawsuits related to acquisitions and patent infringement, and the terms of its $10.0 million secured revolving credit facility Operating Lease Liabilities (in thousands) | Operating Lease Liabilities | Amount (in thousands) | | :--------------------------------- | :-------------------- | | Total operating lease liabilities (June 30, 2020) | $7,325 | | Current lease liabilities | $1,651 | | Non-current lease liabilities | $5,674 | | Weighted-average remaining lease term | 4.5 years | | Weighted-average discount rate | 4.7% | - Mitek is involved in several legal proceedings, including a claim against its subsidiary ICAR, third-party patent infringement claims against its customers (notably USAA vs. Wells Fargo), and a lawsuit against UrbanFT, Inc. for delinquent payments and patent non-infringement[127](index=127&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[138](index=138&type=chunk) - The company has a **$10.0 million** secured revolving credit facility with Silicon Valley Bank, maturing September 30, 2020, with no outstanding borrowings as of June 30, 2020[140](index=140&type=chunk) [9. REVENUE CONCENTRATION](index=34&type=section&id=9.%20REVENUE%20CONCENTRATION) This note discusses Mitek's revenue concentration, highlighting that a significant portion of revenue is derived from a few customers and channel partners; it clarifies that while certain customers may exceed 10% of total revenue in a given period, this is often due to the timing of license renewals and does not indicate dependence on any single partner, as the company believes it could transition end-users to other channels Revenue Concentration | Revenue Concentration | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue from two customers | $6.4 million (15% & 11%) | $6.1 million (16% & 11%) | N/A (one customer 15%) | N/A (one customer 18%) | | Accounts receivable from >10% customers | $4.2 million | $5.5 million | N/A | N/A | - International sales accounted for approximately **25%** of total revenue for the three and nine months ended June 30, 2020[145](index=145&type=chunk) - The company believes it is not dependent on any single channel partner, as the loss of one could be mitigated by direct sales or other partners[144](index=144&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Mitek's financial performance, operational highlights, market opportunities, challenges, and risks for the periods ended June 30, 2020; it includes a detailed comparison of financial results, analysis of liquidity and capital resources, and discussion of critical accounting policies, emphasizing the impact of the COVID-19 pandemic [Overview](index=37&type=section&id=Overview) This overview introduces Mitek's core business as a leader in mobile image capture and digital identity verification, highlighting its key products and global market presence - Mitek is a leading innovator in mobile image capture and digital identity verification, utilizing computer vision, AI, and machine learning to serve over 7,500 financial services and fintech organizations globally[150](index=150&type=chunk) - Key products include Mobile Deposit® (mobile check deposit), Mobile Verify® (online identity verification), MiSnap™ (image capture technology), and CheckReader™ (automated check data extraction)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - The company markets its products and services worldwide through direct sales teams and channel partners in the U.S., Europe, and Latin America[155](index=155&type=chunk) [Third Quarter Fiscal 2020 Highlights](index=38&type=section&id=Third%20Quarter%20Fiscal%202020%20Highlights) This section summarizes Mitek's key financial and operational achievements for the third quarter of fiscal year 2020, including revenue growth and patent portfolio expansion Third Quarter Fiscal 2020 Highlights | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $25.4 million (16% increase) | $21.9 million | | Net income (loss) | $1.3 million | $(0.1) million | | Net income (loss) per diluted share | $0.03 | $(0.00) | | Cash provided by operating activities (9 months) | $17.4 million | $7.9 million | - Mitek increased its patent portfolio to **64 issued patents** as of June 30, 2020, with an additional **19 patent applications** pending[162](index=162&type=chunk) [Market Opportunities, Challenges & Risks](index=38&type=section&id=Market%20Opportunities%2C%20Challenges%20%26%20Risks) This section discusses Mitek's growth drivers, operational challenges, and potential risks, including the impact of digital transformation, competition, and the COVID-19 pandemic - Mitek sees growth opportunities in digital transformation, driven by consumer demand for online trust and convenience, regulatory requirements (AML, KYC), and increasing fraud/cyber-attacks[158](index=158&type=chunk) - Challenges include lengthy sales and implementation cycles, product concentration vulnerability to market demand and competition, and potential adverse impacts from the COVID-19 pandemic[159](index=159&type=chunk)[160](index=160&type=chunk)[165](index=165&type=chunk) - The company aims to maintain competitiveness by strengthening product performance through R&D and partnerships, and anticipates accelerated adoption of digital technologies due to COVID-19[164](index=164&type=chunk)[167](index=167&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of Mitek's financial performance, including revenue and expense trends, for the three and nine months ended June 30, 2020 and 2019 [Comparison of the Three Months Ended June 30, 2020 and 2019](index=39&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202020%20and%202019) For the three months ended June 30, 2020, Mitek experienced a 16% increase in total revenue, driven by growth in both software/hardware and services; operating income improved significantly, moving from a loss to a profit, while restructuring costs were eliminated; expenses generally increased in line with revenue or due to specific factors like litigation costs Three Months Ended June 30, 2020 vs 2019 (in thousands) | Metric | 2020 (in thousands) | 2019 (in thousands) | Change ($) | Change (%) | | :--------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total revenue | $25,413 | $21,906 | $3,507 | 16% | | Software and hardware revenue | $13,212 | $11,888 | $1,324 | 11% | | Services and other revenue | $12,201 | $10,018 | $2,183 | 22% | | Cost of revenue | $3,496 | $3,168 | $328 | 10% | | Selling and marketing expenses | $7,791 | $6,935 | $856 | 12% | | Research and development expenses | $5,111 | $4,663 | $448 | 10% | | General and administrative expenses | $5,884 | $5,074 | $810 | 16% | | Acquisition-related costs and expenses | $1,697 | $1,761 | $(64) | (4)% | | Restructuring costs | $0 | $3,214 | $(3,214) | (100)% | | Net income (loss) | $1,348 | $(99) | $1,447 | * | * Not meaningful - Services and other revenue saw a **22% increase**, primarily due to a **42% growth** in Mobile Verify® transactional SaaS revenue[169](index=169&type=chunk) - General and administrative expenses increased by **16%** due to higher intellectual property litigation costs (**$0.7 million**) and personnel-related costs[173](index=173&type=chunk) [Comparison of the Nine Months Ended June 30, 2020 and 2019](index=41&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20June%2030%2C%202020%20and%202019) For the nine months ended June 30, 2020, Mitek achieved a 19% increase in total revenue, driven by strong growth in both software/hardware and services; the company transitioned from a net loss to a net income, with significant reductions in restructuring costs and improved operating efficiency across several expense categories as a percentage of revenue Nine Months Ended June 30, 2020 vs 2019 (in thousands) | Metric | 2020 (in thousands) | 2019 (in thousands) | Change ($) | Change (%) | | :--------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total revenue | $70,672 | $59,572 | $11,100 | 19% | | Software and hardware revenue | $36,180 | $32,468 | $3,712 | 11% | | Services and other revenue | $34,492 | $27,104 | $7,388 | 27% | | Cost of revenue | $9,615 | $9,037 | $578 | 6% | | Selling and marketing expenses | $22,569 | $20,895 | $1,674 | 8% | | Research and development expenses | $14,540 | $14,441 | $99 | 1% | | General and administrative expenses | $16,382 | $15,743 | $639 | 4% | | Acquisition-related costs and expenses | $4,884 | $5,361 | $(477) | (9)% | | Restructuring costs | $(114) | $3,214 | $(3,328) | (104)% | | Net income (loss) | $2,816 | $(4,006) | $6,822 | 170% | - Services and other revenue increased by **27%**, primarily due to **$6.0 million** growth in Mobile Verify® transactional SaaS revenue and increased maintenance revenue from CheckReader™ and Mobile Deposit®[179](index=179&type=chunk) - Restructuring costs were a **negative $0.1 million** in 2020 due to a reversal of previously accrued costs, compared to **$3.2 million** in 2019[185](index=185&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes Mitek's liquidity and capital resources, highlighting a significant increase in cash and investments; it details cash flows from operating, investing, and financing activities, discusses the revolving credit facility, share repurchase program, and the potential impact of the CARES Act; the company believes its current cash and operational cash generation are sufficient for the next twelve months - Cash and cash equivalents and investments increased by **$17.4 million (50%)** to **$52.2 million** at June 30, 2020, from **$34.8 million** at September 30, 2019[189](index=189&type=chunk) Cash Flow Activity (Nine Months Ended June 30, in thousands) | Cash Flow Activity (Nine Months Ended June 30) | 2020 (in thousands) | 2019 (in thousands) | | :--------------------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | $17,375 | $7,888 | | Net cash used in investing activities | $(15,530) | $(4,320) | | Net cash provided by financing activities | $260 | $3,632 | - The company has a **$10.0 million** secured revolving credit facility with no outstanding borrowings as of June 30, 2020, and a share repurchase program authorized for up to **$10 million**, with **$1.0 million** repurchased as of June 30, 2020[195](index=195&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) [Changes in Critical Accounting Policies](index=47&type=section&id=Changes%20in%20Critical%20Accounting%20Policies) This section discusses any significant changes or new adoptions in Mitek's critical accounting policies and estimates, particularly the impact of ASC 842 on leases - Mitek adopted ASC 842 (Leases) effective October 1, 2019, using the optional transition method, which materially impacted the consolidated balance sheet by recognizing ROU assets and lease liabilities[207](index=207&type=chunk) - No other material changes to critical accounting policies and estimates were reported from those disclosed in the Annual Report on Form 10-K for the year ended September 30, 2019[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses Mitek's exposure to market risks, primarily related to interest rates and foreign currency fluctuations; the company's investment portfolio is managed to preserve principal with short maturities, limiting interest rate sensitivity; foreign currency risk arises from international operations in Euro-denominated regions [Interest Rates](index=47&type=section&id=Interest%20Rates) This section assesses Mitek's exposure to interest rate risk, primarily concerning its investment portfolio, and the potential impact of rate fluctuations on fair value - Mitek's investment portfolio, primarily cash equivalents and marketable debt securities, aims to preserve principal and maximize after-tax yields without significant risk[208](index=208&type=chunk) - As of June 30, 2020, marketable securities had a fair market value of **$33.2 million**, representing **21%** of total assets, with remaining maturities between approximately one and 15 months[208](index=208&type=chunk) - A hypothetical 100 basis point change in market interest rates would not materially impact the fair value of the investment portfolio due to the short maturities of these investments[209](index=209&type=chunk) [Foreign Currency Risk](index=47&type=section&id=Foreign%20Currency%20Risk) This section describes Mitek's exposure to foreign currency exchange rate fluctuations arising from its international operations in Euro-denominated regions - Mitek is exposed to foreign currency exchange risks due to operations in France, the Netherlands, and Spain, where the functional currency is the Euro[210](index=210&type=chunk) - Fluctuations in the Euro exchange rate can impact the company's results of operations and cash flows, with translation adjustments reported in accumulated other comprehensive income (loss)[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Mitek's disclosure controls and procedures as of June 30, 2020, based on management's evaluation; it also states that there have been no material changes in internal control over financial reporting, despite the transition to a remote work environment due to the COVID-19 pandemic [Disclosure Controls and Procedures](index=48&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of Mitek's disclosure controls and procedures, ensuring timely and accurate reporting of financial information - Mitek maintains disclosure controls and procedures designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[211](index=211&type=chunk) - As of June 30, 2020, management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective[212](index=212&type=chunk) [Changes in Internal Control over Financial Reporting](index=48&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes to Mitek's internal control over financial reporting, considering the impact of the COVID-19 pandemic - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2020[213](index=213&type=chunk) - The company has not experienced any material impact on its internal controls despite most employees working remotely due to the COVID-19 pandemic and continues to monitor the situation[213](index=213&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional disclosures not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 8 of the consolidated financial statements for detailed information on Mitek's legal proceedings; it reiterates that while the company is subject to various claims in the ordinary course of business, the aggregate disposition of these matters is not expected to materially affect its financial condition or results of operations - For detailed information on legal proceedings, refer to Note 8 of the consolidated financial statements[216](index=216&type=chunk) - The company believes that the aggregate disposition of its legal matters will not have a material effect on its financial condition or results of operations[216](index=216&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section highlights that there have been no material changes to Mitek's risk factors from those disclosed in its Form 10-K, except for the significant and uncertain impact of the COVID-19 pandemic; it details how the pandemic could adversely affect business operations, customer willingness to contract, financial markets, and overall financial condition - No material changes in risk factors from the Form 10-K, except for the adverse impact of the COVID-19 outbreak[217](index=217&type=chunk)[218](index=218&type=chunk) - The COVID-19 pandemic's impact on Mitek's business, operations, and financial results is uncertain and difficult to predict, depending on factors like duration and severity of the outbreak[218](index=218&type=chunk) - Measures to contain COVID-19 (e.g., remote work, travel restrictions) could delay sales, harm productivity, reduce customer spending, and disrupt global financial markets, potentially affecting liquidity and stock value[219](index=219&type=chunk)[220](index=220&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of Mitek's equity securities during the quarter ended June 30, 2020, that had not been previously disclosed in a Current Report on Form 8-K - No unregistered sales of equity securities occurred during the quarter ended June 30, 2020, that were not previously disclosed[221](index=221&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[222](index=222&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that there are no mine safety disclosures to report - No mine safety disclosures are applicable or reported[224](index=224&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - No other information is reported in this section[225](index=225&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including various agreements, corporate documents, certifications, and XBRL-related documents; it specifies which exhibits are filed herewith and which are incorporated by reference from previous SEC filings - The exhibits include Share Purchase Agreements, Restated Certificate of Incorporation, Bylaws, Certificate of Designation, CEO/CFO Certifications (31.1, 31.2, 32.1), and Inline XBRL documents[226](index=226&type=chunk) - Several exhibits are incorporated by reference from previous Form 8-K and 10-K filings[227](index=227&type=chunk)[228](index=228&type=chunk) [Signatures](index=53&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming that the report has been duly caused to be signed on behalf of Mitek Systems, Inc. by its Chief Executive Officer and Chief Financial Officer - The report is signed by Scipio Maximus Carnecchia, Chief Executive Officer, and Jeffrey C. Davison, Chief Financial Officer, on August 5, 2020[231](index=231&type=chunk)[232](index=232&type=chunk)

Financial Performance - Mitek's FY19 revenue reached $84.6 million, a 33% year-over-year increase, with $14.3 million in cash flow from operations[39] - In FY19, Deposits accounted for 67% of the revenue, growing by 37%, while ID contributed 33%, with a 25% growth[39] - Transactional SaaS revenue in FY19 was $21.4 million, up 63% year-over-year[39] - Q3 FY20 revenue was $25.4 million, a 16% year-over-year increase[10, 42] - Transactional SaaS revenue in Q3 FY20 was $7.6 million, up 42% year-over-year[43] - Mitek reported a 26% non-GAAP operating margin in Q3 FY20[10, 43] - Cash and equivalents totaled $52.2 million[43] Market and Technology - Mitek is a global leader in mobile capture and identity verification, serving over 7,500 customers and over 80 million consumers[7] - The company's mobile deposit solutions have enabled over 4 billion check deposits[10, 18] - Mitek addresses a global $12 billion market in identity verification, growing at a 16% CAGR[21] Strategic Positioning - Mitek leverages macroeconomic trends such as digital transformation, regulatory changes, and mobile-first consumers[11, 12, 14, 45] - The company's technology includes patented IP, AI, and machine learning techniques[7, 33, 45]

Mitek Systems, Inc. (NASDAQ:MITK) Q3 2020 Earnings Conference Call July 30, 2020 4:30 PM ET Company Participants Todd Kehrli - IR, MKR Group, Inc. Max Carnecchia - Chief Executive Officer Jeff Davison - Chief Financial Officer Conference Call Participants Bhavan Suri - William Blair Mike Grondahl - Northland Securities Darren Aftahi - Roth Capital Partners Operator Good day and welcome to the Mitek Systems Third Quarter Fiscal 2020 Financial Results Conference Call. Today's conference is being recorded. And ...

PART I. FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis for the reporting period [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Mitek Systems' unaudited consolidated financial statements and detailed notes for the reporting periods [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement presents the company's financial position, including assets, liabilities, and equity, at specific points in time Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | March 31, 2020 | September 30, 2019 | Change ($) | Change (%) | | :-------------------------- | :------------- | :----------------- | :--------- | :--------- | | Total current assets | $55,447 | $54,130 | $1,317 | 2.4% | | Total assets | $147,978 | $135,897 | $12,081 | 8.9% | | Total current liabilities | $20,408 | $20,048 | $360 | 1.8% | | Total liabilities | $34,070 | $28,564 | $5,506 | 19.3% | | Total stockholders' equity | $113,908 | $107,333 | $6,575 | 6.1% | - Cash and cash equivalents increased slightly from **$16,748 thousand** at September 30, 2019, to **$16,928 thousand** at March 31, 2020[11](index=11&type=chunk) - Long-term investments saw a significant increase from **$1,552 thousand** to **$6,546 thousand**[11](index=11&type=chunk) [Consolidated Statements of Operations and Other Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Income%20(Loss)) This statement details the company's revenues, expenses, and net income or loss over specific periods Consolidated Statements of Operations Highlights (Amounts in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Six Months Ended March 31, 2020 | Six Months Ended March 31, 2019 | | :---------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $23,192 | $19,983 | $45,259 | $37,666 | | Operating income (loss) | $1,064 | $(1,650) | $1,362 | $(6,210) | | Net income (loss) | $908 | $(716) | $1,468 | $(3,907) | | Net income (loss) per share—basic | $0.02 | $(0.02) | $0.04 | $(0.10) | | Net income (loss) per share—diluted | $0.02 | $(0.02) | $0.03 | $(0.10) | - Total revenue increased by **16%** for the three months ended March 31, 2020, and by **20%** for the six months ended March 31, 2020, compared to the respective prior periods[13](index=13&type=chunk) - The company reported a net income of **$908 thousand** for the three months ended March 31, 2020, a significant improvement from a net loss of **$716 thousand** in the prior year period[13](index=13&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in the company's equity accounts, including net income, stock-based compensation, and repurchases Stockholders' Equity Changes (Amounts in thousands) | Metric | March 31, 2020 (3 Months) | March 31, 2019 (3 Months) | March 31, 2020 (6 Months) | March 31, 2019 (6 Months) | | :----------------------------------- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Balance, beginning of period | $111,524 | $95,568 | $107,333 | $95,394 | | Net income (loss) | $908 | $(716) | $1,468 | $(3,907) | | Stock-based compensation expense | $2,308 | $2,353 | $4,611 | $5,023 | | Repurchases and retirements of common stock | $(1,002) | — | $(1,002) | — | | Balance, end of period | $113,908 | $98,069 | $113,908 | $98,069 | - Total stockholders' equity increased to **$113,908 thousand** as of March 31, 2020, from **$107,333 thousand** at September 30, 2019[15](index=15&type=chunk)[18](index=18&type=chunk) - The company repurchased and retired **$1,002 thousand** of common stock during the six months ended March 31, 2020[15](index=15&type=chunk)[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by operating, investing, and financing activities Consolidated Cash Flow Highlights (Amounts in thousands) | Activity | Six Months Ended March 31, 2020 | Six Months Ended March 31, 2019 | | :------------------------ | :------------------------------ | :------------------------------ | | Operating activities | $8,369 | $6,620 | | Investing activities | $(7,835) | $1,945 | | Financing activities | $(325) | $1,368 | | Net increase in cash | $180 | $9,717 | | Cash and cash equivalents at end of period | $16,928 | $18,745 | - Net cash provided by operating activities increased to **$8,369 thousand** for the six months ended March 31, 2020, from **$6,620 thousand** in the prior year[21](index=21&type=chunk) - Net cash used in investing activities was **$7,835 thousand**, primarily due to purchases of investments, a shift from net cash provided in the prior year[21](index=21&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [1. Nature of Operations and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business, products, and key accounting principles applied in financial reporting - Mitek Systems, Inc. is a software development company specializing in mobile image capture and digital identity verification solutions, leveraging computer vision, AI, and machine learning[23](index=23&type=chunk) - Key products include Mobile Deposit® (over **3 billion** check deposits processed), Mobile Verify® (online identity verification with face comparison), MiSnap™ (image capture technology), and CheckReader™ (automated check data extraction)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The company adopted ASC 842 (Leases) as of October 1, 2019, recognizing **$8.2 million** in lease liabilities and **$6.8 million** in right-of-use assets, with no material impact on income statements or cash flows[62](index=62&type=chunk) [2. Revenue Recognition](index=18&type=section&id=2.%20REVENUE%20RECOGNITION) This note details the company's policies and disaggregation of revenue from contracts with customers - Revenue is primarily generated from software and hardware sales (on-premise licenses, hardware scanners) and services and other (transactional SaaS, maintenance, professional services)[75](index=75&type=chunk)[76](index=76&type=chunk) Revenue Disaggregation by Product Category (Amounts in thousands) | Major Product Category | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Six Months Ended March 31, 2020 | Six Months Ended March 31, 2019 | | :------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Deposits software and hardware | $10,317 | $9,215 | $20,600 | $18,265 | | Deposits services and other | $4,305 | $3,693 | $8,673 | $6,513 | | **Deposits revenue** | **$14,622** | **$12,908** | **$29,273** | **$24,778** | | Identity verification software and hardware | $1,136 | $1,370 | $2,368 | $2,315 | | Identity verification services and other | $7,434 | $5,705 | $13,618 | $10,573 | | **Identity verification revenue** | **$8,570** | **$7,075** | **$15,986** | **$12,888** | | **Total revenue** | **$23,192** | **$19,983** | **$45,259** | **$37,666** | - Contract assets (current and non-current) increased from **$2,931 thousand** at September 30, 2019, to **$6,502 thousand** at March 31, 2020, while deferred revenue (current and non-current) increased from **$6,348 thousand** to **$9,973 thousand**[83](index=83&type=chunk) [3. Restructuring](index=20&type=section&id=3.%20RESTRUCTURING) This note explains the details and financial impact of the company's strategic restructuring activities - The company undertook a strategic restructuring of A2iA's Paris operations in June 2019, ceasing sales of certain unprofitable and non-core products and reducing workforce[86](index=86&type=chunk) Restructuring Accrual Changes (Amounts in thousands) | Metric | Amount | | :----------------------------------- | :----- | | Balance at September 30, 2019 | $1,526 | | Accrual reversed | $(114) | | Payments | $(1,098)| | Foreign currency effect | $19 | | Balance at March 31, 2020 | $333 | [4. Investments](index=21&type=section&id=4.%20INVESTMENTS) This note provides information on the company's investment portfolio, including fair value and classification Investment Portfolio Fair Value (Amounts in thousands) | Security Type | March 31, 2020 Fair Value | September 30, 2019 Fair Value | | :---------------------------- | :------------------------ | :---------------------------- | | U.S. Treasury, short-term | $6,311 | $4,242 | | Asset-backed securities, short-term | $1,659 | — | | Corporate debt securities, short-term | $6,170 | $12,260 | | Commercial paper, short-term | $4,878 | $8,386 | | U.S. Treasury, long-term | $1,023 | $1,101 | | Asset-backed securities, long-term | $3,080 | — | | Corporate debt securities, long-term | $2,443 | $451 | | **Total Investments** | **$25,564** | **$18,054** | - All investments are classified as available-for-sale debt securities, carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive loss[89](index=89&type=chunk)[90](index=90&type=chunk) - The company uses a fair value hierarchy (Level 1, 2, 3) for its investments and acquisition-related contingent consideration[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - Acquisition-related contingent consideration is valued using Level 3 unobservable inputs[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) [5. Goodwill and Intangible Assets](index=24&type=section&id=5.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details the balances and amortization of goodwill and other acquired intangible assets - Goodwill balance increased to **$33,554 thousand** at March 31, 2020, from **$32,636 thousand** at September 30, 2019, primarily due to other adjustments and foreign currency effects[95](index=95&type=chunk) Intangible Assets, Net (Amounts in thousands) | Intangible Asset | March 31, 2020 Net | September 30, 2019 Net | | :---------------------- | :----------------- | :--------------------- | | Completed technologies | $11,768 | $13,237 | | Customer relationships | $9,394 | $10,927 | | Trade names | $173 | $241 | | **Total intangible assets** | **$21,335** | **$24,405** | - Amortization expense for acquired intangible assets was **$3.2 million** for the six months ended March 31, 2020, a decrease from **$3.5 million** in the prior year, due to certain assets becoming fully amortized[96](index=96&type=chunk) [6. Stockholders' Equity](index=25&type=section&id=6.%20STOCKHOLDERS'%20EQUITY) This note describes the components of stockholders' equity, including stock-based compensation and share repurchase programs Stock-Based Compensation Expense (Amounts in thousands) | Expense Category | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Six Months Ended March 31, 2020 | Six Months Ended March 31, 2019 | | :------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Cost of revenue | $65 | $56 | $126 | $100 | | Selling and marketing | $703 | $746 | $1,371 | $1,537 | | Research and development | $571 | $567 | $1,149 | $1,001 | | General and administrative| $969 | $984 | $1,965 | $2,385 | | **Total** | **$2,308** | **$2,353** | **$4,611** | **$5,023** | - The company adopted the 2020 Incentive Plan, reserving **4.5 million** shares plus certain shares from prior plans, and had **3,815,819** shares available for future grants as of March 31, 2020[101](index=101&type=chunk) - A share repurchase program for up to **$10 million** was authorized in December 2019, with **$1.0 million** (**137,000** shares) repurchased by March 31, 2020[112](index=112&type=chunk)[113](index=113&type=chunk) [7. Income Taxes](index=30&type=section&id=7.%20INCOME%20TAXES) This note presents the company's income tax provisions, effective tax rates, and deferred tax assets and liabilities Income Tax Benefit (Provision) and Effective Tax Rate (Amounts in thousands) | Metric | Six Months Ended March 31, 2020 | Six Months Ended March 31, 2019 | | :-------------------------- | :------------------------------ | :------------------------------ | | Income tax benefit (provision) | $(229) | $2,149 | | Effective tax rate | 13% | 35% | - The effective tax rate for the six months ended March 31, 2020, was **13%**, compared to **35%** in the prior year, primarily due to excess tax benefits from stock options/RSUs, foreign/state taxes, and R&D credits[120](index=120&type=chunk) [8. Commitments and Contingencies](index=30&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's contractual obligations, lease commitments, and ongoing legal proceedings - Operating ROU assets were **$6.0 million** and total operating lease liabilities were **$7.5 million** as of March 31, 2020, with a weighted-average remaining lease term of **4.7 years**[123](index=123&type=chunk) - The company is involved in legal proceedings, including a claim against ICAR for **€0.8 million**, third-party patent infringement claims against its customers (e.g., USAA vs. Wells Fargo), and a lawsuit against UrbanFT for delinquent payments and patent non-infringement[127](index=127&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[134](index=134&type=chunk) - A **$10.0 million** secured revolving credit facility with Silicon Valley Bank was in place, with no outstanding borrowings as of March 31, 2020[136](index=136&type=chunk) [9. Revenue Concentration](index=33&type=section&id=9.%20REVENUE%20CONCENTRATION) This note identifies significant customer and geographic concentrations in the company's revenue streams - For the three months ended March 31, 2020, two customers accounted for **$6.6 million** (**14%**) of total revenue[137](index=137&type=chunk) - For the six months, two customers accounted for **$11.8 million** (**16%** and **11%** respectively)[137](index=137&type=chunk) - International sales represented approximately **25%** of total revenue for both the three and six months ended March 31, 2020, a decrease from **35%** in the prior year periods[141](index=141&type=chunk) - The company believes it is not dependent on any single channel partner, as the loss of one would not materially affect operations due to the ability to sell products to end-users through other channels[140](index=140&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) Management discusses the company's financial condition, operational results, market opportunities, challenges, and liquidity for the reporting periods [Overview](index=36&type=section&id=Overview) This section provides a high-level summary of the company's business, core solutions, and market position - Mitek is a leading innovator in mobile image capture and digital identity verification, serving over **7,000** financial services organizations and fintech brands globally[146](index=146&type=chunk) - The company's core solutions, Mobile Deposit® and Mobile Verify®, leverage computer vision, AI, and machine learning to enhance user experience, detect fraud, and ensure compliant transactions[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Second Quarter Fiscal 2020 Highlights](index=37&type=section&id=Second%20Quarter%20Fiscal%202020%20Highlights) This section summarizes key financial and operational achievements for the second fiscal quarter of 2020 Q2 Fiscal 2020 Financial Highlights (Amounts in millions, except per share data) | Metric | Q2 FY2020 | Q2 FY2019 | | :----------------------------------- | :-------- | :-------- | | Revenue | $23.2 | $20.0 | | Net income (loss) | $0.9 | $(0.7) | | Net income (loss) per diluted share | $0.02 | $(0.02) | - Cash provided by operating activities increased to **$8.4 million** for the six months ended March 31, 2020, up from **$6.6 million** in the prior year[158](index=158&type=chunk) - The company expanded its patent portfolio to **63** issued patents and has **19** additional patent applications pending as of March 31, 2020[158](index=158&type=chunk) [Restructuring](index=37&type=section&id=Restructuring) This section discusses the strategic restructuring undertaken to streamline operations and focus resources - A strategic restructuring of A2iA's Paris operations was undertaken in June 2019 to streamline the organization and focus resources, involving ceasing sales of certain non-core and unprofitable products and a workforce reduction[153](index=153&type=chunk) [Market Opportunities, Challenges & Risks](index=37&type=section&id=Market%20Opportunities,%20Challenges%20%26%20Risks) This section outlines the company's growth drivers, competitive landscape, and potential business risks - The company anticipates growth in deposits and identity verification products driven by digital transformation, increasing consumer demand for online trust and convenience, and stricter regulatory requirements[154](index=154&type=chunk) - Key challenges include competition, potential declines in demand for digital transactions, lengthy sales and implementation cycles, and product concentration making the company vulnerable to market shifts[155](index=155&type=chunk)[156](index=156&type=chunk) - The COVID-19 pandemic has created global business disruptions, transitioning the workforce to remote operations and potentially impacting revenues, though it may also accelerate digital technology adoption[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance over the reporting periods [Comparison of the Three Months Ended March 31, 2020 and 2019](index=38&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031,%202020%20and%202019) This section compares the company's financial results for the three-month periods ended March 31, 2020 and 2019 Q2 Financial Performance (Amounts in thousands, except percentages) | Metric | 2020 ($) | 2019 ($) | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Total revenue | 23,192 | 19,983 | 3,209 | 16% | | Software and hardware revenue | 11,453 | 10,585 | 868 | 8% | | Services and other revenue | 11,739 | 9,398 | 2,341 | 25% | | Cost of revenue | 3,186 | 2,991 | 195 | 7% | | Selling and marketing expenses | 7,448 | 6,752 | 696 | 10% | | Research and development expenses | 4,819 | 5,290 | (471) | (9)% | | General and administrative expenses | 5,210 | 4,827 | 383 | 8% | | Acquisition-related costs and expenses | 1,579 | 1,773 | (194) | (11)% | | Restructuring costs | (114) | — | (114) | (100)% | | Net income (loss) | 908 | (716) | 1,624 | 227% | - Services and other revenue, driven by Mobile Verify® transactional SaaS, saw a **25%** increase, contributing significantly to overall revenue growth[166](index=166&type=chunk) - Research and development expenses decreased by **9%** due to lower costs resulting from the June 2019 restructuring plan[169](index=169&type=chunk) [Comparison of the Six Months Ended March 31, 2020 and 2019](index=41&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20March%2031,%202020%20and%202019) This section compares the company's financial results for the six-month periods ended March 31, 2020 and 2019 Six-Month Financial Performance (Amounts in thousands, except percentages) | Metric | 2020 ($) | 2019 ($) | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Total revenue | 45,259 | 37,666 | 7,593 | 20% | | Software and hardware revenue | 22,968 | 20,580 | 2,388 | 12% | | Services and other revenue | 22,291 | 17,086 | 5,205 | 30% | | Cost of revenue | 6,119 | 5,869 | 250 | 4% | | Selling and marketing expenses | 14,778 | 13,960 | 818 | 6% | | Research and development expenses | 9,429 | 9,778 | (349) | (4)% | | General and administrative expenses | 10,498 | 10,669 | (171) | (2)% | | Acquisition-related costs and expenses | 3,187 | 3,600 | (413) | (11)% | | Restructuring costs | (114) | — | (114) | (100)% | | Net income (loss) | 1,468 | (3,907) | 5,375 | 138% | - Total revenue increased by **20%** to **$45.3 million**, driven by a **30%** growth in services and other revenue, particularly from Mobile Verify® transactional SaaS[176](index=176&type=chunk) - Net income for the six months ended March 31, 2020, was **$1.5 million**, a significant improvement from a net loss of **$3.9 million** in the prior year[175](index=175&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to generate and manage cash, including its financial resources and obligations - Cash and cash equivalents and investments increased by **$7.7 million** (**22%**) to **$42.5 million** at March 31, 2020, from **$34.8 million** at September 30, 2019[187](index=187&type=chunk) - Net cash provided by operating activities was **$8.4 million**, while net cash used in investing activities was **$7.8 million**, primarily due to investment purchases[188](index=188&type=chunk)[190](index=190&type=chunk) - The company had **$19.0 million** in current available-for-sale securities and **$6.5 million** in long-term available-for-sale securities as of March 31, 2020[201](index=201&type=chunk) [Off Balance Sheet Arrangements](index=46&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section confirms the absence of any material off-balance sheet arrangements - The company had no off-balance sheet arrangements as of March 31, 2020[203](index=203&type=chunk) [Changes in Critical Accounting Policies](index=47&type=section&id=Changes%20in%20Critical%20Accounting%20Policies) This section discusses significant changes in the company's accounting policies and their financial impact - The primary change in critical accounting policies was the adoption of ASU 2016-02, Leases (Topic 842), effective October 1, 2019, which materially impacted the consolidated balance sheet by recognizing ROU assets and lease liabilities[204](index=204&type=chunk)[205](index=205&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section describes the company's exposure to market risks, including interest rate and foreign currency fluctuations [Interest Rates](index=47&type=section&id=Interest%20Rates) This section details the company's exposure to interest rate risk and its management of the investment portfolio - The company's investment portfolio, primarily cash equivalents and marketable debt securities, aims to preserve principal and maximize yields without significant risk, with no use of derivative financial instruments[206](index=206&type=chunk) - A hypothetical **100 basis point** change in market interest rates would not materially impact the fair value of the investment portfolio due to the relatively short maturities of these investments[207](index=207&type=chunk) [Foreign Currency Risk](index=47&type=section&id=Foreign%20Currency%20Risk) This section explains the company's exposure to foreign currency exchange rate fluctuations from international operations - Operations in France, the Netherlands, and Spain expose the company to foreign currency exchange rate fluctuations, particularly between the U.S. dollar and the Euro[208](index=208&type=chunk) - Translation adjustments from converting functional currency financial statements into U.S. dollars are reported in the consolidated statements of operations and other comprehensive income (loss)[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting [Disclosure Controls and Procedures](index=48&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's controls for timely and accurate financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, providing reasonable assurance for timely and accurate financial reporting[210](index=210&type=chunk) [Changes in Internal Control over Financial Reporting](index=48&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in the company's internal control over financial reporting - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2020[211](index=211&type=chunk) - Despite most employees working remotely due to COVID-19, the company has not experienced any material impact on its internal controls and continues to monitor the situation[211](index=211&type=chunk) PART II. OTHER INFORMATION This section includes additional information not covered in the financial statements, such as legal proceedings and risk factors [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) This section details legal proceedings referenced in the financial statement notes, confirming no material impact from ordinary course matters - Information regarding legal proceedings is detailed in Note **8** to the consolidated financial statements[214](index=214&type=chunk) - The company believes that the disposition of various claims and legal proceedings arising in the ordinary course of business will not have a material effect on its financial condition or results of operations[214](index=214&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section highlights key risk factors, including the potential adverse impacts of the COVID-19 pandemic on business operations and financial results - The COVID-19 pandemic is expected to directly and/or indirectly impact the company's business, operations, and financial results, with the full extent being uncertain and difficult to predict[216](index=216&type=chunk) - Governmental measures (e.g., stay-at-home orders, travel restrictions) and remote work transitions may delay sales, harm productivity, and negatively affect customer contracts and revenues[217](index=217&type=chunk) - The pandemic could disrupt global financial markets, reduce access to capital, and negatively affect liquidity and stock market stability, potentially leading to a recession or market correction[218](index=218&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no previously undisclosed unregistered sales of equity securities occurred during the quarter ended March 31, 2020 - No unregistered sales of the company's equity securities occurred during the quarter ended March 31, 2020, that were not previously disclosed[219](index=219&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[220](index=220&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section confirms the absence of any mine safety disclosures - There are no mine safety disclosures[222](index=222&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) This section reports on any other material information not covered elsewhere in the report - There is no other information to report[223](index=223&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - The exhibits include Share Purchase Agreements, Restated Certificate of Incorporation, Bylaws, Certificate of Designation of Series B Junior Participating Preferred Stock, and certifications from the CEO and CFO[224](index=224&type=chunk) [Signatures](index=53&type=section&id=Signatures) This section contains the duly authorized signatures of the CEO and CFO, affirming the submission of the report - The report is signed by Scipio Maximus Carnecchia, Chief Executive Officer, and Jeffrey C. Davison, Chief Financial Officer, on May 7, 2020[228](index=228&type=chunk)[229](index=229&type=chunk)

Investor presentation : MITK Q2 FY20 © 2020 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) Q2 2020 Results Conference Call April 30, 2020 4:30 PM ET Company Participants Todd Kehrli - IR, MKR Group, Inc. Max Carnecchia - CEO Jeff Davison - CFO Conference Call Participants Mike Grondahl - Northland Securities Bhavan Suri - William Blair Allen Klee - National Securities Corporation Darren Aftahi - Roth Capital Partners Operator Good day and welcome to the Mitek Systems Second Quarter Fiscal 2020 Financial Results Conference Call. Today's conference is being recorde ...

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