Mitek Systems(MITK) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Mitek Systems, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter and nine months ended June 30, 2025 ITEM 1. FINANCIAL STATEMENTS This section presents Mitek Systems, Inc.'s unaudited condensed consolidated financial statements for the quarter and nine months ended June 30, 2025, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes on accounting policies, revenue recognition, investments, debt, and other financial disclosures Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and September 30, 2024 Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | June 30, 2025 (Unaudited) | September 30, 2024 | | :-------------------------------- | :------------------------ | :------------------- | | Cash and cash equivalents | $127,124 | $93,456 | | Total current assets | $225,861 | $185,051 | | Total assets | $446,715 | $413,753 | | Total current liabilities | $198,804 | $42,147 | | Convertible senior notes (current) | $150,004 | — | | Total liabilities | $209,123 | $198,952 | | Total stockholders' equity | $237,592 | $214,801 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) This section outlines the company's financial performance, including revenue, operating income, net income, and comprehensive income for the three and nine months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (Amounts in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $45,729 | $44,976 | $134,912 | $128,861 | | Operating income (loss) | $3,809 | $734 | $12,100 | $(5,484) | | Net income (loss) | $2,396 | $216 | $6,936 | $(5,295) | | Net income (loss) per share—basic | $0.05 | $0.00 | $0.15 | $(0.11) | | Net income (loss) per share—diluted | $0.05 | $0.00 | $0.15 | $(0.11) | | Comprehensive income (loss) | $12,688 | $(59) | $11,578 | $(932) | Condensed Consolidated Statements of Stockholders' Equity This section details changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the periods presented Stockholders' Equity Changes (Amounts in thousands) | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :------------ | :----------------- | | Common Stock (shares) | 45,622 | 44,999 | | Additional Paid-In Capital | $261,796 | $247,326 | | Accumulated Other Comprehensive Income (Loss) | $2,340 | $(2,302) | | Accumulated Deficit | $(26,590) | $(30,268) | | Total Stockholders' Equity | $237,592 | $214,801 | - Stock-based compensation expense for the nine months ended June 30, 2025, was $13.2 million, up from $10.9 million in the prior year period[19] - The Company repurchased and retired $3.3 million (369,978 shares) of common stock during the nine months ended June 30, 2025, compared to $10.0 million (819,623 shares) in the same period of 2024[19] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (Amounts in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by (used in) operating activities | $35,879 | $10,586 | | Net cash provided by (used in) investing activities | $(188) | $27,832 | | Net cash provided by (used in) financing activities | $(3,095) | $(12,871) | | Net increase in cash and cash equivalents | $33,668 | $25,438 | | Cash and cash equivalents at end of period | $127,124 | $84,351 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, revenue, investments, and debt 1. Nature of Operations and Summary of Significant Accounting Policies This section describes Mitek's business, its core products, and the significant accounting policies applied in preparing the financial statements - Mitek Systems, Inc. specializes in mobile image capture and provides solutions for fraud prevention, digital identity verification, and cybersecurity, leveraging AI, computer vision, and biometrics[24] - The company's Mobile Check Deposit product processes approximately 1.2 billion transactions annually, serving over 7,900 financial services organizations, fintech brands, telecommunications companies, and marketplace brands globally[25][26] Potentially Dilutive Common Shares Excluded from EPS Calculation (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Stock options | 352 | 298 | 361 | 523 | | RSUs | 2,458 | 1,731 | 2,077 | 2,315 | | Convertible senior notes | 7,448 | 7,448 | 7,448 | 7,448 | | Total potentially dilutive common shares outstanding | 20,135 | 18,662 | 19,257 | 19,034 | - One customer accounted for 13% of total revenue ($6.1 million) for the three months ended June 30, 2025, and 17% ($22.6 million) for the nine months ended June 30, 2025[36] - Approximately 79% of the Company's total long-term assets as of June 30, 2025, are associated with international subsidiaries[37] - The Company is evaluating the impact of recently issued accounting pronouncements, including ASU 2024-03 (Expense Disaggregation), ASU 2023-09 (Income Tax Disclosures), and ASU 2023-07 (Segment Reporting), with ASU 2023-07 expected to be adopted in Q4 fiscal 2025 without material financial statement impact[41][42][43] 2. Revenue Recognition This section details the company's revenue streams, recognition policies for software, hardware, and services, and disaggregated revenue by product category and geography - Revenue is generated from software and hardware sales (on-premise licenses, phased-out appliance products) and services and other (SaaS products, maintenance, consulting); SaaS revenue is recognized based on usage or ratably over the contract term[46][47] Revenue Disaggregated by Major Product Category (Amounts in thousands) | Product Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Deposits software and hardware | $17,529 | $21,793 | $53,326 | $58,335 | | Deposits services and other | $8,693 | $7,493 | $25,870 | $21,539 | | Total Deposits revenue | $26,222 | $29,286 | $79,196 | $79,874 | | Identity verification software and hardware | $1,978 | $869 | $4,866 | $5,196 | | Identity verification services and other | $17,529 | $14,821 | $50,850 | $43,791 | | Total Identity verification revenue | $19,507 | $15,690 | $55,716 | $48,987 | | Total revenue | $45,729 | $44,976 | $134,912 | $128,861 | Total Revenue by Geographic Location (Amounts in thousands) | Geographic Location | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | United States | $35,354 | $35,902 | $103,430 | $102,193 | | United Kingdom | $5,669 | * | $15,442 | $12,587 | | All other countries | $4,706 | $9,074 | $16,040 | $14,081 | | Total revenue | $45,729 | $44,976 | $134,912 | $128,861 | *Revenues from the United Kingdom were not greater than 10% of the Company's total revenue for this period. Contract Balances (Amounts in thousands) | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :------------ | :----------------- | | Accounts receivable, net | $40,207 | $31,682 | | Contract assets, current | $12,180 | $15,818 | | Contract liabilities (deferred revenue), current | $25,925 | $21,231 | Remaining Performance Obligation (Amounts in thousands) | Metric | June 30, 2025 | | :---------- | :------------ | | Current | $60,983 | | Non-current | $19,656 | | Total | $80,639 | 3. Investments This section provides details on the company's investment portfolio, primarily available-for-sale securities, and their fair market values and maturity profiles Available-for-Sale Securities (Amounts in thousands) | Security Type | June 30, 2025 Fair Market Value | September 30, 2024 Fair Market Value | | :-------------------------------- | :-------------------------------- | :----------------------------------- | | U.S. Government and agency securities, short-term | $1,488 | $3,836 (U.S. Treasury) | | Commercial paper, short-term | $17,274 | $15,984 | | Corporate debt securities, short-term | $21,185 | $17,064 | | U.S. Government and agency securities, long-term | $499 | — | | Corporate debt securities, long-term | $7,805 | $11,410 | | Total | $48,251 | $48,294 | - As of June 30, 2025, $39.9 million of investments mature within one year, and $8.3 million mature beyond one year to five years[61] 4. Fair Value Measurement This section explains the company's methodology for fair value measurements, utilizing a three-tier hierarchy based on observable market inputs - The Company uses a three-tier fair value hierarchy (Level 1, 2, 3) for valuation; all investments are valued using Level 2 inputs, based on observable market-based inputs other than quoted prices in active markets[62][63] 5. Goodwill and Intangible Assets This section details the company's goodwill balance, intangible assets, and their amortization schedules, including the impact of foreign currency effects Goodwill Balance (Amounts in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance at September 30, 2024 | $131,574 | | Foreign currency effect on goodwill | $3,109 | | Balance at June 30, 2025 | $134,683 | Intangible Assets, Net (Amounts in thousands) | Intangible Asset | June 30, 2025 Net | September 30, 2024 Net | | :----------------------- | :---------------- | :--------------------- | | Completed technologies | $39,756 | $48,331 | | Customer relationships | $1,795 | $2,517 | | Trade names | $2,257 | $3,192 | | Covenants not to compete | — | $97 | | Total intangible assets | $43,808 | $54,137 | - Amortization expense for acquired intangible assets was $10.8 million for the nine months ended June 30, 2025, down from $11.4 million in the prior year period[66] Estimated Future Amortization Expense (Amounts in thousands) | Fiscal Period | Estimated Future Amortization Expense | | :------------ | :------------------------------------ | | Remainder of 2025 | $3,368 | | 2026 | $13,448 | | 2027 | $12,206 | | 2028 | $10,409 | | 2029 | $4,377 | | Total | $43,808 | 6. Stockholders' Equity This section provides a breakdown of stock-based compensation, share repurchase programs, and outstanding equity awards, including RSUs and Performance RSUs Stock-Based Compensation Expense (Amounts in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Cost of revenue | $181 | $194 | $504 | $447 | | Selling and marketing | $950 | $818 | $2,959 | $2,579 | | Research and development | $1,287 | $1,344 | $3,749 | $3,751 | | General and administrative | $2,004 | $1,229 | $6,027 | $4,124 | | Total stock-based compensation expense | $4,422 | $3,585 | $13,239 | $10,901 | - As of June 30, 2025, the Company had $37.2 million of unrecognized compensation expense, expected to be recognized over a weighted-average period of approximately 2.4 years[69] - The 2020 Incentive Plan (A&R 2020 Plan) has 3,298,745 shares reserved for future grants as of June 30, 2025[70] - The Employee Stock Purchase Plan (ESPP) has 87,204 shares reserved for future purchases as of June 30, 2025, with $0.4 million in stock-based compensation expense recognized for the nine months ended June 30, 2025[73][74] - As of June 30, 2025, 3,103,440 Restricted Stock Units (RSUs) were outstanding, with $22.1 million of unrecognized compensation expense[80] - As of June 30, 2025, 2,111,727 Performance Restricted Stock Units (Performance RSUs) were outstanding, with $15.1 million of unrecognized compensation expense[81][82] - The Board authorized a share repurchase program for up to $50.0 million of common stock, effective May 16, 2024, and expiring May 16, 2026; the Company repurchased $3.3 million (369,978 shares) during the nine months ended June 30, 2025[86][87] 7. Income Taxes This section presents the company's income tax benefit or provision and effective tax rates, explaining key factors influencing tax rate differences and future tax law changes Income Tax Benefit (Provision) and Effective Tax Rate | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Income tax benefit (provision) | $(749) | $375 | $(1,368) | $2,816 | | Effective tax rate | 24% | 236% | 16% | 35% | - The effective tax rate differences from the U.S. federal statutory rate are primarily due to worldwide income mix, non-deductible executive compensation, stock-based compensation impact, and R&D credits; for the nine months ended June 30, 2025, tax expense was also impacted by the release of a valuation allowance related to a foreign jurisdiction[90] - The recently signed 'One, Big, Beautiful Bill Act' will introduce tax law changes related to deductions (depreciation, R&D, interest expense) in Q4 fiscal 2025, potentially impacting the allocation between current and deferred tax expense[91] 8. Debt This section details the company's convertible senior notes, including carrying values and maturity, and outlines the new Amended Credit Agreement for future financing Convertible Senior Notes (2026 Notes) Carrying Values (Amounts in thousands) | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :------------ | :----------------- | | Principal amount | $155,250 | $155,250 | | Less: unamortized discount and issuance costs, net of amortization | $(5,246) | $(11,649) | | Carrying amount | $150,004 | $143,601 | - The 2026 Notes, with a principal amount of $155.3 million and a 0.75% interest rate, mature on February 1, 2026; the Company was in compliance with covenants as of June 30, 2025[92][93] - The Company has the option to settle conversions of the 2026 Notes in cash, common stock, or a combination, as sufficient authorized shares are available[96] - A new Amended Credit Agreement was established on May 7, 2025, providing a delayed draw term loan of up to $75.0 million (for 2026 Notes repayment) and a revolving line of credit up to $25.0 million, both maturing on May 1, 2030[107][108] - As of June 30, 2025, the Company's net leverage ratio was 1.20 to 1.00, in compliance with the Amended Credit Agreement's covenant of no more than 2.50 to 1.00[113] - The Company has $2.7 million outstanding under non-interest-bearing loan agreements with Spanish government agencies, with repayment periods of five to twelve years[114] 9. Commitments and Contingencies This section addresses the company's potential liabilities from indemnification demands, ongoing legal disputes, and the expected impact on financial condition - The Company faces indemnification demands from customers regarding third-party patent infringement allegations, particularly from non-practicing entities (NPEs); Mitek does not believe it is obligated to indemnify customers in these cases but actively monitors the situation[116] - In a lawsuit filed by Mitek against UrbanFT, Inc. for delinquent payments, Mitek secured a judgment of $2.3 million (including compensatory damages, costs, and attorneys' fees) in June 2022; Mitek also filed a Fraud Conveyance Action against UrbanFT's owner and related entities in August 2023 to collect debts[121][122] - The Company believes the disposition of all legal matters, in aggregate, will not materially affect its financial condition or results of operations[126] 10. Leases This section outlines the company's operating lease liabilities, right-of-use assets, and associated costs, along with the maturity schedule of lease payments - As of June 30, 2025, the Company had operating right-of-use (ROU) assets of $2.3 million and total operating lease liabilities of $2.7 million, with a weighted-average remaining lease term of 4.5 years[128] - Operating lease costs recognized were $0.2 million for the three months and $0.6 million for the nine months ended June 30, 2025[129] Maturities of Operating Lease Liabilities (Amounts in thousands) | Fiscal Period | Operating leases | | :------------ | :--------------- | | 2025 | $215 | | 2026 | $844 | | 2027 | $790 | | 2028 | $479 | | 2029 | $314 | | 2030 and thereafter | $610 | | Total lease payments | $3,252 | | Less: amount representing interest | $(529) | | Present value of future lease payments | $2,723 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Mitek's financial condition and results of operations for the three and nine months ended June 30, 2025, highlighting key financial performance, market opportunities, challenges, and liquidity. It also includes forward-looking statements and a discussion of critical accounting estimates Overview This section introduces Mitek Systems, Inc. as a global provider of mobile image capture, fraud prevention, and digital identity verification solutions - Mitek Systems, Inc. is a global provider of mobile image capture, fraud prevention, digital identity verification, and cybersecurity solutions, utilizing AI, computer vision, and biometrics[134] - The company's Mobile Check Deposit product facilitates approximately 1.2 billion transactions annually, serving over 7,900 financial services organizations, fintech brands, telecommunications companies, and marketplace brands[135][136] Third Quarter Fiscal 2025 Highlights This section summarizes key financial and operational achievements for the third quarter of fiscal year 2025, including revenue growth, net income, and patent additions - Revenue for Q3 2025 was $45.7 million, a 2% increase compared to $45.0 million in Q3 2024[137] - Net income for Q3 2025 was $2.4 million ($0.05 per diluted share), up from $0.2 million ($0.00 per diluted share) in Q3 2024[137] - Cash provided by operating activities for the nine months ended June 30, 2025, was $35.9 million, significantly up from $10.6 million in the prior year period[137] - The Company added new patents, bringing the total to 107 issued patents as of June 30, 2025, with 21 patent applications outstanding[137] Market Opportunities, Challenges & Risks This section identifies market opportunities in digital transformation and fraud prevention, alongside challenges such as competition, transaction declines, and lengthy sales cycles - Mitek sees market opportunities in digital transformation for financial institutions and fintech, driven by demand for superior digital customer experience, regulatory compliance, and fraud prevention against increasing cyber-attacks[138] - Challenges include potential adverse effects on pricing or demand from competition, decline in digital transactions, trade disputes, and product obsolescence; the company's revenue concentration in a few technologies makes it vulnerable to market shifts[139] - Sales and implementation cycles for software and services can be lengthy, potentially impacting business if delayed; revenue recognition for on-premise licenses is upfront, while SaaS is recognized ratably or based on usage[140][141] - To remain competitive, Mitek plans to continue investing in research and development and partnering with other technology providers, leveraging its patented technology and market expertise[143] Results of Operations This section analyzes the company's financial performance, comparing revenue, expenses, and net income for the three and nine months ended June 30, 2025 and 2024 Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the three months ended June 30, 2025, against the same period in 2024, detailing revenue and expense changes Key Financial Results (Three Months Ended June 30, 2025 vs. 2024) (Amounts in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | :--------- | | Total revenue | $45,729 | $44,976 | $753 | 2% | | Software and hardware revenue | $19,507 | $22,662 | $(3,155) | (14)% | | Services and other revenue | $26,222 | $22,314 | $3,908 | 18% | | Cost of revenue | $7,022 | $6,482 | $540 | 8% | | Selling and marketing expenses | $11,127 | $10,354 | $773 | 7% | | Research and development expenses | $8,960 | $9,982 | $(1,022) | (10)% | | General and administrative expenses | $11,251 | $12,604 | $(1,353) | (11)% | | Amortization and acquisition-related costs | $3,560 | $3,750 | $(190) | (5)% | | Restructuring costs | — | $1,070 | $(1,070) | (100)% | | Interest expense | $2,469 | $2,329 | $140 | 6% | | Other income, net | $1,805 | $1,436 | $369 | 26% | | Income tax benefit (provision) | $(749) | $375 | $(1,124) | nm | | Net income | $2,396 | $216 | $2,180 | nm | - The decrease in software and hardware revenue was primarily due to lower multi-year term license renewals of Mobile Deposit® software, partially offset by increased sales of standalone biometrics products[146] - The increase in services and other revenue was driven by higher revenue from HooYu, MiVIP, Mobile Verify®, Mobile Deposit®, and Check Fraud Defender products[146] - General and administrative expenses decreased due to lower executive transition costs, audit, accounting, and tax fees, and third-party professional fees, partially offset by higher personnel-related costs as full-time consultants were replaced with employees[151] Comparison of the Nine Months Ended June 30, 2025 and 2024 This section compares the company's financial results for the nine months ended June 30, 2025, against the same period in 2024, detailing revenue and expense changes Key Financial Results (Nine Months Ended June 30, 2025 vs. 2024) (Amounts in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | :--------- | | Total revenue | $134,912 | $128,861 | $6,051 | 5% | | Software and hardware revenue | $58,192 | $63,531 | $(5,339) | (8)% | | Services and other revenue | $76,720 | $65,330 | $11,390 | 17% | | Cost of revenue | $19,497 | $18,231 | $1,266 | 7% | | Selling and marketing expenses | $31,362 | $31,231 | $131 | 0% | | Research and development expenses | $27,049 | $28,569 | $(1,520) | (5)% | | General and administrative expenses | $33,250 | $43,085 | $(9,835) | (23)% | | Amortization and acquisition-related costs | $10,817 | $11,581 | $(764) | (7)% | | Restructuring costs | $837 | $1,648 | $(811) | (49)% | | Interest expense | $7,274 | $6,895 | $379 | 5% | | Other income, net | $3,478 | $4,268 | $(790) | (19)% | | Income tax benefit (provision) | $(1,368) | $2,816 | $(4,184) | (149)% | | Net income (loss) | $6,936 | $(5,295) | $12,231 | nm | - The decrease in software and hardware revenue was primarily due to lower multi-year term license renewals of Mobile Deposit® and decreased sales of legacy identity verification software and hardware products[158] - The increase in services and other revenue was driven by strong growth in Mobile Verify®, HooYu, MiVIP, Mobile Deposit®, and Check Fraud Defender products[158] - General and administrative expenses decreased significantly due to lower audit, accounting, and tax fees, reduced third-party and professional fees, and lower executive transition costs[162] Liquidity and Capital Resources This section assesses the company's ability to meet its financial obligations, discussing cash flow, investments, debt, and working capital, including the impact of the new credit agreement - Cash and cash equivalents and investments increased by $33.6 million (24%) to $175.4 million at June 30, 2025, from $141.8 million at September 30, 2024[168] Cash Flow Summary (Nine Months Ended June 30) (Amounts in thousands) | Cash Flow Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Cash provided by operating activities | $35,879 | $10,586 | | Cash provided by (used in) investing activities | $(188) | $27,832 | | Cash used in financing activities | $(3,095) | $(12,871) | - The increase in cash from operating activities was primarily due to net income, an increase in income taxes payable, and the timing of income tax payments[169] - Net cash used in investing activities was $0.2 million, primarily from net maturities of investments and capital expenditures; this is a decrease in cash inflows of $28.0 million compared to the prior year, mainly due to lower net maturities of investments[170] - Net cash used in financing activities decreased to $3.1 million, primarily due to lower common stock repurchases and no acquisition-related contingent consideration payments compared to the prior year[171] - The 2026 Notes, with a principal amount of $155.3 million and a 0.75% interest rate, mature on February 1, 2026; the Company has a Notes Hedge to reduce potential equity dilution and Warrant Transactions that could cause incremental EPS dilution if the average share price exceeds $26.53[172][175][176] - A new Amended Credit Agreement provides a delayed draw term loan of up to $75.0 million and a revolving line of credit up to $25.0 million, both maturing on May 1, 2030; no borrowings were outstanding as of June 30, 2025[180][181][185] - Working capital decreased to $27.1 million at June 30, 2025, from $142.9 million at September 30, 2024, primarily due to the reclassification of $150.0 million of 2026 Notes to current liabilities[192] - Management believes current cash, proceeds from the Amended Credit Agreement, and expected cash from operations will be adequate to meet working capital needs for at least the next twelve months[192] Changes in Critical Accounting Estimates This section confirms that there have been no material changes to the company's critical accounting estimates since its 2024 Annual Report - There have been no material changes to the Company's critical accounting estimates from those disclosed in its 2024 Annual Report[194] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses Mitek's exposure to market risks, specifically interest rate risk and foreign currency risk, and assesses the impact of inflation on its financial condition and results of operations Interest Rates This section evaluates the company's exposure to interest rate fluctuations on its investment portfolio and the potential impact on fair value - Mitek's investment portfolio, totaling $48.3 million at June 30, 2025, consists of cash equivalents and marketable securities with short maturities (one to 19 months); a hypothetical 100 basis point change in interest rates would not materially impact the fair value of these investments[196][197] Foreign Currency Risk This section describes the company's exposure to foreign currency exchange rate fluctuations due to international operations in the UK, France, Netherlands, and Spain - The Company has operations in the United Kingdom, France, the Netherlands, and Spain, exposing it to fluctuations in the U.S. dollar, Euro, and British pound sterling exchange rates, which can affect results of operations and cash flows[198] Inflation This section assesses the impact of inflation on the company's business, financial condition, and results of operations for the reported periods - Inflation did not have a material effect on Mitek's business, financial condition, or results of operations during the nine months ended June 30, 2025 or 2024[200] ITEM 4. CONTROLS AND PROCEDURES This section addresses Mitek's disclosure controls and procedures, noting their ineffectiveness as of June 30, 2025, due to previously reported material weaknesses in internal control over financial reporting. It outlines the ongoing remediation efforts to address these weaknesses Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures, noting their ineffectiveness due to existing material weaknesses - Mitek's disclosure controls and procedures were not effective as of June 30, 2025, due to previously reported material weaknesses that continued to exist[202] - Despite the material weaknesses, management believes the condensed consolidated financial statements in this Form 10-Q fairly present the Company's financial position, results of operations, and cash flows[203] Remediation of Previously Reported Material Weaknesses in Internal Control Over Financial Reporting This section details the company's ongoing efforts to remediate identified material weaknesses in internal control over financial reporting, including process improvements and training - Material weaknesses identified include ineffective controls related to the financial statement close process, revenue recognition, risk assessment procedures (including segregation of duties), completeness and accuracy of information used by control owners, and insufficient evidence of management review controls[205][206][208] - Remediation efforts include implementing standard templates and a close management tool, conducting training, designing new user roles, documenting completeness and accuracy of inputs, creating cross-functional working groups for contract terms, and implementing systems for order-to-cash management and billing[205][206][208] - The Company is committed to remediating these material weaknesses and expects to continue making progress, with ongoing senior management and Audit Committee oversight; full remediation requires completion and effective operation of these steps over a sufficient period[206] Changes in Internal Control over Financial Reporting This section confirms that no material changes occurred in internal control over financial reporting during the quarter, apart from ongoing remediation efforts - Aside from the remediation efforts for the material weaknesses, there have been no other material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025[207] PART II. OTHER INFORMATION This section covers additional disclosures including legal proceedings, risk factors, equity sales, defaults, and exhibits filed with the Form 10-Q ITEM 1. LEGAL PROCEEDINGS This section incorporates by reference the detailed information on legal proceedings from Note 9 of the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 9 of the notes to the condensed consolidated financial statements[210] ITEM 1A. RISK FACTORS This section refers to the comprehensive discussion of risk factors in the Company's 2024 Annual Report, stating that no material changes have occurred since that filing - There have been no material changes in the Company's risk factors from those disclosed in its 2024 Annual Report[211] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports that there were no unregistered sales of equity securities during the quarter ended June 30, 2025, and provides a summary of common stock repurchases under the authorized program - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025[212] Summary of Common Stock Purchases (Quarter Ended June 30, 2025) | Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs | | :-------------------------- | :---------------------------------------- | :------------------------------------- | :---------------------------------------------------------------------------------------- | :-------------------------------------------------------------------------------------------------------------------- | | April 1, 2025 — April 30, 2025 | — | $— | — | $22,752,694 | | May 1, 2025 — May 31, 2025 | — | $— | — | $22,752,694 | | June 1, 2025 — June 30, 2025 | — | $— | — | $22,752,694 | - The share repurchase program, authorized for up to $50.0 million, was effective May 16, 2024, and expires May 16, 2026; no purchases were made during the three months ended June 30, 2025[212] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[213] ITEM 4. MINE SAFETY DISCLOSURES This section indicates that there are no mine safety disclosures to report - There are no mine safety disclosures[214] ITEM 5. OTHER INFORMATION This section states that there is no other information to report - There is no other information to report[215] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including organizational documents, employment agreements, debt agreements, and certifications - The exhibits include the Restated Certificate of Incorporation, Third Amended and Restated Bylaws, Executive Employment Agreement for Garrett Gafke, Inducement Restricted Stock Unit Award Agreements, and the First Amendment to Loan and Security Agreement[216] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith[216] Signatures This section contains the required signatures of the registrant's principal executive officer and principal financial and accounting officer, certifying the filing of the report - The report is signed by Edward H. West, Chief Executive Officer, and David Lyle, Chief Financial Officer, on August 7, 2025[221][222]