Mitek Systems(MITK) - 2024 Q1 - Quarterly Results

Executive Summary & Fiscal 2023 Performance Mitek Systems achieved record revenue and profitability in fiscal 2023, driven by innovation and strong growth in Deposit and Identity revenues Fiscal 2023 Full Year Financial Highlights Mitek Systems achieved record revenue and profitability in fiscal year 2023, with total revenue increasing 19% year-over-year to $172.6 million. Both GAAP and Non-GAAP operating and net income saw significant growth, alongside a 50% increase in cash flow from operations | Metric | FY2023 Value | YoY Change | Operating Margin | Diluted EPS | Cash Flow | Total Cash & Investments | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $172.6 million | +19% | - | - | - | - | | GAAP Operating Income | $15.6 million | +28% | 9% | - | - | - | | GAAP Net Income | $8.0 million | +117% | - | $0.17 | - | - | | Non-GAAP Operating Income | $53.2 million | +20% | 31% | - | - | - | | Non-GAAP Net Income | $44.4 million | +10% | - | $0.95 | - | - | | Cash Flow from Operations | $31.6 million | +50% | - | - | $31.6 million | - | | Total Cash and Investments (as of Sep 30, 2023) | $134.9 million | +34% | - | - | - | $134.9 million | Fiscal Fourth Quarter 2023 Financial Highlights The fourth quarter of fiscal 2023 saw a 5% year-over-year decrease in total revenue to $37.7 million. The company reported GAAP operating and net losses, and a significant decline in Non-GAAP operating and net income compared to the prior year quarter | Metric | Q4 FY2023 Value | YoY Change | Operating Margin | Diluted EPS | Cash Flow | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $37.7 million | -5% | - | - | - | | GAAP Operating Income (Loss) | ($3.3 million) | N/A (vs $3.8M income) | -9% | - | - | | GAAP Net Income (Loss) | ($1.4 million) | N/A (vs $0.4M income) | - | ($0.03) | - | | Non-GAAP Operating Income | $5.3 million | N/A (vs $11.8M income) | 14% | - | - | | Non-GAAP Net Income | $6.9 million | -30% | - | $0.15 | - | | Cash Flow from Operations | $3.5 million | -32% | - | - | $3.5 million | CEO's Comments CEO Max Carnecchia highlighted record revenue and profitability in fiscal 2023, driven by innovation. He noted strong growth in both Deposit (20% up) and Identity (17% up) revenues, a net revenue retention rate of approximately 117%, and the establishment of new growth drivers leveraging advanced AI and machine learning - Record revenue and profitability achieved in fiscal 2023, driven by innovation[4] - Deposit revenue increased 20% year over year, and Identity revenue increased 17% year over year[4] - Net revenue retention rate was approximately 117% for the fiscal year, indicating strong customer value and success[4] - New growth drivers are in place, including Check Fraud Defender, MiVIP, MiPass, and ID R&D products, leveraging advanced AI and machine learning[4] Fiscal 2024 Guidance Mitek reiterated its fiscal year 2024 guidance, expecting full-year revenue between $180.0 million and $185.0 million, representing a 6% growth rate at the midpoint. Adjusting for a unique multi-year contract recognized in FY2023, the underlying growth rate for FY2024 would be approximately 12.0%. The company also projects a non-GAAP operating margin of 30.0% to 31.0% | Metric | FY2024 Guidance | | :--- | :--- | | Full-year Revenue | $180.0 million to $185.0 million | | Growth Rate (midpoint) | 6% | | Adjusted Growth Rate (midpoint, excluding unique contract) | Approximately 12.0% | | Non-GAAP Operating Margin | 30.0% to 31.0% | - A large multi-year mobile deposit reorder contract in fiscal 2023 led to the recognition of approximately $7.0 million in additional license revenue relating to future years, impacting the reported FY2023 revenue and the direct YoY comparison for FY2024[5][7] Company Overview & Disclosures Mitek Systems, a leader in digital access and identity verification, outlines its business, financial reporting practices, and key performance metrics Conference Call Information Mitek management hosted a conference call and live webcast on March 19, 2024, at 2:00 p.m. Pacific Time to discuss the financial results for Q4 and full fiscal year 2023. Details for accessing the live call, webcast, and phone replay were provided - Conference call and live webcast held on March 19, 2024, at 2:00 p.m. Pacific Time to discuss Q4 and FY2023 financial results[8] About Mitek Systems, Inc. Mitek Systems, Inc. is a global leader in digital access, specializing in advanced identity verification technologies and fraud prevention. The company's solutions are trusted by 99% of U.S. banks for mobile check deposits and 7,900 large organizations worldwide, aiming to enhance trust and convenience in digital interactions - Mitek is a global leader in digital access, providing advanced identity verification technologies and a global platform for faster and more secure digital access[9] - Trusted by 99% of U.S. banks for mobile check deposits and 7,900 of the world's largest organizations[9] Forward-Looking Statements The news release contains forward-looking statements regarding future intentions, beliefs, expectations, and predictions, including fiscal 2024 guidance and the use of AI/machine learning. These statements are subject to various risks and uncertainties, such as global economic conditions, market demand, integration of acquisitions (e.g., HooYu Ltd.), product development, and litigation outcomes. Readers are cautioned not to place undue reliance on these statements, and the company disclaims any obligation to update them - Statements regarding fiscal 2024 guidance, leveraging AI/machine learning, and enhancing digital trust are forward-looking[10] - Risks and uncertainties include global economic conditions, market acceptance, acquisition integration (HooYu Ltd.), product development, and litigation[10][11] - The company disclaims any intention or obligation to update forward-looking statements, except as required by applicable securities laws[11][12] Note Regarding Use of Non-GAAP Financial Measures Mitek uses non-GAAP financial measures (e.g., non-GAAP net income and operating income) to supplement GAAP statements, believing they offer a useful measure of operating results, historical comparisons, and insight into ongoing performance. These measures exclude items like amortization, acquisition-related costs, stock compensation, and non-recurring audit fees. The company notes it cannot reconcile its forward outlook for non-GAAP operating margin to GAAP due to the unreasonable effort required to quantify certain exclusions like share-based compensation and foreign currency fluctuations - Non-GAAP financial measures are used to supplement GAAP statements, providing a useful measure of operating results and a meaningful comparison with historical results and other companies[12] - Non-GAAP adjustments exclude items such as amortization and acquisition-related costs, intellectual property litigation costs, executive transition costs, stock compensation expense, non-recurring audit fees, restructuring costs, amortization of debt discount and issuance costs, income tax effect of pre-tax adjustments, and cash tax difference[12] - The company has not provided a reconciliation of its forward outlook for non-GAAP operating margin to GAAP due to the unreasonable efforts exception, citing difficulties in quantifying share-based compensation and predicting foreign currency fluctuations[13] Key Business Metrics Mitek monitors net revenue retention as a key business metric to evaluate performance, identify trends, and inform strategic decisions. This rate is calculated by dividing total revenue (including expansion revenue, less churn) in the second year of a trailing 12-month measurement period by the revenue in the first year, excluding revenue from newly acquired customers in the second year - Net revenue retention is monitored to evaluate business, identify trends, formulate plans, and make strategic decisions[14] - Net revenue retention is calculated by taking total revenue (including expansion, less churn) in the second year of a trailing 12-month period and dividing it by revenue in the first year, excluding new customer revenue from the second year[15] Consolidated Financial Statements Mitek's fiscal 2023 consolidated financial statements reflect increased assets, equity, and significant growth in operating income, net income, and cash flow Consolidated Balance Sheets As of September 30, 2023, Mitek's total assets increased to $405.4 million from $364.5 million in the prior year. This was primarily driven by an increase in cash and cash equivalents and short-term investments. Total liabilities also increased slightly to $200.2 million, while total stockholders' equity grew to $205.2 million | Metric | Sep 30, 2023 (in thousands) | Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total Assets | $405,375 | $364,479 | | Total Liabilities | $200,187 | $193,500 | | Total Stockholders' Equity | $205,188 | $170,979 | | Cash and cash equivalents | $58,913 | $32,059 | | Short-term investments | $74,700 | $58,268 | | Accounts receivable, net | $32,132 | $35,922 | | Convertible senior notes | $135,516 | $127,970 | Consolidated Statements of Operations For the twelve months ended September 30, 2023, total revenue increased to $172.6 million from $144.8 million in the prior year. Operating income grew to $15.6 million, and net income more than doubled to $8.0 million. In Q4 2023, however, the company reported a total revenue decrease and a GAAP operating loss and net loss | Metric | 12 Months Ended Sep 30, 2023 (in thousands) | 12 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $172,552 | $144,804 | | Operating Income | $15,564 | $12,200 | | Net Income | $8,027 | $3,694 | | Net income per share—diluted | $0.17 | $0.08 | | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $37,656 | $39,626 | | Operating Income (Loss) | ($3,287) | $3,799 | | Net Income (Loss) | ($1,444) | $351 | | Net income per share—diluted | ($0.03) | $0.01 | Consolidated Statements of Cash Flows For the twelve months ended September 30, 2023, net cash provided by operating activities significantly increased to $31.6 million from $21.1 million in the prior year. Investing activities resulted in a net cash outflow of $6.8 million, a substantial change from a net inflow of $1.7 million in 2022, primarily due to increased purchases of investments and reduced sales/maturities. Financing activities provided a net cash inflow of $1.7 million, reversing a net outflow in 2022 | Activity | 12 Months Ended Sep 30, 2023 (in thousands) | 12 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $31,586 | $21,119 | | Net cash provided by (used in) investing activities | ($6,784) | $1,700 | | Net cash provided by (used in) financing activities | $1,701 | ($21,143) | | Net increase in cash and cash equivalents | $26,854 | $1,747 | | Cash and cash equivalents at end of period | $58,913 | $32,059 | Disaggregation of Revenue Mitek's total revenue for the twelve months ended September 30, 2023, was $172.6 million. Deposits revenue, comprising software, hardware, services, and other, increased to $104.1 million from $86.6 million in 2022. Identity verification revenue, including software, hardware, services, and other, also grew to $68.4 million from $58.2 million in 2022 | Major Product Category | 12 Months Ended Sep 30, 2023 (in thousands) | 12 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Deposits revenue | $104,134 | $86,561 | | Deposits software and hardware | $78,212 | $64,548 | | Deposits services and other | $25,922 | $22,013 | | Identity verification revenue | $68,418 | $58,243 | | Identity verification software and hardware | $10,162 | $8,380 | | Identity verification services and other | $58,256 | $49,863 | | Total revenue | $172,552 | $144,804 | Non-GAAP Reconciliations Mitek reconciles non-GAAP net income and operating income to GAAP, adjusting for non-cash and non-recurring items to clarify underlying performance Non-GAAP Net Income Reconciliation For the twelve months ended September 30, 2023, Non-GAAP net income increased to $44.4 million from $40.5 million in the prior year. This was achieved by adjusting GAAP net income for various non-cash and non-recurring items, including acquisition-related costs, stock compensation expense, and non-recurring audit fees. The company used a cash tax rate of 20% for fiscal 2023 and 5% for fiscal 2022 in its non-GAAP calculations | Metric | 12 Months Ended Sep 30, 2023 (in thousands) | 12 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Net income (loss) (GAAP) | $8,027 | $3,694 | | Acquisition-related costs and expenses | $19,046 | $15,533 | | Stock compensation expense | $10,463 | $13,346 | | Non-recurring audit fees | $4,001 | — | | Income tax effect of pre-tax adjustments | ($10,115) | ($9,799) | | Cash tax difference | $1,235 | $7,440 | | Non-GAAP net income | $44,365 | $40,513 | | Non-GAAP income per share—diluted | $0.95 | $0.88 | | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Net income (loss) (GAAP) | ($1,444) | $351 | | Non-GAAP net income | $6,919 | $9,886 | | Non-GAAP income per share—diluted | $0.15 | $0.22 | - Non-GAAP net income for fiscal 2023 was calculated using a cash tax rate of 20%, compared to 5% in fiscal 2022[26] Non-GAAP Operating Income Reconciliation For the twelve months ended September 30, 2023, Non-GAAP operating income increased to $53.2 million from $44.3 million in the prior year, maintaining a 31% Non-GAAP operating margin. This was reconciled from GAAP operating income by adding back acquisition-related costs, intellectual property litigation costs, executive transition costs, stock compensation expense, non-recurring audit fees, and restructuring costs | Metric | 12 Months Ended Sep 30, 2023 (in thousands) | 12 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | GAAP operating income | $15,564 | $12,200 | | Acquisition-related costs and expenses | $19,046 | $15,533 | | Stock compensation expense | $10,463 | $13,346 | | Non-recurring audit fees | $4,001 | — | | Non-GAAP operating income | $53,236 | $44,325 | | Non-GAAP operating margin | 31% | 31% | | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | GAAP operating income (loss) | ($3,287) | $3,799 | | Non-GAAP operating income | $5,316 | $11,813 | | Non-GAAP operating margin | 14% | 30% |