Mitek Systems(US:MITK)2022-02-04 00:58PART I. FINANCIAL INFORMATION Financial Statements This section provides unaudited consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with explanatory notes Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Dec 31, 2021 ($ millions) | Three Months Ended Dec 31, 2020 ($ millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $32.473 | $25.976 | +25.0% | | Operating Income | $4.829 | $1.537 | +214.2% | | Net Income | $3.124 | $2.167 | +44.2% | | Diluted Net Income per Share | $0.07 | $0.05 | +40.0% | Consolidated Balance Sheets Highlights (Unaudited) | Metric | December 31, 2021 ($ millions) | September 30, 2021 ($ millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $24.214 | $30.312 | | Total Assets | $403.001 | $419.693 | | Total Liabilities | $215.572 | $226.863 | | Total Stockholders' Equity | $187.429 | $192.830 | - Net cash provided by operating activities was $2.3 million for the three months ended December 31, 2021, a significant decrease from $8.7 million in the same period of 202017 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the first quarter fiscal 2022 financial performance, covering revenue growth, cost structures, market opportunities, challenges, liquidity, and capital resources - The company serves over 7,500 financial services organizations and fintech brands globally with its mobile image capture and digital identity verification solutions20157 - In May 2021, Mitek acquired ID R&D, an AI-based voice and face biometrics provider, to enhance its security offerings against digital fraud21158163 - The company identifies market growth drivers in digital transformation, stringent regulations, and increasing demand for digital services, while acknowledging risks from competition, product concentration, and lengthy sales cycles164165166 Results of Operations Total revenue for Q1 2022 increased by 25% to $32.5 million, driven by growth in software, hardware, and services, while operating expenses also rose, leading to a 44% net income increase Revenue Breakdown (Three Months Ended Dec 31) | Revenue Category | 2021 ($ millions) | 2020 ($ millions) | Change (%) | | :--- | :--- | :--- | :--- | | Software and hardware | $15.445 | $12.303 | +26% | | Services and other | $17.028 | $13.673 | +25% | | Total Revenue | $32.473 | $25.976 | +25% | Operating Expenses Breakdown (Three Months Ended Dec 31) | Expense Category | 2021 ($ millions) | 2020 ($ millions) | Change (%) | | :--- | :--- | :--- | :--- | | Cost of revenue | $3.356 | $4.138 | -19% | | Selling and marketing | $8.438 | $7.385 | +14% | | Research and development | $7.606 | $6.165 | +23% | | General and administrative | $5.965 | $5.058 | +18% | | Acquisition-related costs | $2.279 | $1.693 | +35% | - The increase in R&D expenses was primarily due to higher personnel-related costs from the ID R&D acquisition and increased headcount177 Liquidity and Capital Resources As of December 31, 2021, cash and investments decreased by $9.2 million due to stock repurchases, following the issuance of $155.3 million in convertible senior notes and the near completion of a $15 million share repurchase program - Cash and investments decreased by $9.2 million during the quarter, primarily due to $10.1 million in stock repurchases184 - The company repurchased approximately 598,636 shares for $10.1 million during the quarter under its share repurchase program104201 - In February 2021, the company issued $155.3 million in 0.75% convertible senior notes due 2026, with net proceeds of approximately $149.7 million112189190 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate fluctuations on its investment portfolio and foreign currency exchange rate volatility, with a focus on principal preservation and minimal impact from interest rate changes - The primary objective of investment activities is to preserve principal while maximizing after-tax yields without significantly increasing risk210 - A hypothetical 100 basis point change in market interest rates would not have a material impact on the fair value of cash equivalents and debt securities due to their short maturities211 - The company is exposed to foreign currency risk from operations in France, the Netherlands, Russia, and Spain, particularly from fluctuations in the Euro212 Controls and Procedures Management concluded that disclosure controls were effective as of December 31, 2021, with a previously identified material weakness in internal control over financial reporting related to contingent consideration valuation now remediated - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of December 31, 2021214 - A material weakness related to the valuation of contingent consideration from the ID R&D Acquisition, identified as of September 30, 2021, was remediated as of December 31, 2021215216 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal matters, including a claim against its subsidiary, ongoing indemnification demands from customers due to patent infringement, and breach of contract lawsuits - A claim for €0.8 million ($0.9 million) was filed against the company's subsidiary, ICAR, in Spain, for which Mitek expects to be indemnified130131 - The company is monitoring and involved in legal actions related to patent infringement claims by USAA against its customers, including Wells Fargo and PNC Bank, but is not a named defendant in those suits133136137 - Mitek filed a lawsuit against Maplebear Inc. (Instacart) for breach of contract, seeking over $2.0 million in damages145 Risk Factors This section confirms no material changes to the company's risk factors from those disclosed in the previous Annual Report on Form 10-K - There have been no material changes in the company's risk factors from those disclosed in the previous Form 10-K220 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the quarter ended December 31, 2021, that were not previously disclosed - No unregistered sales of equity securities were made during the quarter that had not been previously reported221 Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate agreements, CEO and CFO certifications, and financial data files - The filing includes CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act226