PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Mitek Systems' unaudited Condensed Consolidated Financial Statements for March 31, 2023, include restated 2022 comparative data Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2023 (in thousands) | September 30, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$401,966** | **$360,410** | | Total current assets | $160,203 | $129,096 | | Goodwill | $130,148 | $120,186 | | **Total Liabilities** | **$198,936** | **$190,093** | | Total current liabilities | $45,311 | $40,497 | | Convertible senior notes | $131,670 | $127,970 | | **Total Stockholders' Equity** | **$203,030** | **$170,317** | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Mar 31, 2023 (in thousands) | Three Months Ended Mar 31, 2022 (Restated) (in thousands) | Six Months Ended Mar 31, 2023 (in thousands) | Six Months Ended Mar 31, 2022 (Restated) (in thousands) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$46,123** | **$33,510** | **$91,826** | **$65,982** | | Operating Income | $8,686 | $2,680 | $17,059 | $7,509 | | **Net Income** | **$5,169** | **$435** | **$9,899** | **$3,559** | | **Net Income Per Share—Diluted** | **$0.11** | **$0.01** | **$0.22** | **$0.08** | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended Mar 31, 2023 (in thousands) | Six Months Ended Mar 31, 2022 (Restated) (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,561 | $9,686 | | Net cash provided by (used in) investing activities | $37,728 | $(1,743) | | Net cash provided by (used in) financing activities | $1,259 | $(13,736) | | **Net increase (decrease) in cash** | **$50,988** | **$(6,328)** | | **Cash and cash equivalents at end of period** | **$83,047** | **$23,984** | [Note 1. Nature of Operations and Summary of Significant Accounting Policies](index=8&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Mitek offers mobile image capture and digital identity verification, with restated March 2022 financials due to accounting errors - The company provides mobile image capture and digital identity verification solutions using AI and machine learning to over **7,800** financial services organizations and fintech brands globally[25](index=25&type=chunk) - Financials for the three and six months ended March 31, 2022, were restated due to errors in revenue recognition for multiyear licenses and SaaS products, capitalization of certain commissions, and accounting for the HooYu acquisition[28](index=28&type=chunk) [Note 2. Revenue Recognition](index=10&type=section&id=2.%20REVENUE%20RECOGNITION) Revenue disaggregated: Deposits **$59.0 million**, Identity Verification **$32.8 million** for six months ended March 31, 2023 Disaggregation of Revenue by Major Product Category (in thousands) | Product Category | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 (Restated) | Six Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2022 (Restated) | | :--- | :--- | :--- | :--- | :--- | | Deposits revenue | $28,760 | $21,228 | $59,041 | $40,279 | | Identity verification revenue | $17,363 | $12,282 | $32,785 | $25,703 | | **Total revenue** | **$46,123** | **$33,510** | **$91,826** | **$65,982** | - As of March 31, 2023, the company had current contract assets of **$8.8 million** and current contract liabilities (deferred revenue) of **$12.0 million**[51](index=51&type=chunk) [Note 3. Business Combinations](index=13&type=section&id=3.%20BUSINESS%20COMBINATIONS) HooYu Ltd acquisition for **$129.1 million** in March 2022 contributed **$6.0 million** revenue and **$7.8 million** net loss in six months - The company completed the acquisition of HooYu Ltd on March 23, 2022, for **$129.1 million** to enhance its Know Your Customer (KYC) technology offerings[54](index=54&type=chunk) HooYu Acquisition - Fair Value of Assets Acquired and Liabilities Assumed (in thousands) | Account | Amount | | :--- | :--- | | Intangible assets | $73,100 | | Goodwill | $74,206 | | Other net assets | $(19,304) | | **Net assets acquired** | **$127,902** | - For the six months ended March 31, 2023, HooYu contributed **$6.0 million** in revenue and a net loss of **$7.8 million**[57](index=57&type=chunk) [Note 4. Restructuring](index=15&type=section&id=4.%20RESTRUCTURING) June 2022 restructuring incurred **$2.0 million** additional costs and **$2.9 million** payments, resulting in zero accrual by March 31, 2023 Restructuring Accrual Activity (in thousands) | Description | Amount | | :--- | :--- | | Balance at September 30, 2022 | $901 | | Additional costs incurred | $1,986 | | Payments | $(2,942) | | Foreign currency effect | $55 | | **Balance at March 31, 2023** | **$0** | [Note 5. Investments](index=15&type=section&id=5.%20INVESTMENTS) Available-for-sale securities decreased to **$31.5 million** by March 31, 2023, with contingent consideration liability at **$6.1 million** Investments by Security Type (Fair Market Value, in thousands) | Security Type | March 31, 2023 | September 30, 2022 | | :--- | :--- | :--- | | U.S. Treasury | $7,207 | $9,103 | | Commercial paper | $6,084 | $18,022 | | Corporate debt securities | $18,187 | $38,949 | | Foreign government and agency securities | $0 | $2,827 | | **Total** | **$31,478** | **$68,901** | - Acquisition-related contingent consideration, classified as a Level 3 liability, increased from **$5.9 million** at September 30, 2022, to **$6.1 million** at March 31, 2023, due to changes in fair value[62](index=62&type=chunk) [Note 6. Goodwill and Intangible Assets](index=18&type=section&id=6.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Goodwill increased to **$130.1 million** from foreign currency effects; net intangible assets decreased to **$73.5 million** due to amortization - The goodwill balance increased by **$10.0 million** during the six months ended March 31, 2023, primarily due to foreign currency effects[63](index=63&type=chunk) Intangible Assets, Net (in thousands) | Category | March 31, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Completed technologies | $63,160 | $63,496 | | Customer relationships | $5,130 | $6,927 | | Trade names | $4,789 | $4,914 | | Covenants not to compete | $371 | $419 | | **Total intangible assets** | **$73,450** | **$75,756** | [Note 7. Stockholders' Equity](index=19&type=section&id=7.%20STOCKHOLDERS'%20EQUITY) Stock-based compensation expense was **$5.1 million** for six months ended March 31, 2023; **$15 million** share repurchase program completed in fiscal 2022 Stock-Based Compensation Expense (in thousands) | Expense Category | Six Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Cost of revenue | $192 | $167 | | Selling and marketing | $1,538 | $2,078 | | Research and development | $1,453 | $1,804 | | General and administrative | $1,963 | $2,380 | | **Total** | **$5,146** | **$6,429** | - The company's share repurchase program was completed in the second quarter of fiscal 2022, with total purchases of **$14.8 million** during the six months ended March 31, 2022[77](index=77&type=chunk) [Note 8. Income Taxes](index=21&type=section&id=8.%20INCOME%20TAXES) Income tax provision for six months ended March 31, 2023, was **$3.7 million** (**27%** effective rate), compared to **-6%** in 2022 Income Tax Provision and Effective Tax Rate | Period | Income Tax Provision/(Benefit) (in thousands) | Effective Tax Rate | | :--- | :--- | :--- | | Three Months Ended Mar 31, 2023 | $1,808 | 26% | | Six Months Ended Mar 31, 2023 | $3,700 | 27% | | Three Months Ended Mar 31, 2022 | $(20) | -5% | | Six Months Ended Mar 31, 2022 | $(200) | -6% | [Note 9. Convertible Senior Notes](index=21&type=section&id=9.%20CONVERTIBLE%20SENIOR%20NOTES) Company holds **$155.3 million** in 0.75% convertible senior notes due 2026 but was non-compliant with covenants due to late SEC filings - The company was not in compliance with covenants for its 2026 Notes due to the failure to timely file its Form 10-K and Form 10-Q reports, resulting in the accrual of additional special interest[81](index=81&type=chunk) Carrying Value of 2026 Notes (in thousands) | Description | March 31, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Principal amount | $155,250 | $155,250 | | Less: unamortized discount and issuance costs | $(23,580) | $(27,280) | | **Carrying amount** | **$131,670** | **$127,970** | - In connection with the notes, the company entered into a Notes Hedge and Warrant Transactions to reduce potential dilution[91](index=91&type=chunk)[92](index=92&type=chunk) [Note 10. Commitments and Contingencies](index=25&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) Legal proceedings include customer indemnification demands from USAA patent suits, an Instacart breach of contract lawsuit, and a dismissed BIPA class action - The company has received indemnification demands from customers like PNC Bank and Truist due to patent infringement lawsuits filed by USAA related to mobile deposit technology[99](index=99&type=chunk)[102](index=102&type=chunk)[108](index=108&type=chunk) - The company filed a lawsuit against Instacart for breach of contract, seeking over **$2.0 million** in damages, with Instacart filing a cross-complaint[115](index=115&type=chunk)[118](index=118&type=chunk) - A putative class action lawsuit alleging violations of the Illinois Biometric Information Privacy Act (BIPA) was voluntarily dismissed by the plaintiffs on September 13, 2023[120](index=120&type=chunk)[124](index=124&type=chunk) [Note 11. Leases](index=30&type=section&id=11.%20LEASES) Operating ROU assets were **$4.6 million** and lease liabilities **$5.5 million** as of March 31, 2023, with a **4.6-year** weighted-average term Maturities of Operating Lease Liabilities (in thousands) | Period | Amount | | :--- | :--- | | 2023 - remaining | $1,108 | | 2024 | $1,726 | | 2025 | $638 | | 2026 | $629 | | 2027 | $635 | | 2028 | $425 | | Thereafter | $591 | | **Total lease payments** | **$5,752** | [Note 12. Revenue Concentration](index=30&type=section&id=12.%20REVENUE%20CONCENTRATION) Two customers each accounted for **15%** of total revenue for six months ended March 31, 2023; international sales were **24%** - For the six months ended March 31, 2023, two customers each accounted for **15%** of the company's total revenue[130](index=130&type=chunk) - International sales accounted for approximately **24%** of total revenue for the six months ended March 31, 2023, down from **29%** in the prior year period[131](index=131&type=chunk) [Note 13. Restatement of Previously Reported Financials](index=30&type=section&id=13.%20RESTATEMENT%20OF%20PREVIOUSLY%20REPORTED%20UNAUDITED%20INTERIM%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Q2 2022 financials were restated due to material GAAP errors in revenue recognition, commission capitalization, and HooYu acquisition accounting - The restatement was required due to errors in revenue recognition on multiyear term licenses and SaaS, revenue cut-off, capitalization of commissions, and accounting for HooYu acquisition liabilities[135](index=135&type=chunk) Impact of Restatement on Q2 2022 Statement of Operations (in thousands) | Line Item | As Previously Reported | Total Adjustments | As Restated | | :--- | :--- | :--- | :--- | | Total revenue | $34,714 | $(1,204) | $33,510 | | Operating income | $3,504 | $(824) | $2,680 | | Net income | $1,013 | $(578) | $435 | [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 **38%** quarterly and **39%** six-month revenue growth for March 31, 2023, driven by Mobile Deposit® and identity verification, including HooYu [Overview](index=36&type=section&id=Overview) Mitek leads in mobile image capture and digital identity verification, expanding capabilities via ID R&D and HooYu acquisitions - The company's growth strategy includes organic development and strategic acquisitions, such as ID R&D for AI-based biometrics and HooYu for KYC technology[155](index=155&type=chunk)[156](index=156&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Q2 2023 revenue increased **38%** to **$46.1 million** and net income to **$5.2 million**; six-month revenue grew **39%** to **$91.8 million** with **178%** net income growth Comparison of Three Months Ended March 31, 2023 and 2022 (in thousands) | Metric | 2023 | 2022 (Restated) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $46,123 | $33,510 | $12,613 | 38% | | Operating Income | $8,686 | $2,680 | $6,006 | 224% | | Net Income | $5,169 | $435 | $4,734 | 1088% | - The **38%** revenue increase in Q2 2023 was driven by a **$7.1 million** (39%) increase in software and hardware revenue and a **$5.5 million** (36%) increase in services and other revenue, the latter boosted by the HooYu acquisition[168](index=168&type=chunk) Comparison of Six Months Ended March 31, 2023 and 2022 (in thousands) | Metric | 2023 | 2022 (Restated) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $91,826 | $65,982 | $25,844 | 39% | | Operating Income | $17,059 | $7,509 | $9,550 | 127% | | Net Income | $9,899 | $3,559 | $6,340 | 178% | - The **54%** increase in software and hardware revenue for the six-month period was primarily due to a significant multiyear Mobile Deposit® contract with an existing customer[180](index=180&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity remains strong with **$114.5 million** in cash and investments at March 31, 2023, and **$11.6 million** cash from operations Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2022 (Restated) | | :--- | :--- | :--- | | Cash provided by operating activities | $11,561 | $9,686 | | Cash provided by (used in) investing activities | $37,728 | $(1,743) | | Cash provided by (used in) financing activities | $1,259 | $(13,736) | - Working capital increased to **$114.9 million** at March 31, 2023, from **$88.6 million** at September 30, 2022[204](index=204&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) Primary market risks are interest rate risk on investments and foreign currency risk from European operations, with no material inflation impact - The company's investment portfolio is subject to interest rate risk, but short maturities mitigate material impact from rate changes[209](index=209&type=chunk) - The company is exposed to foreign currency risk from its operations in France, the Netherlands, and Spain, primarily related to the Euro and British pound sterling[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective as of March 31, 2023, due to material weaknesses in internal control over financial reporting; remediation is underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2023, due to multiple material weaknesses[213](index=213&type=chunk) - Material weaknesses were identified in controls related to business combination accounting, revenue recognition, risk assessment, IT general controls, contingent consideration valuation, and the financial statement close process[215](index=215&type=chunk)[217](index=217&type=chunk) - A remediation plan is in process, which includes hiring additional accounting personnel, enhancing the risk assessment process, and designing and implementing improved process-level and IT controls[216](index=216&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 10 of the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 10 of the notes to the condensed consolidated financial statements[219](index=219&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors disclosed in the 2022 Annual Report on Form 10-K - There have been no material changes in the company's risk factors from those disclosed in the 2022 Annual Report on Form 10-K[220](index=220&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) Q2 2023 revenue increased by **$0.8 million** due to revised variable consideration; new deadlines for 2024 stockholder proposals are announced - Adjustments were made to the second quarter of fiscal 2023 financial results, increasing services revenue by **$0.8 million** due to revisions in estimates of variable consideration for certain SaaS contracts[224](index=224&type=chunk) - Due to a postponed 2023 annual meeting, the company has set new deadlines for stockholder proposals for the 2024 annual meeting[227](index=227&type=chunk)[228](index=228&type=chunk)

Financial Data and Key Metrics Changes - For Q2 of fiscal 2023, Mitek generated revenue of $45.3 million, representing a 35% increase year-over-year [8][50] - GAAP net income for the quarter was $4.4 million, or $0.10 per diluted share, with a diluted share count of 45.6 million [9][64] - Non-GAAP net income for Q2 was $13.1 million, or $0.29 per diluted share, compared to $9.7 million, or $0.21 per share, for the same period last year [64] - Cash flow from operations was $6.3 million during the quarter, bringing total cash and investments to $114.5 million as of March 31, 2023 [25][64] Business Line Data and Key Metrics Changes - Identity revenue increased 35% year-over-year to $16.6 million, driven by the addition of HooYu SaaS revenue and strong contributions from ID R&D and Mobile Verify products [55][51] - Deposits revenue for Q2 increased 35% year-over-year to $28.8 million, driven by mobile deposit reorders [24][88] - Services and other revenue, including transactional SaaS revenue, maintenance, and professional services, was $20.1 million for the quarter, up 31% year-over-year [24] Market Data and Key Metrics Changes - Deposits revenue for the first six months increased 47% year-over-year to $59 million, driven by solid mobile deposit reorders and a large multiyear contract [65] - Identity revenue for the first six months increased 24% year-over-year to $32 million, driven by the addition of HooYu revenue and strong contributions from ID R&D and Mobile Verify products [65] Company Strategy and Development Direction - Mitek is focused on enhancing its identity verification solutions, positioning itself strategically to meet growing customer demands in a digital landscape [89] - The company is committed to innovation, with products like IDLive Face Plus aimed at combating deep fakes and digital injection attacks [90] - Mitek's strategy includes a principled approach to pricing, allowing for potential price increases as contracts are renewed [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macroeconomic environment impacting new enterprise spending, with expectations of slower growth in the second half of the fiscal year [62][23] - The company reiterated its annual guidance, expecting revenue growth of 18% year-over-year and a non-GAAP operating margin in the range of 30% to 31% for the full fiscal year [26][23] - Management expressed confidence in the growth potential of the Check Fraud Defender and Mobile Deposit solutions, despite anticipated deceleration in growth [27][68] Other Important Information - Mitek is currently involved in litigation related to USAA patents, with positive developments as the U.S. Patent Trial and Appeal Board has invalidated several USAA patents [20][59] - The company has introduced MiPass, a multimodal biometric solution for continuous identity authentication, which combines voice and face recognition [60] Q&A Session Summary Question: What are the highest contributors to growth in the check business? - Management ranked growth drivers as follows: mobile check deposit adoption, Check Fraud Defender, and price increases [27][68] Question: Can you discuss the impact of the macro environment on transactional volumes? - Management noted that the impact from the macro environment became more pronounced in Q3 and Q4, with some headwinds observed in Q2 [98] Question: What are the plans for capital allocation moving forward? - Management indicated that the priority is to become current on filings before considering M&A or stock buybacks [83][109] Question: What should be expected regarding the ongoing patent situation with USAA? - Management advised to keep an eye on PTAB rulings and the ongoing declaratory judgment action on appeal [42][59]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001-35231 MITEK SYSTEMS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) ...

Financial Data and Key Metrics Changes - Mitek reported record revenue of $143.9 million for fiscal 2022, representing a 20% year-over-year growth [3] - Non-GAAP net income reached $40 million or $0.87 per diluted share, up 17% year-over-year [3] - Cash flow from operations was strong at $26 million for the year [3] - GAAP net income for fiscal 2022 was $3 million or $0.07 per share, down from $8 million or $0.18 per share in fiscal 2021 [16] - Non-GAAP net income increased 16% for the year to $39.6 million or $0.87 per share compared to $34.2 million or $0.76 per share in fiscal 2021 [16] Business Line Data and Key Metrics Changes - Services and other revenue for fiscal 2022 was $71 million, a 19% increase over $59.7 million in fiscal 2021 [15] - Transactional SaaS revenue increased 31% year-over-year to $13.4 million, driven by increased mobile verified volumes and the addition of HooYu SaaS revenue [12] - Deposits revenue increased 14% year-over-year to $58.1 million, primarily due to the adoption of Mobile Deposit and Check Fraud Defender product lines [31] - Identity verification revenue increased 31% to $58.1 million, driven by 25% growth in transactional revenue and additional SaaS revenue from HooYu [31] Market Data and Key Metrics Changes - The identity verification market is experiencing significant growth due to the increasing sophistication of financial crimes and the demand for secure online experiences [9] - Mitek's identity business grew 31% year-over-year, reflecting the strong demand for its solutions [88] Company Strategy and Development Direction - Mitek is focusing on expanding its identity verification solutions and enhancing its product offerings to combat digital identity fraud [3][9] - The company plans to hold an Investor Day event to discuss its long-term strategy and growth opportunities in the identity products sector [10] - Mitek launched MiPass, a multi-modal biometrics solution for continuous identity authentication, to strengthen its market position [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fiscal 2023 revenue guidance of $163 million to $165 million, representing a 14% year-over-year increase [17] - The company is optimistic about its long-term prospects and the ability to penetrate its target addressable markets [91] - Management noted that the macroeconomic environment has changed significantly, impacting the identity business, particularly in interest-sensitive sectors [70] Other Important Information - Mitek is actively pursuing a declaratory judgment action against USAA to prove that its products do not infringe on USAA's patents, with positive developments in the litigation process [87] - The company continues to generate meaningful cash flow from operations, with total cash and investments reaching $101 million as of September 30, 2022 [32] Q&A Session Summary Question: Can you discuss transaction activity and trends in Mobile Check and Mobile ID? - Management noted increased transaction volumes from existing customers and new customer additions in identity verifications and mobile check deposits [20] Question: What are the expectations for the timing on the 10-K and subsequent filings? - Management indicated that the 10-K would be filed within a week to ten days, with a return to a regular filing schedule expected soon [40][77] Question: How do you view the growth rates of deposits versus the identity business in fiscal 2023? - Management expects deposits to grow at a high-single digit to low double-digit rate, while the identity business is anticipated to achieve high-teens growth [56][74] Question: What factors could impact the timeline for achieving profitability in the identity segment? - Management highlighted that faster top-line growth could lead to earlier profitability, while slower growth could delay it [49] Question: How is the macro environment impacting each business unit? - Management noted that the identity business is facing challenges in interest-sensitive areas, while the deposits business is benefiting from increased focus on fraud prevention [64][70]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Commission File Number 001-35231 MITEK SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 87-0418827 (State or other jurisdiction of incorporation or organization) Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transit ...

Financial Data and Key Metrics Changes - Mitek reported record revenue of $39.3 million for Q3 2022, representing a 24% year-over-year growth [9][33] - Software and hardware revenue increased by 17% year-over-year to $19.8 million, driven by contributions from ID R&D and Check Fraud Defender [33][34] - Services and other revenue, including transactional SaaS revenue, rose by 32% year-over-year to $19.5 million, with transactional SaaS revenue increasing by 45% to $14.7 million [35][36] - Total GAAP operating expenses were $38.1 million, up from $26.3 million in Q3 of the previous year, attributed to investments in the identity business and acquisition-related costs [38][39] - Non-GAAP net income for Q3 was $10.2 million or $0.23 per diluted share, a decrease of 4% year-over-year [41] Business Line Data and Key Metrics Changes - Deposit revenue increased by 5% year-over-year to $21.9 million, supported by global deposit reorders and Check Fraud Defender [37] - Identity revenue surged by 58% year-over-year to $17.4 million, driven by expanded use cases and the addition of HooYu SaaS revenue [37] Market Data and Key Metrics Changes - The identity verification market is experiencing significant growth due to increased online transactions and rising identity fraud incidents, which affected 42 million consumers in 2021 [10][11] - Regulatory requirements in the UK, such as right-to-work and right-to-rent laws, are creating new opportunities for identity verification solutions [12][14] Company Strategy and Development Direction - Mitek launched the Mitek Verified Identity Platform (MiVIP), aimed at enhancing digital access and security, which is expected to expand the addressable market and accelerate growth [20][26] - The company is focusing on regulated industries, including fintech and financial services, to target faster-moving businesses that require efficient identity verification solutions [78][80] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the ability to replicate Q3 revenue in Q4, noting that identity revenue is transactional and may vary based on consumer activity [42][43] - The company anticipates that the identity business will reach profitability in the second half of fiscal 2024, emphasizing the complexity of the identity verification market [45][89] Other Important Information - Mitek's gross margin for the quarter was 88%, slightly down from 89% in the previous year [38] - The company integrated orchestration technology from the HooYu acquisition and is building a sales pipeline for the new platform in the U.S. [30] Q&A Session Summary Question: Impact of macro environment on customer buying behaviors - Management noted that, so far, there has been no significant impact on individual customers or use cases due to the macro environment, although they anticipate potential headwinds in certain areas like mortgage origination as interest rates rise [52][53] Question: Changes in relationships with orchestration partners due to MiVIP - Some smaller partners view MiVIP as competitive, but larger partners see it as an opportunity, enhancing Mitek's attractiveness as a partner [55] Question: Initial customer reception for MiVIP - Early engagement has been positive, with several serious prospects and demonstrations conducted, indicating a good initial reception [57][58] Question: Revenue performance attribution - Revenue growth was attributed to both HooYu and strong performance from Mobile Verify, particularly in new use cases [63] Question: Go-to-market strategy for MiVIP - MiVIP will be sold by all Mitek salespeople, targeting regulated industries and faster-moving businesses that require efficient identity solutions [78][80] Question: Timeline for identity segment profitability - Management expects the identity segment to reach profitability in the second half of fiscal 2024, citing the complexity of the identity verification market as a challenge [89]

Financial Performance - Total revenue for the three months ended March 31, 2022, was $34.7 million, an increase of 21% compared to $28.8 million for the same period in 2021[190] - Net income for the three months ended March 31, 2022, was $1.9 million, or $0.04 per diluted share, compared to $1.0 million, or $0.02 per share, for the same period in 2021[190] - Total revenue increased by $12.4 million, or 23%, to $67.2 million for the six months ended March 31, 2022, compared to $54.7 million for the same period in 2021[201] - Net income increased by $1.8 million, or 58%, to $5.0 million for the six months ended March 31, 2022, compared to $3.2 million in the same period in 2021[200] Revenue Breakdown - Software and hardware revenue increased by $6.3 million, or 48%, to $19.3 million, primarily due to increased sales of Mobile Deposit® and IDLive® software products[191] - Software and hardware revenue rose by $9.4 million, or 37%, to $34.7 million, primarily driven by a $10.5 million increase in sales of Mobile Deposit® and IDLive® software products[201] Expenses - Research and development expenses increased by 23% to $8.2 million for the three months ended March 31, 2022, compared to $6.7 million for the same period in 2021[190] - Selling and marketing expenses increased by $1.7 million, or 11%, to $17.6 million, but as a percentage of revenue, they decreased to 26% from 29%[203] - Research and development expenses rose by $2.9 million, or 23%, to $15.8 million, accounting for 24% of total revenue, up from 23%[204] - General and administrative expenses increased by $1.2 million, or 12%, to $12.0 million, with a decrease in percentage of revenue to 18% from 20%[205] - Acquisition-related costs increased by $2.0 million, or 59%, to $5.3 million, representing 8% of total revenue, up from 6%[206] Cash Flow and Liquidity - Cash provided by operating activities was $9.7 million for the six months ended March 31, 2022, compared to $16.1 million for the same period in 2021[190] - As of March 31, 2022, the company had $93.4 million in cash and cash equivalents, a decrease of $134.0 million, or 59%, from $227.4 million on September 30, 2021, primarily due to acquisitions and stock repurchases[210] - Net cash provided by operating activities for the six months ended March 31, 2022, was $9.7 million, driven by net income of $5.0 million and net non-cash charges of $15.2 million[211] - The company used $1.7 million in investing activities during the six months ended March 31, 2022, mainly for acquisitions and capital expenditures, partially offset by net sales and maturities of investments of $125.5 million[214] - Net cash used in financing activities was $13.7 million during the six months ended March 31, 2022, primarily due to $14.8 million in stock repurchases[216] Acquisitions - The acquisition of ID R&D was completed for an aggregate purchase price of up to $49.0 million, including $13.0 million in cash and $13.9 million in common stock[179] - The acquisition of HooYu Ltd was completed for £97.8 million in cash, enhancing Mitek's KYC capabilities[180] Tax and Interest - For the six months ended March 31, 2022, the company recorded an income tax provision of $0.5 million, resulting in an effective tax rate of 9%[209] - Interest expense for the six months ended March 31, 2022, was $4.0 million, significantly up from $1.3 million in the same period in 2021[207] Market and Operational Insights - The company anticipates growth in deposits and identity verification products due to trends in payments, online lending, and increasing demand for digital services[181] - The sales cycle for software and services can be lengthy, often taking up to six months or longer for larger customers[183] Assets and Securities - As of March 31, 2022, the company had $69.4 million in available-for-sale debt securities, with $37.9 million classified as current and $31.5 million as long-term[231] - The fair market value of the company's marketable securities was $69.4 million, representing 18% of total assets[237] - The company's investment portfolio includes cash equivalents and marketable securities such as corporate debt securities, commercial paper, certificates of deposit, and asset-backed securities[237] - A hypothetical 100 basis point change in market interest rates would not materially impact the fair value of cash equivalents and debt securities due to their relatively short maturities[238] Currency Exposure - The company has operations in the United Kingdom, France, the Netherlands, Russia, and Spain, which are exposed to foreign currency exchange rate fluctuations[239] - The functional currency for the company's French, Dutch, and Spanish operations is the Euro, affecting results and cash flows due to exchange rate changes[239]

Financial Data and Key Metrics Changes - Mitek reported a revenue growth of 21% year-over-year, reaching $34.7 million in Q2 2022 [9][30] - Non-GAAP net income increased by 49% year-over-year to $10.8 million, or $0.24 per diluted share [9][36] - Cash flow from operations was $7.4 million for the quarter [9][37] - Total GAAP operating expenses rose to $29.9 million from $26.4 million in Q2 of the previous year [33] Business Line Data and Key Metrics Changes - Software and hardware revenue increased by 48% year-over-year to $19.3 million, primarily due to contributions from ID R&D and mobile deposit reorders [30] - Services revenue, which includes transactional SaaS revenue, decreased by 2% year-over-year to $15.4 million, with transactional SaaS revenue down 4% to $10.5 million [31] - Deposit revenue grew by 24% year-over-year to $21.3 million, while identity revenue increased by 16% year-over-year to $13.4 million [32][78] Market Data and Key Metrics Changes - The identity verification market is experiencing increased demand due to rising fraud attacks and data breaches, which increased by 68% in 2021 [22] - The acquisition of HooYu is expected to expand Mitek's addressable market significantly, targeting more customers and accelerating growth in the identity business [10][25] Company Strategy and Development Direction - Mitek's acquisition of HooYu aims to enhance its capabilities in identity verification and authentication, providing a comprehensive orchestration platform [10][25] - The company is focusing on integrating its technology and harmonizing go-to-market efforts to capitalize on growing market opportunities [28][39] - Mitek plans to leverage its low code, no code capabilities to allow businesses of all sizes to quickly implement identity verification solutions [14][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential headwinds within the core identity business but emphasized the urgency for orchestration-enabled solutions in the market [28] - The integration of HooYu is expected to take 90 to 180 days, with a focus on demonstrating the combined platform to existing and new customers [66] - Management believes that profitability for the identity business may be pushed back to the second half of fiscal 2024 due to integration costs [39] Other Important Information - Mitek's total cash and investments stood at $93.4 million as of March 31, following the acquisition of HooYu for $127.1 million [37] - The company is making necessary investments to integrate HooYu and enhance its offerings in the identity verification market [39] Q&A Session Summary Question: How are initial customer and partner conversations changing with the new platform? - Management noted that customers are increasingly recognizing the ROI of combining technologies into one platform rather than seeking point solutions [45][46] Question: Can you provide updates on new products like Check Fraud Defender and IDLive Doc? - Management reported positive adoption and interest from large financial institutions for Check Fraud Defender, while IDLive Doc has seen increasing transaction volumes with initial customers [51][56] Question: What were HooYu's revenue and historical losses? - HooYu generated just under $10 million in revenue last year but was a loss-making startup, requiring additional investments for integration and growth [62][64] Question: What is the timeline for integrating HooYu and selling to larger customers? - Management aims to have a demonstrable product in the market within 90 days and to build pipeline sales cycles shortly thereafter [66] Question: Can you explain the decrease in services revenue and the headwinds in the identity segment? - The decrease was attributed to the completion of a large project for a customer, creating a difficult comparison for future quarters [70][71]

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) 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 2020[17](index=17&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) 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 solutions[20](index=20&type=chunk)[157](index=157&type=chunk) - In May 2021, Mitek acquired ID R&D, an AI-based voice and face biometrics provider, to enhance its security offerings against digital fraud[21](index=21&type=chunk)[158](index=158&type=chunk)[163](index=163&type=chunk) - 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 cycles[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) 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 headcount[177](index=177&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) 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 repurchases[184](index=184&type=chunk) - The company repurchased approximately **598,636** shares for **$10.1 million** during the quarter under its share repurchase program[104](index=104&type=chunk)[201](index=201&type=chunk) - In February 2021, the company issued **$155.3 million** in **0.75%** convertible senior notes due 2026, with net proceeds of approximately **$149.7 million**[112](index=112&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) 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 risk[210](index=210&type=chunk) - 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 maturities[211](index=211&type=chunk) - The company is exposed to foreign currency risk from operations in France, the Netherlands, Russia, and Spain, particularly from fluctuations in the Euro[212](index=212&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) 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, 2021[214](index=214&type=chunk) - 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, 2021[215](index=215&type=chunk)[216](index=216&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) 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 indemnified[130](index=130&type=chunk)[131](index=131&type=chunk) - 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 suits[133](index=133&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) - Mitek filed a lawsuit against Maplebear Inc. (Instacart) for breach of contract, seeking over **$2.0 million** in damages[145](index=145&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) 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-K[220](index=220&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) 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 reported[221](index=221&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) 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 Act[226](index=226&type=chunk)

Investor presentation : MITK Q1 FY22 © 2022 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 earnings, ...