Artificial intelligence and biometrics are the winning combination to fight fraud online

Mitek (NASDAQ:MITK) (www.miteksystems.com), a global leader in digital fraud prevention, today reported financial results for its fiscal 2022 first quarter ended December 31, 2021. Total revenue increased 25% year over year, driven by increased demand for both digital identity verification solutions and mobile deposit, as commerce continues its rapid shift to digital channels.

Fiscal First Quarter 2022 Financial Highlights

Total revenue increased 25% year over year to a first quarter record $32.5 million.
GAAP net income increased 44% year over year to $3.1 million, or $0.07 per diluted share.
Non-GAAP net income increased 65% year over year to $10.2 million, or $0.22 per diluted share.
Cash flow from operations was $2.3 million.
Total cash and investments were $218.2 million at the end of the quarter.

"I am proud that the world's leading brands trust Mitek to protect their companies and their customers from growing online fraud," said CEO Max Carnecchia. "Biometrics are transforming the way we deliver authentication solutions. Our team will continue to innovate to build trust and keep people safe online."

"Mitek is combating fraud in more ways, in more countries and in more industries than ever before," CFO Frank Teruel added. "We also delivered record first quarter revenue, which is evidence of the positive impact our technology is making on financial services and marketplace businesses, mitigating business operation costs and fraud losses."

Conference Call Information

Mitek management will host a conference call and live webcast for analysts and investors today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss the company's financial results.

To access the live call, dial 800-437-2398 (US and Canada) or +1 323-289-6576 (International) and give the participant passcode 5800312.

A live and archived webcast of the conference call will be accessible on the Investor Relations section of the company's website at www.miteksystems.com. In addition, a phone replay will be available approximately two hours following the end of the call, and it will remain available for one week. To access the call replay dial-in information, please click here.

About Mitek

Mitek (NASDAQ:MITK) is a global leader in digital fraud prevention using its mobile capture and digital identity verification solutions built on the latest advancements in computer vision and artificial intelligence. Mitek's identity verification solutions enable organizations to protect their customers by verifying an individual's identity during digital transactions to reduce risk and meet regulatory requirements, while increasing revenue from digital channels. More than 7,500 organizations use Mitek to enable trust and convenience for mobile check deposit, new account opening, account protection, and more. Mitek is based in San Diego, Calif., with offices across the U.S. and Europe. Learn more at www.miteksystems.com. [(MITK-F)]

Follow Mitek on LinkedIn, Twitter and YouTube, and read Mitek's latest blog posts here.

Notice Regarding Forward-Looking Statements

Statements contained in this news release relating to the company's or management's intentions, hopes, beliefs, expectations or predictions of the future, including, but not limited to, statements relating to the company's long-term prospects and market opportunities are forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties, including, but not limited to, risks related to the company's ability to withstand negative conditions in the global economy, the extent to which the COVID-19 outbreak and measures taken in response thereto impact our business, results of operations and financial condition, a lack of demand for or market acceptance of the company's products, the company's ability to continue to develop, produce and introduce innovative new products in a timely manner or the outcome of any pending or threatened litigation and the timing of the implementation and launch of the company's products by the company's signed customers.

Additional risks and uncertainties faced by the company are contained from time to time in the company's filings with the U.S. Securities and Exchange Commission (SEC), including, but not limited to, the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021, and its quarterly reports on Form 10-Q and current reports on Form 8-K, which you may obtain for free on the SEC's website at www.sec.gov. Collectively, these risks and uncertainties could cause the company's actual results to differ materially from those projected in its forward-looking statements and you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company disclaims any intention or obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Note Regarding Use of Non-GAAP Financial Measures

This news release contains non-GAAP financial measures for non-GAAP net income and non-GAAP net income per share that exclude stock compensation expenses, intellectual property litigation costs, acquisition-related costs and expenses, amortization of debt discount and issuance costs, income tax effect of pre-tax adjustments, and the cash tax difference. These financial measures are not calculated in accordance with generally accepted accounting principles (GAAP) and are not based on any comprehensive set of accounting rules or principles. In evaluating the company's performance, management uses certain non-GAAP financial measures to supplement financial statements prepared under GAAP. Management believes these non-GAAP financial measures provide a useful measure of the company's operating results, a meaningful comparison with historical results and with the results of other companies, and insight into the company's ongoing operating performance. Further, management and the Board of Directors utilize these non-GAAP financial measures to gain a better understanding of the company's comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Management believes these non-GAAP financial measures, when read in conjunction with the company's GAAP financial statements, are useful to investors because they provide a basis for meaningful period-to-period comparisons of the company's ongoing operating results, including results of operations against investor and analyst financial models, which helps identify trends in the company's underlying business and provides a better understanding of how management plans and measures the company's underlying business.

MITEK SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (amounts in thousands except share data)

	December 31, 2021			September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	24,214		$	30,312
Short-term investments		137,753			149,057
Accounts receivable, net		16,930			16,602
Contract assets		4,406			4,080
Prepaid expenses		2,540			1,920
Other current assets		2,500			2,085
Total current assets		188,343			204,056
Long-term investments		56,255			48,051
Property and equipment, net		3,654			3,671
Right-of-use assets		6,564			7,056
Intangible assets, net		26,285			28,734
Goodwill		62,305			63,096
Deferred income tax assets		10,677			10,511
Convertible senior notes hedge		42,821			48,208
Other non-current assets		6,097			6,310
Total assets	$	403,001		$	419,693
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,571		$	2,507
Accrued payroll and related taxes		7,206			11,776
Deferred revenue, current portion		8,168			10,381
Lease liabilities, current portion		1,970			1,943
Acquisition-related contingent consideration		11,210			11,050
Other current liabilities		1,646			1,552
Total current liabilities		32,771			39,209
Convertible senior notes		122,632			120,918
Embedded conversion derivative		42,821			48,208
Deferred revenue, non-current portion		644			955
Lease liabilities, non-current portion		6,004			6,588
Deferred income tax liabilities		4,020			4,117
Other non-current liabilities		6,680			6,868
Total liabilities		215,572			226,863
Stockholders' equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.001 par value, 60,000,000 shares authorized, 44,296,771 and 44,168,745 issued and outstanding, as of December 31, 2021 and September 30, 2021, respectively		44			44
Additional paid-in capital		203,091			199,935
Accumulated other comprehensive loss		(2,480	)		(943	)
Accumulated deficit		(13,226	)		(6,066	)
Treasury stock, at cost, no shares and 7,773 shares as of December 31, 2021 and September 30, 2021, respectively		—			(140	)
Total stockholders' equity		187,429			192,830
Total liabilities and stockholders' equity	$	403,001		$	419,693

MITEK SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (amounts in thousands except per share data)

	Three Months Ended December 31,
	2021		2020
Revenue
Software and hardware	$	15,445	$	12,303
Services and other		17,028		13,673
Total revenue		32,473		25,976
Operating costs and expenses
Cost of revenue—software and hardware		378		1,245
Cost of revenue—services and other		2,978		2,893
Selling and marketing		8,438		7,385
Research and development		7,606		6,165
General and administrative		5,965		5,058
Acquisition-related costs and expenses		2,279		1,693
Total operating costs and expenses		27,644		24,439
Operating income		4,829		1,537
Interest expense		2,008		—
Other income, net		135		96
Income before income taxes		2,956		1,633
Income tax benefit		168		534
Net income	$	3,124	$	2,167
Net income per share—basic	$	0.07	$	0.05
Net income per share—diluted	$	0.07	$	0.05
Shares used in calculating net income per share—basic		44,788		42,476
Shares used in calculating net income per share—diluted		46,155		43,897

MITEK SYSTEMS, INC. NON-GAAP NET INCOME RECONCILIATION (Unaudited) (amounts in thousands except per share data)

	Three Months Ended December 31,
	2021			2020
Net income	$	3,124		$	2,167
Non-GAAP adjustments:
Acquisition-related costs and expenses		2,279			1,693
Intellectual property litigation costs		374			241
Stock compensation expense		3,132			2,747
Amortization of debt discount and issuance costs		1,715			—
Income tax effect of pre-tax adjustments		(1,875	)		(1,077	)
Cash tax difference⁽¹⁾		1,415			385
Non-GAAP net income		10,164			6,156
Non-GAAP income per share—basic	$	0.23		$	0.14
Non-GAAP income per share—diluted	$	0.22		$	0.14
Shares used in calculating non-GAAP net income per share—basic		44,788			42,476
Shares used in calculating non-GAAP net income per share—diluted		46,155			43,897

(1)

The company's non-GAAP net income is calculated using a cash tax rate of 3% in both fiscal 2022 and 2021. The estimated cash tax rate is the estimated tax payable on the company's tax returns as a percentage of estimated annual non-GAAP pre-tax net income. The company uses an estimated cash tax rate to adjust for the historical variation in the effective book tax rate associated with the reversal of valuation allowances, the utilization of research and development tax credits, and the utilization of loss carryforwards which currently have an overall effect of reducing taxes payable. The company believes that the cash tax rate provides a more transparent view of the company's operating results. The company's effective tax rate used for the purposes of calculating GAAP net income for the three months ended December 31, 2021 and 2020 was negative 6% and negative 33%, respectively.

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Mitek Reports 25% Year Over Year Revenue Growth and Another Record Quarter