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Investments | 12 Months Ended
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Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
INVESTMENTS | 5. INVESTMENTS The Company determines the appropriate designation of investments at the time of purchase and reevaluates such designation as of each balance sheet date. All of the Company’s investments are designated as available-for-sale debt securities. As of September 30, 2022 and 2021, the Company’s short-term investments have maturity dates of less than one year from the balance sheet date. The Company’s long-term investments have maturity dates of greater than one year from the balance sheet date. Available-for-sale marketable securities are carried at fair value as determined by quoted market prices for identical or similar assets, with unrealized gains and losses, net of taxes, and reported as a separate component of stockholders’ equity. Management reviews the fair value of the portfolio at least monthly and evaluates individual securities with fair value below amortized cost at the balance sheet date. For debt securities, in order to determine whether impairment is other-than-temporary, management must conclude whether the Company intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. If management intends to sell an impaired debt security or it is more likely than not that the Company will be required to sell the security prior to recovering its amortized cost basis, an other-than-temporary impairment is deemed to have occurred. The amount of an other-than-temporary impairment on debt securities related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings. The amount of an other-than-temporary impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of stockholders’ equity in other comprehensive income (loss). No other-than-temporary impairment charges were recognized in the twelve months ended September 30, 2022, 2021, and 2020. The Company realized a $0.3 million loss from the sale of available-for-sale securities during the twelve months ended September 30, 2022. There were no realized gains or losses from the sale of available-for-sale securities during the twelve months ended September 30, 2021. The cost of securities sold is based on the specific identification method. Amortization of premiums, accretion of discounts, interest, dividend income, and realized gains and losses are included in other income, net in the consolidated statements of operations and other comprehensive income (loss). The following tables summarize investments by type of security as of September 30, 2022 and 2021, respectively (amounts in thousands):
September 30, 2022: | Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Market Value
Available-for-sale securities: |  |  |  |  |  |  |
U.S. Treasury, short-term | $ | 6,016 |  |  | $ | — |  |  | $ | (134) |  |  | $ | 5,882 |
Foreign government and agency securities, short-term | 2,865 |  |  | — |  |  | (38) |  |  | 2,827 |
Commercial paper, short-term | 18,245 |  |  | — |  |  | (223) |  |  | 18,022 |
Corporate debt securities, short-term | 32,065 |  |  | — |  |  | (528) |  |  | 31,537 |
U.S. Treasury, long-term | 3,431 |  |  | — |  |  | (210) |  |  | 3,221 |
Foreign government and agency securities, long-term | — |  |  | — |  |  | — |  |  | — |
Corporate debt securities, long-term | 7,692 |  |  | — |  |  | (280) |  |  | 7,412 |
Total | $ | 70,314 |  |  | $ | — |  |  | $ | (1,413) |  |  | $ | 68,901 |
September 30, 2021: | Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Market Value
Available-for-sale securities: |  |  |  |  |  |  |
U.S. Treasury, short-term | $ | 4,222 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 4,223 |
Asset-backed securities, short-term | 4,812 |  |  | 1 |  |  | (2) |  |  | 4,811 |
Corporate debt securities, short-term | 140,042 |  |  | 6 |  |  | (25) |  |  | 140,023 |
U.S. Treasury, long-term | 6,996 |  |  | 1 |  |  | (2) |  |  | 6,995 |
Foreign government and agency securities, long-term | 2,909 |  |  | — |  |  | (1) |  |  | 2,908 |
Corporate debt securities, long-term | 38,184 |  |  | 3 |  |  | (39) |  |  | 38,148 |
Total | $ | 197,165 |  |  | $ | 12 |  |  | $ | (69) |  |  | $ | 197,108 |
Fair Value Measurements and Disclosures FASB ASC Topic 820, Fair Value Measurements (“ASC 820”) defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which consists of the following: •Level 1—Quoted prices in active markets for identical assets or liabilities; •Level 2—Inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and •Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following tables represent the fair value hierarchy of the Company’s investments and acquisition-related contingent consideration as of September 30, 2022 and 2021, respectively (amounts in thousands):
September 30, 2022: | Balance |  | Quoted Prices in Active Markets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Short-term investments: |  |  |  |  |  |  |
U.S. Treasury | $ | 5,882 |  |  | $ | 5,882 |  |  | $ | — |  |  | $ | — |
Commercial paper | 18,022 |  |  | — |  |  | 18,022 |  |  | — |
Foreign government and agency securities | 2,827 |  |  | — |  |  | 2,827 |  |  | — |
Corporate debt securities | 31,537 |  |  | — |  |  | 31,537 |  |  | — |
Total short-term investments at fair value | 58,268 |  |  | 5,882 |  |  | 52,386 |  |  | — |
Long-term investments: |  |  |  |  |  |  |
U.S. Treasury | 3,221 |  |  | 3,221 |  |  | — |  |  | — |
Foreign government and agency securities | — |  |  | — |  |  | — |  |  | — |
Corporate debt securities | 7,412 |  |  | — |  |  | 7,412 |  |  | — |
Total long-term investments at fair value | 10,633 |  |  | 3,221 |  |  | 7,412 |  |  | — |
Convertible senior notes hedge | — |  |  | — |  |  | — |  |  | — |
Total assets at fair value | $ | 68,901 |  |  | $ | 9,103 |  |  | $ | 59,798 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |
Acquisition-related contingent consideration | $ | 5,920 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,920 |
Non-current liabilities: |  |  |  |  |  |  |
Acquisition-related contingent consideration | — |  |  | — |  |  | — |  |  | — |
Embedded conversion derivative | — |  |  | — |  |  | — |  |  |
Total liabilities at fair value | $ | 5,920 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,920 |
September 30, 2021: | Balance |  | Quoted Prices in Active Markets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Short-term investments: |  |  |  |  |  |  |
U.S. Treasury | $ | 4,223 |  |  | $ | 4,223 |  |  | $ | — |  |  | $ | — |
Asset-backed securities | 4,811 |  |  | — |  |  | 4,811 |  |  | — |
Corporate debt securities | 65,666 |  |  | — |  |  | 65,666 |  |  | — |
Commercial paper | 74,357 |  |  | — |  |  | 74,357 |  |  |
Total short-term investments at fair value | 149,057 |  |  | 4,223 |  |  | 144,834 |  |  | — |
Long-term investments: |  |  |  |  |  |  |
U.S. Treasury | 6,995 |  |  | 6,995 |  |  | — |  |  | — |
Foreign government and agency securities | 2,908 |  |  | — |  |  | 2,908 |  |  | — |
Corporate debt securities | 38,148 |  |  | — |  |  | 38,148 |  |  | — |
Total long-term investments at fair value | 48,051 |  |  | 6,995 |  |  | 41,056 |  |  | — |
Convertible senior notes hedge | $ | 48,208 |  |  | $ | — |  |  | $ | 48,208 |  |  | $ | — |
Total assets at fair value | $ | 245,316 |  |  | $ | 11,218 |  |  | $ | 234,098 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |
Acquisition-related contingent consideration | $ | 11,050 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,050 |
Non-current liabilities: |  |  |  |  |  |  |
Acquisition-related contingent consideration | 5,720 |  |  | — |  |  | — |  |  | 5,720 |
Embedded conversion derivative | 48,208 |  |  | — |  |  | 48,208 |  |  | — |
Total liabilities at fair value | $ | 64,978 |  |  | $ | — |  |  | $ | 48,208 |  |  | $ | 16,770 |
As of September 30, 2022, total acquisition-related contingent consideration related to the ID R&D Acquisition of $5.9 million is recorded in acquisition-related contingent consideration in the consolidated balance sheets. The Company recorded the acquisition-date fair value based on the likelihood of contingent Earnout Payments, as part of the consideration transferred. The Earnout Payments consist of cash payments and issuances of Common Stock and are subsequently remeasured to fair value each reporting date. The Company uses a Monte Carlo Simulation to estimate fair value of total contingent consideration. Additionally, for contingent consideration to be settled in a variable number of shares of Common Stock, the Company used the most recent Mitek share price as reported on the Nasdaq Capital Market to determine the fair value of the shares expected to be issued. The Company classified the contingent consideration as Level 3, due to the lack of relevant observable inputs and market activity. Changes in assumptions described above could have an impact on the payout of contingent consideration with a maximum payout being $22.1 million. The following table includes a rollforward of the contingent consideration liability measured at fair value using significant unobservable inputs (Level 3) during the twelve months ended September 30, 2022 (amounts in thousands):
Balance at September 30, 2021 | $ | 16,770 |
Expenses recorded due to changes in fair value | (1,358) |
Payment of contingent consideration associated with the ID R&D acquisition | (9,492) |
Balance at September 30, 2022 | $ | 5,920 |
The following tables summarize the quantitative information including the unobservable inputs related to our acquisition related accrued earnout as of September 30, 2022 and 2021, respectively (amounts in thousands):
| Fair Value at September 30, 2022 |  | Valuation Technique |  | Unobservable Input |  | Input Used
Acquisition-related contingent consideration | $ | 5,920 |  |  | Monte Carlo simulation |  | Weighted-average cost of capital |  | 14.80 | %
|  |  |  | Revenue weight-average cost of capital |  | 4.40 | %
|  |  |  | Revenue volatility |  | 0.20
| Fair Value at September 30, 2021 |  | Valuation Technique |  | Unobservable Input |  | Input Used
Acquisition-related contingent consideration | $ | 16,770 |  |  | Monte Carlo simulation |  | Weighted-average cost of capital |  | 11.40 | %
|  |  |  | Revenue weight-average cost of capital |  | 2.90 | %
|  |  |  | Revenue volatility |  | 0.20

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI https://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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