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Investments | 3 Months Ended
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Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract] |
INVESTMENTS | 5. INVESTMENTS The following tables summarize investments by type of security as of December 31, 2022 and September 30, 2022 (amounts in thousands):
December 31, 2022: | Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Market Value
Available-for-sale securities: |  |  |  |  |  |  |
U.S. Treasury, short-term | $ | 4,010 |  |  | $ | — |  |  | $ | (89) |  |  | $ | 3,921 |
Foreign government and agency securities, short-term | 2,854 |  |  | — |  |  | (12) |  |  | 2,842 |
Commercial paper, short-term | 15,680 |  |  | — |  |  | (251) |  |  | 15,429 |
Corporate debt securities, short-term | 22,849 |  |  | — |  |  | (227) |  |  | 22,622 |
U.S. Treasury, long-term | 3,420 |  |  | — |  |  | (196) |  |  | 3,224 |
Corporate debt securities, long-term | 2,586 |  |  | — |  |  | (136) |  |  | 2,450 |
Total | $ | 51,399 |  |  | $ | — |  |  | $ | (911) |  |  | $ | 50,488 |
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 |
Corporate debt securities, long-term | 7,692 |  |  | — |  |  | (280) |  |  | 7,412 |
Total | $ | 70,314 |  |  | $ | — |  |  | $ | (1,413) |  |  | $ | 68,901 |
All of the Company’s investments are designated as available-for-sale debt securities. As of December 31, 2022 and September 30, 2022, the Company’s short-term investments have maturity dates of less than one year from the balance sheet date and the Company’s long-term investments have maturity dates of greater than one year from the balance sheet date. The contractual maturities of the available-for-sale securities held at December 31, 2022 are as follows: $44.8 million within one year and $5.7 million beyond one year to five years. As of September 30, 2022, the contractual maturities of the available-for-sale securities were $58.3 million within one year and $10.6 million beyond one year to five years. The following tables represent the fair value hierarchy of the Company’s investments and acquisition-related contingent consideration as of December 31, 2022 and September 30, 2022, respectively (amounts in thousands):
December 31, 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 | $ | 3,921 |  |  | $ | 3,921 |  |  | $ | — |  |  | $ | — |
Commercial paper | 15,429 |  |  | — |  |  | 15,429 |  |  | — |
Foreign government and agency securities | 2,842 |  |  | — |  |  | 2,842 |  |  | — |
Corporate debt securities | 22,622 |  |  | — |  |  | 22,622 |  |  | — |
Total short-term investments at fair value | 44,814 |  |  | 3,921 |  |  | 40,893 |  |  | — |
Long-term investments: |  |  |  |  |  |  |
U.S. Treasury | 3,224 |  |  | 3,224 |  |  | — |  |  | — |
Corporate debt securities | 2,450 |  |  | — |  |  | 2,450 |  |  | — |
Total long-term investments at fair value | 5,674 |  |  | 3,224 |  |  | 2,450 |  |  | — |
Total assets at fair value | $ | 50,488 |  |  | $ | 7,145 |  |  | $ | 43,343 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |
Acquisition-related contingent consideration | $ | 6,250 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,250 |
Total liabilities at fair value | $ | 6,250 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,250 |
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 |  |  | — |  |  | — |
Corporate debt securities | 7,412 |  |  | — |  |  | 7,412 |  |  | — |
Total long-term investments at fair value | 10,633 |  |  | 3,221 |  |  | 7,412 |  |  | — |
Total assets at fair value | $ | 68,901 |  |  | $ | 9,103 |  |  | $ | 59,798 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |
Acquisition-related contingent consideration | $ | 5,920 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,920 |
Total liabilities at fair value | $ | 5,920 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,920 |
•Level 1: Includes investments in U.S. Government and agency securities, which are valued based on recently executed transactions in the same or similar securities. •Level 2: Includes Convertible senior notes and corporate debt securities. Corporate debt securities are valued using 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. On February 5, 2021, the Company issued the 2026 Notes as defined and further described in Note 9. Concurrently with the issuance of the 2026 Notes, the Company entered into the Notes Hedge (as defined in Note 9) and Warrant Transactions (as defined in Note 9) which in combination are intended to reduce the potential dilution from the conversion of the 2026 Notes. The fair value of the Notes Hedge and the embedded conversion derivative were estimated using a Black-Scholes model. Based on the fair value hierarchy, the Company classified the Notes Hedge and the embedded conversion derivative as Level 2 as significant inputs are observable, either directly or indirectly. The significant inputs and assumptions used in the models to calculate the fair value of the derivatives include the Common Stock price, exercise price of the derivatives, risk-free interest rate, volatility, annual coupon rate and remaining contractual term. •Level 3: As of December 31, 2022, total acquisition-related contingent consideration of $6.3 million is recorded in acquisition-related contingent consideration, in the condensed 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 by 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 three months ended December 31, 2022 (amounts in thousands):
Balance at September 30, 2022 | $ | 5,920 |
Expenses recorded due to changes in fair value | 330 |
Balance at December 31, 2022 | $ | 6,250 |
The following tables summarize the quantitative information including the unobservable inputs related to our acquisition related accrued earnout as of December 31, 2022 and September 30, 2022, respectively (amounts in thousands):
| Fair Value at December 31, 2022 |  | Valuation Technique |  | Unobservable Input |  | Input Used
Acquisition-related contingent consideration | $ | 6,250 |  |  | Monte Carlo simulation |  | Weighted-average cost of capital |  | 14.30 | %
|  |  |  | Revenue weight-average cost of capital |  | 4.40 | %
|  |  |  | Revenue volatility |  | 0.20

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