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Investments

6 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

5. INVESTMENTS

The following tables summarize investments by type of security as of March 31, 2023 and September 30, 2022 (amounts in thousands):

March 31, 2023:			Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Market Value
Available-for-sale securities:
U.S. Treasury, short-term			$	4,004					$	—					$	(48)					$	3,956
Commercial paper, short-term			6,185						—						(101)						6,084
Corporate debt securities, short-term			16,812						—						(141)						16,671
U.S. Treasury, long-term			3,409						—						(158)						3,251
Corporate debt securities, long-term			1,593						—						(77)						1,516
Total			$	32,003					$	—					$	(525)					$	31,478

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 March 31, 2023 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 March 31, 2023 are as follows: $26.7 million within one year and $4.8 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 March 31, 2023 and September 30, 2022, respectively (amounts in thousands):

March 31, 2023:			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			$	3,956					$	3,956					$	—					$	—
Commercial paper			6,084						—						6,084						—
Corporate debt securities			16,671						—						16,671						—
Total short-term investments at fair value			26,711						3,956						22,755						—
Long-term investments:
U.S. Treasury			3,251						3,251						—						—
Corporate debt securities			1,516						—						1,516						—
Total long-term investments at fair value			4,767						3,251						1,516						—
Total assets at fair value			$	31,478					$	7,207					$	24,271					$	—
Liabilities:
Acquisition-related contingent consideration			$	6,070					$	—					$	—					$	6,070
Total liabilities at fair value			$	6,070					$	—					$	—					$	6,070

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:
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: 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 further described in Note 9. Concurrently with the issuance of the 2026 Notes, the Company entered into the Notes Hedge and Warrant Transactions which in combination are intended to reduce the potential dilution from the conversion of the 2026 Notes (see Note 9).

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 March 31, 2023, total acquisition-related contingent consideration of $6.1 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 roll-forward of the contingent consideration liability measured at fair value using significant unobservable inputs (Level 3) during the six months ended March 31, 2023 (amounts in thousands):

Balance at September 30, 2022			$	5,920
Expenses recorded due to changes in fair value			150
Balance at March 31, 2023			$	6,070

The following tables summarize the quantitative information including the unobservable inputs related to our acquisition-related contingent consideration as follows (amounts in thousands):

Fair Value at March 31, 2023						Valuation Technique						Unobservable Input						Input Used
$	6,070					Monte Carlo simulation						Weighted-average cost of capital						14.50		%
												Revenue weight-average cost of capital						6.30		%
												Revenue volatility						0.26

Fair Value at September 30, 2022						Valuation Technique						Unobservable Input						Input Used
$	5,920					Monte Carlo simulation						Weighted-average cost of capital						14.80		%
												Revenue weight-average cost of capital						4.40		%
												Revenue volatility						0.20

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- Definition

The entire disclosure for investments in certain debt and equity securities.

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