NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Dec. 31, 2024

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Mitek Systems, Inc. (“Mitek,” the “Company,” “we,” “us,” and “our”) is a provider of mobile image capture and digital identity verification solutions. We are a software development company with expertise in artificial intelligence and machine learning. We currently serve more than 7,900 financial services organizations and leading marketplace and financial technology (“fintech”) brands around the globe. Mitek markets and sells its products and services worldwide through internal, direct sales teams located in the United States (“U.S.”), Europe, and Latin America as well as through channel partners. Our partner sales strategy includes channel partners who are financial services technology and identity verification providers. These partners integrate our products into their solutions to meet the needs of their customers, typically provisioning Mitek services through their respective platforms.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of the Company as of and for the three months ended December 31, 2024 have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, they do not include all information and footnote disclosures required by accounting principles generally accepted in the U.S. (“GAAP”). The Company believes the footnotes and other disclosures made in the financial statements are adequate for a fair presentation of the results of the interim periods presented. The financial statements include all adjustments (solely of a normal recurring nature) which are, in the opinion of management, necessary to make the information presented not misleading. These financial statements and the accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the U.S. Securities and Exchange Commission (“SEC”) on December 16, 2024.

Certain amounts within the prior period’s condensed consolidated balance sheet and condensed consolidated statement of cash flows have been reclassified and revised to conform to the current period presentation. Income tax payables were presented separately and value added tax (“VAT”) payables were included in the other current liabilities line in the condensed consolidated balance sheet as of September 30, 2024, however, income tax payables are included in the other current liabilities line and VAT payables have been presented separately in the consolidated balance sheet as of December 31, 2024 so that the total of the other current liabilities line is less than five percent of total current liabilities. Non-cash expense associated with amortization of costs capitalized to obtain revenue contracts and bad debt expense were revised to be presented separately as adjustments to reconcile net income to net cash provided by operating activities. The reclassification and revision, which is considered to be immaterial to the previously issued condensed consolidated financial statements for the corresponding prior period in fiscal 2024, had no impact on net cash provided by operating activities, and did not change other amounts reported within the condensed consolidated balance sheet, statement of operations and comprehensive income (loss), or statement of stockholders’ equity.

Results for the three months ended December 31, 2024, are not necessarily indicative of results for any other interim period or for a full fiscal year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenue, expenses, deferred taxes, and related disclosure of contingent assets and liabilities. On an ongoing basis, management reviews its estimates based upon currently available information. Actual results could differ materially from those estimates. These estimates include, but are not limited to, assessing the collectability of accounts receivable, estimation of the value of stock-based compensation awards, fair value of assets and liabilities acquired, impairment of goodwill, useful lives of intangible assets, standalone selling price related to revenue recognition, estimated variable consideration in contracts, contingent consideration, and income taxes.

Net Income (Loss) Per Share

For the three months ended December 31, 2024 and 2023, the following potentially dilutive common shares were excluded from the calculation of net income (loss) per share, as they would have been antidilutive (amounts in thousands):


	Three Months Ended December 31,
	2024	2023
Stock options	273	594
RSUs	2,226	1,749
ESPP common stock equivalents	52	49
Performance options	717	476
Performance RSUs	1,908	1,312
Convertible senior notes	7,448	7,448
Warrants	7,448	7,448
Total potentially dilutive common shares outstanding	20,072	19,076

The calculation of basic and diluted net income (loss) per share is as follows (amounts in thousands, except per share data):


	Three Months Ended December 31,
	2024		2023
Net loss	$	(4,612)	$	(5,793)
Weighted-average shares outstanding—basic	45,195		46,294
Common stock equivalents	—		—
Weighted-average shares outstanding—diluted	45,195		46,294
Net loss per share:
Basic	$	(0.10)	$	(0.13)
Diluted	$	(0.10)	$	(0.13)

Concentrations of Significant Customers and Assets

For the three months ended December 31, 2024, the Company derived revenue of $5.6 million from one customer, with such customer accounting for 15% of the Company’s total revenue. For the three months ended December 31, 2023, the Company derived revenue of $9.7 million from two customers, with such customers accounting for 16% and 10% of the Company’s total revenue. The corresponding accounts receivable balances of customers from which revenues were in excess of 10% of total revenue were $3.4 million and $11.2 million at December 31, 2024 and 2023, respectively.

From a geographic perspective, approximately 76% and 78% of the Company’s total long-term assets as of December 31, 2024 and September 30, 2024, respectively, are associated with the Company’s international subsidiaries. From a geographic perspective, approximately 13% and 19% of the Company’s total long-term assets excluding goodwill and other intangible assets as of December 31, 2024 and September 30, 2024, respectively, are associated with the Company’s international subsidiaries.

Recently Adopted Accounting Pronouncements

The Company did not adopt any new accounting pronouncements in the three months ended December 31, 2024.

Change in Significant Accounting Policy

The Company’s significant accounting policies are disclosed in the Company’s audited condensed consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2024, filed with the SEC on December 16, 2024. There have been no changes to these accounting policies through December 31, 2024.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires disaggregation of certain costs in a separate note to the financial statements, such as the amounts of employee compensation, depreciation and intangible asset amortization, included in each relevant expense caption in annual and interim consolidated financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and for interim periods beginning after December 15, 2027 on a retrospective or prospective basis,

with early adoption permitted. The Company is evaluating the effect that ASU 2024-03 will have on its financial statement disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company is currently evaluating the ASU to determine its impact on its income tax disclosures.

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires additional operating segment disclosures in annual and interim consolidated financial statements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024 on a retrospective basis, with early adoption permitted. The Company will adopt ASU 2023-07 in the fourth quarter of fiscal 2025 and does not expect the additional required disclosures to have a material impact on its financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and also issued subsequent amendments to the initial guidance (collectively, Topic 848). Topic 848 provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. The Company will adopt Topic 848 when the relevant contracts are modified upon transition to alternative reference rates. The Company does not expect the adoption of Topic 848 will have a material impact on the condensed consolidated financial statements.

No other new accounting pronouncement issued or effective during the three months ended December 31, 2024 had, or is expected to have, a material impact on the Company’s condensed consolidated financial statements.