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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .
Commission File Number 001-35231
MITEK SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware87-0418827
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
600 B Street, Suite 100
San Diego, California
92101
(Address of principal executive offices)(Zip Code)
(619269-6800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareMITK
The NASDAQ Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
There were 45,589,575 shares of the registrant’s common stock outstanding as of September 30, 2023.



MITEK SYSTEMS, INC.
FORM 10-Q
For The Quarterly Period Ended June 30, 2023
INDEX
 




PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MITEK SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share data)
 June 30, 2023 (Unaudited)September 30, 2022
ASSETS  
Current assets:  
Cash and cash equivalents$87,490 $32,059 
Short-term investments40,651 58,268 
Accounts receivable, net37,616 27,874 
Contract assets, current portion7,420 6,273 
Prepaid expenses2,227 2,000 
Other current assets2,828 2,622 
Total current assets178,232 129,096 
Long-term investments2,815 10,633 
Property and equipment, net3,010 3,493 
Right-of-use assets4,335 5,155 
Intangible assets, net70,414 75,756 
Goodwill131,535 120,186 
Deferred income tax assets18,553 10,245 
Contract assets, non-current portion7,050 4,218 
Other non-current assets1,533 1,628 
Total assets$417,477 $360,410 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$7,733 $4,974 
Accrued payroll and related taxes9,548 10,393 
Accrued liabilities1,231 1,155 
Accrued interest payable(1)
673 202 
Income tax payables(1)
10,059 194 
Deferred revenue, current portion12,786 13,394 
Lease liabilities, current portion2,123 2,110 
Acquisition-related contingent consideration8,013 5,920 
Restructuring accrual 901 
Other current liabilities(1)
1,521 1,254 
Total current liabilities53,687 40,497 
Convertible senior notes133,579 127,970 
Deferred revenue, non-current portion2,056 1,775 
Lease liabilities, non-current portion2,968 4,106 
Deferred income tax liabilities, non current portion15,970 14,132 
Other non-current liabilities1,573 1,613 
Total liabilities209,833 190,093 
Stockholders’ equity:  
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding
  
Common stock, $0.001 par value, 120,000,000 and 120,000,000 shares authorized, 45,507,401 and 44,680,429 issued and outstanding, as of June 30, 2023 and September 30, 2022, respectively
45 44 
Additional paid-in capital225,633 216,493 
Accumulated other comprehensive loss(9,504)(28,219)
Accumulated deficit(8,530)(18,001)
Total stockholders’ equity207,644 170,317 
Total liabilities and stockholders’ equity$417,477 $360,410 
 (1) September 30, 2022 condensed consolidated balance sheet reflects reclassifications to conform to the current year presentation.

See accompanying notes to condensed consolidated financial statements.
1


MITEK SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE INCOME (LOSS)  
(Unaudited)
(amounts in thousands except per share data)
 
 Three Months Ended June 30,Nine Months Ended June 30,
 2023
2022
As Restated
2023
2022
As Restated
Revenue  
Software and hardware$21,447 $19,515 $73,083 $53,110 
Services and other21,623 19,680 61,813 52,068 
Total revenue43,070 39,195 134,896 105,178 
Operating costs and expenses  
Cost of revenue—software and hardware (exclusive of depreciation & amortization)428 508 816 1,196 
Cost of revenue—services and other (exclusive of depreciation & amortization)5,284 5,276 15,863 13,594 
Selling and marketing10,296 11,216 29,434 28,859 
Research and development7,461 8,411 22,504 21,914 
General and administrative11,588 6,591 30,126 18,628 
Amortization and acquisition-related costs6,207 4,493 15,302 10,777 
Restructuring costs14 1,807 2,000 1,807 
Total operating costs and expenses41,278 38,302 116,045 96,775 
Operating income1,792 893 18,851 8,403 
Interest expense2,362 2,077 6,662 6,125 
Other income (expense), net925 89 1,719 (2)
Income (loss) before income taxes355 (1,095)13,908 2,276 
Income tax benefit (provision)(783)880 (4,437)1,068 
Net income (loss)$(428)$(215)$9,471 $3,344 
Net income (loss) per share—basic$(0.01)$(0.00)$0.21 $0.07 
Net income (loss) per share—diluted$(0.01)$(0.00)$0.20 $0.07 
Shares used in calculating net income (loss) per share—basic
46,002 44,669 45,625 44,721 
Shares used in calculating net income (loss) per share—diluted
46,473 45,224 46,210 45,793 
Other comprehensive income (loss)  
Net income (loss)$(428)$(215)$9,471 $3,344 
Foreign currency translation adjustment2,219 (13,595)17,944 (16,724)
Unrealized gain (loss) on investments123 909 771 (189)
Other comprehensive income (loss)$1,914 $(12,901)$28,186 $(13,569)
 
See accompanying notes to condensed consolidated financial statements.
2


MITEK SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(amounts in thousands)
Three Months Ended June 30, 2023
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
SharesAmount
Balance, March 31, 202345,410 $45 $222,933 $(8,102)$(11,846)$203,030 
Exercise of stock options13 — 56 — — 56 
Settlement of restricted stock units84 — — — — — 
Stock-based compensation expense— — 2,644 — — 2,644 
Components of other comprehensive income:
Net loss— — — (428)— (428)
Currency translation adjustment— — — — 2,219 2,219 
Change in unrealized gain (loss) on investments— — — — 123 123 
Total other comprehensive income1,914 
Balance, June 30, 202345,507 $45 $225,633 $(8,530)$(9,504)$207,644 

Three Months Ended June 30, 2022
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmount
Balance, March 31, 202244,344 $44 $207,491 $(17,473)$(5,170)$184,892 
Exercise of stock options10 — 33 — — 33 
Settlement of restricted stock units42 — — — — — 
Stock-based compensation expense— — 3,688 — — 3,688 
Components of other comprehensive loss:
Net loss— — — (215)— (215)
Currency translation adjustment— — — — (13,595)(13,595)
Change in unrealized gain (loss) on investments— — — — 909 909 
Total other comprehensive income(12,901)
Balance, June 30, 202244,396 $44 $211,212 $(17,688)$(17,856)$175,712 

See accompanying notes to condensed consolidated financial statements.
3


MITEK SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CONTINUED
(Unaudited)
(amounts in thousands)
Nine Months Ended June 30, 2023
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmount
Balance, September 30, 202244,680 $44 $216,493 $(18,001)$(28,219)$170,317 
Exercise of stock options99 — 732 — — 732 
Settlement of restricted stock units656 1 (1)— —  
Issuance of common stock under employee stock purchase plan72 — 619 — — 619 
Stock-based compensation expense— — 7,790 — — 7,790 
Components of other comprehensive income:
Net income— — — 9,471 — 9,471 
Currency translation adjustment— — — — 17,944 17,944 
Change in unrealized gain (loss) on investments— — — — 771 771 
Total other comprehensive income28,186 
Balance, June 30, 202345,507 $45 $225,633 $(8,530)$(9,504)$207,644 

Nine Months Ended June 30, 2022
Common StockAdditional
Paid-In
Capital
Treasury StockAccumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
SharesAmountSharesAmount
Balance, September 30, 202144,169 $44 $199,935 (8)$(140)$(6,066)$(943)$192,830 
Exercise of stock options35 — 239 — — — — 239 
Settlement of restricted stock units1,015 1 (1)— — — —  
Issuance of common stock under employee stock purchase plan71 — 923 — — — — 923 
Stock-based compensation expense— — 10,117 — — — — 10,117 
Repurchases and retirements of common stock(894)(1)(1)8140(14,966)— (14,828)
Components of other comprehensive loss:
Net income— — — — — 3,344— 3,344
Currency translation adjustment— — — — — — (16,724)(16,724)
Change in unrealized gain (loss) on investments— — — — — — (189)(189)
Total other comprehensive loss(13,569)
Balance, June 30, 202244,396 $44 $211,212  $ $(17,688)$(17,856)$175,712 

See accompanying notes to condensed consolidated financial statements.
4


MITEK SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
Nine Months Ended June 30,
 2023
2022
As Restated
Operating activities:  
Net income$9,471 $3,344 
Adjustments to reconcile net income to net cash provided by operating activities:  
Stock-based compensation expense7,790 10,117 
Amortization of intangible assets13,270 9,176 
Depreciation and amortization1,187 1,064 
Amortization of investment premiums & other(64)1,348 
Accretion and amortization on debt securities5,609 5,239 
Net changes in estimated fair value of acquisition-related contingent consideration2,093 (1,278)
Deferred taxes(8,246)(1,705)
Changes in assets and liabilities, net of acquisitions:  
Accounts receivable(9,014)(12,233)
Contract assets(3,758)(1,737)
Other assets(73)(848)
Accounts payable2,633 1,147 
Accrued payroll and related taxes(1,099)(2,643)
Income taxes payable(1)
9,865 85 
Deferred revenue(752)1,917 
Restructuring accrual(971)1,900 
Other liabilities(1)
172 1,120 
Net cash provided by operating activities28,113 16,013 
Investing activities:  
Purchases of investments(23,723)(47,818)
Sales and maturities of investments50,000 173,198 
Acquisitions, net of cash acquired (126,607)
Purchases of property and equipment, net(656)(929)
Net cash provided by (used in) investing activities25,621 (2,156)
Financing activities:  
Proceeds from the issuance of equity plan common stock1,351 1,162 
Repurchases and retirements of common stock (14,828)
Payment of acquisition-related contingent consideration (6,770)
Acquisition-related shares issued (1,041)
Principal payments on other borrowings(36)(36)
Net cash provided by (used in) financing activities1,315 (21,513)
Foreign currency effect on cash and cash equivalents382 (1,113)
Net increase (decrease) in cash and cash equivalents55,431 (8,769)
Cash and cash equivalents at beginning of period32,059 30,312 
Cash and cash equivalents at end of period$87,490 $21,543 
Supplemental disclosures of cash flow information:  
Issuance of common stock for acquisition-related contingent consideration$ $2722 
Cash paid for interest$829 $597 
Cash paid for income taxes$3,074 $819 
Supplemental disclosures of non-cash investing and financing activities:  
Reclassification of convertible senior notes hedge and embedded conversion derivative to additional paid-in capital$ $42,821 
Unrealized holding gain (loss) on available for sale investments$771 $(189)
  (1) March 31, 2022 condensed consolidated statement of cash flows reflects reclassifications to conform to the current year presentation.

See accompanying notes to condensed consolidated financial statements... ..
5


MITEK SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 leading innovator 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. Customers count on Mitek to deliver trusted and convenient online experiences, detect and reduce fraud, and document Know Your Customer (“KYC”) and Anti-Money Laundering (“AML”) regulatory compliance. The Company’s solutions are embedded in native mobile apps and web browsers to facilitate digital consumer experiences. Mitek’s identity verification and authentication technologies and services make it possible for banks, financial services organizations and the world’s leading marketplace and sharing platforms to verify an individual’s identity during digital transactions, allowing them to reduce risk and meet regulatory requirements. The Company’s advanced mobile deposit system enables secure, fast and convenient deposit services. Thousands of organizations use Mitek solutions to optimize the security of mobile check deposits, new account openings and more.
Mitek markets and sells its products and services worldwide through internal, direct sales teams located in the U.S., Europe, and Latin America as well as through channel partners. Our partner sales strategy includes channel partners who are financial services technology providers 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 condensed consolidated financial statements of the Company as of June 30, 2023 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. You should read these financial statements and the accompanying notes 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, 2022, filed with the U.S. Securities and Exchange Commission (“SEC”) on July 31, 2023.
In connection with the preparation of the Company’s financial statements for the fiscal year ended September 30, 2022, the Company noted that certain revenue contracts and other items were improperly accounted for during three and six months ended March 31, 2022 and the three and nine months ended June 30, 2022. Specifically, the Company (a) did not appropriately (i) recognize revenue on its multiyear term licenses; (ii) recognize revenue related to guaranteed minimums and overages for software as a service (“SaaS”) product sales; (iii) cut off revenue related to term license sales; (iv) capitalize certain commissions paid to the HooYu Ltd (“HooYu”) sales team subsequent to the acquisition of HooYu in March 2022; (v) recognize a lease liability and right-of-use asset related to the office lease assumed in the HooYu acquisition; and (vi) recognize certain liabilities upon the acquisition of HooYu that were not valid liabilities; and (b) misclassified certain employee costs related to cloud operations as research and development expense instead of cost of revenue. Refer to Note 13. Restatement of Previously Reported Unaudited Interim Consolidated Financial Statements for further details.
Results for the nine months ended June 30, 2023 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 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
6


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, fair value of debt derivatives, standalone selling price related to revenue recognition, contingent consideration, and income taxes.
Reclassifications
A reclassification has been made to the prior periods’ condensed consolidated financial statements in order to conform to the current period presentation. Accrued interest payable and income tax payables were included in the other current liabilities line in the condensed consolidated balance sheet as of September 30, 2022, however, they have been presented separately in the condensed consolidated balance sheet as of June 30, 2023 so that the total of the other current liabilities line is less than five percent of total current liabilities.
Net Income (Loss) Per Share
For the three and nine months ended June 30, 2023 and 2022, 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 June 30,Nine Months Ended June 30,
 2023202220232022
Stock options443 540 453 484 
RSUs1,256 853 1,138 861 
ESPP common stock equivalents295 148 89 36 
Performance options783 678 772 550 
Performance RSUs728 492 228 279 
Convertible senior notes7,448 7,448 7,448 7,448 
Warrants7,448 7,448 7,448 7,448 
Total potentially dilutive common shares outstanding18,401 17,607 17,576 17,106 
The calculation of basic and diluted net income (loss) per share is as follows (amounts in thousands, except per share data):
 Three Months Ended June 30,Nine Months Ended June 30,
 2023
2022
As Restated
2023
2022
As Restated
Net income (loss)$(428)$(215)$9,471 $3,344 
Weighted-average shares outstanding—basic46,002 44,669 45,625 44,721 
Common stock equivalents471 555 585 1,072 
Weighted-average shares outstanding—diluted46,473 45,224 46,210 45,793 
Net income (loss) per share:
Basic$(0.01)$(0.00)$0.21 $0.07 
Diluted$(0.01)$(0.00)$0.20 $0.07 
Other Borrowings
The Company has certain loan agreements with Spanish government agencies which were assumed when the Company acquired ICAR Vision Systems, S.L. ("ICAR") in 2017. These agreements have repayment periods of five to twelve years and bear no interest. As of June 30, 2023, $1.3 million was outstanding under these agreements and $0.1 million and $1.2 million is recorded in other current liabilities and other non-current liabilities, respectively, in the condensed consolidated balance sheets. As of September 30, 2022, $1.3 million was outstanding under these agreements and approximately $0.1 million and $1.2 million is recorded in other current liabilities and other non-current liabilities, respectively, in the condensed consolidated balance sheets.
Recently Adopted Accounting Pronouncements
The Company did not adopt any new accounting pronouncements in the quarter ended June 30, 2023.


7


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, 2022, filed with the SEC on July 31, 2023. There have been no changes to these accounting policies through June 30, 2023.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting (ASU 2020-04) 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 June 30, 2023 had, or are expected to have, a material impact on the Company’s condensed consolidated financial statements.

2. REVENUE RECOGNITION
Nature of Goods and Services
The following is a description of principal activities from which the Company generates its revenue. Contracts with customers are evaluated on a contract-by-contract basis as contracts may include multiple types of goods and services as described below.
Software and Hardware
Software and hardware revenue is generated from on premise software license sales, as well as sales of hardware scanner boxes and on premise appliance products. Software is typically sold as a time-based license with a term of one to three years. For software license agreements that are distinct, the Company recognizes software license revenue upon delivery and after evidence of a contract exists. Hardware revenue is recognized at a point in time upon shipment and after evidence of a contract exists.
Services and Other
Services and other revenue is generated from the sale of software as a service (“SaaS”) products and services, maintenance associated with the sale of on premise software licenses and consulting and professional services. The Company’s SaaS offerings give customers the option to be charged upon their incurred usage in arrears (“Pay as You Go”), or commit to a minimum spend over their contracted period, with the ability to purchase unlimited additional transactions above the minimum during the contract term. Revenue related to Pay as You Go contracts are recognized based on the customer’s actual usage, in the period of usage. For contracts which include a minimum commitment, the Company is standing ready to provide as many transactions as desired by the customer throughout the contract term, and revenue is recognized on a ratable basis over the contract period including an estimate of usage above the minimum commitment. Usage above minimum commitment is estimated by looking at historical usage, expected volume, and other factors to project out for the remainder of the contract term. The estimated usage-based revenues are constrained to the amount the Company expects to be entitled to receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.
Significant Judgments in Application of the Guidance
The Company uses the following methods, inputs, and assumptions in determining amounts of revenue to recognize:
Identification of Performance Obligations
For contracts that contain multiple performance obligations, which include combinations of software licenses, maintenance, and services, the Company accounts for individual goods or services as a separate performance obligation if they are distinct. The good or service is distinct if the good or service is separately identifiable from other items in the arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.
Determination of Transaction Price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. The Company includes any fixed charges within its contracts as part of the total transaction price. To the extent that variable consideration is not constrained, the Company includes an estimate of the variable
8


amount, as appropriate, within the total transaction price and updates its assumptions over the duration of the contract. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
Assessment of Estimates of Variable Consideration
Many of the Company’s contracts with customers contain some component of variable consideration; however, variable consideration will only be included in the transaction price to the extent it is probable that a significant reversal of revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company may constrain the estimated transaction price in the event of a high degree of uncertainty as to the final consideration amount owed because of an extended length of time over which the fees may be adjusted or due to uncertainty surrounding collectability. The Company estimates variable consideration in its contracts primarily using the expected value method as the Company believes this method represents the most appropriate estimate for this consideration, based on historical usage trends, the individual contract considerations, and its best judgment at the time.
Allocation of Transaction Price
The transaction price, including any discounts, is allocated between separate goods and services in a contract that contains multiple performance obligations based on their relative standalone selling prices. The standalone selling prices are based on the prices at which the Company separately sells each good or service. For items that are not sold separately, the Company estimates the standalone selling prices using available information such as market conditions and internally approved pricing guidelines. In certain situations, primarily transactional SaaS revenue described above, the Company allocates variable consideration to a series of distinct goods or services within a contract. The Company allocates variable payments to one or more, but not all, of the distinct goods or services or to a series of distinct goods or services in a contract when (i) the variable payment relates specifically to the Company’s efforts to transfer the distinct good or service and (ii) the variable payment is for an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to its customer.
9


Disaggregation of Revenue
The following table presents the Company's revenue disaggregated by major product category (amounts in thousands):
Three Months Ended June 30,Nine Months Ended June 30,
2023
2022
As Restated
2023
2022
As Restated
Major product category
Deposits software and hardware$18,300 $16,955 $64,979 $46,574 
Deposits services and other6,504 5,010 18,866 15,670 
Deposits revenue24,804 21,965 83,845 62,244 
Identity verification software and hardware3,147 2,560 8,104 6,536 
Identity verification services and other15,119 14,670 42,947 36,398 
Identity verification revenue18,266 17,230 51,051 42,934 
Total revenue$43,070 $39,195 $134,896 $105,178 
Contract Balances
The following table provides information about contract assets and contract liabilities from contracts with customers (amounts in thousands):
June 30, 2023September 30, 2022
Contract assets, current$7,420 $6,273 
Contract assets, non-current7,050 4,218 
Contract liabilities (deferred revenue), current12,786 13,394 
Contract liabilities (deferred revenue), non-current2,056 1,775 
Contract assets, reported within a separate line in current assets and the other non-current assets line in the condensed consolidated balance sheets, primarily result from when the right to consideration is conditional upon factors other than the passage of time. Contract liabilities primarily relate to advance consideration received from customers (deferred revenue), for which transfer of control occurs, and therefore revenue is recognized as services are provided. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period. The Company recognized $1.8 million and $1.2 million of revenue during the three months ended June 30, 2023 and 2022, respectively, and $11.7 million and $11.1 million during the nine months ended June 30, 2023 and 2022, respectively, which was included in the contract liability balance at the beginning of each such period. Unbilled receivables are included within contract assets on the condensed consolidated balance sheets and were $6.1 million and $1.9 million as of June 30, 2023 and September 30, 2022, respectively.
Contract Costs
Contract costs included in other current and non-current assets on the condensed consolidated balance sheets totaled $2.3 million and $2.4 million as of June 30, 2023 and September 30, 2022, respectively. Contract costs are amortized based on the transfer of goods or services to which the asset relates. The amortization period also considers expected customer lives and whether the asset relates to goods or services transferred under a specific anticipated contract. These costs are included in selling and marketing expenses in the condensed consolidated statement of operations and other comprehensive income (loss) and totaled $0.4 million and $0.3 million during the three months ended June 30, 2023 and 2022, respectively, and $1.1 million and $1.0 million during the nine months ended June 30, 2023 and 2022, respectively. There were no impairment losses recognized during both the nine months ended June 30, 2023 and 2022 related to capitalized contract costs.

3. BUSINESS COMBINATIONS
Acquisition of HooYu Ltd
10


On March 23, 2022, the Company completed the acquisition (the “HooYu Acquisition”) of HooYu Ltd (“HooYu”) pursuant to the Purchase Agreement (the “Purchase Agreement”) dated March 23, 2022, by and among the Company and certain persons identified in the Purchase Agreement (the “Sellers”). Pursuant to the Purchase Agreement, the Company, among other things, acquired 100% of the outstanding share capital of HooYu, a leading global customer onboarding platform designed to increase the integrity of KYC and maximize the success of customer onboarding. As consideration for the HooYu Acquisition, the Company paid aggregate consideration in the amount of $129.1 million (the “Closing Consideration”), as such amount may be adjusted for transaction expenses and indebtedness. Pursuant to the Purchase Agreement, $1.6 million was withheld as a reduction to the Closing Consideration and was retained by the Company for the final working capital adjustments and indemnification of certain tax matters under the Purchase Agreement.
The Company incurred $3.2 million of expense in connection with the acquisition primarily related to legal fees, outside service costs, foreign currency and realized losses on investments, and travel expense, which are included in amortization and acquisition-related costs in the condensed consolidated statements of operations and other comprehensive income (loss).
On March 23, 2022, using cash on hand, the Company transferred an aggregate of $127.5 million to the Sellers and its third-party legal and investment advisors, net of cash acquired of $0.5 million. In July 2022 the Company paid an additional $0.4 million to the Sellers in settling final working capital.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed from the HooYu Acquisition as of June 30, 2023 (amounts in thousands):
HooYu
Accounts receivable$1,234 
Property, plant, and equipment504 
Other current assets630 
Intangible assets73,100 
Goodwill74,206 
Current liabilities(2,264)
Deferred revenue(2,612)
Deferred income tax liabilities(16,896)
Net assets acquired$127,902 
The goodwill recognized is due to expected market participant synergies and other factors and is not expected to be deductible for income tax purposes. The Company estimated the fair value of identifiable acquisition-related intangible assets with definite lives primarily based on discounted cash flow projections that were estimated to arise from these assets. The Company exercised significant judgment with regard to assumptions used in the determination of fair value such as with respect to discount rates and the determination of the estimated useful lives of the intangible assets. The following table summarizes the estimated fair values and estimated useful lives of intangible assets with definite lives acquired from the HooYu Acquisition as of June 30, 2023 (amounts in thousands, except for years):
Amortization PeriodAmount assigned
Completed technologies7 years$61,400 
Customer relationships5 years5,000 
Trade name5 years6,100 
Covenants not to compete3 years600 
Total intangible assets acquired$73,100 
The following unaudited pro forma financial information should not be taken as representative of the Company’s future consolidated results of operations and includes adjustments for the amortization expense related to the identified intangible assets. The following table summarizes the Company’s unaudited pro forma financial information and is presented as if the HooYu Acquisition occurred on October 1, 2021 (amounts shown in thousands):
Three months ended June 30, 2022
As Restated
Nine months ended June 30, 2022
As Restated
Pro forma revenue$39,195 $110,915 
Pro forma net income (loss)$(215)$(6,311)
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The following table summarizes the results of HooYu that are included in the Company’s consolidated results (amounts shown in thousands):
Three Months Ended June 30,Nine Months Ended June 30,
2023
2022
As Restated
2023
2022
As Restated
Revenue
$4,100 $2,653 $10,124 $2,958 
Net income (loss)
$(3,028)$(3,764)$(10,798)$(4,015)

4. RESTRUCTURING
In order to streamline the organization and focus resources going forward, the Company undertook a strategic restructuring in June and November 2022, which included a reduction in workforce. Restructuring costs consist of employee severance obligations and other related costs. The following table summarizes changes in the restructuring accrual during the nine months ended June 30, 2023 (amounts in thousands):
Balance at September 30, 2022
$901 
Additional costs incurred1,986 
Payments(2,942)
Foreign currency effect on the restructuring accrual55 
Balance at June 30, 2023$ 

5. INVESTMENTS
The following tables summarize investments by type of security as of June 30, 2023 and September 30, 2022 (amounts in thousands):
June 30, 2023:Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market
Value
Available-for-sale securities:    
U.S. Treasury, short-term$22,135 $ $(96)$22,039 
Commercial paper, short-term6,200  (45)6,155 
Corporate debt securities, short-term12,534  (77)12,457 
U.S. Treasury, long-term1,375  (79)1,296 
Corporate debt securities, long-term1,594  (75)1,519 
Total$43,838 $ $(372)$43,466 
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-term2,865  (38)$2,827 
Commercial paper, short-term18,245  (223)18,022 
Corporate debt securities, short-term32,065  (528)31,537 
U.S. Treasury, long-term3,431  (210)3,221 
Corporate debt securities, long-term7,692  (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 June 30, 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 June 30, 2023 are as follows: $40.7 million within one year and $2.8 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.
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The following tables represent the fair value hierarchy of the Company’s investments and acquisition-related contingent consideration as of June 30, 2023 and September 30, 2022, respectively (amounts in thousands):
June 30, 2023:BalanceQuoted Prices in Active Markets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
    
Short-term investments:    
U.S. Treasury$22,039 $22,039 $ $ 
Commercial paper6,155  6,155  
Corporate debt securities12,457  12,457  
Total short-term investments at fair value40,651 22,039 18,612  
Long-term investments:
U.S. Treasury1,296 1,296   
Corporate debt securities1,519  1,519  
Total long-term investments at fair value2,815 1,296 1,519  
Total assets at fair value$43,466 $23,335 $20,131 $ 
Liabilities:
Acquisition-related contingent consideration$8,013 $ $8,013 $ 
Total liabilities at fair value$8,013 $ $8,013 $ 

September 30, 2022:BalanceQuoted 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 paper18,022  18,022  
Foreign government and agency securities2,827  2,827  
Corporate debt securities31,537  31,537  
Total short-term investments at fair value58,268 5,882 52,386  
Long-term investments:
U.S. Treasury3,221 3,221   
Corporate debt securities7,412  7,412  
Total long-term investments at fair value10,633 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
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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.
As of June 30, 2023, total acquisition-related contingent consideration of $8.0 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 related to the Company’s acquisition of ID R&D Inc., 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 used 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 previously classified the contingent consideration as Level 3, due to the lack of relevant observable inputs and market activity. The second earnout period ended on May 28, 2023 and the valued recorded as of June 30, 2023 is based on the calculated final payout and the Company reclassified the contingent consideration as Level 2 during the third quarter of fiscal 2023. The following table includes a roll-forward of the contingent consideration liability during the nine months ended June 30, 2023 (amounts in thousands):
Balance at September 30, 2022$5,920 
Expenses recorded due to changes in fair value2,093 
Balance at June 30, 2023$8,013 
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 September 30, 2022
Valuation TechniqueUnobservable InputInput Used
$5,920 Monte Carlo simulationWeighted-average cost of capital14.80 %
Revenue weight-average cost of capital4.40 %
Revenue volatility0.20

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6. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The Company had a goodwill balance of $131.5 million at June 30, 2023, representing the excess of costs over fair value of assets of businesses acquired. The following table summarizes changes in the balance of goodwill during the nine months ended June 30, 2023 (amounts shown in thousands):
Balance at September 30, 2022$120,186 
Foreign currency effect on goodwill11,349 
Balance at June 30, 2023$131,535 
Intangible Assets
Intangible assets include the value assigned to purchased completed technology, customer relationships, trade names and covenants not to compete. The estimated useful lives for all of these intangible assets range from three to seven years and they are amortized on a straight-line basis. Intangible assets as of June 30, 2023 and September 30, 2022, respectively, are summarized as follows (amounts in thousands, except for years):
June 30, 2023:Weighted Average Amortization Period (in years)CostAccumulated AmortizationNet
Completed technologies6.9$95,761 $34,585 $61,176 
Customer relationships4.725,168 20,832 4,336 
Trade names5.07,088 2,518 4,570 
Covenants not to compete3.0600 268 332 
Total intangible assets $128,617 $58,203 $70,414 
September 30, 2022:Weighted Average Amortization Period (in years)CostAccumulated AmortizationNet
Completed technologies6.9$95,761 $32,265 $63,496 
Customer relationships4.725,168 18,241 6,927 
Trade names5.07,088 2,174 4,914 
Covenants not to compete3.0600 181 419 
Total intangible assets $128,617 $52,861 $75,756 
Amortization expense related to acquired intangible assets was $4.3 million and $4.7 million for the three months ended June 30, 2023 and 2022, respectively, and $13.3 million and $9.2 million during the nine months ended June 30, 2023 and, 2022, respectively, and is recorded within amortization and acquisition-related costs on the condensed consolidated statements of operations and other comprehensive income (loss).
The estimated future amortization expense related to intangible assets for each of the five succeeding fiscal years is expected to be as follows (amounts in thousands):
 Estimated Future Amortization Expense
2023 - remaining3,835 
202415,050 
202513,787 
202612,560 
202711,410 
Thereafter13,772 
Total$70,414 

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7. STOCKHOLDERS’ EQUITY
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense related to restricted stock units (“RSUs”), stock options, and Employee Stock Purchase Plan (“ESPP”) shares, which was allocated as follows (amounts in thousands):
Three Months Ended June 30,Nine Months Ended June 30,
 2023202220232022
Cost of revenue$124 $82 $316 $249 
Selling and marketing885 1,273 2,423 </