MITK Slides With Market, But Prospects Remain Promising

Mitek Systems (MITK) reported fiscal 2024 Q2 results on May 10. Revenue for the period rose 1.8% year-over-year to $47 million, driven by demand for its new MiVIP, MiPass and ID R&D biometrics identity products. Though this came in at the top end of its guidance range of $46 million to $47 million and $1.7 million above the $45.3 million expected by the Street, the adjusted earnings of 24 cents per share were down 20% and missed consensus by a penny due to fees associated with the company’s delayed SEC filings.

The good news is that despite these extra costs incurred to get its regulatory filings up-to-date, MITK was able to generate $6.8 million of free cash flow during the quarter. That’s up 8.2% from the $6.1 million produced in Q2 of fiscal 2023 and enabled it to reduce its net debt by $4.3 million to just $9.2 million.

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With MITK now current on its filings the extra fees should not recur, and recent product innovations are gaining market acceptance, which should allow the company to meet its performance targets. MITK maintained full-year revenue guidance of $180 million to $185 million, up from $172.6 million last year, and its 30%-31% adjusted operating margin target despite the slight Q2 miss. At the midpoint, this implies an acceleration in top-line growth to 21% and a return to earnings expansion in the second half. MITK felt sufficiently comfortable with its outlook to initiate a $50 million program to repurchase its stock over the next two years. As this materializes, I think the shares will rebound well from the more than 10% they have lost from their initial post-earnings pop.