Mitek Systems FY21 and Q4 Results

Nothing is better than a beat on the top line, and a beat on the bottom. There is always more to it though, what was the extent of the beat? What is priced in? Is guidance strong?


Looking at results every 90 days gets a little shortsighted. Everyone always says how long-term of an investor they are, yet we sit here and judge a businesses on 90 day results and we see the after market and next one day price movement and I do think we sometimes judge it a little more than we should, maybe it is just in our nature? Mitek was down 6% or something after their report, I thought the initial press release was pretty solid, we had record revenue, record earnings, and record cash flow from operations. You would think share price would initially be up? Nope! Down.


Press Release:


Mitek Systems posted solid Q4 results and ending to their Fiscal Year 2021. Revenue jumped 9% to $33.3m which is a record, GAAP net income was $2.2m or $0.05 per diluted share, non-GAAP net income was $10.1m, or $0.22 per diluted share, CFFO was $12.3m and Total Cash and Investments were $227.4m in the quarter.


For the full year 2021, revenue had increase 18% on a YoY basis to a record $119.8m, GAAP net income was $8.5m, or $0.19 per diluted share, non-GAAP net income increase 19% YoY to a record $34.2m or $0.76 per diluted share and CFFO was a record $37.4m (representing a 55% YoY increase!).


Mitek is making key investments across the board, in its people and acquisitions. The most recent acquisition ID R&D seems like it is doing very well, management notes that the biometric segment in the digital identity solutions category will be the largest market share. Knowing that, we can see why Mitek's management has decided to go with best in class ID R&D to further their biometrics to not only enhance security, but convenience as well for customers and consumers.


Management spent some time talking about ID R&D in the call, I was able to get a lot more information on the business and integration and that made me feel more confident in their ability to execute on the business. Recently, ID R&D had released ID LiveDocs, which helps customers prove if a document is legit or not. "Bad actors" they call them, use digital images of valid and altered drivers licenses, passports, etc, attempting to spoof the identity verification process.


Management believes they will continue to make strategic acquisitions and invest further to accelerate innovation to fight fraud.

 

Financial Performance


Frank Teruel is the new CFO, other than him talking extremely fast on the call I thought he did a nice upbeat job.


Below in the yellow and gray, you can see the 2021 results for their segments.

The percent of total revenue has shifted over the years as they focus on building their services and other, it is becoming a larger % of total revenue year after year as transactional SaaS grows. Mobile Check deposit, the legacy business, has pricing power, but check deposit volumes declining year on year. This is their "second act" as management once said at a William Blair conference.


This quarter, the company saw software and hardware revenue down 1% YoY because of the legacy on-prem ID products that are being discontinued, and the timing of the Mobile Deposit reorders. This seems fine. The services and other revenue (that includes transactional SaaS) saw a jump to $15.5m for the quarter which is a 22% YoY increase. The increase IS primarily due to transactional SaaS which increase 26% YoY to $10.2m. Transactional SaaS is 65.8% of this quarters revenue for that segment.


For the full fiscal year, Mitek saw a record $119.8m in revenue representing an 18% gain on a YoY basis. The key drivers of this increase were growth in mobile deposits, and growth in transactional SaaS revenue. The Services and other revenue was $59.7m, up 27% on a YoY basis, transactional SaaS revenue out of this $59.7m was $40.2m, up 38% YoY. These are very solid growth numbers in the SaaS revenue given other public business valuations, everyone likes to look at P/S ratios right now on SaaS names and Mitek is growing theirs at a 38% clip in 2020, 10x sales on $59.7m is a $597m market cap businesses right there and Mitek is only $791m market cap as of close November 8th. That is just extremely simple napkin math, but you get my point.


Over the past four fiscal years, Mitek has grown CFFO from $5.6m to $37.4m. Management notes that coming out of COVID, they see themselves better positioned for growth than before the pandemic as digital engagement is a key driver of economic growth, this translates to identity verification services.

 

Fiducia Concluding Remarks


Quarterly reports are sort of boring to write, I can just say "good quarter, bad quarter", but writing helps me remember key parts and really try to put the pieces together. I think ID R&D is a great addition to Mitek, as the company deepens their understanding and build out facial liveness solutions, this seems like a critical identity management tool for customers to utilize to prevent fraud. I think we can expect Mitek to make more strategic acquisitions over the next few years as they want to be the leader in what they are building, I am happy with majority of my account sitting in this company.


Quarter to quarter I dont have much new stuff to say, I think it was a good quarter and will add more as I see fit. I am comfortable with the position I have with the market backdrop right not (frothy IPOs, valuations, 60x sales, EVs, etc)...


Side note: I am going to start hammering out more posts other than earnings releases. Broader market talk, companies I dont follow on here. I am going to create a tab on here for the public on 20-25 businesses that are "FinTwit popular" and give them the good old Fiducia Rating.

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