Friday, May 02, 2014

Notes from Mitek Q2 Earnings call

As I Tweeted earlier @DIREditor, capture ISV Mitek Systems, which specializes in mobile imaging technology, recently reported strong growth for its fiscal Q2 ended June 30. But the company continues to burn through cash. It's revenue for the quarter was $4.5M (40% YOY growth), but this came with a GAAP net loss of $2.2M and a non-GAAP loss of $1.3M.

Russell Clark, Mitek CFO, from the transcript of the conference call as recorded by Seeking Alpha: "Total operating expenses were $6.7 million compared to $5.6 million in the year ago period. This year-over-year increase was primarily driven by investments in sales and marketing personnel as well as litigation costs related to protecting our IP....Q2 litigation expenses were higher than previous quarters due to the timing of expert testimony moving into Q2....It's also important to note that the $1.2 million in litigation expenses in Q2 of the current year comprised almost all of the $1.3 million non-GAAP net loss in the quarter. Our non-GAAP results will be very close to breakeven if not for these expenses."

Regarding the litigation,CEO Jim DiBello said, "We have patents infringement losses against Top Image Systems and USAA, both suits are ongoing. In the USAA lawsuit the deadline to file motions for a summary judgment is mid May with the trial date set for early September."

So, maybe things are as bad as initially appear when a company's net loss is about half its revenue. Mitek still has $31.5M in assets listed on its balance sheet, including $26M in cash and short term investments. This second figure is down a little less than $3M from six months previous.

However, in that six-month period (specifically in the last three months), Mitek's stock value has certainly taken a beating. After peaking at more than $7 per share in late January, it is now trading at less than half that, with the company's market cap, falling all the way to $95M. When you consider the $26M in the bank - it's net value is around $69M - which may actually bring them into potential acquisition territory - hostile or otherwise. However, the question is, do savvy investors know something more about the USAA case than we do? Or are they just panicking? If I was a betting man...


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