Mitek Systems, Inc. (MITK, $17.27): “Keep An Eye On Mitek”
By: Owen
Filbin, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Mitek Systems, Inc. (NYSE: MITK)
is a global-leading software company that specializes in providing mobile facial
identification and image capturing solutions. Mitek Systems’ products and
solutions reach nearly 7,500 financial organizations (banks, fintech companies,
lenders, card issuers, etc.) to enhance the mobile customer experience and ensure
compliant digital transactions.
• Mitek’s main product line
includes Mobile Deposit, Mobile Verify, and CheckReader, all of which focus on
digital banking processes.
• Mitek Systems reported net
revenues of ~$101 million in FY20, up about 20% since FY19. Mitek segments
their revenue into ‘Software and Hardware’ and ‘Services and Other,’
representing about 53% and 47% of net revenues, respectively.
• All of the top 10 major U.S.
retail banks, and nearly all of the top 50 U.S. retail banks utilize Mitek’s
technology and products.
• In 2018, Mitek completed their
acquisition of A2iA, a software company dedicated to extracting customer data
and documents. Some of the products spun off from this acquisition include: A2iA
CheckReader, A2iA XE, A2iA DocumentReader, and A2iA TextReader. This
acquisition increased their global footprint by placing two of the leaders in
digital recognition technologies under the same house.
Key
points: With an increased push for online
banking and going digital, Mitek Systems has experienced growth through their Mobile
Deposit, Mobile Verify, and CheckReader products. Over the past couple years,
Mitek has been able to capitalize on this push with their software and hardware
line. This line totaled $60.1 million for FY21, growing 16%. Their SaaS revenue
represented $40.2 million of their total revenue, up 37%.
During Mitek’s 4Q21 earnings
call, it was heavily stressed that management is making significant R+D
investments into their fraud product offering, as well as their AI
advancements. This is represented in their acquisition of ID R&D, adding
AI-based voice technology, as well as biometric facial detection. On top of
this, the acquisition of ID R&D also
led Mitek to branch off into the customer onboarding market, utilizing the new
technologies in this acquisition to streamline this process.
Mitek’s main competitor is Top
Image Systems Ltd., a leader in Enterprise Content Management (ECM). They also
compete more directly with IDNow, an identity verification platform. Mitek
Systems houses multiple product segments under the same umbrella, something I see
lacking in other competitors that offer similar solutions. This bodes well for Mitek
going forward as the go-to shop for banks and other financial institutions. As
previously mentioned, they have been able to attract the attention of major
U.S. banks, and I intend this number will grow throughout FY22 and on.
What
has the stock done lately?
Mitek is currently trading right
in the middle of their 52 week H-L, representing a 10.33% decrease since its
addition to the Small Cap Portfolio. MITK currently holds a P/E multiple of
97.4x, an EV/EBITDA multiple of 17.6x, and an ROE of 5.2%. FY 20 was a huge
year for MITK, and has already shown signs in FY21 that point towards this
trend continuing.
Past
Year Performance: Mitek’s 52 Week Range is $11.27-23.29 and was
added to the Small Cap Portfolio at a price of $19.26. MITK increased 132.40%
FY19 to FY20, outperforming the industry and market benchmark. MITK’s EBITDA
nearly doubled, and record record level sales. MITK did not pay a dividend in
FY 20, and that still currently remains true.
My
Takeaway
It is becoming quite clear that
institutions are putting their trust in Mitek Systems to deliver
marketing-leading fraud detection and digital identity recognition services to
streamline their processes. Mitek has carved out a significant amount of the
market as noted previously, and captured the attention of major U.S. banks and
financial organizations. I do not think Mitek’s current short-term price
fluctuation should raise any red flags. Due to MITK’s ability to capture market
share through their facial recognition and fraudulent proofing mechanisms,
sizeable YoY growth, and future ramped up demand, I expect MITK to grow to analyst
target price of $25.75.
