Company Quick10K Filing
Quick10K
Mitek Systems
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$10.65 40 $424
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-K 2017-09-30 Annual: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-K 2016-09-30 Annual: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-K 2015-09-30 Annual: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-K 2014-09-30 Annual: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-07-25 Earnings, Exhibits
8-K 2019-05-01 Earnings, Regulation FD, Exhibits
8-K 2019-03-06 Shareholder Vote
8-K 2019-01-29 Earnings, Exhibits
8-K 2018-12-21 Other Events
8-K 2018-12-11 Other Events
8-K 2018-12-05 Officers, Exhibits
8-K 2018-11-26 Officers
8-K 2018-11-21 Other Events
8-K 2018-11-20 Other Events
8-K 2018-11-06 Officers, Other Events, Exhibits
8-K 2018-11-05 Other Events, Exhibits
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-10-23 Enter Agreement, Shareholder Rights, Amend Bylaw, Exhibits
8-K 2018-08-27 Officers, Other Events, Exhibits
8-K 2018-07-26 Earnings, Exhibits
8-K 2018-05-23 Enter Agreement, M&A, Sale of Shares, Other Events, Exhibits
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-03-07 Shareholder Vote
8-K 2018-02-27 Officers, Exhibits
8-K 2018-01-25 Earnings, Exhibits
RJF Raymond James Financial 12,250
BFAM Bright Horizons Family Solutions 7,610
BBBY Bed Bath & Beyond 2,120
SSP EW Scripps 1,870
LSCC Lattice Semiconductor 1,800
TRHC Tabula Rasa Healthcare 1,050
TRST Trustco Bank N Y 773
INSE Inspired Entertainment 162
KTCC Key Tronic 60
GETH Green Envirotech Holdings 0
MITK 2019-06-30
Part I
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 mitk-20190630xexx311.htm
EX-31.2 mitk-20190630xexx312.htm
EX-32.1 mitk-20190630xexx321.htm

Mitek Systems Earnings 2019-06-30

MITK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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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, 2019
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. (Check one):
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 40,177,044 shares of the registrant’s common stock outstanding as of July 31, 2019.





MITEK SYSTEMS, INC.
FORM 10-Q
For The Quarterly Period Ended June 30, 2019
INDEX
 
   
   
   





PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MITEK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share data)

 June 30, 2019 (Unaudited)September 30, 2018
ASSETS  
Current assets:  
Cash and cash equivalents$16,092 $9,028 
Short-term investments11,892 8,448 
Accounts receivable, net14,566 16,821 
Prepaid expenses1,847 2,278 
Other current assets3,084 1,053 
Total current assets47,481 37,628 
Property and equipment, net4,543 4,665 
Intangible assets, net27,080 32,947 
Goodwill33,925 34,407 
Deferred income tax assets, net20,317 15,356 
Other non-current assets2,524 2,147 
Total assets$135,870 $127,150 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$3,593 3,573 
Accrued payroll and related taxes6,027 7,915 
Deferred revenue, current portion6,317 4,792 
Acquisition-related contingent consideration1,180 1,849 
Restructuring accrual3,082  
Other current liabilities1,795 2,278 
Total current liabilities21,994 20,407 
Deferred revenue, non-current portion681 485 
Deferred income tax liabilities8,025 8,162 
Other non-current liabilities1,846 2,702 
Total liabilities32,546 31,756 
Stockholders’ equity:    
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding
  
Common stock, $0.001 par value, 60,000,000 shares authorized, 40,177,044 and 37,961,224 issued and outstanding, as of June 30, 2019 and September 30, 2018, respectively
40 38 
Additional paid-in capital129,145 116,944 
Accumulated other comprehensive loss(1,773)(586)
Accumulated deficit(24,088)(21,002)
Total stockholders’ equity103,324 95,394 
Total liabilities and stockholders’ equity$135,870 $127,150 
 
See accompanying notes to consolidated financial statements.

1



MITEK SYSTEMS, INC.
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,
 2019201820192018
Revenue  
Software and hardware$11,888 $10,458 $32,468 $26,437 
Service and other10,018 5,651 27,104 16,085 
Total revenue21,906 16,109 59,572 42,522 
Operating costs and expenses  
Cost of revenue—software and hardware838 1,023 2,590 2,227 
Cost of revenue—service and other
2,330 1,655 6,447 3,785 
Selling and marketing6,935 5,740 20,895 15,863 
Research and development4,663 4,161 14,441 10,942 
General and administrative5,074 3,239 15,743 10,529 
Acquisition-related costs and expenses1,761 3,154 5,361 5,616 
Restructuring costs3,214  3,214  
Total operating costs and expenses24,815 18,972 68,691 48,962 
Operating loss(2,909)(2,863)(9,119)(6,440)
Other income (expense), net98 (1,351)252 (957)
Loss before income taxes(2,811)(4,214)(8,867)(7,397)
Income tax benefit (provision)2,712 1,430 4,861 (2,283)
Net loss$(99)$(2,784)$(4,006)$(9,680)
Net loss per share—basic and diluted$(0.00)$(0.08)$(0.10)$(0.28)
Shares used in calculating net loss per share—basic and diluted
39,936 36,190 39,034 35,122 
Other comprehensive income (loss)  
Net loss$(99)$(2,784)$(4,006)$(9,680)
Foreign currency translation adjustment814 (942)(1,213)(350)
Unrealized gain (loss) on investments7 43 26 (28)
Other comprehensive income (loss)$722 $(3,683)$(5,193)$(10,058)
 
See accompanying notes to consolidated financial statements.
2



MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(amounts in thousands except per share)


Three Months Ended June 30, 2019
Common Stock
Outstanding
Shares
Common
Stock
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Balance, March 31, 201939,348 $39 $124,613 $(23,989)$(2,594)$98,069 
Exercise of stock options726 1 2,264 — — 2,265 
Settlement of restricted stock units103 — — — —  
Stock-based compensation expense— — 2,268 — — 2,268 
Components of other comprehensive income:
Net loss— — — (99)— (99)
Currency translation adjustment— — — — 814 814 
Change in unrealized gain (loss) on investments
— — — — 7 7 
Total other comprehensive income
722 
Balance, June 30, 201940,177 $40 $129,145 $(24,088)$(1,773)$103,324 

Three Months Ended June 30, 2018
Common Stock
Outstanding
Shares
Common
Stock
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Balance, March 31, 201835,059 $35 $89,109 $(16,091)$668 $73,721 
Exercise of stock options114 — 329 — — 329 
Settlement of restricted stock units109 1 (1)— —  
Acquisition-related shares issued2,515 2 21,875 21,877 
Stock-based compensation expense— — 1,980 — — 1,980 
Components of other comprehensive loss:
Net loss— — — (2,784)— (2,784)
Currency translation adjustment— — — — (942)(942)
Change in unrealized gain (loss) on investments
— — — — 43 43 
Total other comprehensive loss
(3,683)
Balance, June 30, 201837,797 $38 $113,292 $(18,875)$(231)$94,224 

See accompanying notes to consolidated financial statements..
3



MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CONTINUED
(Unaudited)
(amounts in thousands except per share)


Nine Months Ended June 30, 2019
Common Stock Outstanding SharesCommon StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
Balance, September 30, 201837,961 $38 $116,944 $(21,002)$(586)$95,394 
Exercise of stock options1,362 1 4,420 — — 4,421 
Settlement of restricted stock units786 1 (1)— —  
Issuance of common stock under employee stock purchase plan
68 — 491 — — 491 
Stock-based compensation expense— — 7,291 — — 7,291 
Cumulative-effect adjustment from the adoption of ASU 2014-09
— — — 920 — 920 
Components of other comprehensive loss:
Net loss— — — (4,006)— (4,006)
Currency translation adjustment— — — — (1,213)(1,213)
Change in unrealized gain (loss) on investments
— — — — 26 26 
Total other comprehensive loss
(5,193)
Balance, June 30, 201940,177 $40 $129,145 $(24,088)$(1,773)$103,324 

Nine Months Ended June 30, 2018
Common Stock Outstanding SharesCommon StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
Balance, September 30, 201733,724 $34 $78,677 $(17,450)$147 $61,408 
Exercise of stock options187 — 495 — — 495 
Settlement of restricted stock units706 1 (1)— —  
Acquisition-related shares issued3,180 3 27,484 — — 27,487 
Stock-based compensation expense— — 5,927 — — 5,927 
Amortization of earnout shares— — 710 — — 710 
Cumulative-effect adjustment from the adoption of ASU 2016-09
— — — 8,255 — 8,255 
Components of other comprehensive loss:
Net loss— — — (9,680)— (9,680)
Currency translation adjustment— — — — (350)(350)
Change in unrealized gain (loss) on investments
— — — — (28)(28)
Total other comprehensive loss
(10,058)
Balance, June 30, 201837,797 $38 $113,292 $(18,875)$(231)$94,224 

See accompanying notes to consolidated financial statements..
4



MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
 
Nine Months Ended June 30,
 20192018
Operating activities:  
Net loss$(4,006)$(9,680)
Adjustments to reconcile net loss to net cash provided by operating activities:
  
Stock-based compensation expense7,291 5,927 
Amortization of closing and earnout shares 355 
Amortization of intangible assets5,298 2,215 
Depreciation and amortization1,047 316 
Amortization of investment premiums and other(73)(23)
Deferred taxes(5,232)3,541 
Changes in assets and liabilities:  
Accounts receivable2,168 (267)
Other assets(769)(1,838)
Accounts payable28 596 
Accrued payroll and related taxes(1,995)746 
Deferred revenue1,733 1,565 
Restructuring accrual3,082  
Other liabilities(684)919 
Net cash provided by operating activities7,888 4,372 
Investing activities:  
Purchases of investments(14,175)(15,391)
Sales and maturities of investments10,830 40,069 
Acquisitions, net of cash acquired (29,744)
Purchases of property and equipment(975)(3,176)
Net cash used in investing activities(4,320)(8,242)
Financing activities:  
Proceeds from the issuance of equity plan common stock4,912 495 
Payment of acquisition-related contingent consideration(1,030) 
Principal payments on other borrowings(250)(249)
Net cash provided by financing activities3,632 246 
Foreign currency effect on cash and cash equivalents(136)(31)
Net increase (decrease) in cash and cash equivalents7,064 (3,655)
Cash and cash equivalents at beginning of period9,028 12,289 
Cash and cash equivalents at end of period$16,092 $8,634 
Supplemental disclosures of cash flow information:  
Cash paid for income taxes$310 $128 
Supplemental disclosures of non-cash investing and financing activities:  
Unrealized holding gain (loss) on available-for-sale investments$26 $(28)
 
See accompanying notes to consolidated financial statements. .. ..
5



MITEK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Mitek Systems, Inc. ("Mitek" or the "Company") is a leading innovator of mobile capture and digital identity verification solutions. Mitek is a software development company with expertise in artificial intelligence and machine learning. The Company is currently serving more than 6,600 financial services organizations and leading marketplace and financial technology ("fintech") brands across the globe. The Company's solutions are embedded in native mobile apps and mobile optimized websites to facilitate better mobile user experiences, fraud detection and reduction, and compliant transactions.
Mitek's Mobile Deposit® solution is used today by millions of consumers in the United States ("U.S."), Canada, the United Kingdom, and Australia for mobile check deposit. Mobile Deposit® is the category leading product that allows individuals and businesses to remotely deposit checks using their camera-equipped smartphone or tablet. The Company's Mobile Deposit® solution has now processed over three billion check deposits. Mitek began selling Mobile Deposit® in the second fiscal quarter of 2008, and received its first patent issued for this product in August 2010.
Mitek’s Mobile Verify® is an important technology used to verify people’s identities at the point of onboarding via web or mobile device. Scanning an identity document enables an enterprise to identify the person with whom they are conducting business, comply with growing governmental Know Your Customer and Anti-Money Laundering ("AML") regulatory requirements, and to improve the overall customer experience for digital onboarding. To be sure the person submitting the identity document is who they say they are, Mitek's Mobile Verify Face Comparison provides an incremental layer of verification and compares the face on the identity document with the selfie photo of the user. Mitek's Mobile Verify Face Comparison technology uses advanced liveness detection so it cannot be spoofed.
The identification capture process provided by Mitek can also provide prefill of much of the data obtained from the identity document into an application, requiring far fewer key strokes, reducing keying errors, and improving both operational efficiency and the customer experience. Today, the financial services verticals (banks, credit unions, lenders, payments processors, card issuers, fintech companies, etc.) represent the greatest percentage of use of the Company's solutions, but marketplaces, sharing economy, telecommunications, healthcare, travel, and retail sectors are showing accelerated adoption. Similarly, websites that must verify the customer’s age (or other consumer information) prior to selling goods can do so by verifying identity documents. Mitek uses machine learning to constantly improve the product performance of Mobile Verify® and applies artificial intelligence to increase automation and speed of approvals of identification documents.
The core of the Company's user experience is Mitek MiSnap™, a touch-free automated capture technology which can be incorporated across product lines. It provides a simple and superior user-experience, making transactions on mobile devices fast, accurate, and easy for the consumer while helping organizations drive revenue from the increasingly popular mobile channel.
Mobile Fill®, Mitek's mobile identity capture solution, enables the camera to serve as a keyboard. Using Mobile Fill®, consumers can quickly prefill any form with personal data by simply snapping a picture of their driver's license, credit card, or other similar identity document.
CheckReader, which the Company acquired through the acquisition of A2iA (as defined below), enables financial institutions to automatically extract data from a check image received across all deposit channels – branch, ATM, Remote Deposit Capture, and mobile. Through the automatic recognition of all fields on checks, whether handwritten or machine print, CheckReader speeds the time to deposit for banks and customers and reduces costs formerly incurred before images could be exchanged.
ID_CLOUD™ is a fully automated identity verification solution that can be integrated into a customer’s application to instantly read and validate identity documents. ID_CLOUD™ automated technology enables global enterprises to improve their customer acquisition technology while meeting AML requirements in a safe and cost-effective manner. This solution is available in the cloud, and via mobile websites and desktop applications. Additionally, a version of ID_CLOUD™ is available that works locally on a desktop that is connected to a proprietary hardware scanner for reading and validating identity documents.
The Company 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. The Company's partner sales strategy includes channel partners who are financial services technology providers and identity verification providers. These partners integrate the Company's products into their solutions to meet the needs of their customers.
6



As of June 30, 2019, the Company has been granted 51 patents and it has an additional 19 patent applications pending.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company as of June 30, 2019 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. Certain reclassifications were made to previously reported amounts in the consolidated statements of cash flows to make them consistent with the current period presentation. You should read these financial statements and the accompanying notes in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, filed with the U.S. Securities and Exchange Commission on December 14, 2018.
Results for the three and nine months ended June 30, 2019 are not necessarily indicative of results for any other interim period or for a full fiscal year.
Principles of Consolidation
The 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.
Foreign Currency
The Company has foreign subsidiaries that operate and sell products and services in various countries and jurisdictions around the world. As a result, the Company is exposed to foreign currency exchange risks. For those subsidiaries whose functional currency is not the U.S. dollar, assets and liabilities are translated into U.S. dollars at the exchange rate in effect on the balance sheet date and revenues and expenses are translated into U.S. dollars using the average exchange rate over the period.  Resulting currency translation adjustments are recorded in accumulated other comprehensive loss in the consolidated balance sheets. The Company recorded a net gain resulting from foreign exchange translation of $0.8 million for the three months ended June 30, 2019 and a net loss resulting from foreign exchange translation of $0.9 million for the three months ended June 30, 2018. The Company recorded a net loss resulting from foreign exchange translation of $1.2 million for the nine months ended June 30, 2019 and a net loss resulting from foreign exchange translation of $0.4 million for the nine months ended June 30, 2018.
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 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, standalone selling price related to revenue recognition, contingent consideration, and income taxes.
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and its related amendments (collectively known as “ASC 606”). ASC 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. The core principle, involving a five-step process, of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company generates revenue primarily from the delivery of licenses (to both on premise and transactional software as a service ("SaaS") products) and related services, as well as the delivery of hardware and professional services. Revenue is measured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer which may be at a point in time or over time. See Note 2 of the consolidated financial statements for additional details.
7



Net Loss Per Share
The Company calculates net loss per share in accordance with FASB ASC Topic 260, Earnings per Share. Basic net loss per share is based on the weighted-average number of common shares outstanding during the period. Diluted net loss per share also gives effect to all potentially dilutive securities outstanding during the period, such as restricted stock units (“RSUs”), stock options, and Employee Stock Purchase Plan (“ESPP”) shares, if dilutive. In a period with a net loss position, potentially dilutive securities are not included in the computation of diluted net loss because to do so would be antidilutive, and the number of shares used to calculate basic and diluted net loss is the same.
For the three and nine months ended June 30, 2019 and 2018, the following potentially dilutive common shares were excluded from the calculation of net loss per share, as they would have been antidilutive (amounts in thousands):

 Three Months Ended June 30,Nine Months Ended June 30,
 2019201820192018
Stock options1,664 2,871 1,664 2,871 
RSUs2,498 2,476 2,498 2,476 
ESPP common stock equivalents65 63 65 63 
Total potentially dilutive common shares outstanding4,227 5,410 4,227 5,410 

The calculation of basic and diluted net loss per share is as follows (amounts in thousands, except per share data):
 Three Months Ended June 30,Nine Months Ended June 30,
 2019201820192018
Net loss$(99)$(2,784)$(4,006)$(9,680)
Weighted-average shares outstanding—basic39,936 36,190 39,034 35,122 
Common stock equivalents    
Weighted-average shares outstanding—diluted39,936 36,190 39,034 35,122 
Net loss per share:
Basic$0.00$(0.08)$(0.10)$(0.28)
Diluted$0.00$(0.08)$(0.10)$(0.28)
Investments
Investments consist of corporate notes and bonds, commercial paper, and U.S. Treasury securities. The Company classifies investments as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All investments are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive loss, a component of stockholders’ equity. The Company evaluates its investments to assess whether those with unrealized loss positions are other-than-temporarily impaired. Impairments are considered to be other-than-temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before the recovery of its cost basis. Realized gains and losses and declines in value judged to be other-than-temporary are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations and other comprehensive income (loss). No other-than-temporary impairment charges were recognized in the three and nine months ended June 30, 2019 and 2018.
All investments whose maturity or sale is expected within one year are classified as “current” on the consolidated balance sheets. All other securities are classified as “long-term” on the consolidated balance sheets.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the net invoice value and are not interest bearing. The Company considers receivables past due based on the contractual payment terms. Allowances for doubtful accounts are established based on various factors, including credit profiles of the Company’s customers, contractual terms and conditions, historical payments, and current economic trends. The Company reviews its allowances by assessing individual accounts receivable over a specific aging and amount. Accounts receivable are written off on a case-by-case basis, net of any amounts that may be collected. The Company had $0.1 million of write-offs to the allowance for doubtful accounts in the nine months ended June 30, 2019. The Company had no write-offs to the allowance for doubtful accounts for the nine months ended June 30, 2018. The Company maintained an allowance for doubtful accounts of $0.2 million and $0.3 million as of June 30, 2019 and September 30, 2018, respectively.
8



Capitalized Software Development Costs
Costs incurred for the development of software that will be sold, leased, or otherwise marketed are capitalized when technological feasibility has been established. Software development costs consist primarily of compensation of development personnel and related overhead incurred to develop new products and upgrade and enhance the Company’s current products, as well as fees paid to outside consultants. Capitalization of software development costs ceases, and amortization of capitalized software development costs commences when the products are available for general release. For the nine months ended June 30, 2019 and 2018, no software development costs were capitalized because the time period and costs incurred between technological feasibility and general release for all software product releases were not material or were not realizable. We had no amortization expense from capitalized software costs during the nine months ended June 30, 2019 and 2018.
Costs related to software acquired, developed, or modified solely to meet our internal requirements, with no substantive plans to market such software at the time of development, are capitalized. Costs incurred during the preliminary planning and evaluation stage of the project and during the post-implementation operational stage are expensed as incurred. Costs incurred during the application development stage of the project are capitalized. The Company defines the design, configuration, and coding process as the application development stage. The Company capitalized $0.2 million and $0.6 million of costs related to computer software developed for internal use during the nine months ended June 30, 2019 and 2018, respectively. The Company had $0.3 million in amortization expense from internal use software during the nine months ended June 30, 2019 and no amortization expense from internal use software during the nine months ended June 30, 2018.
Goodwill and Purchased Intangible Assets
The Company’s goodwill and intangible assets resulted from prior acquisitions. Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually or as circumstances indicate that their value may no longer be recoverable. In accordance with ASC Topic 350, Intangibles—Goodwill and Other (“ASC 350”), the Company reviews its goodwill and indefinite-lived intangible assets for impairment at least annually in its fiscal fourth quarter and more frequently if events or changes in circumstances occur that indicate a potential reduction in the fair value of its reporting unit and/or its indefinite-lived intangible asset below their respective carrying values. Examples of such events or circumstances include: a significant adverse change in legal factors or in the business climate, a significant decline in the Company’s stock price, a significant decline in the Company’s projected revenue or cash flows, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, or the presence of other indicators that would indicate a reduction in the fair value of a reporting unit. No such events or circumstances have occurred since the last impairment assessment was performed.
The Company’s goodwill is considered to be impaired if management determines that the carrying value of the reporting unit to which the goodwill has been assigned exceeds management’s estimate of its fair value. Based on the guidance provided by ASC 350 and ASC Topic 280, Segment Reporting, management has determined that the Company operates in one segment and consists of one reporting unit given the similarities in economic characteristics between its operations and the common nature of its products, services and customers. Because the Company has only one reporting unit, and because the Company is publicly traded, the Company determines the fair value of the reporting unit based on its market capitalization as it believes this represents the best evidence of fair value. In the fourth quarter of fiscal 2018, management completed its annual goodwill impairment test and concluded that the Company’s goodwill was not impaired. The Company’s conclusion that goodwill was not impaired was based on a comparison of its net assets to its market capitalization.
Because the Company determines the fair value of its reporting unit based on its market capitalization, the Company’s future reviews of goodwill for impairment may be impacted by changes in the price of the Company’s common stock, par value $0.001 per share (“Common Stock”). For example, a significant decline in the price of the Common Stock may cause the fair value of its goodwill to fall below its carrying value. Therefore, the Company cannot assure that when it completes its future reviews of goodwill for impairment a material impairment charge will not be recorded.
Intangible assets are amortized over their useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. The carrying amounts of these assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. The carrying amount of such assets is reduced to fair value if the undiscounted cash flows used in the test for recoverability are less than the carrying amount of such assets.
9



Income Taxes
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes. Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years.
Management evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets. The valuation allowance reduces deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. See Note 8 of the consolidated financial statements for additional details.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to income tax matters in income tax expense. See Note 8 of the consolidated financial statements for additional details.
Stock-Based Compensation
The Company issues RSUs, stock options, performance options, and Senior Executive Long Term Incentive Restricted Stock Units (“Senior Executive Performance RSUs”) as awards to its employees. Additionally, eligible employees may participate in the Company’s ESPP. Employee stock awards are measured at fair value on the date of grant and expense is recognized using the straight-line single-option method in accordance with FASB ASC Topic 718, Compensation-Stock Compensation. Forfeitures are recorded as they occur.
The Company assigns fair value to RSUs based on the closing stock price on the date of grant.
The Company estimates the fair value of stock options and ESPP shares using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the expected life of the grant effective as of the date of the grant. The expected volatility is based on the historical volatility of the Company’s stock price. These factors could change in the future, affecting the determination of stock-based compensation expense in future periods.
The Company estimates the fair value of Senior Executive Performance RSUs, performance options, and similar awards using the Monte-Carlo simulation. The Monte-Carlo simulation requires subjective assumptions, including the Company’s valuation date stock price, the annual risk-free interest rate, expected volatility, the probability of reaching the performance targets, and a 20-trading-day average stock price.
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"). These agreements have repayment periods of five to twelve years and bear no interest. As of June 30, 2019, $0.6 million was outstanding under these agreements and $0.2 million and $0.5 million is recorded in other current liabilities and other non-current liabilities, respectively, in the consolidated balance sheets. As of September 30, 2018, $0.8 million was outstanding under these agreements and $0.3 million and $0.5 million was recorded in other current liabilities and other non-current liabilities, respectively, in the consolidated balance sheets.
Guarantees
In the ordinary course of business, the Company is not subject to potential obligations under guarantees that fall within the scope of FASB ASC Topic 460, Guarantees (“ASC 460”), except for standard indemnification and warranty provisions that are contained within many of the Company’s customer license and service agreements and certain supplier agreements, and give rise only to the disclosure requirements prescribed by ASC 460. Indemnification and warranty provisions contained within the Company’s customer license and service agreements and certain supplier agreements are generally consistent with those prevalent in the Company’s industry. The Company has not historically incurred significant obligations under customer indemnification or warranty provisions and does not expect to incur significant obligations in the future. Accordingly, the Company does not maintain accruals for potential customer indemnification or warranty-related obligations.
Comprehensive Loss
Comprehensive loss consists of net loss, unrealized gains and losses on available-for-sale securities, and foreign currency translation adjustments. Included on the consolidated balance sheets is accumulated other comprehensive loss of $1.8 million and $0.6 million at June 30, 2019 and September 30, 2018, respectively.
10



Recently Adopted Accounting Pronouncements
In October 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which eliminates the current prohibition on immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory, with the intent of reducing complexity and diversity in practice. Under ASU 2016-16, entities must recognize the income tax consequences when the transfer occurs rather than deferring recognition. For public entities, ASU 2016-16 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017. Entities must apply the guidance on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company adopted ASU 2016-16 in the first quarter of 2019, and the adoption did not have a material impact on its consolidated financial statements.
In May 2014, the FASB issued guidance codified in ASC 606, to replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services for an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, ASC 606 requires expanded disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The Company adopted ASC 606 on October 1, 2018 for all contracts that were not completed as of the adoption date using the modified retrospective method and the practical expedient was not applied. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company expects the impact of the adoption of the new revenue standard to be immaterial to our net income on an ongoing basis.
See Note 2 of the consolidated financial statements for additional details on the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
Change in Significant Accounting Policy
Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in its consolidated financial statements. The details of the significant changes and quantitative impact of the changes are disclosed below.
Contract Assets and Liabilities
The Company previously recognized license revenue on term licenses and transactional SaaS revenue on the date payments become due and payable. Under ASC 606, the Company recognizes revenue when control of the license or transactional SaaS service is transferred to the customer. The Company records a contract asset when the revenue is recognized prior to the date payments become due.
Contract assets that are expected to be paid within one year are recorded in other current assets on the consolidated balance sheets. All other contracts assets are recorded in other non-current assets in the consolidated balance sheet. Contract liabilities consist of deferred revenue. When the performance obligation is expected to be fulfilled within one year, the deferred revenue is recorded in current liabilities in the consolidated balance sheet. When the performance obligation is expected to be fulfilled beyond one year, the deferred revenue is recorded in non-current liabilities in the consolidated balance sheet. The Company reports net contract asset or liability positions on a contract-by-contract basis at the end of each reporting period.
Contract Acquisition Costs
The Company previously recognized commission costs in the period earned if the contract was for one year or less. Under ASC 606, when the commission rate for a customer renewal is not commensurate with the commission rate for a new contract, the commission is capitalized if expected to be recovered. Such costs are capitalized on a contract-by-contract basis and amortized using a portfolio approach consistent with the pattern of transfer of the good or service to which the asset relates. Contract acquisition costs are recorded in other current and non-current assets in the consolidated balance sheets.
11



Impacts on Financial Statements
The following table summarizes the cumulative effect of the changes made to the consolidated balance sheet as of October 1, 2018 due to the adoption of ASC 606 (amounts in thousands):
Balance at September 30, 2018Adjustments Due to the Adoption of ASC 606Balance at October 1, 2018
Assets
Other current assets$1,053 $169 $1,222 
Deferred income tax asset15,356 (267)15,089 
Other non-current assets2,147 507 2,654 
Liabilities
Deferred revenue, current portion4,792 (511)4,281 
Deferred revenue, non-current portion485  485 
Equity
Accumulated deficit$(21,002)$920 $(20,082)

The following tables summarizes the impacts of ASC 606 adoption on the Company's consolidated financial statements as of and for the three and nine months ended June 30, 2019 (amounts in thousands except per share data):
Consolidated Statement of Operations
Impact of changes in accounting policies
Three Months Ended June 30, 2019:As reportedAdjustmentsBalances without adoption of ASC 606
Revenue
Software and hardware$11,888 $(244)$11,644 
Service and other10,018  10,018 
Total revenue21,906 (244)21,662 
Operating expenses
Selling and marketing$6,935 $(10)$6,925 
Impact of changes in accounting policies
Nine Months Ended June 30, 2019:As reportedAdjustmentsBalances without adoption of ASC 606
Revenue
Software and hardware$32,468 $(1,592)$30,876 
Service and other27,104  27,104 
Total revenue59,572 (1,592)57,980 
Operating expenses
Selling and marketing$20,895 $(9)$20,886 

12



Consolidated Balance Sheet
Impact of changes in accounting policies
June 30, 2019:As reportedAdjustmentsBalances without adoption of ASC 606
Assets
Accounts receivable, net$14,566 $649 $15,215 
Other current assets3,084 (1,983)1,101 
Deferred income tax asset20,317 623 20,940 
Other non-current assets2,524 (128)2,396 
Liabilities
Deferred revenue, current portion6,317 1,183 7,500 
Deferred revenue, non-current portion681  681 
Equity
Accumulated deficit$(24,088)$(2,022)$(26,110)

Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (ASC 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"), which requires hosting arrangements that are service contracts to follow the guidance for internal-use software to determine which implementation costs can be capitalized. ASU 2018-15 is effective either prospectively or retrospectively for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company does not expect the adoption of ASU 2018-15 to have a material impact on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, to eliminate, add, and modify certain disclosure requirements for fair value measurements. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for annual and interim periods beginning after December 15, 2019, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Company is currently evaluating how to apply the new guidance.
In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). Under previously existing GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The amendments in this ASU also require certain disclosures about stranded tax effects. The guidance is required for fiscal years beginning after December 15, 2018 (our fiscal year 2020), and interim periods within those fiscal years. Early adoption in any period is permitted. The Company does not expect the adoption of ASU 2018-02 to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 will be effective prospectively for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.
13



In June 2016, the FASB issued ASU No. 2016-13,