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Stockholders' Equity
 12 Months Ended
Sep. 30, 2022
Equity [Abstract]  
STOCKHOLDERS' EQUITY
7. STOCKHOLDERS’ EQUITY
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense related to RSUs, stock options, and ESPP shares for the twelve months ended September 30, 2022, 2021, and 2020, which were allocated as follows (amounts in thousands):
202220212020
Cost of revenue$289 $339 $267 
Selling and marketing4,383 3,399 2,528 
Research and development3,701 3,218 2,802 
General and administrative4,973 4,576 3,954 
Total stock-based compensation expense
$13,346 $11,532 $9,551 
No options were granted in the twelve months ended September 30, 2022 or 2021. The fair value calculations for stock-based compensation awards to employees for the twelve months ended September 30, 2020 were based on the following assumptions:
2020
Risk-free interest rate
1.35% – 1.35%
Expected life (years)5.78
Expected volatility48%
Expected dividends—
The expected life of options granted is derived using assumed exercise rates based on historical exercise patterns and vesting terms, and represents the period of time that options granted are expected to be outstanding. Expected stock price volatility is based upon implied volatility and other factors, including historical volatility. After assessing all available information on either historical volatility, or implied volatility, or both, the Company concluded that a combination of both historical and implied volatility provides the best estimate of expected volatility.
As of September 30, 2022, the Company had $28.5 million of unrecognized compensation expense related to outstanding RSUs, stock options, and ESPP shares expected to be recognized over a weighted-average period of approximately 2.2 years.
2020 Incentive Plan
In January 2020, the Board adopted the Mitek Systems, Inc. 2020 Incentive Plan (the “2020 Plan”) upon the recommendation of the compensation committee of the Board. On March 4, 2020, the Company’s stockholders approved the 2020 Plan. The total number of shares of Common Stock reserved for issuance under the 2020 Plan is 4,500,000 shares plus such number of shares, not to exceed 107,903, as remained available for issuance under the 2002 Stock Option Plan, 2006 Stock Option Plan, 2010 Stock Option Plan, and 2012 Incentive Plan (collectively, the “Prior Plans”) as of January 17, 2020, plus any shares underlying awards under the Prior Plans that are terminated, forfeited, cancelled, expire unexercised or are settled in cash after January 17, 2020. As of September 30, 2022, (i) 1,494,178 RSUs and 919,456 Performance RSUs were outstanding under the 2020 Plan, and 1,477,769 shares of Common Stock were reserved for future grants under the 2020 Plan and (ii) stock options to purchase an aggregate of 471,303 shares of Common Stock and 401,350 RSUs were outstanding under the Prior Plans.
Employee Stock Purchase Plan
In January 2018, the Board adopted the Mitek ESPP. On March 7, 2018, the Company’s stockholders approved the ESPP. The total number of shares of Common Stock reserved for issuance thereunder is 1,000,000 shares. As of September 30, 2022, (i) 608,229 shares have been issued to participants pursuant to the ESPP and (ii) 391,771 shares of Common Stock were reserved for future purchases under the ESPP. The Company commenced the initial offering period on April 2, 2018.
The ESPP enables eligible employees to purchase shares of Common Stock at a discount from the market price through payroll deductions, subject to limitations. Eligible employees may elect to participate in the ESPP only during an open enrollment period. The offering period immediately follows the open enrollment window, at which time ESPP contributions are withheld from the participant's regular paycheck. The ESPP provides for a 15% discount on the market value of the stock at the lower of the grant date price (first day of the offering period) and the purchase date price (last day of the offering period). The Company recognized $0.4 million in stock-based compensation expense related to the ESPP during each of the twelve months ended September 30, 2022 and 2020 and $0.6 million in the twelve months ended September 30, 2021.
Director Restricted Stock Unit Plan
In January 2011, the Board adopted the Mitek Systems, Inc. Director Restricted Stock Unit Plan, as amended and restated (the “Director Plan”). On March 10, 2017, the Company's stockholders approved an amendment to the Director Plan. The total number of shares of Common Stock reserved for issuance thereunder is 1,500,000    shares. As of September 30, 2022, (i) 259,513 RSUs were outstanding under the Director Plan and (ii) 144,412 shares of Common Stock were reserved for future grants under the Director Plan.
Stock Options
The following table summarizes stock option activity under the Company’s stock option plans during the twelve months ended September 30, 2022, 2021, and 2020:
Number of
Shares
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual Term
(in Years)
Outstanding at September 30, 20191,686,902 $7.00 5.4
Granted92,610 $9.49 
Exercised(580,861)$6.15 
Canceled(36,146)$10.76 
Outstanding at September 30, 20201,162,505 $7.51 6.1
Granted— $— 
Exercised(329,878)$7.63 
Canceled(15,910)$9.41 
Outstanding at September 30, 2021816,717 $7.42 5.8
Granted— $— 
Exercised(35,625)$6.68 
Canceled— $— 
Outstanding at September 30, 2022781,092 $7.46 3.7
Vested and Expected to Vest at September 30, 2022781,092 $7.463.7
Exercisable at September 30, 2022706,377 $7.233.7
The Company recognized $0.5 million, $0.7 million, and $0.7 million in stock-based compensation expense related to outstanding stock options in the twelve months ended September 30, 2022, 2021, and 2020, respectively. As of September 30, 2022, the Company had $0.3 million of unrecognized compensation expense related to outstanding stock options expected to be recognized over a weighted-average period of approximately one year.
Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the weighted-average exercise price, multiplied by the number of options outstanding and exercisable. The total aggregate intrinsic value of options exercised during the twelve months ended September 30, 2022, 2021, and 2020 was $0.3 million, $2.7 million, and $2.5 million, respectively. There were no options granted during the twelve months ended September 30, 2022 and 2021. The per-share weighted-average fair value of options granted during the twelve months ended September 30, 2020 was $4.32. The aggregate intrinsic value of options outstanding as of September 30, 2022 and 2021, was $1.5 million and $9.0 million, respectively.
Restricted Stock Units
The following table summarizes RSU activity under the Company’s equity plans in the twelve months ended September 30, 2022, 2021, and 2020:
Number of
Shares
Weighted-
Average
Fair Value
Per Share
Outstanding at September 30, 20192,352,487 $8.26 
Granted1,394,869 $7.39 
Settled(818,665)$7.82 
Canceled(266,748)$8.26 
Outstanding at September 30, 20202,661,943 $7.95 
Granted887,049 $13.35 
Settled(975,764)$7.64 
Canceled(161,961)$8.94 
Outstanding at September 30, 20212,411,267 $9.99 
Granted1,272,917 $14.43 
Settled(898,178)$9.57 
Canceled(344,329)$11.16 
Outstanding at September 30, 20222,441,677 $12.29 
The cost of RSUs is determined using the fair value of the Common Stock on the award date, and the compensation expense is recognized ratably over the vesting period. The Company recognized $9.4 million, $8.1 million, and $6.9 million in stock-based compensation expense related to outstanding RSUs in the twelve months ended September 30, 2022, 2021, and 2020, respectively. As of September 30, 2022, the Company had approximately $21.2 million of unrecognized compensation expense related to outstanding RSUs, which is expected to be recognized over a weighted-average period of approximately 2.3 years.
Performance Restricted Stock Units
Pursuant to the 2020 Plan, the Company granted performance-based restricted stock unit awards (“Performance RSUs”) to certain members of the Company’s senior leadership team, including the Chief Executive Officer. The Performance RSUs are subject to vesting based on a performance-based condition and a service-based condition. The Performance RSU will vest over three years in a percentage of the target number of shares between 0% and 133%, depending on the extent the performance condition is achieved. The following table summarizes Performance RSU activity under the Company’s equity plans in the twelve months ended September 30, 2022, 2021, and 2020:
Number of
Shares
Weighted-
Average
Fair Value
Per Share
Outstanding at September 30, 20191,722,551 $7.76 
Granted353,556 $6.06 
Settled— $— 
Canceled(1,722,551)$7.76 
Outstanding at September 30, 2020353,556 $6.06 
Granted284,765 $11.84 
Settled(90,345)$6.06 
Canceled(19,252)$6.06 
Outstanding at September 30, 2021528,724 $9.17 
Granted629,279 $15.60 
Settled(176,864)$8.42 
Canceled(61,683)$13.51 
Outstanding at September 30, 2022919,456 $13.43 
There were 919,456 Performance RSUs outstanding as of September 30, 2022. The Company recognized $3.0 million, $1.3 million, and $0.7 million in stock-based compensation expense related to outstanding Performance RSUs in the twelve months ended September 30, 2022, 2021, and 2020, respectively. As of September 30, 2022, the Company had $6.8 million of unrecognized compensation expense related to outstanding Performance RSUs, which is expected to be recognized over a weighted-average period of approximately 2.2 years. During the twelve months ended September 30, 2022, the Company cancelled 61,683 previously issued Performance RSUs as the criteria for vesting were not met during the performance period.
Performance Options
On November 6, 2018, as an inducement grant pursuant to Nasdaq Listing Rule 5635(c)(4) of the Nasdaq Stock Market LLC, the Company’s Chief Executive Officer was granted performance options (the “Performance Options”) to purchase up to 800,000 shares of Common Stock at an exercise price of $9.50 per share, the closing market price for a share of the Common Stock on the date of the grant. As long as he remains employed by the Company, such Performance Options shall vest upon the closing market price of the Common Stock achieving certain predetermined levels and his serving as the Chief Executive Officer of the Company for at least three years. In the event of a change of control of the Company, all of the unvested Performance Options will vest if the per share price payable to the stockholders of the Company in connection with the change of control is an amount reaching those certain predetermined levels required for the Performance Options to otherwise vest. During fiscal 2021, the performance conditions were achieved and in November 2021, the performance options vested in full. The Company recognized $0.1 million and $0.8 million in stock-based compensation expense related to outstanding Performance Options in the twelve months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the Company had no unrecognized compensation expense related to outstanding Performance Options.
Share Repurchase Program
On June 15, 2021, the Board authorized and approved a share repurchase program for up to $15 million of the currently outstanding shares of Common Stock. The share repurchase program expired on June 30, 2022. The Company made purchases of $14.8 million, or 886,204 shares, during twelve months ended September 30, 2022 at an average price of $16.73 per share. The Company made purchases of $0.2 million, or 10,555 shares, during twelve months ended September 30, 2021 at an average price of $17.99 per share.
On December 13, 2019, the Board authorized and approved a share repurchase program for up to $10.0 million of the currently outstanding shares of the Company’s Common Stock. The share repurchase program expired on December 16, 2020. The Company made purchases of $1.0 million, or approximately 137,000 shares, during the twelve months ended September 30, 2020 at an average price of $7.33 per share. Total purchases made under the share repurchase program were $1.0 million as of September 30, 2020 and the repurchased shares were retired.
Rights Agreement
On October 23, 2018, the Company entered into the Section 382 Rights Agreement (the “Rights Agreement”) and issued a dividend of one preferred share purchase right (a “Right”) for each share of Common Stock payable on November 2, 2018 to the stockholders of record of such shares on that date. Each Right entitles the registered holder, under certain circumstances, to purchase from the Company one one-thousandth of a share of Series B Junior Preferred Stock, par value $0.001 per share (the “Preferred Shares”), of the Company, at a price of $35.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement.
The Rights are not exercisable until the Distribution Date (as defined in the Rights Agreement). Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.
At any time prior to the time any person becomes an Acquiring Person (as defined in the Rights Agreement), the Board may redeem the Rights in whole, but not in part, at a price of $0.0001 per Right (the “Redemption Price”). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.
On February 28, 2019, the Company entered into an Amendment No. 1 to the Rights Agreement for the purpose of (i) modifying the definitions of “Beneficial Owner,” “Beneficially Own,” and “Beneficial Ownership” under the Rights Agreement to more closely align such definitions to the actual and constructive ownership rules under Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”) or such similar provisions of the Tax Cuts and Jobs Act of 2017 and the rules and regulations promulgated thereunder, and (ii) adding an exemption request process for persons to seek an exemption from becoming an “Acquiring Person” under the Rights Agreement in the event such person wishes to acquire 4.9% or more of the Common Stock then outstanding.
The Rights expired on October 22, 2021 and no Rights were redeemed or exchanged.