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INVESTMENTS
 12 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
INVESTMENTS
5. INVESTMENTS
The Company determines the appropriate designation of investments at the time of purchase and reevaluates such designation as of each balance sheet date. All of the Company’s investments are designated as available-for-sale debt securities. As of September 30, 2023 and 2022, the Company’s short-term investments have maturity dates of less than one year from the balance sheet date. The Company’s long-term investments have maturity dates of greater than one year from the balance sheet date.
Available-for-sale marketable securities are carried at fair value as determined by quoted market prices for identical or similar assets, with unrealized gains and losses, net of taxes, and reported as a separate component of stockholders’ equity. Management reviews the fair value of the portfolio at least monthly and evaluates individual securities with fair value below amortized cost at the balance sheet date. For debt securities, in order to determine whether impairment is other-than-temporary, management must conclude whether the Company intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. If management intends to sell an impaired debt security or it is more likely than not that the Company will be required to sell the security prior to recovering its amortized cost basis, an other-than-temporary impairment is deemed to have occurred. The amount of an other-than-temporary impairment on debt securities related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings. The amount of an other-than-temporary impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of stockholders’ equity in other comprehensive income (loss). No other-than-temporary impairment charges were recognized in the twelve months ended September 30, 2023, 2022, and 2021. The Company had no realized gain or loss from the sale of available-for-sale securities during the twelve months ended September 30, 2023. The Company realized a $0.3 million loss from the sale of available-for-sale securities during the twelve months ended September 30, 2022. There were no realized gains or losses from the sale of available-for-sale securities during the twelve months ended September 30, 2021.
The cost of securities sold is based on the specific identification method. Amortization of premiums, accretion of discounts, interest, dividend income, and realized gains and losses are included in other income, net in the consolidated statements of operations and other comprehensive income (loss).
The following tables summarize investments by type of security as of September 30, 2023 and 2022, respectively (amounts in thousands):
September 30, 2023:Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market
Value
Available-for-sale securities:
U.S. Treasury, short-term$40,329 $1 $(76)$40,254 
Corporate debt securities, short-term34,545 — (99)34,446 
U.S. Treasury, long-term1,371 — (67)1,304 
Total$76,245 $1 $(242)$76,004 
 
September 30, 2022:CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Market
Value
Available-for-sale securities:
U.S. Treasury, short-term$6,016 $— $(134)$5,882 
Foreign government and agency securities, short-term2,865 — (38)$2,827 
Commercial paper, short-term18,245 — (223)18,022 
Corporate debt securities, short-term32,065 — (528)31,537 
U.S. Treasury, long-term3,431 — (210)3,221 
Corporate debt securities, long-term7,692 — (280)7,412 
Total$70,314 $— $(1,413)$68,901 
Fair Value Measurements and Disclosures
FASB ASC Topic 820, Fair Value Measurements (“ASC 820”) defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which consists of the following:
•Level 1—Quoted prices in active markets for identical assets or liabilities;
•Level 2—Inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following tables represent the fair value hierarchy of the Company’s investments and acquisition-related contingent consideration as of September 30, 2023 and 2022, respectively (amounts in thousands):
September 30, 2023BalanceQuoted Prices in Active Markets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Short-term investments:
U.S. Treasury$40,254 $40,254 $— $— 
Corporate debt securities34,446 — 34,446 — 
Total short-term investments at fair value74,700 40,254 34,446 — 
Long-term investments:
U.S. Treasury1,304 1,304 — — 
Total long-term investments at fair value1,304 1,304 — — 
Total assets at fair value$76,004 $41,558 $34,446 $— 
Liabilities:
Current liabilities:
Acquisition-related contingent consideration$7,976 $— $7,976 $— 
Total liabilities at fair value$7,976 $— $7,976 $— 
September 30, 2022BalanceQuoted Prices in Active Markets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Assets:
Short-term investments:
U.S. Treasury$5,882 $5,882 $— $— 
Commercial paper18,022 — 18,022 — 
Foreign government and agency securities2,827 — 2,827 — 
Corporate debt securities31,537 — 31,537 — 
Total short-term investments at fair value58,268 5,882 52,386 — 
Long-term investments:
U.S. Treasury3,221 3,221 — — 
Corporate debt securities7,412 — 7,412 — 
Total long-term investments at fair value10,633 3,221 7,412 — 
Total assets at fair value$68,901 $9,103 $59,798 $— 
Liabilities:
Current liabilities:
Acquisition-related contingent consideration$5,920 $— $— $5,920 
Total liabilities at fair value$5,920 $— $— $5,920 
•Level 1: Includes investments in U.S. Government and agency securities, which are valued based on recently executed transactions in the same or similar securities.
•Level 2: Convertible Senior Notes and corporate debt securities. Corporate debt securities are valued using quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. On February 5, 2021, the Company issued the 2026 Notes as further described in Note 9. Concurrently with the issuance of the 2026 Notes, the
Company entered into the Notes Hedge and Warrant Transactions which in combination are intended to reduce the potential dilution from the conversion of the 2026 Notes (see Note 9).
The fair value of the Notes Hedge and the embedded conversion derivative were estimated using a Black-Scholes model. Based on the fair value hierarchy, the Company classified the Notes Hedge and the embedded conversion derivative as Level 2 as significant inputs are observable, either directly or indirectly. The significant inputs and assumptions used in the models to calculate the fair value of the derivatives include the Common Stock price, exercise price of the derivatives, risk-free interest rate, volatility, annual coupon rate and remaining contractual term.
As of September 30, 2023, total acquisition-related contingent consideration of $8.0 million is recorded in acquisition-related contingent consideration in the consolidated balance sheets. The Company recorded the acquisition date fair value based on the likelihood of contingent earnout payments related to the Company’s acquisition of ID R&D, as part of the consideration transferred. The earnout payments consist of cash payments and issuances of Common Stock and are subsequently remeasured to fair value each reporting date. The Company used a Monte Carlo Simulation to estimate fair value of total contingent consideration. Additionally, for contingent consideration to be settled in a variable number of shares of Common Stock, the Company used the most recent Mitek share price as reported by the Nasdaq Capital Market to determine the fair value of the shares expected to be issued. The Company previously classified the contingent consideration as Level 3, due to the lack of relevant observable inputs and market activity. The second earnout period ended on May 28, 2023 and the value recorded as of September 30, 2023 is based on the calculated final payout and the Company reclassified the contingent consideration as Level 2 during the third quarter of fiscal year 2023. The following table includes a roll-forward of the contingent consideration liability during the twelve months ended September 30, 2023 (amounts in thousands):
Balance at September 30, 2022$5,920 
Expenses recorded due to changes in fair value2,056 
Balance at September 30, 2023$7,976 
The following tables summarize the quantitative information including the unobservable inputs related to our acquisition-related contingent consideration as of September 30, 2022 (amounts in thousands):
Fair Value at September 30, 2022
Valuation TechniqueUnobservable InputInput Used
Acquisition-related contingent consideration$5,920 Monte Carlo simulationWeighted-average cost of capital14.80 %
Revenue weight-average cost of capital4.40 %
Revenue volatility0.20