MITEK SYSTEMS INCMITK
MITEK SYSTEMS INC Income Taxes Disclosure
7. INCOME TAXES
Provision for Income Taxes
Income (loss) before income taxes for the twelve months ended September 30, 2025, 2024, and 2023 is comprised of the following (amounts in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 14,418 | $ | 10,246 | $ | 23,836 | |||||||||||
| Foreign | (2,809) | (11,155) | (13,495) | ||||||||||||||
| Total | $ | 11,609 | $ | (909) | $ | 10,341 | |||||||||||
For the twelve months ended September 30, 2025, 2024, and 2023 the income tax benefit (provision) was as follows (amounts in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (10,217) | $ | (6,323) | $ | (4,414) | |||||||||||
| State | (906) | (420) | (1,215) | ||||||||||||||
| Foreign | (1,266) | 495 | (1,023) | ||||||||||||||
Total current benefit (provision) for income taxes | (12,389) | (6,248) | (6,652) | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 6,128 | 4,291 | (659) | ||||||||||||||
| State | 548 | 397 | 819 | ||||||||||||||
| Foreign | 2,900 | 5,747 | 4,178 | ||||||||||||||
Total deferred benefit (provision) for income taxes | 9,576 | 10,435 | 4,338 | ||||||||||||||
Total tax benefit (provision) | $ | (2,813) | $ | 4,187 | $ | (2,314) | |||||||||||
Deferred Income Tax Assets and Liabilities
Significant components of the Company’s net deferred tax assets and liabilities as of September 30, 2025 and 2024 are as follows (amounts in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Stock-based compensation | $ | 2,664 | $ | 2,866 | |||||||
| Net operating loss carryforwards | 11,552 | 12,437 | |||||||||
| Research credit carryforwards | 5,311 | 5,398 | |||||||||
| Lease liability | 717 | 1,235 | |||||||||
Accrued bonus | 1,771 | — | |||||||||
| Capitalized research and development costs | 12,596 | 8,408 | |||||||||
| Other, net | 921 | 682 | |||||||||
| Total deferred assets | 35,532 | 31,026 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (633) | (1,141) | |||||||||
| Intangibles | (9,860) | (13,414) | |||||||||
| Total deferred liabilities | (10,493) | (14,555) | |||||||||
| Valuation allowance for net deferred tax assets | — | (1,215) | |||||||||
| Net deferred tax asset | $ | 25,039 | $ | 15,256 | |||||||
The net change in the total valuation allowance for the twelve months ended September 30, 2025 and 2024 is a decrease of $1.2 million and $1.6 million, respectively due to the release of valuation allowances in certain of the Company's foreign jurisdictions in fiscal 2025 and fiscal 2024.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more likely than not that these assets will be realizable. Mitek routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three
years of cumulative pretax income for each tax jurisdiction. Based on the overall analysis of the positive and negative evidence in each tax jurisdiction, during the twelve months ended September 30, 2025 and 2024, Mitek released the valuation allowances related to certain foreign deferred tax assets. Valuation allowance releases for the year ended September 30, 2025 and 2024 resulted in recognition of a portion of these deferred tax assets and a benefit to Mitek's provision for income taxes of $1.2 million and $1.6 million, respectively.
As of September 30, 2025, the Company has no available net operating loss carryforwards for federal income tax purposes. The net operating losses for state purposes are $24.5 million, which will begin to expire in 2036. As of September 30, 2025, the Company has no available federal research and development credit carryforwards. As of September 30, 2025, the Company has available foreign net operating loss carryforwards of $39.2 million, which do not expire.
As of September 30, 2025, the Company has available California research and development credit carryforwards, net of reserves, of $3.5 million, which do not expire. As of September 30, 2025, the Company has available foreign research and development credit carryforwards of $1.7 million, which will begin to expire in 2037.
Federal and state tax attributes can be subject to an annual limitation under the provisions of Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and state tax laws. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5% stockholders in the stock of a corporation by more than 50% in the aggregate over a three-year period. In the event that we experience a change of ownership, utilization of state net operating loss and tax credit carryforwards may be limited.
Earnings from the Company's foreign subsidiaries are considered to be indefinitely reinvested. Therefore, the Company has not established a deferred tax liability on the amount of non-cash foreign undistributed earnings for the year ended September 30, 2025. However, if these non-cash undistributed earnings were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with these non-cash unremitted earnings due to the complexity of the hypothetical calculation.
Income Tax Provision Reconciliation
The difference between the income tax benefit (provision) and income taxes computed using the U.S. federal income tax rate was as follows for the twelve months ended September 30, 2025, 2024, and 2023 (amounts shown in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Amount computed using statutory rate | $ | (2,438) | $ | 191 | $ | (2,172) | |||||||||||
| Net change in valuation allowance for net deferred tax assets | 1,049 | 1,696 | 292 | ||||||||||||||
| Foreign rate differential | 47 | 439 | 504 | ||||||||||||||
| Permanent differences | 175 | 190 | (14) | ||||||||||||||
| State income tax | (262) | (19) | (100) | ||||||||||||||
| Research and development credits | 781 | 1,754 | 791 | ||||||||||||||
| Contingent consideration | — | (28) | (432) | ||||||||||||||
| Uncertain tax positions | (220) | (93) | (184) | ||||||||||||||
| Stock compensation, net | (1,935) | (242) | (522) | ||||||||||||||
| Other | (10) | 299 | (477) | ||||||||||||||
| Income tax (provision) benefit | $ | (2,813) | $ | 4,187 | $ | (2,314) | |||||||||||
Uncertain Tax Positions
The following table reconciles the beginning and ending amount of unrecognized tax benefits for the twelve months ended September 30, 2025, 2024, and 2023 (amounts shown in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
Gross unrecognized tax benefits at the beginning of the year | $ | 2,883 | $ | 2,985 | $ | 2,664 | |||||||||||
| Additions from tax positions taken in the current year | 183 | 253 | 330 | ||||||||||||||
| Additions from tax positions taken in prior years | — | — | — | ||||||||||||||
| Reductions from tax positions taken in prior years | (24) | (355) | (9) | ||||||||||||||
| Gross unrecognized tax benefits at end of the year | $ | 3,042 | $ | 2,883 | $ | 2,985 | |||||||||||
Of the total unrecognized tax benefits at September 30, 2025, $2.5 million will impact the Company’s effective tax rate. The Company does not anticipate that there will be a substantial change in unrecognized tax benefits within the next twelve months.
The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of September 30, 2025 and 2024, the company accrued $0.2 million and $0.1 million, respectively, of interest and penalties related to uncertain tax positions are recorded in the consolidated financial statements.
The Company is subject to periodic examinations in the U.S. by federal and state taxing authorities. All tax years are subject to examination by U.S., California, and other state tax authorities due to the utilization of carryforwards in recent years and due to the carryforward of unutilized net operating losses and tax credits. The Company is also subject to periodic examinations in the foreign countries in which it operates, however, the Company is not currently under examination by any foreign taxing authorities. For the majority of foreign tax jurisdictions, the Company is no longer subject to income tax examinations for years before 2021.
On July 4, 2025, President Trump signed into law the One, Big, Beautiful Bill Act (the “Act”). Within the Act, there were significant tax law changes with various effective dates. The tax law changes within the Act include those related to the timing of certain tax deductions including depreciation expense, research and development expenditures, and interest expense. The Company implemented the tax law changes in the fourth quarter of fiscal 2025 and, while there was no impact to its overall tax expense, the allocation between current and deferred tax expense will be impacted in the future.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 11, 2025 | Showing above |
| 2024 | Dec 16, 2024 | |
| 2023 | Mar 19, 2024 | |
| 2022 | Jul 31, 2023 | |
| 2021 | Dec 13, 2021 | |
| 2020 | Dec 7, 2020 | |
| 2019 | Dec 6, 2019 | |
| 2018 | Dec 14, 2018 | |
| 2017 | Nov 30, 2017 | |
| 2016 | Dec 9, 2016 | |
| 2015 | Dec 7, 2015 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.