Concerned Stockholder Group Issues Second Public Letter to Mitek Systems’ Board of Directors Regarding Necessary Capital Allocation, Governance and Operational Improvements

Rhea-AI Summary

Mitek Systems, Inc. (NASDAQ: MITK) receives a second open letter from Concerned Stockholder Group outlining actions to improve financial performance and stock valuation. The group calls for corporate governance enhancements, a large share repurchase, operational efficiency improvements, and a comprehensive strategic review. The Board has addressed some concerns but greater urgency is requested. The group reiterates the call for a $100 million Dutch tender offer to optimize capital structure and solidify management's commitment to stockholder value.

HOUSTON--(BUSINESS WIRE)-- Hammana Partners LP, Bradley L. Radoff and Joshua E. Schechter (together with their affiliates, the “Concerned Stockholder Group” or “we”) today issued a second open letter to the Board of Directors (the “Board”) of Mitek Systems, Inc. (NASDAQ: MITK) (“Mitek” or the “Company”):

Dear Members of the Board,

As of the release of Mitek’s third quarter results for 2023 on October 26^th, the Company is no longer delinquent on its financial disclosures. Yet, despite the removal of this overhang, the Company’s stock price continues to languish. In our previous communications with the Board, we have outlined four specific actions that we believe would likely improve Mitek’s financial performance, valuation and restore investor confidence:

1. Meaningful corporate governance enhancements;
2. Instituting a large share repurchase to take advantage of the Company’s significant undervaluation;
3. Committing to operational efficiency; targeting at least 250bps of annual EBITDA margin expansion; and
4. Running a comprehensive strategic review if Mitek’s management is unwilling or unable to balance revenue growth with this new, value-per-share driven capital allocation and margin improvement framework.

On the Company’s recent earnings call, we were pleased to hear that the Board has taken our previously identified corporate governance concerns seriously, with the Company announcing Scott Carter would step down from his position as Executive Chair. Moreover, we view management’s statement that further acquisitions are not needed at this time and current cash flow will instead go towards driving increased stockholder value as a turn in the right direction. However, we believe that greater urgency is needed in addressing the remaining issues we have highlighted to the Board.

We reiterate our call for the Company to execute a $100 million Dutch tender offer to optimize Mitek’s capital structure and proactively solidify management’s commitment to withdrawing from large scale M&A. A significant Dutch tender offer would prove substantially accretive to earnings per share, offset the dilutive impact of Mitek’s stock-based compensation over the past several years and commit the Company to buying back its stock – all signals to the market that this Board is now focused on improving stockholder value.

We contend that with a large share buyback to address Mitek’s significant undervaluation, the Board should then lay a framework for generating increased go-forward value per share. At the forefront of this, we believe that management should commit to annual improvements in operating margins and free-cash-flow per share and provide these targets to investors to improve transparency and accountability, while tying executive compensation to the achievement of these targets to promote stockholder alignment.

Mitek’s fourth quarter earnings release provides an opportunity to set a new course for investors. The Company will exit its blackout period, is expected to provide fiscal 2024 guidance and can use the earnings call to address stockholder concerns rather than ignoring them. We were pleased the Board quickly acknowledged our concern that the Executive Chair role represented a significant corporate governance issue; we believe our calls for a Dutch tender offer and margin improvement deserve a similar immediate response.

Sincerely,

Nicholas M. O’Sullivan		Bradley L. Radoff		Joshua E. Schechter
Hammana Partners LP

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231108821671/en/

Greg Lempel

greg@fondrenlp.com

Source: Concerned Stockholder Group of Mitek Systems, Inc.

FAQ

What actions are being outlined by the Concerned Stockholder Group for Mitek Systems, Inc. (NASDAQ: MITK)?

The Concerned Stockholder Group is calling for corporate governance enhancements, a large share repurchase, operational efficiency improvements, and a comprehensive strategic review.

What is the group's request regarding a Dutch tender offer?

The group is requesting a $100 million Dutch tender offer to optimize Mitek's capital structure and solidify management's commitment to stockholder value.

What is the significance of Mitek's fourth quarter earnings release?

The fourth quarter earnings release provides an opportunity for Mitek to address stockholder concerns and set a new course for investors.

Who issued the open letter to the Board of Directors of Mitek Systems, Inc.?

The open letter was issued by the Concerned Stockholder Group of Mitek Systems, Inc., including Nicholas M. O'Sullivan, Bradley L. Radoff, and Joshua E. Schechter.