Software House Behind Mobile Capture Gets into the Black

After rolling out its flagship mobile remote deposit software product in mid-2009, Mitek Systems Inc. is harvesting a bit of a profit. The company last week reported net income of $7,000 for its fiscal 2010 second quarter ended March 31. That’s close to break even, but much better than the $223,000 loss it reported in the first quarter and the $238,000 loss in fiscal 2009’s second quarter.

Mitek Systems’ improving financials come against a background of increased consumer, bank, and processor interest in remote deposit capture. With the mobile version of the service, a consumer with a camera-equipped smart phone can snap a picture of the front and back of a check and upload the images to his bank for deposit. Mobile capture is an offshoot of remote deposit capture, which facilitates check deposits using personal computers and common printer/document scanners.

Many of the banks and processors rolling out mobile remote deposit capture are using or plan to use Mitek Systems applications. San Diego-based Mitek has announced deals this year with The Bancorp Bank and NetDeposit Corp., a major provider of remote deposit capture services (Digital Transactions News, March 4). Another user is the big bank processor Fiserv Inc. (Brookfield, Wis.-based Fiserv this month reported that more than 2,000 financial-institution clients are bringing its various remote deposit capture services to 129,000 end users.)

Meanwhile, San Antonio, Texas-based USAA FSB, a pioneer in PC and mobile remote capture, reports that about 10% the checks it receives each day for deposit are coming in through Apple Inc.’s iPhone or smart phones running on Google Inc.’s Android operating system for mobile devices (Digital Transactions News, May 21). USAA developed most of its remote-capture applications in-house, but uses Mitek software to assess image quality and the check’s magnetic-ink character recognition (MICR) line, according to John Brady, vice president of application architecture.

More deals are in the works, Mitek Systems president and chief executive James B. DeBello told Digital Transactions News at a recent payments conference. “We’ve got a lot of excited partners,” he said. “I think the dynamic will change dramatically in the next 12 months.”

Mitek Systems’ software sales grew 138% in the second quarter to $1.03 million compared with $431,433 a year earlier. Operating income before interest and other expenses improved to $97,586 from a $236,729 loss in fiscal 2009’s second quarter. While net income was in the black in the second quarter, Mitek’s latest quarterly report warns that the company might not be able to continue as a “going concern” unless its finances continue to improve. Mitek Systems reduced staff last year, which it says did not affect its ability to develop its ImageNet Mobile Deposit application or other mobile- capture products. In December, the company netted $922,000 from a private placement of debt and stock warrants.

DeBello said that while consumer check use is declining, the billions still written each year represent a huge market for Mitek Systems. “Yes, it is going away, but it may take 20 years,” he said. Mitek Systems also is working on applications for business checks, where volumes have been more stable, and for the imaging of other documents.

Competitors are beginning to discover the mobile remote capture software market, DeBello said, but he believes Mitek Systems’ current and forthcoming customers give the firm a head start and will raise its profile. “We’re the least-known story out there,” he said.