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Why Mitek Shares Plunged Today

By Evan Niu, CFA - Aug 28, 2018 at 12:22PM

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The digital identity company is losing its CEO and CFO.

What happened

Shares of Mitek (MITK -4.83%) have plunged today, down by 17% as of 11:50 a.m. EDT, after the company announced two major executive transitions. The digital identity specialist is losing both its CEO and CFO.

So what

CEO Jim DeBello has notified the company that he will be stepping down effective Jan. 1, 2019, after serving as CEO for 15 years. DeBello has also served as chairman of the board for the past two years. Mitek says its lead independent director, Bruce Hansen, will become the new chairman during the transition process as the board looks for a new CEO.

Person using mobile check deposit on a smartphone

Image source: Getty Images.

The company also announced that CFO Jeff Davison will be stepping down, which Mitek says is an "unrelated development." Davison will leave at the end of November, a voluntary departure "for personal and family reasons." The resignation is not due to any disagreement with Mitek's policies, practices, or operations, the company said.

Now what

"We are immensely grateful for the legacy Jim has created," Hansen said in a statement. He went on:

His leadership and loyalty have helped Mitek successfully navigate transitions in the industry while positioning it for future technological leadership. Similarly, Jeff's commitment to sound financial management, as well as to open communication with investors, has created a solid foundation for Mitek's future success. We remain confident in the Company's strategic direction, including the growth of its Mobile Verify and Mobile Deposit businesses as well as the development of its next-generation Identity solutions.

Executive departures often rattle investors, and losing a CEO and CFO at the same time is a particularly disconcerting combination. Mitek will retain an executive search firm to fill both positions, but there will naturally be some uncertainty and risk around the transitions. Mitek also reaffirmed its full-year guidance provided in July, and still expects total revenue for 2018 to be $62 million to $63 million. The company expects its non-GAAP profit margin to be 15% to 16%.

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