Shares of Mitek Systems (MITK) have been under pressure since the company reported Q1 2024 results on April 15 that fell slightly short of expectations. Specifically, revenue and adjusted earnings for the period declined 19.2% and 54.8% year-over-year to $36.9 million and 14 cents per share, missing analysts’ projections for $37.6 million and 15 cents. Worse, MITK burned through $9.7 million of cash during the quarter after generating positive free cash flow of $5.1 million in the prior-year period.

However, I think sellers are overlooking a benefit in last year’s first quarter from a large one-time multi-year mobile deposit reorder that pulled forward about $7 million of future revenue into that quarter, including $2.7 million that would have been recognized in Q1 of fiscal 2024, making for a very tough year-over-year comp. In fact, had it not been for this pull-forward, the top-line would have actually grown by 3% in the latest quarter as underlying demand for MITK’s Deposits and Identity offerings remained solid. And when you also factor out the extra costs the company was facing due to audit, accounting and legal support related to the delayed filings it had been dealing with for the past year-and-a-half, the bottom line clearly would have fared much better as well.

Moreover, the negative free cash flow performance to kick off the current fiscal year (which started in October) was entirely due to $7.8 million in taxes paid for 2023 and $4.6 million for the cash portion of the final earn-out payment for its acquisition of ID R&D. Even with these non-recurring cash outflows, MITK still exited the quarter with a very healthy financial position that included cash and short-term investments of $123.9 million, no debt due over the next 12 months and net debt of just $13.6 million.

Mitek Systems (MITK) is one of the stocks recommended in our market-beating investment newsletter, Forbes Investor. To discover more undervalued gems with significant upside like MITK, try Forbes Investor for FREE.

This gets me to the most important part of the earnings release, MITK’s guidance. With steady demand for the company’s flagship identity platform, MiVIP, and its MiPass and ID R&D biometrics products and uptake of its Check Fraud Defender product accelerating as the year progresses, MITK reiterated its revenue and adjusted operating margin targets of $180 million to $185 million and 30% to 31% for the full year despite the Q1 miss. As evidenced by the preliminary Q2 revenue guidance of $46 million to $47 million—the midpoint of which is about 3% above both the $45.3 million achieved last year and the current consensus—the return to top-line growth implicit in its full-year view has already occurred. Thus, with the company now finally current on all of its SEC filings and able to turn its entire focus toward delivering the improving performance it has laid out for the rest of year, I think it would make a lot of sense to buy the recent short-sighted dip.