OSPN - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the OneSpan Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded.

I'd now like to hand the conference over to your speaker today, Joe Maxa, Director of Investor Relations. sir. ahead, go Please

Joe Maxa

Investor Hello on quarter thank My XXXX and OneSpan's and as Director Joe Sydney. broadcast site is the the Web Investor over name for Relations OneSpan Maxa internet of the am third earnings be I This everyone you, call you being accessed and can joining is relations. the Thank investors.onespan.com. conference of call. section

Officer, market Clements, also call Web the and first other OneSpan's today third Mark Chief a To information, Scott our site. release This Executive issued visit quarter the With Financial me on and access our investor please press copy Hoyt, on will speaking results is closed, call Officer. be the for of a our release XXXX. announcing Chief afternoon OneSpan after press

Following our open prepared will we comments for the questions. call today,

conference statements. statements plans, are for that forward-looking during events, made performance note full including or future Please that guidance the this relate to XXXX year call

these risks We involve beliefs, similar statements have these expectations. tried to on are words. And current projects statements by plans, based expects anticipates, words uncertainties and and as and such using identify

on call from expressed Please financial certain adjusted measures financial GAAP are be Consequently, the in non-GAAP have forward-looking to Exchange Commission that expectations I on this note risks of materially differ discussion these filings attention actual and measure. and today's direct U.S. uncertainties expressed this regard. related in your the release such Securities that and may could statements. press company's results basis the from a discussed been a with for a and

financial earnings directly GAAP explanation press an financial and measures non-GAAP measures the to most the provided comparable have release. in reconciliations of We these

a call assumptions to the undertake events made expressly the or information date as by please is result required as future these related any of Federal XXXX, other note conference update addition, forward-looking or we no Securities as are obligation this of In except statements new and any October date this statements of reason. XX, that laws,

turn call to will this the over I Scott. At time,

Scott Clements

thank today. joining us Thanks Good afternoon everyone and Joe. you for

strength for was revenue. We just completed EBITDA or year-over-year and a record $XX XX% adjusted revenue to great Revenue software at in XX% and million million $XX truly and strong of profits. mobile XX% security grew solid increased revenues growing driven Overall, contribution e-signature. by from OneSpan Pronto generating double-digit advanced XX% quarter in had growth our solid with quarter another technology. Hardware

complete on Identity opportunities XXXX with qualified to We for continue We're a achieve deployments, A third XXXX. establish strong annualized solutions. reference and customers, during gain rate which were XX% to initial traction to track pipeline expanded of goals at the pipeline approximately Trusted number customer primary quarter. TID our the for opportunity in develop

XXXX customer revenue every small the region as in from banks. Trusted material adopts to opportunities new tier expect These offerings. Identity base of global institutions world one range from services financial contributions these We our are in and

our deployed with our For contextual analytics example, real-time ago, The our and identify longstanding years channels, European significant now and differentiators and five across our behavioral mobile our security were ability real-time. versus risk then collect of data mobile the started hardware solutions in TID fraud stop bank and customer a top and added technologies, interoperability the analytics analysis to and competitors. have security authenticators risk to

physically packages to customer improving the postal their decided mobile sign the delivery expand present program use cost Sign, the being without United States to use for OneSpan to USPS its recently while signature This electronic delivery. the service of attempts will their of to address our solution to enable experience. Turning repeated our solution, phone for customers

to enterprise we launched and user features we're support opportunities releasing features regulatory improved And in signature capability in Overall, enhanced and quarter worldwide. requirements XXXX. introduce we e-Signature qualified as experience growth QX, improved an Europe management fourth new in will In in that we're electronic Asia. seeing customers the the benefit

Finally, Trusted solutions more market added our our expand agreement agreement to technology to our we're partners to to Identity work systems our access. in the automation and We expanding we enable and and partner authenticators hard Cisco ecosystem market. support with offerings hardware reached e-Signature an secure three at resell enterprise

over few quarter I'll about come and call to provide now the Mark call details a about the back and opening to the update XXXX questions then guidance additional to turn I'll financial comments to before provide Mark?

Mark Hoyt

Thanks. Scott.

grew Product revenue revenue grew services components million. license grew to for $XX were XX% grew XX% XX% license revenue for revenue Subscription quarter software XX% as to revenue quarter licenses year-over-year the software a million. XXXX million XX.X and million. follows, XX% XX% million. Total grew to to million. to record, to of including grew $XX $X.X $XX.X $XX and Total third subscriptions other and Revenue the

$XX $XX revenue to increased services and to XX% X% to and million. other support Maintenance Hardware revenue million. increased million $X.X professional XX% revenue grew

in prior Operating in the of the in margin third from to of XXXX quarter a third quarter expenses last XX% XXXX $XX was for in Gross X% the quarter million, quarter third were XX% the and million compared QX decrease of $XX XX% of year. recorded XXXX.

do single fourth operating digits. quarter year-over-year in expenses mid in We the expect increase the

Adjusted $XX compared long-term taxes, the Adjusted year. EBITDA XXXX. of non-recurring third before or to amortization, last was in the million quarter of in XX% depreciation, quarter items was incentive earnings or $XX and EBITDA than million margin compensation X% third interest adjusted higher

of in Non-GAAP incentive XXXX quarter and long-term the the loss the of impact GAAP earnings $X.XX third per year. was share excludes $X.XX earnings amortization, in compensation, of $X.XX compared adjustments of the share compared quarter a tax XXXX. per share was third third in to in quarter third which of last XXXX non-recurring items, the $X.XX to quarter per of

affected third our in expect in expect accounts orders fourth million to and XX% the for $X mix to receivable from respectively. the XX% we in the XX% decrease third the the generate region and same balances, QX. generated the in operations in XX% revenue quarter the which and XX%, QX quarter cash included quarter. Americas, from from from XX% Timing OneSpan additional the cash EMEA, as to regions we our last Asia Pacific Geographically, compared

will Scott. to turn you I meeting the back

Scott Clements

Thanks, Mark.

on conference what compliance we approached we revenue level call, PSDX accelerated communicated to as with last growth past software third quarter's the Consistent the in record quarter deadline. and

sequential quarter margins We the software hardware gross expect with in overall expected. continued strong and year-over-year increase growth soften double-digit as as revenues fourth and

adjusted double-digit expect margins EBITDA We QX. for

$XX full $XXX as XXXX, we guidance year be $XXX is versus guidance expected and EBITDA Revenue adjusted our And of previous be to million. $XX $XX $XXX to to of expected EBITDA previous the $XXX to million follows. our to million For is million million. guidance in range of to increasing adjusted are range in versus $XX of million million million revenue the the

are the user growth company reduce cloud and agility emphasis the clearly The are Banks and experiences, channel as defined. increasing of to on more their intensifies. solid competitive remain the costs, beginning operations and to transition mobile to increase improve our drivers of their environment

due attacks stolen mobile and Meanwhile, to threats evolving information. application synthetic are identity increasingly sophisticated personal powered by malware mobile rapidly

proven anticipate we effective of portfolio demand continued result, are security a expanding that technologies advanced As attacks. for and our preventing fraud solid

our the opportunities e-signature solid our solutions. We pipeline are for growth and and global of Identity Trusted seeing

year here thank seen been this to have work around I the I to world working our and quarter OneSpan do who colleagues expect want think the one of we here results to very continue. just moment really take their in the hard and very, a has that third

in of to today. who all thanks listening you are So,

and questions, to call the our scheduled Investor to sure I an for opening Before received that is make do in December York Day, Xth Analyst which everyone invitation New to want City.

he'll not you the here reach please had to it, you Joe received invitation. Maxa If out get and

I Mark Operator? questions. and that will take happy with to be So, your

Operator

Instructions] [Operator question first question. Please our with Dan Wedbush comes from Ives proceed your And with Securities.

Strecker Backe

of great And This again, is, on if is first I or question. that's both. if strong. from But or is more five, the our some question first Strecker That's driven PSDX from device battery really that's year been hardware, Hi. by deadline those wondering need that hardware quarter guys. Thanks. for seeing renewals was our And coming if XXXX life only six Dan. you're

Scott Clements

Sure.

of majority We sort believe is that next driven PSDX. do think stage, being So, I performances by that still I the really this over the at would that say deadline above of early three will start we of guess I years, the the see decade, decade this two, same part last to -- in in decade. some the from those still orders refresh we're

but really think this point by being So, driven at it PSDX. is I

the during happened XXXX of XXXX, third the extended that deadline officially things the end of that to was is I believe. the XX, -- actually PSDX December interesting quarter One

not I have like have suspect with don't know at this some the know impact, whether have but positive impact. certainly don't significant we this I a seen that will PSDX it impact. year So, -- we'd will point

really that's happening what's present. So, at think I

Strecker Backe

there. just you Great. license quarter And on software us? like color any to you Is then great the out additional there another give call I can anything guys or size, would mean,

Scott Clements

security seeing I was quarter activity, think the in very, away some mobile real shift that offerings and think the of real We that hardware business for talk taking were around short-term. half we in would the need what's activity first focus in we we strong did that happening. have. during of that's the when sorry, time mobile order I the marketplace at security demand the very to second real from order that exactly XXXX. to believed back a the And is begin that second these XXXX, the and that There

points. Let's give you a few data

about We know last over transaction mobile have years, three that grown by volumes the XXX%.

are the fast. for very, So, as that it mobile happening imagine. space That can makes volume of and the channel growing attractive an for you fraud and transactions in hacking usage the is very

year, application And we've doubled than malware SIM those banks the XX% big during services financial swaps that attacks hit all mobile other same more time, and and like attacks, attacks, period. And over so, takeovers, at all mobile of malware organizations. account the more mobile seen than

have And we lot an I demand just really of I offerings. is security about trends probably to mobile that environment I've our think these going So, think creates for are talked that a continue.

expect years, would to us. very we to this for a coming continue the good over business be So,

Strecker Backe

Thank you, Scott.

Operator

our proceed you. with from Galinko National Thank next comes Matthew Please question your with And Securities. question.

Matthew Galinko

app data quarter. Congrats Identity. quarter engine Maybe security the -- this mobile my this on the Trusted question, sort mentioned when as -- but the whole I is you risk afternoon. good useful for suffice, solid being of heating on you maybe combination first of think the combination from highlighted a Hey,

of expect pipeline So, or and that you without? sort one, of to do I the support guess that that help with irrelevant is reference moving how how is or account sort that build,

opportunity how customers. security I'm app significant second, mobile existing of into there curious Thank base across the installed in And you. the

Scott Clements

in bit how reverse me just, a little Hi, Matt. maybe Sure. I are that let think, answer And you? order. I a

know, Trust I think when we Identity you a It's many not really isolated the platform is or solutions. bringing top a these strategy. together have sum times technologies talked that parts. And about of as are on as these the about and on than things isolated capabilities products together greater really we've brought of platform. It's

large So, we and out that to user that reduce help have improving experience. data grow the that of as it's been the you quarter this a versus world the fraud provide the needs source a in verification of as rich see the will well done continues both simplify very mobile us installed base can in way identity devices can past as time over

stronger. together is these and So, intentional work do very of different our other that very, this make each elements portfolio

with And early a in deployment that strong Trusted to of very we the customers of base XXXX it build of reference us important first the our the respect and period the future Identity strategy. question is in to

as already expect that here would referenced that customer customers we've this So, the certainly well we other I as deployed.

build universe Our reference in and I solutions terms using mobile ecosystem And of make our trust think all that we data time everybody of customers really comes secure. and [indiscernible] whole to customers of our this more more security to from ability And Identity that and leverage have and is identity solutions is important will that be opportunities think to are our to that for of information I those? there us. over and more customers who of save business. Trusted helpful that

user is So world to platform that's fraud improve the across people's reduce make experience. to and the -- banking a here strategy that leverage element really to of

Matthew Galinko

you. Thank Great.

Operator

unmute. Sidoti. you. with And your from is question Anja Please next line Thank please Soderstrom question. your mute, with proceed our is Anja comes on

Anja Soderstrom

Can you hear me?

Scott Clements

Yes, we can.

Anja Soderstrom

Okay. quarter. I'm a great Congratulations on sorry.

Just that mentioned the curious in of terms about you hardware. this Cisco agreement

So, hardware that elevated might does staying you. is hardware to how then mean that be or Thank affect orders? going the

Scott Clements

quarters that couple of a going will trend we And go rate to a market modest, take that users, authentication trend long nicely. best can up their long-term not which business. think -- have from the the some more appropriate sustain lot where the and years as shift, secular secure have safe to a It's hardware But, to broaden think can. of change I to business. some some year remain believe for things customer would the we These recently mobile advantage hardware We as some is we that about time, of we continue. lot We and quarters from this this that we've so for fast. devices hardware lot to good have there over business I do think to trendline. broadly decline us. ways don't It's for business make falling talked now and business the here. for are and is reliable. I falling base is volume, of last as a us We the faster, be -- the at and extremely costs going really a profitable our of the But, do as and of that a into authenticating going opportunities quarters like long-term we it's steps authentication we course, and quite of to meantime indicators trend other way believe in hardware these

relationships by partners cost-effectively So, things and and through we is to that. markets like I additional think channel that see OEM a going this business want maximize

the it So, think years. don't it or of think help decline, of pace but will fundamental to perhaps I pickup for limit the I next modulate changes few the

Anja Soderstrom

was color. That you. good Thank Okay.

software, said quarter And You sounds should this there? this because in on affected held sort is people was so think? the really there first or cadence were the terms of for hardware anything more what's think a that itt sustainable and regulation in nice But quarter. the tastes that bump of half you probably they we orders focused off the under How and…? about

Scott Clements

Yes, of course.

of there some think all, strong, have certainly for expect But another this the two, thing recognize to year years, QX. of of to put And strong I think first been the time rate period. security of the in contribution kind strong some our pent-up the in, at we consistently from over very other in mobile the of in first think I the growth we three outside year. when order quarter when is half particular, that was digits I quarter quarter mobile that to growing been quite demand fourth this over security patterns pretty in the in look this we for past double the first it's quarter,

year. we've With the early that talked office exception the about this of of this part in

described So opportunity. little I think environment. I active that threat a significant to the this business have earlier, very, very will continue

financial the and means for money. preferring are to channel. a steal increasingly it And would hackers that attention who an that as those know, guess and channel that customers services important like You fraud is what commit and attracts such consumers becoming of mobile and

fundamental So this that drivers foreseeable we're about those I that. for will and business think are the optimistic future support

Anja Soderstrom

much and are Okay. more, a mentioned about terms you you. in how then, quarter market partnerships do things the had and should couple sort of you you go Thank resolve how you of announced think And Avaloq you to that top-line? in that of the last talking show that strategy also fast

Scott Clements

Yes.

in chain. entire what relationships we're strategic pointing and is value about strategy general that larger across really here think a I our partnerships to

e-signature increased customers. are who when value our of offering Those we TID the with or our combined and our increase to technology partners. platform that partners value platform deliver at adding So,

others. We distribution also are like channels agreements and expanding Avaloq, our distribution some like OEM through and Cisco

And And so, contributor this the happening can to security other that model, open up we benefit business space. over in we I is revenues. are can will a our everything are doing time to from will become the think so that things meaningful it we

manner, would a relationships I Avaloq. starting these are positive say of very including in out many

several of third them related that expand in in won projects the Avaloq now right to with we're relationship. have more to discussions coverage relationship and that the We quarter geographic

relationships only to will think contribute forward, the even they are existing relationships, are more go business these that So, I relationships to within as we And add. our today. additional with going contributing not we're but continue to that

we We us accelerate, have think security a that the very finding in active identity financial business program services help industry. in exists the and opportunity partners that right the will and amplify

Anja Soderstrom

read great Analyst come are should then your Okay. or the a December. lastly, that in we of timing anything and having And Thank up Is into you. you Day there Analyst Day. the quarter with

Scott Clements

the Christmas Thanksgiving York and Christmas, opportunities shopping of so in you have City. your New

Anja Soderstrom

Oh, well, live I here.

up much it. to Thank forward time. your Sure for later. to you so Looking catch

Okay, bye.

Operator

from Thank Company. & your Please our you. Instructions] And [Operator comes Dougherty Andrew proceed next question. question with King with

Andrew King

for Congratulations guys. my Hi, on quarter. Thanks taking the really good question.

percent First touch I the how that you to partner on more And see you currently? network. some this? partnership? of network What are with want partner the all, Cisco from come do changed seeing being touch revenues just by of

Scott Clements

partnerships or of partnerships these all not Many distribution are new.

time. of had have quite a number for We these some

through I a rough think if don't distribution of historically recently. you looked I that have to any channels that I haven't recall insight. just number our idea. Mark, about give know at XX% revenue I comes you

these agreements to a hope give just And on the would to so, partners that we're add over that an collecting, now, I you I magnitude. the year, certainly additional the building think would of we’re next order that points few

business traditional that contribute few should way things it. to And of model. -- points growth sort think a growth be kind I our our the rate. of of That's rate incremental all organic to these about So, the hopefully

Andrew King

how driven within of continuing extended. really of was that saw that really any growth be this you Avaloq over forward? PSDX obviously do the quarter because you rapid so much of being at by a then, PSDX pretty that with it'd rate, was much that, but how And slower Great. won and see and Obviously,

Scott Clements

driver. a PSDX think I year predominantly the hardware So, is driver this

strong And decline a say still by fifties, growth being a trendline would of the so, the drivers say, mid obviously for quarter driven of a have hardware last trendline QX seeing think that be been -- but I above I going as I look growth that of in the growth remain We couple multiyear period And the wrong year in some intact. the year, solid hardware would we're the very of lot pretty some We PSDX. is I and bit in underlying over to after believe, the that years. business. outlook little at last with a that a trendline growth of hardware were well. that flat or believe again to growth I've I for is quarter this on

And into there a so, we go hardware be XXXX in I next expect would year. revenues that will as decline

will We year. yet. working obviously for our look next on We're don't that exactly like know plans what

are the of assessment pipeline the and and macro affect up opportunities the We our bottoms through going our business. that factors

that grow rapid also very at rate. software continue We will expect to businesses services our and a

about we're so, And year. think very I next optimistic

next and to that distant we'll decline are the that have do hardware not in future. we of too Although, going on for course believe you year some more details to revenues degree

I driven would it's PSDX little Avaloq, much it's that's the more hard factor contribution, to I their of numbers. versus either a was demand way guess think for these say overriding fundamental security would of be that like not parse, relationships I how

Andrew King

Congratulations on you. questions. guys. my quarter And for the taking thanks Great. Thank

Scott Clements

Thanks Andrew.

Operator

not any I'd Scott further I'm time. to remarks. it this Clements, for turn any at like And to closing CEO you. Thank showing questions over

Scott Clements

there this of think don't going the see I for than into quarter. Thanks listening earnings are call many lot that numbers week. calls today. operator. much very with this on our Thanks other are a know I you'll better for

for talking Analyst at in. individually look with of many So, you thank over listening to you And Day. forward you. Thank all

Operator

Thank conference. for concludes and Ladies you gentlemen, today's participating. this

You may now disconnect.

OneSpan (OSPN) 29 Oct 192019 Q3 Earnings call transcript