OSPN - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Span One First Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to introduce your speaker today, Mr. Joe Maxa, Director of Investor Relations. Sir, please go ahead.

Joe Maxa

Thank you, Michelle. you call. the thank XXXX first and conference earnings everyone for OneSpan joining quarter Hello, is webcast at call Relations This being section the accessed of Investor on OneSpan’s website investors.onespan.com. and can be

today Joining me Officer Mark our Hoyt, Scott OneSpan’s Financial Chief and Officer. is Chief on Executive Clements, call the

release our and To afternoon, copy access This press of market website. other our for the OneSpan close, results after release information, a visit please first a press issued announcing quarter XXXX.

we will note full today, performance, the call during Following conference Please comments our guidance relate year or open for questions. forward-looking statements. plans, that this for prepared are including the events made statements XXXX to call that future

direct plans, expects, and and tried today’s filings risks uncertainties materially statements results the discussion statements. words to expectations and projects involve expressed in these for these have actual Commission are risks U.S. the of expectations. company’s forward-looking using these Consequently, and a identify current such to and anticipates, your based I words could with and Exchange release on uncertainties. differ and attention Securities the by similar We believes, from statements such as press

measures are be a basis that certain on this financial discussed measure. call GAAP related that note have been Please expressed financial non-GAAP a from on may and adjusted

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

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

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

Scott Clements

and favorable profitability. a in strong late everyone with year-over-year OneSpan much. saw significant joining the the very thank we accelerated and in and afternoon, with revenue quarter in an that thanks wherever from QX. XX% pandemic, are. outstanding reported Good of you momentum us of the today to XXXX, continued software growth services impact here you global from began increase orders some related QX for XXXX, the in first middle and Joe quarter,

software total million, a revenue record accounted and services to XX%, Our in and $XX of revenue quarter. grew XX% for the total

first towards As the revenue transition $XX XXXX you revenue our XXXX a record Recurring to majority period. the know, during is quarter, strategy million. to grew XX% recurring to in

$X and by spend additional Banks at sharp like affecting in EBITDA activities bottom-line adjusted gross and and us to on few channel higher year will seeing it just a this is by a operating top banking hacking and pandemic to give moment. year digital I higher Looking profitability, margin, core revenue are minutes in how the would on the as well. is improved both partially customers. various over million, They in studies our on attacks. Mark detail offset increases you telling evident $X are drivers million expenses.

among fraud financial group well at in trends interviewed started. mobile expect and found are believe month to and that increased XXXX. from increased American mobile bode in largest fraud XX% first see of in grew financial North for coronavirus customers the using study, surveyed first for over April, services JD The three institutions banking customers XX% industry this logins acceleration found people of trends Power to month online time an another began that found year. since in digital executives their weeks banking of of recent OneSpan. far of future the banking the longer-term and study and the We the and banking in of most In that pandemic these mobile a use the online XXXX many so their the U.S., banks four XX% also losses

revised One – of from pandemic now. its prevent to large XX% XX% financial the fraud an projection, of loss institution to sorry, increase X% a before decrease

fraud proper system functioning the important secure right banking, than and the account world opening more prevention, the have technologies digital around they been Our now. enable financial never are and of

We are volume activity QX. a and demand from also in increasing into signatures in benefiting for transaction and spike late order saw quarter electronic and

a million ability to the dramatic a Office Protection process of their a the to in Small deadline Notable it day, the over usage the annual mid-X-figure bank said, from loans. bank I Paycheck value us. e-signature Assistance, us to competitor nearly was to large included to loans. and XX and than respond sales a OneSpan’s e-signing totaling $XX win game-changer very Disaster customers, highly less quickly been as meeting Program up example next U.S. than XXX pleased our for deliver would of Business has set increase activity of our community an Administration contract in They loans more for and am very an fund able with recommend The these I them. process CEO hours

comments, on opening now Mark. about the time Automation our turn some e-signature, the questions. call of come The from Agreement identity with our Mark? He new TID outlook nearly the will some engine. quarters. with and with our financial information turn Agreement open solution quarter a call portfolio. institutions to Automation me increased further before online top helps customer over to opportunities to cloud-first two then value will from Secure I year verification XX% pipeline of identity last by offering last trusted provide to the at accounts closing the along Secure growing XXXX provide Let of over I will briefly back our this contribution integrating workflow

Mark Hoyt

and follows. grew million OneSpan and quarter customers. $XX to through grew Thank Total first thanking in were the services Product license our XX% world around this really revenue I revenue you, of other of an pandemic to million. Revenue to and $XX our products service quarter, and want the the and join XX% Scott. to for revenue as to of for XXXX outstanding It grew all was XX% associates major services you powering million. by $XX adversity

Software XX% license revenue and million, Subscription to revenue $X the security million. to to grew with both rapid mobile growth. software server $XX XXX% grew contributing

expectations. software quarter, Total and this revenue, XX% and to $XX including line software licenses and revenue support, XX%, $XX with XX% subscriptions, Maintenance, to revenue million. increased declined grew million other our in hardware

recurring record This Term million term-based quarter, more from detailed the licenses, $X and we license to mentioned, includes which you order in rapidly grew provide as grew period software a XXX% year, revenue XX% same the million recurring quarter. and term-based at our to to our disclosed $XX revenue, subscription, growing revenue. licenses last a our maintenance in Scott with look revenue

The was the HR driven first million for XX% along processes, quarter XXXX. quarter in partially and the XX% security. million, our an of versus software XXXX the margin reported in decrease in attributed first services last quarter quarter, in Operating bolstering the increase margin the XXXX and first Gross fourth with is XX% $XX primarily areas G&A, was quarter $XX of like of XX% a with information offset the of first by year. investments XX% were and XXXX first travel prior mix, company. revenue The in increase with from This across primarily X% in by of financial, expenses QX quarter to and was the of to gross the compared expenses in increase contributing in quarter last XX% product of year. for IT, in

three negative remaining taxes, earnings and We Adjusted depreciation, over expect interest, with items, in R&D, for growth quarter and X%, the or higher compensation, X% adjusted growth year. last operating than incentive non-recurring full expenses or the sales the was to long-term margin in lower million, in quarter to million quarters, G&A. EBITDA of year in and higher and the first before compared was normalize XXXX. $X of marketing EBITDA, amortization, first Adjusted $X a

investments, from XX% the in our from included loss $XXX the cash XX% and short-term equivalents, the to with earnings million first $X.XX share last and year. XXXX, compared loss which and quarter compares $XXX Asia-Pac the regions of Americas, incentive and tax the per items to year. first $X.XX respectively. ended $X was first XX% to of We the non-recurring first in quarter. in XX%, a amortization, in long-term utilized of for the in the region. share, XXXX the in QX last earnings XX%, to the $X of million XXXX This operations $X.XX the excludes million revenue quarter in impact were compared of quarter GAAP Non-GAAP XXXX. per first a of compensation, of from mix quarter same end adjustments, the quarter XX% EMEA, first quarter in at cash, was Cash compared in of Geographically,

you, the to meeting I back Scott. now turn

Scott Clements

Thanks financial fraud solutions, revenue and we the to and of to deliver recurring powering a those and cloud are mobile By channels. market-leading industry’s adoption of and technologies to technologies, the to range prevention, lot, of position, The identify pandemic anti-fraud needed is Mark. protect accelerating response services that of security, continue period. business in us allows model. are future a our our And strong software our the services the growth and through to our ability sheet a balance investing current transition as on global the e-signature basis,

hardware, and opportunities, software guidance. most same we in in partially and see start like the as services growth environment though the with growth financial to XXXX about companies, of at be will a XXXX. growth not half in but remain second projected uncertainty great by growth this in QX, as and economic plan strong the substantial decline expected global elevated expect After a rate optimistic dynamic the necessarily of in QX, year, continued our our offset We we

and an on further the our will to outlook call. provide or of evaluate for QX next earnings develops second will our We XXXX continue as half update

of of guidance comfortable reiterating to EBITDA $XXX in in year, $XX million. range million So, for to now, adjusted range for revenue and $XXX the the the our $XX we’re

now. and to thank safety have and us we them want the IT growth. over our a strong OneSpan the and is year support the while remote investments are work environment, paying valued priority right made us for revenue our to colleagues The of health continuing I delivering top really for efficiently really Finally, quickly customers transitioning off and last for to

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

Operator

Thank you. the first from Dougherty. with Instructions] line [Operator comes Trebnick of Our Catharine question

Please Your line is open. go ahead.

Catharine Trebnick

Thank versus fast beat, I the around great bit can provide perpetual? licensing a quarter. you you for into dig the question. more color for really revenue Yes, segments, the my what four little you growth taking XXX% a is here, to growth nice Thanks. Thank wanted

Scott Clements

Mark, go ahead.

so not that? obviously in the same take the over are all We Zoom coordinating to want You are place, here. we

Catharine Trebnick

Yes, I understand.

Mark Hoyt

detail more the are time, quarter bit You little Page X, am extra super that release. for disclosures the I this earnings excited first press go our know in Catharine, with we can we into a because On can we that you our perpetual our have our revenue that called also that licenses license you can out at can means you what licenses software look and – are. term-based license total if – see see you putting

see last saw licenses tremendous growth had and as year. term can and from growing subscription million with million $X.X And you in year, the $X.X we $X we’ve mentioned in perpetual. to term million in over the we So, in year during growing growth from – license call,

Catharine Trebnick

it. Okay, got part of that to get didn’t it. I

Mark Hoyt

No, that’s quite alright.

Catharine Trebnick

The different revenue color you that gross can you us give on the other have? was, streams any margin question

Mark Hoyt

in over software our margins the the XXs, Yes. really lines attributed year, growth and gross to which in previous saw similar total The hardware toward saw The and low in last saw gross software business were our our in with XXs we quarter, services. is services the up quarters. margin, low again in the is shifting mix were XX% we that lines this to margins we also and

Catharine Trebnick

recurring wondering the but into some any you maintaining us because revenue you last some in going revenue on of year can is can at year, are I because there are that if coming looking versus your what everything hardware had any growth then how came way contribution you give to how revenue the PSDX you great EMEA, you in these color? expect And excellent. and that you through September uncertain XXXX? issues seeing you give Okay, rest look what the us think Remember, times, are of color regulatory I’m it’s upside-down in year? changes you the so there, had at in in

Scott Clements

Hey, a Catharine. that. I’ll of Scott. maybe couple is comments on This give you

was would I all, say, year course much normal this think first last I would revenue that it of of quarterly than more I year. over note of be, spread will the the

the you the had revenue last in September PSDX deadline third So rightly called year. out contribution, elevated quarter contribution last impact that the in definitely year

pattern with see and balanced, is some that certainly expect more balanced, again XXXX, would right meaningfully but the more I usually second the more we half, I QX than on this the also typically first our normal much case and QX. saw this year, a in between based QX more what delivering, think to order, we’ll we half and largest year, than what now. balanced be know

terms coming of maybe we had year this in that, talked over in, of higher-single it’s to think hardware certainly the hardware for really mid-single, year, I drivers term kind than but that being we digits, last about be the robust longer going of have the more of down off year. the

same they similar to revenues we more see, will than in hardware – and obviously, were So services that then kind ranges offset software and XXXX I of growth. in offset the expect by or would in XXXX, be

that’s So would pattern reason There a change view the and lot moving we see I parts. expect, think we right are that any to of that don’t now.

as helping a and, lot e-signature now different the well between moving and both are think regions right of now the banking, in anybody security We as differences on. our run knows, a and world consumer software our trying a business. of the see, who’s to of so businesses, business there in as I lot strength right economy parts

so on, to different recover half consumer a that’s of are second those our now. to that part right year, little second we lot in are see. the eye that well timing start bit expect stream the banking, we’ll might revenue them, we many negative essentially as out look to keep we smaller regions the not of the a than now, into of an come when As a to That’s year, a forward couple need the probably business of half doing of as but the businesses much do of a things of right but from, the shutdown of have

Catharine Trebnick

that for much very you explanation. Thank Alright.

Operator

Thank next question of with you. Gray the And our Powell BTIG. line comes from

go Your line Please open. is ahead.

Gray Powell

congratulations the taking for questions the on Thanks and quarter.

Scott Clements

Thank you.

Gray Powell

the what is quarter, lot anything QX? we and spending, emergency off deals sustainable that just than or is expected. start contribution term to your or performance anything a in performance, like the higher had just that was like license that multiyear unusual Maybe in there How any helps there

Scott Clements

was Mark, from I in just think patterns of we I quarter. add comments, some demand But of a in ago, generally we as change quarter. strong year growth I We as do that second quarter, QX. over of I but a to think, as be high little as mentioned that think level good not it quite I in quarter really little did a that think going I want into little I was, this. you see details some of quarter. those to the see probably may expect year mentioned there the percentage to in think, pull-in QX, a last and the similar think will bit year QX we think terms the, fairly probably of I to the a And saw that there’s it saw looks lot to, affected bit are I into as don’t in the revenue, total-year going another as first an second uptick, bit And first

or I that always have that don’t one a and I moves to little think So there’s Mark, points us really outside across the bit end-of-quarter few there’s I to you But percentage that of on. forth unusual. back a anything don’t that? remark move would think can revenue the anything add anything line other. that, There’s way of

Mark Hoyt

more little of Gray, is, XXX. you do. have included rec do our add answer everybody a just here? color. were remind alluded to I’ll that deals it And with of because lumpy kind bit be yes, we I rev will And multiyear we that can the And

higher here couple in as will a had that revenue QX. recognized were So, unexpected. That in did first QX, XX% of to the in that we was quarter, some just that mentioned. means numbers Scott not lead X-year They so come deals

line, in line. there recurring still revenue is term some that in So lumpiness that license

Gray Powell

if okay. That’s more just then, it, one Got And really I color. great can.

terms can I customers, the both and side, just business growth software see been if that do in the growth but existing on changing give of and sort you license how this So, just of you just versus the like, am course from the sure higher subscription over the new year? not in color, has historically of what split

Scott Clements

Yes.

customers driven existing existing really by by is customers. or lot purchases business Our new and use, expanded a

from last have in more we reasons and our customers, things the of had, growth. talk Frankly, where we We lot area of over have than before. we have lot really, and seen, sell, contribution ever better, of couple it’s to new to customers terms do an of increased a years, new a we’ve can to new

So, really selling more customers, or already and selling, on. existing new the solutions by rely customers, use we solutions by mostly of they driven to are today, existing they that

think I without think year. benefit and effort from through from we will outsized customers customers, new of it’s see an any frankly, go the area but we we some have as we’re new So real this, a I lot seeing contribution where

Gray Powell

Perfect.

you very thank much. Okay,

Scott Clements

Thank you.

Operator

with Instructions] next [Operator from you. comes Thank Company. Soderstrom Our Sidoti the question of line & Anja

Your open. Please line go is ahead.

Anja Soderstrom

are quarter. and great everyone hope hear doing you Can Hi, well. another me? all you I congratulations on

Scott Clements

We can.

Anja Soderstrom

that around last comment just I the there So follow-up want to sales. on

software-based trending, of been and productivity? up the sort force their has of the added that sales and are working-from-home how you impacted environment salespeople. ramping just sort So How has

Scott Clements

Yes.

described intend sales make and have XXXX, we little previously, recall, out of would meaningful on incremental new you that, I in this think did when say, a as solutions. we being marketing some rolling in cautious that we XXXX, in So after were we to about these some year, this investments may Anja that

We track with are on that.

quota-carrying We about bit more in Our got – quarter some would go to about the plan think, far half we’ll of this more resources. in and here year, terms be that I through of to adding our those add the go quarter. so that to little in force. is second largely a to sales roughly XX% I expect that, second

track So I on that. pretty everything’s say would for

grow that We I and an and the say, talent would plan our customers. bringing set in be, to active expanded are executing continuing business on to of require and aggressive we business satisfy our

that’s along fine. a materials great got lead of think enablement I incremental We’ve just marketing generation year. on from this our going sales are and also, So lot making side training investments, and the marketing and sales we team,

investment that the because present a shifted the, little have We of bit situation.

that’s Some live those hosted of happening, and that generation. so that some lead events or far, aren’t pretty more the areas obviously away digital have productive, And, investment have we of would say. online we been attended from shifted I would so and toward

a won’t But, looks We’re if going so that the watch feel far, money. spend and we okay. buck, for continue like that, then to to it don’t bang we we’re getting

Anja Soderstrom

thank year? terms I And color. might you the impose think up. mentioned be such renewal that Are I in regulation hardware that a not there yes. that slowdown you know But had you anything the cycle might influx a expected seeing this to from in had additional coming of Europe. that new – mentioned Okay, decline you sales the an I in you. appreciate you because going that’s

Scott Clements

would think in the that direction, matter. change that We I anything to this a at outlook or don’t negative positive see for point

to cases surprised difficult to think time very, it. to current track I out, These or that’s I I And cycles how that reasonably those through exactly our going handle I of then, be used look refresh are of – authentication, some going you think happening. expectation to also get obviously sort for we’re us know given at I downward got wouldn’t always with and might But when year. if, on that the the if much second even little balance hardware. for who bit. any think very haven’t so are have who things We��re we in this continue go. direction. situation think where we’ve so that some be to a on that we’re see we on good we’re to quarter need a view there’s But, reason change really, the really authentication really and before, pushed far, expected out upward pretty customers in seeing

Anja Soderstrom

one then operating of you. the Okay, And you is thank housekeeping, the expenses. sort mentioned next

G&A You Was up a expect research the sales a down and and that and development to marketing to the tick come and bit, correct? bit.

Scott Clements

That’s correct.

Mark Hoyt

exactly right, That’s Anja.

Anja Soderstrom

Thank was you. me. great. That all Okay, for

Scott Clements

Thanks, Anja.

Operator

and remarks. And would call further back for this like to to I questions showing no further Thank at am Scott I turn Clements time, the you. any Mr.

Scott Clements

on in I all many today. have to know you and, Well, few to over you a few you the next we’ll people sure. had we much. appreciate I of Okay. days, quite talk thank very line the I a dialing chance really am of

We quarter financial the the think that to pleased has and banking that company and things always are about digital The this I demand. transactions for very primarily we secure services. just done, had, is

think a for to are I of valued expect obviously, not but an think. and world have it’s long-lasting that we the business. capabilities, positive And new, our that’s in, is I I set this it in acceleration think impacts and very we

those will ultimately channel we good more banking, and use of As digital so, OneSpan. experience for people that more continue think many people will and and be do to

everybody around colleagues calling everyone. for appreciate our it. to challenges. thanks in. the despite So Again, it for world Thanks thanks the Really OneSpan happen making

Operator

Thank conference call. concludes for this you gentlemen, and participating. Ladies

now may You disconnect.

OneSpan (OSPN) 10 May 202020 Q1 Earnings call transcript