OSPN - Earnings call transcript Q2 2021

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Operator

Hello, and welcome to the OneSpan Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Joe Maxa, Vice President of Investor Relations. Mr. Maxa, please go ahead.

Joe Maxa

operator. you, Thank thank XXXX and joining OneSpan the Hello, Conference you Call. Quarter Earnings Second everyone, for This being at Investor Relations call on section accessed is of webcast and OneSpan’s website investors.onespan.com. be can the OneSpan This afternoon, for second XXXX. quarter a release announcing our issued after results press close, market press Interim issued John Interim named of In the Financial announced Officer, closed and company who after Chief today, has role been a separate leadership who changes, has market Officer. the Bosshart, assumed several Chief including release, also Steven Worth, Executive To access these visit of financial our copy investor information, press please other a second releases including our results, reflecting and website. a presentation quarter Steven participate in Worth both Bosshart and will today’s call. John

have and on release such from and materially adjusted the direct discussed your press expectations use expressed open on performance, Following statements statements. measures company’s call and risks forward-looking for as relate These this call questions. uncertainties. based are similar financial basis been statements. I call Consequently, differ XXXX, be and risks anticipates, projects that for Securities that GAAP of including and full future year these may from are this to and words, discussion a our will forward-looking words Please events with statements today’s Form Commission plans, Also financial expressed involve note certain the a actual conference results prepared to current comments, that that outlook plans, and or these expects, could measure. attention on the the such statements are we note assumptions. made during related non-GAAP uncertainties, believes, filings for a in these Form XX-K U.S. Exchange XX-Q and and

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

Except as as date or call reason. new result date. to required of August these future obligation a In over that we undertake With information Any to are related assumptions made note for X, addition, turn I Steven. law, the statements of or and no is other XXXX. that, this please will update of as any this the forward-looking statements by call events

Steven Worth

Thanks and today. the on Joe, good much, us afternoon, everyone. very for joining Thanks call

in company. quarter we into changes I’m the of short years, solutions. journey that can that of to I Chief financial Board, proactive That with Chief Interim believe of attest over assumed the John the tremendous Accounting deliver John team and Bosshart, in leadership act has and the across includes management I’d potential several look know We’ve the focus CEO important best Officer. number we is like get to role. I’ve working our Before has drive at the the and that our but Accountability succeed, to our look and appointed our forward who opportunity our highest as we will at working accelerate we our with second on and Officer, the the Executive growth execution, within as made see that to functions products me strength on for relevant of results requires experience be results, his revenue starting company, we fallen forward straightforward and five Chief and value the where positioned greater had closely the expertise, this transformation have levels the customers, worked last reflect and leadership our Interim pleasure a of address Board I’ve honored we see to that OneSpan with we strategic Board for team. are have to our us interim markets of approach to and Financial I employees. shareholders, closely urgency role our our and afternoon. together progress announced years Officer. the change, progress optimize results transformational we before drive team assets

a the approaching ahead, it work coming appropriate As to deal we we good and sense are in urgency drive but do these have months, of with opportunity of to results. we look an a

will fresh where We leverage growth and will be aspects can take our to more the enhance do we our our and time, better organization. markets portfolio, across the a ways and profile. look the overall at same serve strengths to company of to other evaluate product we areas operationally efficient the we At explore

more to these about next can quarter. You hear initiatives expect

executive also the has with over Al changes, made want independent I and joined that I’ll has from he role in And to turn I since to has the for to welcome the first him John to our new who lead Director Board was that, Fox, I contributions role. assumed forward new to addition the experience first our cloud and look announced also today. years. last has and second to retired Chair, the want company Mitzel our contributions today we independent to his and In his John thank with results. role. finance now significant November. John Board Chair his Al working Board to Al effective quarter

make business. a to in revenue to recurring software continue progress We transition our

in XX%. and revenue, revenue both growth security year-over-year, and During term-based recurring solutions. revenue and in XX% XX%, increased contracts e-signature ARR, of two ARR or With we specific to had year-over-year quarter, increased subscription annual the excess growing mobile strong key recurring

Some of to built solution in during and number growing America our e-sign OneSpan second multiple and collaborate Sign features the we that quarter solution doing This Room Virtual have unique to XXXX won quarter other co-browsing has highlights to case. use security conferencing including solve in solutions, trials. include first This and our X-figure recurring customers was a customers new customer. mobile our contract the bank’s combines enabled securely web with We of the documents. e-signature, users bookings OneSpan enable video and their currently a North one banks for that of that largest review launched

We help future. motorization identity deliver will verification capabilities virtual also in online room the our completed integrating technology which OneSpan Sign, remote combined our newest into with capabilities

year expect $X.X this driven available There this found digitally and remote in verification, solution next take financial you significant to for opening notarization and an statements, businesses comments questions. spending and offer. by John? call on increase A to users, with are along newest recent our identity that identity will found will strengthen year Furthermore, virtual We opportunities room that study solutions. services almost need customers verification be of by identity Research online XXXX. onboard to provide John XX% e-signature our before verifications, the I’ll and billion through then our back now to XX% on spend to our financial outlook the digital Juniper $XX.X banking for study to will account from come the XXXX. update digital billion additional by to by

John Bosshart

this Thank period. Annual rate representing into revenue you, quarterly year appreciate prior the end recurring at Steven. QX XX% results. take company’s of was the I role. the to trust growth a Jumping compared to million, me of the on in $XXX

by year-over-year handful in the following program American which in the ARR the CARES we Our growth of ARR define contracts, e-signature a existing XXX% the reduction which related North the of pandemic-related was year-over-year impacted Act. dollar-based based, was federal customers, second to from expansion in as size government customer It quarter. net rate, declined

$X Turning revenue recurring $XX grew to This growth million. grew software in cloud revenue to in and revenue. strong e-signature from to XX% XX% contribution license includes million. increase Subscription Term-based an authentication.

in security mobile noted, Maintenance of XXXX, revenue grew a it X% reduction Steven to As excess million. posted partially grew was XX%. after related of revenue year-over-year This software driven $XX pandemic quarter a second record authentication growth revenue offset by in by in demand. quarter

the XXXX recurring revenue million of service revenue XX% million to recurring margin impacted and services XX% $XX Gross million. shift revenue software $XX XX% Total year for and and quarter to for X% Hardware to We grew within and XX% total software In the mix the license. to to and The XX% as XXXX. expect compared transition in in quarter the services to revenue. ago the revenue. balance we increased our business X% toward by software declined accounted within $XX to and of growth software declined million moderate second XXXX our Recurring revenue subscription services attributed model maintenance XX% in software $XX accounted of continue difference second second in and quarter, was of and product in primarily revenue over and hardware. was to a term-based record gross quarter revenue margin XXXX is revenue.

end share items loss as non-recurring $X $X.XX in compares per second of before excludes $X.XX second at impact operating a second of the compensation in cash, the per non-GAAP million compared and EBITDA of $X.XX in quarter, expenses quarter related of depreciation, or compensation, of We amortization, million XXXX. incentive and long-term non-recurring investments in approximately cash the of year. second impacted second loss equivalents short-term expenses compared was quarter in last in $XXX adjustments, compared proxy by positive quarter This of and $X Adjusted $XXX XXXX negative second the share XXXX share, last with the million. XXXX ended share per in quarter $X earnings of the $X.XX the which GAAP quarter. quarter the second of was loss During quarter XXXX. quarter amortization incentive and to of non-recurring taxes, a XXXX. interest, to negative per Non-GAAP the earnings and adjusted contest million a long-term was tax with GAAP items to

North for stock. with and we the shares EMEA, last of Year-to-date, During the of to Asia XX% for declined Asia of offset revenue and and Latin XXX,XXX XX% accounted Americas Pac XX% America. revenue, growth common I to similar declined will and repurchase meeting by trends $X.X turn for back now Pac accounted XX% million grew used accounted revenue. Geographically, the XX% were EMEA Steven. revenue, quarter, in in to XX% quarter, of declines America,

Steven Worth

John. Thanks,

security We continue e-signature to and see our strong demand mobile for solutions.

some seeing with or Therefore, solutions EBITDA. plan is margin expect exceed increased year revenue. half the progress remainder to our resurgence some at growth results EBITDA of half gross guidance the to full for adjusted of expect prudent be meet it believe first below However, continue XXXX adjust pandemic approximately revenue We half to year. second other at we first to and investing half slower time. pressure expect our labor to we and costs, pressure, and are currently currently We or for adjusted our this XXXX second

XX% range guidance parts the full prior million our as to million, be XX% of be to guidance as to $XXX breakeven. the million expect range to of $XXX to in as to million to ARR revenue compared $XX in core to prior to million reiterate compared $XXX $XXX to prior XX% be to year demand of recurring the revenue to our negative to in to range compared guidance to million adjusted remains as our growth We of for of range our total XXXX, $XXX negative of EBITDA be that the prior range XX%, of of $XXX range range in guidance we want So and drivers approximately million million many $XX strong. million the $XXX compared $XXX of business our the million, to for

attacks, growth need and growth. anti-fraud solutions for the will be and takeover to e-signature workflows fraud theft, new fraud, and solutions need sophistication customers’ identity with security, for account continued along remote digital hacking important. and very mobile continues of our related The Our drive account

to We to months coming better the do the elements customers. work evolving to operations revise our have and of needs strategy of meet our in

best to to efforts Operator? and on, we are markets evaluating and Our focus and the strengths, of with be performance. committed John serve, happy questions. to operations and leverage management And head take product will accelerate drive I our challenges portfolio optimizing will addressing your that, team be looking change investments, our improved and these to our pace our we and Board to the

Operator

the At Gray with from you. question Instructions] we first time, thank will question-and-answer comes the And session. this begin Yes, [Operator BTIG. Powell

Gray Powell

Yes, All right. taking on Thanks few just for the my a side. question.

about And months it, the say your how and So, have that maybe guidance? starting the feel call ago? you’ve you today off do visibility demand versus, that high-level, just you on pipeline much then six today would de-risked you how

Steven Worth

Well, of I terms steady. are say, things would pipeline, in fairly

has to bit we I improved little initial over better second getting predict half a saw as ability the of half business, think, the of We stages experience have visibility year our the with pandemic the our into first time. beyond the and year the

of In drivers couple markets we’re our in in lot months terms of thinking a looking for the as factors. part going going of the XXXX, future. of to of be each next And we’re be in plans the time about spending all into demand obviously pipeline the to of and the those our that,

Gray Powell

Got it.

then maybe shifting recurring side. And the Okay. just over to

like security sounds e-signature good and – they it mobile had a quarter. good So, quarters had

there said what into in progress a it for slower most maybe the was the just Can that that XXXX? You is just And solutions. more? drill other ARR surprised revision to the you outlook bit that caused you

Steven Worth

have you the we most and a well. see of are can a focus e-signature value successful products the company, performed Yes, lot in looking we and of it’s security if going things better have the in markets. mobile little one Like the on we highest to said, projects on into bit

invested Some few not that of years, money we over the time of year, a as and products quite we’ve been our results. our have expected and bit has that last affected banking in this performing security

Gray Powell

it. much. Got very others you I’ll the Thank question. ask the let

Operator

And the from with Colliers. comes Trebnick next Catherine question

Catharine Trebnick

much ARR click come XX% down to to question. were guys you you Can reiterate come we’re You had it nice very another the range call, talking. for while seems from just in? taking I why really XX% seeing have previously the Thank to grabbed you XX%. a going, and my

why So can that is? review you for just me

Steven Worth

and – year. in had year. a Well, some little a some to e-signature of bit those of and we’ve some first where few related gradual over solutions, is of It’s impact in that we cloud-based things a contracts, ARR couple renewed our outlook renewing in a the a of kind the at course to six that we then it pandemic And extent had the the level due last to those now for different the ARR. the months. affects are And we have tailwind year slowness of on. lower affects going underperformance there’s less newer a and we’ve of the for Part banking

Catharine Trebnick

the too into is just some better. is on on the tracking a piece long? are products changed you Because cycle to some little and say solutions, complicated to – there factors is these more grasp trying newer too your be it out Well, are have dig and Can that of sales that would the bit right sales what them the why newer force or there? you oriented, of I’m aren’t software Thanks. you

Steven Worth

strides Sure. the sales have and part, I would of in say for force the training. most terms sales we and the made a approach lot of the

invested but the categories, recent in of years. those competition. capital up competing going also Our we’re how many amount have the are been them the in the and focus of for taking the large had we’re they fresh with review what a match at categories in not on this products themselves, against more vendors needs, capabilities products, a years, that current is against look only established some competing do start-ups who customer of have product the In tremendous to these be in

the competition so, And intense. pretty is

would that area into is to the I to looking sales less markets and the more going related to that products So, force. the say we’re the be related in

Catharine Trebnick

All thanks. right

Operator

Thank from you. with Anja comes The next Soderstrom Sidoti. question

Anja Soderstrom

seems Did taking product-related and for right? like whether was I question. It intense it product-related is more more go-to-market? ahead or it it thanks was that Hi, – headwinds questions my Or... more Further competition. it’s understand

Steven Worth

generally yes. that’s Yes, correct,

Anja Soderstrom

and something talking at that. expand how you’re that push if think are going you the subscription, for And now markets previously you’ve then? a the bit adjacent the working into Okay. harder you, about segments to then then you do case Or Is that? that use and for been about with little that better going look e-signature

Steven Worth

announcements I but the expect that can decisions we made you made, will. see No from the final been have of road in some map. we

you a for solution it’s by e-signature, If example, take horizontal nature.

We’ve that, will that identity already are room, virtual notary. we or and like online also remote market into segments, more year, connecting I next enhancements getting some and in expect targeted verification, done product continue. with So many extensions target

the a specific a but Mobile different of also be of well, at looking has that applications part a examples cases our identified to as that is where So, we’ve type and made as horizontal market, different those some sense extension. use are of security do that in and investment we’ll product process.

Anja Soderstrom

Okay.

we needing your So or about less this should has to Or to how sales force do all be not more there changes been there? ready. or There’s redirected to major that? any think going ramp

Steven Worth

have last we Yes. spent lot that’s of force wonderful And We an of foundations. the a years. on sales where these time of the over example couple

a a have have great balance We we list. customer sheet, and wonderful

long reputation, and a strong have people. a We talented history, lot a of

advantage our taking of pace the those goal. is assets of really So, change accelerating and

Anja Soderstrom

Okay. you. Thank helpful. was That so

Operator

with the Rudy Davidson. Kessinger you. question next Thank from comes And D.A.

Rudy Kessinger

a I my your signed Thanks guys. I And that, the anticipated said had in pilots relative that sig wanted last question to that Great. – in came for are what quarter. the that contracts. picking quarter, that. give you room – know initial regular seeing there Is pricing would I more one color think to pricing be with said ones said you any right first touch see talks where on you on first in you on think I would customer virtual significant now? you’re you you’re – in where on that you premium e-signature can

Steven Worth

in times the finishing believe early other But handful e-signature the range normal the pilots, point. is a into are stand-alone case we Well, four still the not numbers. it’s the or we’re somewhere opportunity where we to trials have a because that contracting and to in up that, get that price little in numbers capture of the phase

Rudy Kessinger

back And guide. going then the it. to Got

Is non-recurring give primarily out of of you five it Or five like is color lower other five expect non-recurring. recurring, So – do of licenses? out can that any hardware? Or took looks you there? you that perpetual

Steven Worth

year. are is I selling that, versus perpetual say term year, product bit customers decline. expected hardware I and at of checking fairly stable that to purchase the And clip think but year at and a that to is transition a will not be the we perpetual flip the approximately show that continue existing this – Well, numbers process. licenses is would line And Hardware continuous that, for beginning a large the into the next down point. this at we’re

Rudy Kessinger

then to a you the after it. to million loss I’m breakeven $XX guiding, million the went Got taking also, $XX curious down some only million. in And $XX EBITDA by revenue

so exactly I’m what down you to $X adjust extra And I on said know curious, but drill $X is drive of labor that, revenue more increased could when you going to costs, million for the adjustment? it, Just call expense that? million you

Steven Worth

lighter increased you. that we number a on beginning moving for with, felt That’s have that about EBITDA and and adding high really Yes. that The not top costs we that. come EBITDA number, because the have projections – not like there. as things, happy to to. the It’s has mean, on started come line that bit year gross then hits And in supply of freight starting we our we tough of affects under other that to it it of us needed our versus wanted we’re admit we to a top margin highest a the we’re in the where at things reset and things happy January. adjusted our It costs we’re and margins, that and chain on then, but number. little in I that, And

Rudy Kessinger

me. That’s I Thanks got again. just for it.

Operator

the any That turn you. Steve for conclude closing Thank to like to the floor comments. does I would question-and-answer. Worth

Steven Worth

news have and to and lot everyone, you, expect over work months, we to We a out for on, thanks, the going cut of do Thank Obviously, need we of next for our have you. what for some have us. exactly know joining. change further and we important couple we

to time. your you back November coming for again, And planning sooner. talk We’re if early on not thank

Operator

Thank you. you attending concluded. conference The for Thank is presentation. now today’s

lines. may You your disconnect all

OneSpan (OSPN) 7 Aug 212021 Q2 Earnings call transcript