OSPN - Earnings call transcript Q4 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and thank you for attending today’s OneSpan Fourth Quarter 2021 Conference Call. My name is Jason, and I’ll be your moderator for today’s call. [Operator Instructions]. I would now like to pass the conference over to Joe Maxa, Vice President of Investor Relations. Joe, please proceed.

Joe Maxa

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

XXXX. Joining and Chief Chief Kees Officer; access OneSpan’s release Matt announcing To Executive a This Officer. for the full afternoon, me fourth our close, and results website. Interim press information, of OneSpan call issued on copy Gaalen, is the Moynahan, other today and van year please Financial Jan quarter after our our visit a market release press investor

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

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

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

Matt Moynahan

key planning good few everyone. wins. the call call, value results, efforts. growth Equally a an Jan topics, joining long-range update Joe, handful including progress the today. proposition Thank afternoon, you QX Kees our to questions. drivers our of customer will strategic you, opening important, that, the through you cover will and provide After I’ll our Thank walk and financials with a I and relevant before call Today’s our on for

enterprises I my Two more the I years on capital like operational say joined who will development on and overall end leveraging only tenure, strategic and encouraged performance operate our made through and focus, sharing to by proposition, generation I’m proposition. an shareholder exciting while of both our to profile, November, efficiency. believe value increasing while important to advantages can portfolio long-term cybersecurity the in growth solution which digital by as we’ve the the people improve in has company as we months I the perspective operations relevant OneSpan and impressed to lie have our plan, the on I and to us. as unlock well by growth market enhance position enhancing important the transition will to begin agreements, ahead confident to that First, our our our of truly potential would that because markets strength drive value my of in I’ve company the increasing the our to been two into become revenue OneSpan I competitive the I significant I’m the profitability We and excited ability we of and also joined our next opportunities all customer and of company. progress am value execute come. by by in OneSpan. of talented the our at

also of the shielding, many experiences such in while that and identity comply security-conscious risk verification, compelling have more. our mobile e-signature, base tremendous asset as regulations help companies top-tier signing, transaction and in that us across signing world, a to customer authentication, video We trust most mobile technologies app fraud largest of includes mitigate with and delivering the the companies user them

quarter. Turning highest In plan expected adjusted approximately the the exceeded level expectations. to in million and fiscal and $XX December, actions savings primarily pretax leased achieved and savings to ARR $XX eight our in we of announced year is million headcount-related was QX result million spaces. reduction from the EBITDA cost of revenue, for to $XX XXXX, in revenue quarters office that

in in to progress significant turning action opportunities. operations most compelling against Now execute aligning strategic evaluation and product portfolio We’ve our the investments markets, made prioritizing plan. to our our our our of

we enhance introduce our We the Investor solutions provide that innovative I believe observations. solutions suite on security a are have go-to-market will details of you our to short, I tuned more my In that But our customer us in Stay also go-forward information. our at with and update solid strategy would deepen both a to strong on of for today, to like initial platform track mid-May. new with you Day share e-signature relationships. and

DNA in markets identity, we also by clear disruptive our core serve position agreements the a leveraging establish compliance can and we and transactions We as believe deliver trusted a security leadership to and differentiator.

journey. in position market have We’re as fortunate progress to transformational a we our strong

new e-signature Our and providing existing selling security solutions. core focus our on customers efforts with continue and will to

standards. security partnership smart increased OneSpan customer alliances, completion the targeting recently strengthen new account and with This compliance document Smart expansion, will creating improve combines maintaining strategic leverage forms with increased and Communications. reduced our go-to-market with focus our application rates We sales to our partnership while experience, through announced cross-selling, the Sign digital as and customer on an hours strategy such strictest

partnerships, OEM coming form in including relationships months. to the additional expect We

We such global need technology to pace changing verification the the are financial to changes companies remote key mitigating a our To essential put as and are and comply our be of in XX% consumer environment. as innovative also and for customers transactions. for a had strategic demonstrate solutions. solutions for trusted fraud customer our that of accounts place. partnering privacy execute opportunity important data A banks to roll to help of keeping fourth mobile enable of digital drive with end-user trusted vendors the institutions regulatory customers to rising year. our advisers as regulations safeguarding as found Recent e-signature and identity for increased identity user-friendly each banks digital increases is with the recent laws. markets. sensitive and is Improving agreements risk have help our theft continue dollars quarter regulations customers our solutions. study six-figure other trend challenges need like OneSpan comply as a We navigate closed is in them innovation with credential We and experience security digital provider a Top in billions of value significant fraud, demand contracts wins as regulations, during out of of number and trusted government with a driver security to and to solutions losses security

of transaction number expansions displacements, from by a closed also units and additional to volumes, DocuSign. e-signature business including six-figure contracts increased driven competitive We

Let examples. a me few with provide you

verification increasing the provider OneSpan for OneSpan customer lastly, need over First, arm. their in in Similarly, a in for ACV $XXX,XXX signature was A $X well-known XXX,XXX key ACV its North approximately selected the in previous trusted ACV a customer a major this major customer status across [ph]. Sign commitment e-signature mid-six-figure and with from of ACV. million. its And banking security digital staffing long-time annual us their global major an HR temporary Kingdom deployment their incumbent provider expanded $XX,XXX Sign a provider major increased United of insurance leading selected deal United digital WIP the e-signature ninefold and reason a lines use with OneSpan’s over to multiple American security deal. identity firm to States

capital we better significant forward by Jan become look opportunities. on addressing our with Kees our topics through that, take at growth will our detail Kees? Jan have now Day. strong I organization more to our across more costs product portfolio, our these Beyond a With our you Investor efficient aligning to opportunity upcoming financials.

Jan Kees van Gaalen

Good Matt. you, afternoon, Thank everybody.

customers excess accounted which and of to dollar-based you For the fourth we high of maintenance of quarter subscription net million to of revenue SaaS DBNE fourth XXX% year-over-year in in in software and XX% XX% total November. XXXX ARR. term-based revenue, from $XXX and licenses specific full XX% define the rate, as the adjusted for our recurring Annual or in guidance to ARR, subscription range. existing and in year SaaS the in and ARR grew X% we provided quarter. grew was growth increased of and which Total $XX ranges consists accounted approximately subscription year-over-year term-based end early the at guidance services XX% the or recurring expansion ARR of of high exceeded EBITDA and revenue. and revenue, contracts year-over-year came XXXX, for to end million our

XX% cloud subscription XX% QX our For million revenue. in quarter and to XX% year. of coming end in accounted and in and to at recurring e-signature to legacy revenue. was $XXX guidance SaaS the XX% in million, revenue by grew $XX partially the the million of authentication and total the $XX a revenue fourth decline Growth Dealflo increased for high services software year, for offset range

impacted results. addition, a timing In contracts QX of subscription of adversely the recognition large handful revenue our

XX% million the declined Hardware X% fourth million and the quarter in X% contributors. subscription increased $XX million year, in Maintenance for to revenue fourth grew and the were in and declined million the grew $XX to and declined revenue $XX the our revenue e-signature year. the fourth fourth in full for for Mobile million grew to $X SaaS largest XXXX. X% XX% company revenue million Term-based revenue with subscription security For year the $XXX year. grew the expectations. quarter to quarter to for to XX%. server and in million XX% to X% Total the the quarter $XX line software X% year, $XX

related however, and errors prior classification we identified to and of did of understatement goods to product sold affect the expense. During the cost and attributable quarter certain profitability. of directly sales of resulted overall marketing of not, fourth production in immaterial This overstatement It hardware costs products. corrected license an and an period distribution XXXX, and

is adjustments today. the in margin margin attributed mix with to XX% gross in press the XX% fourth revenue total found in quarter XX-K our of to in details, XX% in Gross primarily Additional quarter XXXX. XXXX QX can be fourth services published compared of to periods in and to contributing including XXXX of The difference in QX release software our was earnings the and prior product compared as XX% filing XXXX.

million $X $X fourth recognized on increased our positive EBITDA and to mix quarter the quarter. also tokens the supply fourth EBITDA from X% experienced negative year in negative for supply challenges was in Adjusted disruptions, fourth of XXXX. global X% the chain million in ago We XXXX of which compares freight. expected This quarter quarter versus and quarter margin Adjusted revenue to of positive lower-margin XXXX. are was of higher authentication a the in chain in the XXXX. transportation reliance air These continue

year. the deferred million, XXXX, compared per the to fourth year fourth incentive share, the year was cash nonrecurring million adjustments of income full quarter GAAP quarter recorded quarter XXXX expectations. long-term of $X to investments operations compared impact last million excludes included EBITDA the quarter and assets. $X XXXX non-GAAP loss fourth $X.XX in of in an $X.XX and of fourth items valuation was Fourth ended of at to and For tax XXXX. We the compensation, $XX end share was allowance adjusted attributed increase fourth utilized tax million. X%, EBITDA in quarter during loss with Cash $XXX our per U.S. of in $X.XX XXXX $X.XX amortization, negative in earnings in an compared in quarter XXXX adjusted of share Non-GAAP was the equivalents $X tax the negative outperforming last year. cash, which million on the expense was the short-term margin the per to

to of from repurchase and revenue of So during the the XX% year, mix our million we $X.X region Americas, shares used common Geographically, Asia Pacific. from XXX,XXX XXXX the XX% EMEA, by in fourth approximately was from XX% stock. quarter

by mix I and Thank revenue the full you. Asia will was from XXXX. year from turn to now the For Americas Matt. XX% region the XX% The meeting back from Pacific. EMEA, XX%

Matt Moynahan

Kees. you, Jan Thank

establish will As we our Investor and become go from our compliance. in go-to-market I update efficient do mentioned the quarter, and a at to believe leveraging and focusing second serve the markets identity, plan including how in a better we perspective. Day previously, forward we position on opportunity you strategic by strengths aligning clear to our organization in have disruptive an more leadership security by we our plan

For instance, and by other expertise, our signing significantly provide differentiated we security transaction believe leveraging we e-signature solutions. digital and agreement can

to and work aligning promising have shareholder portfolio, improving better unlock improving most routes value markets by ability to solution confident execution I capital our thereby our do, our optimizing we we structure cost to efficiency. growth have core opportunities, market to including While and our in our am the

of add increased growth in the to much need profitability we we to plan visas today, drive coming years. While have we [ph] through what permanent

year made will ahead more details, at and see, fully be this to guidance can the we strategic out to but of the solid we details you As there of detailed more Investor not a progress the ended XXXX to the work of strong work the be done long-term with our plan, Day done mid-May and flushing recognizing our in in development the providing time. share be is momentum have our desire long-term plan,

and I Jan In for will and long-term I’m Day importantly, that, excited However, take Operator? metrics adjusted Investor and revenue fiscal be to our happy year. details or at the the your plan Kees a be just meet exceed better expect of or year we forward level to time. discussing full for XXXX’s outlook questions. our to and in OneSpan With future closing, the about of for and quarter’s and breakeven XXXX, look EBITDA to

Operator

Instructions] question is [Operator Our with please Chad, from Bennett first Thank you. Craig-Hallum. Chad proceed.

Chad Bennett

Welcome, with future. Great. Thanks look forward the and for working Matt to questions. taking my in you

So, a I couple things. of guess

First, line. subscription on the

Just Is in impact the could timing-wise a didn’t revenue you there if would there? the quantification be think hit that few large on terms I transactions question in on you of, any I provide from, first guess, quarter. any there’s that line indicated just rec quantification

Matt Moynahan

No, we’re to not prepared that. do

Chad Bennett

Okay.

forward? think we be Do quarters do last is pull business to where or of in forward? optimistic going big was four – have the of changed? So, whatnot. maybe and about kind being that guess, and that the is to rate how to digital growth subscription like business more rate had growth six you subscription of And plus is there going a related seems I sell importantly, view the forward, e-sign about that, thoughts being the growth It – should part pretty the able overall and forward how going a there that going some we of think you places that you’re your XX% to more in e-sign of challenging more do growth business, agreements quarters think

Matt Moynahan

XXXX, part right through over the material time-to-time does of the do is But effect given of it revenue May business. much right of now. a portion the working plan. sequential middle long-term the mix that in we’ll portion is of for laser-focused the that line. that timeframe. side But and anticipate basis. on in on strategic our total of elements should we from hardware, have on more the bad a revenue our do the a plan Again, our detail we’re now come growth hardware total portfolio. on perpetual, become not the some it thing subscription from right disclose But with of our in hardware you am we’re a transition I to that of solution as We as absolutely you performance total go-forward see continued dampening And which decreasing

Chad Bennett

Got my it. taking for questions. Appreciate Thanks.

Matt Moynahan

Chad. Thanks,

Operator

Thank you, your Bennett for question. Mr.

question Schwartz is next Our Schwartz, BTIG. Mr. Stefan proceed. with please with

Stefan Schwartz

for Thanks my for taking This on is Gray. question. Stefan

Matt Moynahan

Stefan. Hi,

Stefan Schwartz

you. thank Hi,

I to perpetual dampening do revenue you close and impacting that how the should think how we that of about end are transition? year? to related And shift perpetual, So created the just at from point for think effect at growth the for this multiyear term ask, wanted you headline

Matt Moynahan

the concluded business last to model, from a I year largely transition think if a model. was legacy go when subscription-based we you business

obviously, laser are you that comprised from model drivers, the subscription focused would As customer on then making SaaS cross-selling, our gone new term okay. traditional know focus more through acquisition, is our low, take is as business. we on alluded subscription customer of the rates which that I elements laser sure But And now I ARR we’ve migration. in largely of comments, churn we’re ensuring and my a better and e-signature have what say

most so so itself, in our the go ARR. that’s And excited to shift much is strategy but really moving where of model I’m business and operationalizing the of not beyond drive

hard at plan, these be We’re business the equally long-range exist also work the of level transparency to they in about company. should a in two bringing our viewing total, now that doing how investor but that community also dynamics the of important, inside different but

Stefan Schwartz

Thanks. down think Got hoping And you wins. win, was I you then one why which more. particularly against drill few mentioned. you e-signature DocuSign, just like had I It it. looks a maybe maybe could you

Matt Moynahan

the heartened do right what here. seen happening. very is the right I’ve and in When renew the and expand by the customers, behavior of I’m things Yes, we natural with land

very was born in company, more worked they’ve very environments. in complex in nice segments estate, OneSpan where of what’s the can horizontal the win enterprise was SMB environments benefit DocuSign more DocuSign. from where – and OneSpan think most for relative an into themselves real our in enterprise to and benefit we we being discriminating heterogeneous of born is in these obviously. I focused environment segmentation significant one a

side my aren’t have lack conversations that feel our pleased through a discriminator differentiator who working that identity heterogeneous in we discriminator seem in requirements regulatory verification of and customer parity to on systems. or would winning addition and class count be on significantly a say we that the the big environment in But so a enterprise So, to is very many is of – in house. where more like to significant I’ve is I integration features in has to larger. unique been most, that is that us feature areas requirements are their And cases, a for we the high compliance that the and DNA and our background. DocuSign against customers

Stefan Schwartz

Got it. very Thank much. you

Operator

Schwartz Mr. for you, Thank your question.

Our with next Catharine question proceed. Trebnick, Colliers. is Ms. Trebnick please with

Catharine Trebnick

you. Hadn’t Thanks What year-over-year. Thank staff quarter. deals for or closed it been growth my for of Might was taking you on you quarter? the piece them question. subscription – into had that XX% grew the the these move

Jan Kees van Gaalen

had have of would you subscription a you Look, OSS more percent numbers. – of terms the couple in

Catharine Trebnick

that Got would line the it. were there in other… been And have e-signature outside then subscription anything or

Jan Kees van Gaalen

legacy Yes. little We’ve there a a bit product. that decrease is that mentioned of Dealflo in the

Catharine Trebnick

it. got margin low XX%. shift down give it? you and a mix gross Can to coming the And more Okay, Is little is you’re where on that is detail the it from bit then margin, hardware on from?

Jan Kees van Gaalen

Yes.

hardware significantly shift in composition, big comparable quarter with and So component higher of less software was the than XXXX. a a there overall the in

from $X.X which a lower margin time time we was If million-ish, we of to $X.X that to related authentication to costs increased about shift freight, air year-end. related freight, to at had products had happens primarily. about and somewhat And normalize you then it,

those lower are components the margin. that shift So in big in that

Catharine Trebnick

you. thank right, All

Operator

you, your Thank Trebnick Ms. question. for

from with Sidoti. next is proceed. Anja question Our Please Soderstrom

Anja Soderstrom

for you my thank question. Hi, taking

quarter. much we the affected the I about what and questions a the margin good of going already. how that like But to should question I hampered have inflation XXXX? cost you lot about just how margin asked think in And is a of So guess be performance for things by the fourth on touched that? –

Jan Kees van Gaalen

in be the quarter. But the margins air Yes. the quite continuing year, reliance first side what the on we year to second to XXXX. at similar into we had We freight would air least freight expect impact of the into house full of see the and the for hardware quarter, the perhaps the in

Anja Soderstrom

the that’s the of come $XX saving million Okay. $XX for to cost million of And downsizing the to mainly space? going and from year, headcount

Jan Kees van Gaalen

Yes.

and positions other and a from space two open side the are that real having not in reduction unfortunately filling predominantly there components: the release of also A people the savings leases company. also making to So estate some that And there. were was

Matt Moynahan

to the the important It’s note are continuing year. throughout still Yes. execution that actions these of

the amount. growth Meeting. some we’ll Investor of will in whether So of there the of benefit will be and prepared to the also in be areas. planning middle talk we’re our not that And that right of process savings be about obviously be full into detail strategic evaluating the And a realization year May that realized will reinvested full in

Jan Kees van Gaalen

Yes.

We on provide you with where savings the will quarterly also you can accruing. see basis, a tracker a

Anja Soderstrom

all great. Okay, me. you. Thank That’s Thank you. for

Operator

Thank you. Ms.

question Soderstrom. with Kessinger is And with D.A. next Rudy our Davidson. proceed. Please

Rudy Kessinger

typically X% know QX, on Thanks overages questions. down I one drives been pretty growth, my subscription, XX% back a But that some of time. sequential just the of from or I for the a to I times. on QX. more taking there’s each and sequential go know decline, last touched big want growth couple sequential to I QX. it’s mean XX% usage QX,

was how can Dealflo than as you to well. just the the product, way It’s a there not decline a bit just is quantify perplexing lower much even subscription even just being legacy QX QX. mean, QX I QX the So from QX,

Joe Maxa

Rudy. is Hey, Joe. This

at down. have look said, we that numbers, like you the overall as Dealflo in, factor that So, to came do you which

some then the think in right to day pushed the on the close side the into and XX% the it impact the we to in of front that exact QX. the in of range. don’t And now. an expected quarter was We quarter the subscription us had last on e-signature of early deals number basically I line. But overall that out have

So, we didn’t recognize that contracts. those revenue from

Rudy Kessinger

there. the cost going to cuts, your on it. last then Got comment just And back

it, savings in a XX% basis, full there than not XXXX, said a those I don’t fully cuts Is how What million you realizing can equate XX% much year pretax will it on you realization mean, think full but you’re year to XX%. or be will $XX it? to $XX be – quantify to I know, yet. that’s or XX% I higher once million somewhere

Joe Maxa

XXXX think But you’re year depending I say, how only year cuts a the actions be see the quickly for will XXXX, probably to the XX%, fully. you in those coming certain financial XX% going realizing on that in have can statements. percentage, implemented through XX%

Rudy Kessinger

my got it. for Thank Okay, you questions. taking

Joe Maxa

you, Rudy. Thank

Operator

Thank you, Mr. Kessinger for your question. There at There are Instructions] waiting currently [Operator no this time. further questions are waiting at this time. questions more no

So, the over I’d team to like conference closing for pass back the to management remarks.

Matt Moynahan

and Thank hard very on excited you, I’d I’m at like at our the our to May. business to here everyone. to been planning again, note positive that, of view be in strategic a end OneSpan work very detailed deliver confident in ability quite at a We’ve feel process.

enhanced to I proposition track, much all very on and internal detail. what our you see, about an customers person, And in you milestones seeing if our the with excited timeframe I’m offer based deliverables. hopefully more virtual call Thank are the not our and joining value of mid-May path on and for our in forward today. look all ability to We we hit have and

Operator

XXXX fourth for conference call. concludes your That the OneSpan quarter you participation. Thank

disconnect now may your You lines.

OneSpan (OSPN) 23 Feb 222021 Q4 Earnings call transcript