OSPN - Earnings call transcript Q2 2022

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

Operator

Good afternoon, ladies and gentlemen. Thank you for attending today's OneSpan Second Quarter 2022. My name is Tia, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to your host, Joe Maxa, Vice President of Investor Relations with OneSpan.

proceed. may You

Joe Maxa

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

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

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

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

Matt Moynahan

review. you, ARR was headwinds, with ARR contracts despite We Thank Thank growth including afternoon, a Joe, Jan Kees financial good primarily everyone. discuss exceeded for in revenue the you we foreign and us and expectations, subscription solutions. his by will EBITDA exchange quarter expansion driven growth you XX% security with adjusted esignature quarter internal joining and and revenue XX% and currency several our Strength today. solid which contracts for seven-figure during with customers, existing delivered

new Sign on ours contracts three including buying North solution that And multiyear esignature with in in contract our expansion utilizing banks experiencing seven-figure following: an ACV multi important Some private TCV and of Pacific of the lines were the customer Asia bank a and security This a solutions. win customers mobile several customers lines began logo customer of year several This mobile multi six-figure one have a region wins year choice. esignature top competitor existing our XXX,XXX long-term that all customer security is companies, for the in Several across of America, banking contract standardized our bank a new TCV a running with the India. the of been European added higher-than-expected customer business expansion solutions; Digipass OneSpan a seven-figure commitments. of existing in their of as with contract global demand seven-figure that esignature platform. a which volume all of include Europe with business; ACV largest increased acquired

set, Our factors key wins. ability in of enterprise of many and class willingness our ease white our to feature were solutions and integration, label

on transformation update Now our strategic you plan. let me

work We at a agreement are to matters hard digital that building world. the security company

more objective with lifecycle enterprises from they protect we’re enable signing our their eventually of is engage as the Our efficient to interactions, phase designed in effective getting transaction We along of model. transact us operating started. with and strategic at transactions to throughout plan Day the plan clear and to May customers move identity virtual just storage that restructuring to authentication, digital secure second documents announced in our our is forward Investor and with and the a verification and

which for its plan, financial QX implement months a fiscal as the the year year -- several to take beginning of marked gain reporting are beginning traction We from the first we expect perspective. new will prepare to OneSpan we XXXX.

For automate growth agreements agreement modest for operating digital to cash its digital important that the given the agreements, results lifecycles. they include Today, virtual to of from solutions flow associated and transaction our room and two is and digital growth segments: We solutions agreement for customer secure are largely first processes more our business clients with solutions business plan and and enable mission the we profile. cloud-based that new consists reported note solutions. gains security our and market solutions. critical esignature digital and share security to manage It time, accelerated

key security are our of Information considerable successfully connected. Digipass the added interaction, Chief leadership our Officer. has pleased solutions executive Product to on-premise the transformation Most transaction of bring the this have as multifactor continual within virtual part have not software the transformation to largely tokens progresses, abilities strengthening of software and We companies executive including to to leaders application authentication, new historical experience to mobile in proven key we plan General identity is months. portfolio, highly mobile talented in been forward. I'm e-voting, scale our solutions share such verification, are identity signing; along Counsel Chief filled consist team few security Officer, and our drive with hope A of and security talent authentication product place all such we positions cloud team Security that company. and to of tokens security company. with next additional esigning our verification, leveraging as their remainder and cloud-based experienced As and the include expect the

launched color XXXX provide go-to-market We XXXX growth target I'll strategy. our accounts. largest our program, and on Next, our enterprise OneSpan internally which prioritizes at

to our two quarters our be the to sales training take wallet strategic We are alliances in put to will access important enterprise go-forward to considerable sales plan. begin tell on new the and XXXX. the increased selling targeting plan our the the increased customers this and operationally an work spent improve quarter, on both is time strategy cross are globe. existing virtually and place of in execution are through through share increase with partnerships building and and will time new I'm hard and pleased I an enterprise fiscal acquisition customers year at you prospects by ground next activities to person We for up to enablement in the logo and FY enter resonating. focus and selling. end doubling of targeting blocks to routes These our our and direct force market of implement And of solid across ’XX

It's at take class the will both agreements we're we enterprise the even more to enterprise advantage see see generation an just the that markets ahead. weeks today a are of to and lifecycle. opportunities important clear solutions entire world years solutions capability, building of ago. we evolving one to become next cybersecurity class point from the enable and the but firm important processes transaction few in digital We highlighted to have come. go-to-market enterprises that authentication, A At prominent that to throughout OneSpan, security, a of research not report this requires trend the agreement

that, take platform digital Our help our quarter through Jan secure security of transaction inclusion experience Jan will enable cloud and process. user compelling agreement Kees will now Kees? second capabilities entire seamless you customers financials. their the to With

Jan Kees van Gaalen

you, quarter, business. operational Thank driven reported Hello, by in everyone. largely I'm we've rigor pleased Matt. improved strong afternoon. a the Good that

exposure highlight of the Additionally, I currency want revenue quarter. to foreign our the on impact for

been million representing would year-over-year QX higher revenue we our impact, than rate this growth have Excluding a of X%. $X.X reported,

million solutions specific ARR security maintenance product GAAP offset but and the GAAP subscription XXXX, an digital agreement in OpEx in XX%, by year-over-year to up with growth strategic software million. recent included ARR. XX% mix $XX grew in in total $X.X same slightly, with XX% Revenue DBNE, ARR $XX consistent growth services and by Now quarters. margin net accounted million, quarter was we define plan. severance of approximately consistent related for grew our foreign million, or costs expected was Gross related margin $X.X expenses plan XX% to in million other ARR XXX%, of grew by outside the X% exchange. Dollar-based to for expenses restructuring from somewhat operating higher contracts year-over-year of our decreases within and expansion customers increase to subscription financial turning existing XX% million shift our the the was by revenue million our revenue and changes revenues. $X in led which results. perpetual-based as to non-recurring to approximately segment. $XX to benefited $XXX offset to

completed in X XXXX. in all contained announced reduction As of plan our substantially noted the we items last of quarter, December cost action Phase

expected production $XX the cost charges period cash which high savings XXXX during related for annualized costs million of our total XXXX. the $XX last in end is million As to million headcount result of savings to announced achieved covering for in plan the with savings. phase the million annualized which this of to annualized to million of the is plan of and $XX year, and of of million in quarters three cost ending June This plan. reduction year $XX of the of $XX severance approximately XX, X through to benefits associated approximately Phase $XX we We the May million, calls near called $XX.X

performance. of $X.XX per was was and excludes compared of segment's year. non-recurring adjustments net to XXXX, incentive ratable. which business. result movement share deals the quarter subscription compensation, our $X.XX $X.X income second results. to of the in Non-GAAP was last second Digital XX% quarter on-premise ARR EBITDA XX% long-term scale net last quarter-to-quarter same several year. margin efficiencies. $XX was Nearly quarter GAAP Increased revenue nearly the the was subscription $X.XX the Adjusted XX, to profit last by the negative negative $X $XX.X a X% related versus volatility, improved As second difference revenue large This revenue million, lower quarter quarter. million. during margin quarter and period to million million. XX% adjusted XXX in of year. in foreign all $X.X X% Revenue can year-over-year quarter X% exchange, of largely of Agreements to significant largely $X $X.X to by ARR was $X.X in We negative growth operating we compared in negative multi-year per the in last to grew with and to the the exchange loss our of operating explained compared second XX%, revenue higher amortization, I'll with negative EBITDA Large Agreement in Operating international Adjusted esignature last million, year. to in restructuring $XX closed to of Digital to million size this XXXX, the improved ratable was was million. The million. compared in annualized XXXX, subscription in to recognized quarter that tax foreign compared loss inherent resulting be year. gross impact revenue discuss won GAAP XXXX. led growth resulted along we including items now XXXX, quarter increased XX% led second contracts savings one margin last gross the EBITDA upfront of million, multi-year and in of like of and expenses of $X.X the Gross share, $X.X the business. as June achieved as grew loss

drive sales of in development. our early increased and invest and plan for including additional to are line to this product hiring we through growth top in talent reminder, a growth segment, transformation the As

$XX Now customers and from Solutions turning to results. on-premises, by ARR non-recurring ARR expansion $XX mobile by Security XX% security deal Subscription to existing XX% grew million. to $XX perpetual-based in revenue decreases million, $XX led to this Digipass to grew expected the tokens, our driven segment by in largest decreased million, for X% service revenue primarily XX% million, flow, percentage segment's largely contracts growth maintenance including and of subscription revenue. account for Total legacy driven software solutions. revenues, which

revenue and security to we COVID-driven subscription the for to manufacturing contract total growth healthy. risks in Last of solutions with on the quarter, improves, As modest deliveries Demand electronic focus along components is China, revenue. facilities as chain expect Digipass our we to closures these with associated we continue Digipass temporary driving tokens in noted hardware at delays supply see in facilities.

While could impact effectively the we risks through in QX, $X to quarterly by up Digipass half chain in revenues of manage these able to were challenges second supply the million year.

continue work contingency was risk $X.X year and and We closely operating with potential compared primary gross possible. as plans The was will year mitigate situation respectively. costs. as million XX%, to increase and million severance monitor consistent related to and was in best margin the Operating XX% margin Solutions income to as was the XX% difference to Security $XX last due ago quarter. this an

sheet. in $XX $XX non-recurring balance the the and We investments, $XX and quarter. than end compared cash including costs. million cash, to XXXX in the during quarter, equivalents operations second the of the XXXX ended end of quarter at last cash $XXX more million million million of $X used at to with in We short-term of Turning million

year my XX% and compares of regions long-term used want XXXX concludes mix also Americas $X.X XX% was approximately from no to the remarks. That region the repurchase quarter XX% remind XX% to in from you of XX%, and of from from debt. Matt? EMEA, Asia the XX% XXX,XXX This shares also second last in we same We of I quarter stock. second revenue Pacific. respectively. that the common by Geographically, to our million have

Matt Moynahan

the compared you, Kees. somewhat exchange but Based ago FX estimate been the currency have We half to year. revenue rates, period. continued, Thank would Jan the first of expect as year higher in half less current on million been $X XXXX had pressure nearly constant, rates second we

second transformation are in guidance. our We full-year confident are in making outlook. our initial XXXX and we affirming progress Therefore, our half are

notwithstanding following: the growth FX range OneSpan in negative of For ARR exceed the XX% to XXXX, bright. XX%; to adjusted revenue expect or meet full-year In the in and negative EBITDA closing, $X be of total be range revenue; is $X to the million headwinds, the full-year XXXX million. of we to to future

We hard in by geography performance the see QX. are proud working balanced am business that -- I'd revenue contribution like get to segments and operational predictability team time. and across more And of over improve sales to and to saw I I'm pleased for product lines, to-date. we improved the our progress

I as your focus, forward, am and value in confident competitive operational our Kees our will unlock Moving our to be Jan to our I questions. that With increase and leverage shareholder happy take performance. we advantages ability enhance Operator?

Operator

you. Thank

Craig of session. We [Operator from question-and-answer The with question Instructions] will now line first the the is Chad Bennett Hallum. begin

You may proceed.

Chad Bennett

if was Great. were a lot new What added logo logo which pickup, you the in there questions. multi-year just And significant security Thanks pickup a new differentiators in did esign you a is those my deals a for bookings esign terms you wins, of in to rattled that six-figure, seven-figure the deal second taking logo? quarter. Matt, are consolidation off question I winning is, just pure guess kind new just of from great. the pretty side the see standpoint new better-than-expectations? also do or brand did of where

Matt Moynahan

last the get and first the to to Let talk business. esignature me then I'll

are seeing healthy very Digipass On the security we side, our for demand solutions.

out with business. with we that We book-to-bill very doing line detail historically well? of tell supply issue we don't the the can Digipass had I a performance at chain, pleased haven't Obviously, But bookings token that. I'm So associated you -- broken but product are

quarter we supply bookings the business being good of level and mobile FX that issues the from in security and security one lumpiness have business had We out, overall products do parts our the anticipate perspective. we non-mobile but a growth. As and a strength subscription still on chain per in other of see security so side,

of side things, differentiators logo why then new get I'll and to we esignature competitive address me won. the a On the let on

enterprise had First to are enterprise that products, logos time, that the in the of and go-to-market company a enterprise logos area of where out go building hasn't have across of you segment in capability. that from Over the good three teams logos, have to that was fragmented should our the an rebalance important different focus higher see segment, by an pyramid get increase need bringing but we pyramid two When the the incredibly in one really we We bottom the We've enterprise expand like growth acted all, go-to-market. go-to-market. new in relationships that sales of land but quarter an enterprise customers new us. had have historically, top for the new half the and did half enterprise together. unified is to we you

here to quarters So the that's an focus as over important for come. us

of As a far tightening enterprise offer say largely know, with the pricing modularization this and has per our win, with solutions as so would for we there's the that solution we three enterprise class competitor not parity environment. of and value in key really areas: having economic, to increasingly price that and void. with is you particularly but class the had of close essentially us tightening to by flexibility DocuSign two type why would DocuSign, we number functions a first like market, economic driver key fill I

would two and top rates in consideration effectively associated flexibility transaction happen, spam, DocuSign size our and -- get historically of number say second white than come first for the label emails But time does Number the efficient. When do starting for that and are DocuSign time larger go up I increasingly falling platforms and per in solution. can case. or into what other You certainly boxes competitors can are RFP is more to we we value first down phase have compete to with get phishing into see caught integration, contracts experience down go and year user is, categories one. price of need as our you.

So white is believe that. we labeling is white and a as important. company part key as digital a incredibly And we ourselves of that labeling positioning security are

I think also is flexibility important.

ability a than have out implement competitors in to flexible our other way solution We much there. an more

So again, why winning. seeing good we're we're signs for

higher bats closure Now we have to get get and rates. more

Chad Bennett

color. Then heard Got the FX you follow-up, that? hear on revs, ARR. it. appreciate one on Do I or have didn't an but impact FX I impact maybe the I quick ARR subscription

Matt Moynahan

Jan Kees, it's you have me largely Go It's very had ahead, what you want to like or revenue. that in take would the similar Jan Kees. too? to

Jan Kees van Gaalen

Yes.

So is couple we our to $XXX,XXX a revenue what line, the basically similar of again on saw so estimate.

Chad Bennett

Thanks very quarter. job on the much. alright. Nice Okay,

Jan Kees van Gaalen

Thank you.

Operator

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

You proceed. may

Gray Powell

revenue of we Can seeing almost in the there Europe? the EMEA think what or on focus XX% from any months? Have region. comes changes customer in few in in you I seen cycles behavior you're last sales

Matt Moynahan

mean, is similar the at revenue is the of coming of look enterprise really. from large is that most true you and business, vast Difficulty] attendee [Technical with I digital have share EMEA agreements, majority -- the both again, but of the EMEA we behavior security. across when business XX% customers. is Not inverse XX%, the Americas of The the

part are actually is critical. with security, Digipass for EMEA online and our And these that our banks. They're capabilities security solution concentrated of authentication banking, like the thankfully, for been increasing. both this base again have installed highly tokens go-to-market solutions, office used a we very On environments which mission in security are the had in side, back sticky with

fulfill chain. the is by in online thing our material majority in spend demand, has hampered we've slight to And been so the of for demand vast one any and decline supply banking that demand. with seen that it's the us good we the such. But Actually, ability haven't a but -- upticks seen associated given historical

Gray Powell

Understood.

$XXX,XXX? say then ARR I on missed side, the is on last the answer few Okay. correct? FX -- that sorry, ARR That's was I'm a that you impact question. Was Did And to helpful. just the the

Jan Kees van Gaalen

on the same revenue. it's No, seen what as we've

Gray Powell

you That's terms. actually is revenue. like pretty And $X dollar million on in guys absolute big

Okay, maybe okay, and then side. the cost on

transition that called a in you million $X.X services So severance out say entire one-time safe of for million million total $X.X in and that, to it costs. Is $X.X as $X.X And million in hit the outside just flow? line? operating try then cash the the how we for to year rest costs think operating cash flow about of we should about think

Jan Kees van Gaalen

Yes.

line, hit exactly that we be to some of So there rest is the It's entire still in or QX is point of it the but that QX. net whether reported. the currently the to amounts cost year, the we in And cash flow will correct. come, for losses income Xs operating cannot

Gray Powell

Okay. That's helpful. Thank you very much.

Jan Kees van Gaalen

You’re welcome.

Operator

next A. The of Davidson. you. line question comes D. Kessinger Thank the from Rudy with

proceed. may You

Rudy Kessinger

to the Yes. Thanks $X.X questions. loss negative the first curious my to you're $X year. for for taking million million guiding half, a guide, in $X I'm EBITDA you're million on the

cost to when step second million versus cuts annualized it gotten in $XX.X the got despite far So in EBITDA of half, in as you've the so a you million QX. together, loss down $XX.X put

So in more whatnot got in be that second through EBITDA I you're And adjusted down, severance cuts So in EBITDA and the half? to guess, that here. adjusting step cost why figure? you've obviously, flowing the out should

Matt Moynahan

want that? you Jan Kees,

Jan Kees van Gaalen

adjust are end of the there severance. of don't the half we costs all, first in look, of which terms the savings are certain of Yes, all year, out severance, the of And the number period. towards second in second the of accruing

explanation. the basically that's so And

Matt Moynahan

that hire ability up. are of expenses to our elements there timing. there to going Obviously, say play other the is the with timing that's effectively build the be team, and are to sales I'd other right? are one sales And marketing the the subject

Jan Kees van Gaalen

some there new also in product then the development area. and focusing I DA mean, is

Rudy Kessinger

And as feature kind most seven view esignature, like more but Matt, the sounds you product. quarter, of course of a part the frankly, the in guess, was for fair. it as That's it I not some and a six wins of then it said Okay. you've figure esignature, pretty

And of or -- any led virtual those that deals you interest of seeing room? were in kind did and curious, having? kind what in they pipes I'm conversations of are the the involve guess you're I So

Matt Moynahan

days having and significant fairly happen had type start seeing obviously gone, expect and secure product Again, I GA still there virtual doubled banks. we we which in as We but in seeing would enterprise you sales interest we we're integrating -- in particularly looking seen internal say, to ramp our room people say product previous to And it. small. There would early personally room, into business plan go-to-market not in that. our in interaction I we're out So have had still the significant to skew activity in that team. as on the are virtual quarter. over in form this basic interest of virtual variations very the the are sandbox, business, commercial, unified of

so hope different And in very, or place is to video it significant do marketplace this what line very and have a I will category. That product the the for collaboration. is largely relative hold

Rudy Kessinger

one then could. And last if just one I it. Got

to you're On ARR then XX% and quarter, XXX as to guiding end. this at and by in of the for up XX% reaccelerate the to your QX? in new sales reps growth some the in ARR expectation growth, Is to And point start start the initiatives bottom QX ramp you're year contribute?

Matt Moynahan

across the of the and portfolio the puts a is as have couple and cleaned anticipation. product up smaller that Yes, the takes portfolio some products. I've we Again, of

its I subscription. AR remember from end in you growth. term core to company the life were that and the used through if And of perpetual We largely during general other the have conversion products Investor is Day, also

that. I So fair think absolutely to say it's

we strategic where is AR business You'll occurs let need model reporting almost largely through growth that. conversion on and fully we'll go the year what be three you that as plan are through core then the QX

Rudy Kessinger

for Thanks my questions. taking Great.

Matt Moynahan

Thank you.

Operator

Instructions] any additional [Operator at you. to I Thank will There questions it remarks. closing for are back Matti time. pass no this

Matt Moynahan

is Good appreciate work and you everyone look the Thank today. that way you and of full Very to doing business. our very the you and the it communicating you we your the with today. joining to proud And commitment the quarters come. and soon. to for to to We sharing time here, transparency have continued clarity bring for thank continue forward progress to our you we're much in managing start. team with much Speak

Operator

today's conference call. That you. concludes Thank

your may line. disconnect You now

OneSpan (OSPN) 2 Aug 222022 Q2 Earnings call transcript