Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to the OneSpan Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, Joe Maxa, VP of Investor Relations. ahead go Please

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

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

full materially statements forward-looking plans, release your and expectations results Exchange our long-term assumptions. the uncertainties. year relate made that statements. conference expressed discussion from this Commission financial actual to Company’s for targets the note are events and to these in call statements uncertainties including future U.S. attention performance, and risks forward-looking involve with a risks that filings current for could Securities Consequently, XXXX Please and or These are such the and and during outlook on direct based I today’s differ the of statements. press

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

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

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

now the to call Matt. over I will turn

Matt Moynahan

us. Joe. you, Good joining everyone. for you afternoon, Thank Thank

the Rule like for our OneSpan meaningful create an of on achieve value to plan providing XX a our begin into Today, enterprise-class I transform to company, and would by shareholders. progress update

and more execution transformation the now are plan, the we into has visibility the our operating We increased. have than into two quarters of

it demand in it will projected marketing and to apparent Given take generation mature, this and for now pressure. longer by originally engines increased sales our current productivity market exacerbated increased visibility, than pricing part competitive conditions that is

authentication, As life mentioned during drivers sales important marketing eVaulting enable growth a e-signature an the it of in the solution weaving assurance with most to designed verification, collaboration, across globe. business processes world must secured and resonate secure deepfakes. generative high previous today’s in is our five-pillar the AI top identity cycle becoming and line and digitize calls, plan. by strategic of transaction generation demand us productivity to three-year virtual together and believe need continues to digital is And securely customers sound, transaction two our strategy, entire We to are

to significantly visibility respective operating we have adjustments business general and manager profitability driving to strategy driving cost managing the long-term security agreements distinct a continue execute digital with agreements growth business segment reduction coupled cash logical for two taking for and our to potential. improve model, each of next operational units, with the maintaining by solutions, formally make our operating throughout operational including acceleration excellence our that growth initiatives Given strategies rigor Company, to security end, to business, the improved we’ve creating we decided flow. the our our into level of and are operating our to segments their To while the digital business

XX% margin for year to EBITDA longer-term to XXXX. to adjusted the our EBITDA to Company range XXXX. This XX% XX% of target previous enable We believe these changes full adjusted XX% compares the in will achieve

the stockholders of return reach the in plan. up to to than expect of $XX both. to end dividends It our intention our more million We to capital our by XX stock quickly is also combination a in of also original Rule through or repurchases, XXXX

Going on will return more consistent stockholders, our forward, capital regarding and strategy to growth with our balancing detail to provide we profitability. focus

and clear became second would and operating to that targets our quarter the thee-year enterprise in our year high-performing to It time therefore, consequently, the full more class achieve in digital time marketing engine, financial agreements financial time, more implement sales and XXXX take segment. during this segment a primarily targets our take

in certain cost proactively a our model actions we savings QX, to X%, the consolidated process by organization, change our We two As headcount vendors operating by and begin late across initiatives. of reduced began result, approximately accelerating offices. cost structure with rebalancing variable of the took closing in reduced connection spend

We’re confidence substantial providing rightsizing end our additional also the headcount, with before visibility and in primarily the planning adjusted the to year, of us EBITDA targets. related XXXX

markets. new geographic work be We core Perhaps digital solutions on we to as most date. and plan creating a across team law installed doing in most base investments and focus culture the we importantly, in am very in will Security half what the such has continue that our e-signature I first to serve to ROI in and roll customers the nature continue of of continue new is been promising we our will our our will our efficiently self-service performance-based we will efforts proud to strategy offering focus global out Company. go-to-market XXXX. are our agreements, In accomplished refine common to countries. to

believe right effectively manage and organizational sight of we Today’s economic line in alignment our of is team products we efficient people, requires for are and place what needed environment growth. execution, to the into day. the and the business through strong design executive every improving have We

remains to attacks a cyberattacks hacking make grew the as a X% to for Security to high segment adjusted Turning continue operating negative regular that proliferation ARR headlines was priority our customers. EBITDA $X part of expected Revenue to on grew in and million performed basis. news QX X% $XX by $XXX results. our preventing and million, million. as generally mitigating driven

mobile authentication The mid-X-figure we licenses second contract the the which was and range our in customer example, against order of their strength the large For largely ACV and the customers. protect additional security in a QX, multiple in was such won competitively solutions. banking to from due consecutive bank, last purchased to banking mobile retail quarters international flexibility and firms quarter,

sector. token affect to for some at We visibility the We majority in continue did, account large extent banking who to banking environment revenue. the have see to customers good Digipass orders orders our the of hardware begin however, into our macroeconomic mid-market

ripple of financial mid-market closely. very effect the We crisis continue market to watch the

$X plans a customer contract want In in and had on put that more One sales customer I which compared quarters. digital uncertainties the a been as year, agreements on-premise ACV new end the this closed end was macroeconomic long-time and sizes that last sunset product, profound segment, in to of early e-signature to scrutiny QX It prior at our North deal cycles, at our agreements three-year effect and on million reprioritization expansion we contract of QX year. America conversion is logos. with of a us deal opportunities rates to digital QX. slipped pipeline both our pressure communicated out and have of using investments Increased highlight for in

the red cloud, associated more costs our the customer. that a driven ROI, tape took updating customer in diligence per and primarily due of this infrastructure with close to to anticipated, By reduction of the solution, to than able the required increase additional by The longer was price the to leading contract than size due deal which by cloud the in we use its public improve transaction. offset

e-signature mid-X-figure increased the of their the model. a their expecting costs their signed e-signature than also contract as overage to a that them XX% by three-year volumes I want that win few volume the band as related A customer large not catch-up to grow a ACV were eliminated key by see nearly potential highlight confidently accurate. allows concern volumes our over new next Customer if to This volume grow. charges years, to or forecasts $XXX,XXX. forecast pricing more

I on product will initiatives. key Next, provide updates

We the market and focused general e-signature XXXX. the try of are buy the our in of commercial self-service targeting half SMB and availability first segments solution on

launched is interest, gaining and at have initially approval we and play, recently working solution, our regulatory currently in states. customers OneSpan signed It customer. targeting has are Notary XX getting trials first on existing we Our than additional several more

on track to later on secure also are artifacts We blockchain year. and for to documents technology based this bring market eVaulting

higher operating to of activities repurpose pivot our new We products highly product rationalization, these with consistent more potential Digipass model in marketing opportunities. are discontinuing that some other plan to with investment CX. profitable we ROI a into for investments Finally, includes

more more foundation achieve efficiency growing drive to become summary, believe accelerate profitable term. we provide base are path leaner, with will return over shareholder taking our to us commitment the and profitably our and company a stronger a the to by we actions value create and to to OneSpan In long across our efficient

an will outlook. financial detail. I our will quarter more Jorge? results then our in and to back Jorge discuss update now second come provide financial

Jorge Martell

Matt, you, Thank good and afternoon, everybody.

actions top line our the of in I Before cost taking provide million. savings more quarter to reviewing cost in we second resulted efficient results, our we details are XXXX on growth. of actions quarter to want rebalance the second structure to drive took annualized The $X.X

and expanding accelerating Matt our cost As savings are mentioned, initiatives. we

million $XX $XX million are X annualized $XX In cost expecting addition the of savings. savings we to additional target, of to million Phase cost an

million we savings result, of XXXX. by to $XX annualized the expect total in $XX end a cost As now million

headcount to this vendor a by time dollars of majority related expected primarily The the million realize and be strategies optimization consolidation additional the will to expect of by savings to next related realized few end is the XXXX. be which We year. these of savings, balance

to our results. turning Now

grew contracts for XXX%. and XX% to rate, accounted of the NRR specific and retention X% $XXX or was were to macroeconomic ARR. NRR, approximately to to ARR last quarter ARR year-over-year $XXX quarter, subscription million. grew by environment. Net Similar ARR million total impacted Second XX%

and in in see and expansion prior year and more security. contracts few decision to new from to business to segment certain We impacted, moderate continue These last metrics and also noted our our agreements a as be digital primarily lost continue offerings. scrutiny lesser to cycles, calls, longer resulting operating sales in on extent, deal a portfolio sunset increased rates,

million, plan. sell $XX X%. to as security in e-signature driven recurring our software. to decision SaaS grew to Digipass and part led X% our million. revenue revenue XX% increased revenue revenue by revenue expected, increased token as strategic three-year revenue quarter XX% growth support new of and in Second Maintenance by only growth XX% Subscription declined $XX.X contracts

$X.X a prior third-party in costs costs product increases inventory Second was related increases XX% by CX. impacted our XX% mix, hardware electronic business in quarter to and and and quarter year and the in was million freight compared gross in margin components write-off Digipass to customer

compared our in with profit to reduction quarter Operating as discontinue and the hires, compared investment in $X.X things. was increase marketing year. R&D in were was loss $XX.X decision in CX, loss increases software fees nonrecurring to to the The to by operating dollars million sales costs an restructuring offset primarily and in increase third-party gross million related same year. higher second plan a These of and period costs an expenses resulting other T&E in along expenses workers, from increased among to contract partially due last Digipass capitalization last

charges, which $X.XX in restructuring share, This compares items loss in year. tax excludes and $X.XX to share quarter last quarter to second of quarter. loss the in XXXX incentive the share last of compensation, adjustments Non-GAAP year. second impact of was loss nonrecurring $X.XX per amortization, non-GAAP second was compared QX of the net long-term per other of in per $X.XX GAAP the

the made was adjusted EBITDA the functions, last negative particularly same in related EBITDA to over last sales including to $X.X hiring of of primarily year. $X.X The change we as negative is in year, the quarter Second period increased in million our year-over-year salespeople. million marketing compared the and adjusted investments quota-bearing

XX% increased agreements SaaS $XX and ARR ARR $XX I’ll revenue for million. to million. $XX.X X% agreements subscription X% XXX% year-over-year in segment results. grew to million Subscription our grew subscription $XX.X now digital second to Digital discuss XX% million. revenue of the quarter. grew the accounted quarter revenue to

X, this version on-premise this As at our new and effective end minimal the Jan selling We, XXXX, stopped licenses e-signature revenue therefore, of subscription on-premise discussed previously, expect sunsetting solution we year. will be year. of

$X.X on-premise For subscription year included our million revenue revenue, total million is million in and contributed $X.X respectively. which follows: XXXX in QX, agreements comparison digital $X.X QX million purposes, in in fiscal in QX, subscription $X.X as

as million compared in year year prior XX% loss $X QX an in loss $X.X of was the operating Second operating an million quarter gross of to margin last quarter. to was $X.X quarter. XX% and compared last million Operating loss

our with same in operating travel of marketing the last offset change. and to we as segment last which quota-bearing expenses As agreements, costs gross sales investment to of Security expenses to quarter from salespeople a reminder, partially in increased digital by increased the this year, capitalization combined majority for quarter reallocated and increases quarter, lower year-over-year beginning and margin the change. R&D the compared entertainment contributed accounted Solutions Slightly

quarter revenue Turning grew we to million maintenance perpetual-based app driven highest a ARR to results our a year-over-year ARR second subscription by continued to and decline offset to from primarily Security by time. quarter solutions, $XX shift shielding as trend the for million, Solutions QX, authentication, $XX million. partially strong contracts maintenance second transaction ARR, grew to grew in was in segment legacy Revenue signing to results. a demand X% continue customers. following perpetual XX% Subscription Subscription expect contracts increased very million. and existing our XX% $XX.X X% $XX.X over to

offset and token and other, revenue growth in we legacy The increased that software subscription perpetual partially sunset by revenue XXXX. in declines professional X% in maintenance support, year-over-year. expected Digipass and services products was

related In customers that partner now I’m to shortages to inventory normalized increases over shipments deliveries, which lead optimize pleased to regard we’ve and with increase able Digipass and levels levels. have electronic token returned been that last the times impacted year, more to our component in

in year. costs last in is and increased to freight change margin in was and prices margin increase component to business, gross customer hardware the period our as to Digipass the same in primarily mix related increased write-off The QX inventory third-party Digipass in CX. product electronic XX% compared XX% used costs charge software tokens, and related

quarter. compared in income to XX% million, last and million and was was second margin XX% $X.X Operating operating $X year’s

of last deal flow CX digital offset by asset lower to was amortization year, discontinuation agreements result and operating the the of certain the compared year As income of by Digipass reallocation to and million prior impacted $X a as intangible expenses impairment.

to million uses cash, Turning the with to $XX include at $XX balance cash million of cash investments for operations, quarter for year-to-date equivalents and to expenditures, $X acquisition-related of cash component second ended compared million $X.X Key $X.X We the $X quarters. in XXXX costs. an in short-term sheet. million our software, tax of our of increase million end devices capital contributed primarily and to in related last reduce for to payments risks million capitalized electronic and inventories supply Timing in collections two changes chain in Digipass XXXX. over the

long-term We have no debt.

in Geographically, our EMEA, XXXX from from year, Pacific. This XX% quarter and Asia quarter from was the in same of revenue second XX% mix XX% by XX%, Americas XX% to from of the the second region and regions the XX% respectively. compares last

turn That concludes my now I’ll back remarks. Matt. the to call

Matt Moynahan

Jorge. you, Thank

efficient operational and growth and strategic we to on help value. focus provide for our to Company our full and are guidance will shareholder our XXXX return the will actions unlock and initial targets. XXXX are the OneSpan size now I confident decisions the I’m taking capital cost shareholders structure, right right

the be to $X EBITDA to XXXX, $XXX million as the previous range million million of the to $XXX guidance range to following: our $X to compared million $XXX million; as $XXX to of $X million compared as be million to the million; of to million our million million of and million. $XXX $X range range adjusted $XXX year For previous guidance full to in to compared of we Revenue in $XXX ARR expect to to our of $XXX the previous in be

mid-single be the adjusted margin low I to earlier, are For we the EBITDA range as of targeting year range, to the and mentioned to revenue in growth full digits in XXXX, XX% XX%.

financial adjustments operating communicate made model, XXXX and a them to are the we our later we Given our we’ll date. resetting targets, at

Jorge, now and that, With take happy to would questions. I your be

Operator

Craig-Hallum. Please from comes Bennett first Chad ahead. [Operator our Instructions] question of And go

Chad Bennett

of X when kind I don’t Matt, force suite and reorganize looked however do across the business both of pretty that. and kind ago, long and segments how of years was. this of products them were so forth. sales actually at synergistic you and I more And sell enabled and thought to the together. all X.X the hired qualified approach salespeople kind I of reorganized into accelerated that them trained guess, actually we were We years, to the that the And hiring ago you year business two So, to do salespeople our segments thought we know, wanted now, came to and it the

three months? changed in what has So,

Matt Moynahan

seller, unifying intact. for -- there one three still the Individual security all digital was security sell agreements. you sales sales came account hardware, to unified I go and is And for force So, mentioned, for sellers in, sales in sell is to one and be can continue software products. the where individual unified those control force perspective we When forces, products. one to able as all will

there. changed has nothing So

of directly in we team, be have necessary. demand generate new application both. continue for combined the the and ramp What experience of the performance with existing sellers. invested is both those bring visibility their more into Both total really who enterprise changed, and the but came we are do believe really the applicable building business, they been and sales capability growth in out attacking know, have structure, marketing investing essentially cost the we simultaneously Key cost when the for has productive force -- as future. the a structure, to but attacking any What in the you really as more the story And we’ve necessary into we infrastructure been to sum sellers, to simultaneously parallel times.

But, I’ve of value execution, transformation. We believe still time the the look I capital at as think essentially commitment time our of about what efficient potential. the based go more the is that Rule we a our execute look has what the XX, through deployment we at longer long-term in against execution, growth so, also when that’s taken And this to the time cost, and really And to the changed. have frame. to

the we from visibility uptake market. committed as the additional give more needed and generation manner on have attack engine, to essentially we calls, uptake sales Now was demand that the previous built in of in update capacity the of scratch the to an which you go to marketing

only required real Craig this everything has only make that the And intact. will, rebalancing, the transformation, that we’re has execute the to time so really frame. sure I time else the Chad, remains to would say, thing just -- thing been changed you -- if capital cost that against deploying And efficiently is

as Increased mentioned long-term call, the strategy uptick. approach, focus segment intact. structure, unchanged, the will started in division with we agreements, growth the of I still believe, digital which Our remains remains and facilitate I the I potential that believe with

Chad Bennett

the Okay. cost P&L, in Then provide of some land numbers? least will rough or ranges can cuts where kind into you rough the color at

Matt Moynahan

I’ll level more. for a give you a you it then high Jorge bit level, little down can and just high break

So for We And portfolios, that $XX to put profitable That approach upon savings. term. to to the my obviously, put in other we’ll came to good one. comfort million that. $XX of parts very, this That That arrival. the we the long as extended I cost also business, think there cetera. that high have very -- execute million well in be was against, et able we gives and right I we business executed me manage place the parallel restructuring more initial that execution out that of we’ve at end the rationalizing

parallel and cost. in really increased the that The sales increased in happened investment driven was marketing by spend

future really are a of It’s to company. Okay? And company we implementing performance-based critical so culture. any [Technical our and the Difficulty]

commensurate be entities two the providing. marketing a reduction see meaningful spending for sales would capital that of and will you so rate growth in And efficient with what expenses those are

-- about allow with sales close some across marketing portfolio. to focus us in So, in punch fists as talked refine across product-related two parallel call, and to broad and we’ve we you made, a decisions our if roll very the

had to that decisions were of few certain those CX, other platforms technical and internally projects a One cloud-based decisions we with and going. our regard Digipass token, was around

So being area. product primary the message next with marketing is largest sales and -- the

do Jorge, you more little to level? a want give breakdown, detail a

Jorge Martell

for How Chad. Yes. Thanks are Yes. you? the question. Hey

cost things. I share covered I’ll is, from -- One savings is in think, well, So come couple but Matt, to sales will lion’s I add a and of just going of you the think be pretty marketing. what the

be also would it R&D, Secondly, G&A. but

So it’s really three categories, Chad, and OpEx looking optimizing at those all those.

every with is growth, at three NRI Company Going line going the the dollar growth -- are the ultimately biggest for and be and have categories, top in all have S&M. and has that R&D end back But to tied to the what Matt to drive in the will impacted G&A to to buck tied day. products mentioned it bang of S&M, majority it’s the spend

Operator

question comes Gray ahead. BTIG. our next Powell of go Please And from

Gray Powell

A side. was top how ARR decisions? few my Maybe customers environment to Can much of the company-specific a issues and the through due macro and versus weaker-than-expected ongoing more help to delaying you line. just transformation more just the on on reduction start us think

Jorge Martell

I can take Matt. one, this

So, a Gray, take to maybe back. step just

And taking ending ARR when obviously of and well, to, the growth -- again, -- longer, part quarter, at primarily the has that is that. it’s of taking the macro I sales this longer which but over the X% partly it quarters, look -- deceleration, would you couple say, marketing so last the is as related impacted

X% will X% that has other about as is on I impact. had has The right? that component an an well impact That That’s sunsetting, mention that on. the product

in X the well, this or The primarily we larger contracted, that as other couple clients which component, of in the is calls QX. mentioned last X

like but few also see business, of the in you’ll some So, of insurance sort last due that quarter in would to case to macro, continue extent, to to or then And this mortgage important a DA the verticals, the see quarters. to is another particularly for and mention say, levels I that so. lower lower the compared

as driven verticals. well, so And again, the that those by particularly impacting macro, but also,

about well deals increasing. the currently QX, to more of macro pronounced one DA. I in particularly mentioned things then that We as saw just is, in the mention And

slipped into QX, deal, would slipped One to of million it. the QX mentioned, added points that ACV another have deals deal, Matt that that X that from X.X a

And think also that a than lower both, and the macro, it’s I but like sales it’s also sort anticipated so equally marketing dampening Gray, growth. I is taking of think of but combination engine

Gray Powell

the then And in the I in one, million But QX. to confidence additions, weeds think too so next that net of $X.X just your have new that declined ARR can or you at ARR get XXXX comps, that and level you math. there you want I that ARR of so guidance if last just improvement what’s just I XX% million us the implies $X.X I reaffirm half this second helps. target? that sort on and look like sort new year. of so like But the in understand driving don’t into versus about new The of midpoint easier help of add guess

Jorge Martell

then that add the going that of X of new obviously, element existing we Yes. be number deal part the -- clients. going said, that ACV well other Like to to of is that’s existing the that the mentioned have, year. that share be we’ll to lion’s but expansion are of the as Chad. There’s an clients, to expansion primarily be of to to for logos components the get have that full of I the And million the just I remainder going

Gray Powell

more. Taking better just effectively if to a from a guess, Okay. just breakeven then, lot. Cool. XX% year, this it’s margins EBITDA squeeze know I in XX%. really can slightly big I or breakeven one than jump. like It’s to And I

this that the expectations related versus think in that months? business So, restructuring? it, leverage next, natural in even the how can do call of you And to if target much over comes to you hit from ringing you’re again XX X that out the cost is additional revenue below

Matt Moynahan

Yes. I’ll that take one.

on things previously Xst fully of we improved structure really have Company the dramatically we January a I in. since was arrived which team, to -- the -- arrived is when and So was think had cost in able the that the came way operational not tackle we’ve that on, since ability the intact our in more rigor and I

that. good very about feel I So,

confidence have and sight end be already with will of begun actions, we But is the of strong. that, environment, We these that have estimates so line into executable, put happening by this that there my range year but degree vast do the continue completed And monitor that for to macroeconomic the do we actions and of some of we hitting in sure. we in XXXX. believe majority anticipate we out are

Operator

next question of Anja ahead. Please Sidoti. Soderstrom go comes our And from

Anja Soderstrom

that them and has more started? Was addressed taking I’m that developed the for questions. in did have my saw increased that you Thank curious of end Most the how been deal of towards that since But second being the seeing already. quarter, just you scrutiny the about more quarter pronounced. when or start you

Matt Moynahan

had When Anja, think that the migration the the a eyeballs And already our which shown installed there’s we into e-signature business from comes obviously, actually good in been and and by contractual a lot the of QX driven a or size reviewing macroeconomic in of things of to case customers, of customer, of number base when right, cloud, contract, happen, $X has right growth situations it place. the moved mean, the so, but that the we get delivers, new We’ve on-premise of given obviously, in deal, -- I obviously we’ve result number right? a it our was environment. transaction to that the signators required was that QX, out were also execute that like the were mentioned specifically to million that product it does, that expansion. deal

less is that business it have on because we place, of logo it’s we to customers already in migrations cases, So, would of we already the place. around so in new base Most vehicles from have still the the specific, see in cloud. -- deal most on-premise installed the

Operator

And from ahead. Please Kessinger question comes Davidson & of Company. next D.A. our Rudy go

Rudy Kessinger

almost to for guess, been you of years that me wrong, the just still XXXX. a kind to if I’m curious, yet have to two you’ve new of couple of Matt, profile. on but these questions maybe hire already Similar improvement any now in I’m here correct growth asked. I reps, see the and we’re been started May

pricing expected? so, you macro? that today, reps you look at you heard hired not happening? of And to productivity the it fully to at that and would look it year, wave I some productive growth competitive ramping ramped you reps pressure? of drive to Would -- attribute what first get first to the would attribute if attribute enablement? -- you productivity you attribute it reps inability as to call it sales their you this faster you and Would attribute those What not that Would to you wave

Matt Moynahan

Sure, Yes. No. sure.

came the So years. in so XX, into adding in and plan put November X.X began been additional reps. play year, May really We of back in it’s in I about half last

our the to So stood strategic force Rudy, there, New we about three-year sales May as end in we plan, I XX out York, of by rolled year. in and reps, the -- this XX, committed had doubling we XX

Okay. We did hit that target.

the seen you’ve the is Company full were across what that here. of certainly really, year a so And performance XX in

half we in, through came quarter I the that. quarter, were year, and When partly Okay? through

will. this has second go to that half in mark And would staggered the that’s to three-quarter last year, and back quarter, came So I and their of performance, dates of you many if second anniversary. year many, sort the one cohort, ability the four-quarter that had on into which

that’s total But you look when performance, of So the the the of at through system. sum flowing the reps. still

fact really. on primarily multifold and demand it this and it’s across but maturing say sales just company multiple generation. marketing would comes And to down that I really fronts, the So the is

Okay?

The one has team But quarter not is I’ve a sure, job, done been it’s still reps get here. the go them time. ability more brand say but those a since for is I’d thing. so, with maturing whose good every ramp built And the to taking and company being demand get

obviously, restructuring to have why any some performance the should company going will you’re in as And that. done, some items seeing of so, the related that that’s to of cases, -- is be be

agreement we’ve force now to the the augmenting was productivity, are possibly talent had some and the we’ve the reason think We I that of would make sales not existing that to in can is come as those sure that seen the But talent to not put got case. that play go and digital segment So, with reps. productive reps is the together costs in productive the the make the tenure we team has that be And best no that that assume here. of right? as certainly in given line out,

an area good have the it say to the rebalance. am expense And have sales sales we part of given of so, the team. I’d total that we of our in a confident I productivity is sum

the to it. We marketing the mix parallel lines have to of rates, the normal then cross that demand for sales of we’re journey. productivity I and engine have on and cross get generation that and to have to still it -- those to them to on make generation mix would feed act to sure that And building the it’s demand we’re in out say a

Rudy Kessinger

in of digits XX, for think being that growth of Okay. of And targets mid-single that the I were ‘XX higher mix more to, growth, margins, expect as kind XX% -- getting previously percent then you a about roughly or And likely now think, to the or XX-XX? opposed Rule we as should outlook be you the ‘XX growth as low ARR we XX-ish lower? should think to then, to similar when revenue given

Matt Moynahan

Yes.

the one, So I’ll last take will the then ARR. Jorge into go

to of here, so So to we’ve getting XX. committed come administration, the listen, we’re new since speak, Rule the in to

XX sure from or equation, and I on different through achieve of that EBITDA. it think which to to into we close growth it I We digital that Rule action took has a Rule ‘XX was of it. back just continue combination for action right? time engine comment, going take of of and the a growth okay? the And it XX think value that adjusted that you XX-XX that to got growth majority those taking exited know as our We the three-year plan, have agreements almost that really XX if will, targets, a sort top profile execution the targeting Obviously, ‘XX, when so going make the split we between you security profitability. look at line is XXXX to of time to that two path business, was realizing to in of coming

align get but stronger, that to obviously stated way in hopefully of to now new have. appropriately on go expenses Rule we that and into we’ll we’ll us we different more think a equation Okay? profit right of quickly, take target given growth as than we But XX, the get based get expenses that recalibrate it that also elements previously we and for to time profile. stand the now I information the As going, engine to and perfect makes sense

Jorge Martell

Rudy, back to And question. your going first

to I of and your couple the So, right XXXX. from premature that’s of expectation. due all But in full we But do we’re little that I like KPIs the metrics like publishing just KPIs a I sort address said, course think for be XXXX over next We’ll the question, think publishing will later. still quarters.

Operator

to would the back remarks. for to you. Moynahan closing now Thank turn Matt like I conference

Matt Moynahan

joining I you, you for your as sessions Thank look on quarter, and much appreciate and forward to today. couple the Thank giving we forward much next your updates our everyone, time, the look future weeks one-on-one course I to our the time of for us progress very Company you and today. transformation. in over very of

Operator

today’s conference now This concludes you participating, disconnect. and call. you for may Thank

OneSpan (OSPN) 9 Aug 232023 Q2 Earnings call transcript