Company Performance - OneSpan's upcoming EPS is projected at $0.19, indicating a 205.56% increase compared to the same quarter of the previous year [2] - The company's shares have decreased by 0.92% over the last month, underperforming the Computer and Technology sector's gain of 6.52% and the S&P 500's gain of 3.53% [5] - In the latest trading session, OneSpan closed at $12.82, reflecting a -0.47% move from the previous day [8] Valuation Metrics - OneSpan has a Forward P/E ratio of 12.04, which is a discount compared to its industry's average Forward P/E of 30.12 [3] Analyst Sentiment - Recent revisions to analyst forecasts for OneSpan are important, as upward revisions indicate analysts' positivity towards the company's business operations [1] - OneSpan currently holds a Zacks Rank of 1 (Strong Buy), which has historically outperformed with an average annual gain of +25% since 1988 [6] - The Zacks Industry Rank for the Internet - Software industry is 81, placing it in the top 33% of all 250+ industries [10]

OneSpan (OSPN) closed the most recent trading day at $12.63, moving +0.8% from the previous trading session. The stock exceeded the S&P 500, which registered a gain of 0.16% for the day. On the other hand, the Dow registered a gain of 0.04%, and the technology-centric Nasdaq increased by 0.49%. Investors will be eagerly watching for the performance of OneSpan in its upcoming earnings disclosure. The company is forecasted to report an EPS of $0.19, showcasing a 205.56% upward movement from the corresponding ...

Investors will be eagerly watching for the performance of OneSpan in its upcoming earnings disclosure. In that report, analysts expect OneSpan to post earnings of $0.19 per share. This would mark year-over-year growth of 205.56%. The Zacks Rank system, which varies between #1 (Strong Buy) and #5 (Strong Sell), carries an impressive track record of exceeding expectations, confirmed by external audits, with stocks at #1 delivering an average annual return of +25% since 1988. Within the past 30 days, our conse ...

Core Viewpoint - OneSpan Inc. is a security software company specializing in e-signatures and fraud protection, currently rated as a Zacks Rank 1 (Strong Buy) with a D for Value and an A for Growth [1] Company Description - OneSpan Inc. designs and develops security software and e-signature solutions to protect devices and financial transactions from fraud and misuse, offering risk analytics, mobile security, and authentication services [2] Earnings History - Over the past year, OneSpan has achieved three consecutive earnings beats and one miss against the Zacks Consensus Estimate, with an average positive earnings surprise of 501% [3] - Two quarters ago, the company reported an EPS of $0.19 against an expected $0.01, resulting in an 1,800% positive earnings surprise [3] Earnings Estimates Revisions - The consensus estimate for the current quarter remains at $0.19, while the full fiscal year 2024 estimate has increased from $0.99 to $1.07 over the last 60 days [4] Valuation - OneSpan's forward PE multiple stands at 11.8x, significantly below the market average and many peers, with a price to book multiple of 2.8x and a price to sales multiple of 1.97x [5] - The company has improved its operating margins from negative 7.5% to positive 4.4% over the last three quarters, indicating potential for increased EPS alongside revenue growth [5]

PART I. FINANCIAL INFORMATION [Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) OneSpan Inc. reported a significant Q1 2024 turnaround, achieving **$13.5 million** net income from a prior-year loss, and increasing cash to **$63.9 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $63,859 | $42,493 | | Accounts receivable, net | $32,382 | $64,387 | | Total current assets | $134,167 | $146,343 | | Total assets | $277,142 | $289,191 | | Deferred revenue (current) | $55,573 | $69,331 | | Total current liabilities | $92,171 | $114,830 | | Total liabilities | $106,273 | $130,050 | | Total stockholders' equity | $170,869 | $159,141 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenue | $64,843 | $57,607 | | Gross profit | $47,395 | $39,286 | | Operating income (loss) | $14,110 | $(8,130) | | Net income (loss) | $13,468 | $(8,356) | | Diluted EPS | $0.35 | $(0.21) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $26,960 | $13,237 | | Net cash used in investing activities | $(3,080) | $(2,546) | | Net cash used in financing activities | $(1,795) | $(1,098) | | Net increase in cash | $21,351 | $10,162 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) OneSpan's notes detail business transformation, segment performance, and restructuring, including **$1.5 million** in Q1 2024 cost reduction charges - In August 2023, the company modified its strategy to focus more on improving profitability margins, approving cost reduction actions (the "2023 Actions") to drive higher profitability while maintaining long-term growth potential[24](index=24&type=chunk) Segment Performance - Q1 2024 vs Q1 2023 (in thousands) | Segment | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | :--- | | **Digital Agreements** | Revenue | $14,414 | $11,552 | | | Gross Profit | $9,892 | $8,448 | | | Operating Loss | $(265) | $(6,033) | | **Security Solutions** | Revenue | $50,429 | $46,055 | | | Gross Profit | $37,503 | $30,838 | | | Operating Income | $25,878 | $15,631 | Revenue by Major Products and Services (in thousands) | Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Subscription | $39,994 | $29,956 | | Maintenance and support | $10,571 | $11,161 | | Hardware products | $12,576 | $14,866 | | Professional services and other | $1,702 | $1,624 | | **Total Revenue** | **$64,843** | **$57,607** | - In connection with its restructuring plan, the company recorded **$1.5 million** in charges for Q1 2024, primarily for employee severance costs. The remaining restructuring liability as of March 31, 2024, is **$4.2 million**[87](index=87&type=chunk)[89](index=89&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses OneSpan's financial performance, highlighting **13% revenue growth** and a shift to operating income, with **Adjusted EBITDA at $19.8 million** [Business Transformation and Strategy](index=21&type=section&id=Business%20Transformation%20and%20Strategy) OneSpan's business transformation, initiated in late 2021, shifted in August 2023 to prioritize **Adjusted EBITDA margin improvement** via cost reduction - In response to challenges in growing Digital Agreements revenue, the company modified its strategy in August 2023 to focus more heavily on improving Adjusted EBITDA margin across the business[103](index=103&type=chunk) - The company expects to incur an additional **$2.5 million to $4.5 million** in restructuring charges related to the 2023 Actions, primarily for employee severance[106](index=106&type=chunk) - On January 4, 2024, Victor Limongelli was appointed as Interim Chief Executive Officer, replacing Matthew Moynahan[108](index=108&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q1 2024 revenue increased **13% to $64.8 million**, with gross margin at **73%** and operating expenses down **30%**, leading to **$14.1 million** operating income Revenue Growth by Segment (Q1 2024 vs Q1 2023) | Segment | Revenue Growth | Key Drivers | | :--- | :--- | :--- | | Digital Agreements | +25% | Higher cloud subscription revenue from existing customer expansions | | Security Solutions | +9% | Higher on-premises term subscription revenue and customer conversions from perpetual to term licenses | Revenue by Geographic Region (in thousands) | Region | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | EMEA | $31,842 | $27,820 | +14% | | Americas | $21,344 | $20,498 | +4% | | APAC | $11,657 | $9,289 | +25% | - Total gross margin increased to **73%** in Q1 2024 from **68%** in Q1 2023, primarily due to a more favorable revenue mix between software and hardware, as well as lower third-party license costs[141](index=141&type=chunk)[145](index=145&type=chunk) - Operating expenses decreased by **$14.1 million (30%)** YoY, driven by significant reductions in Sales and Marketing (**-35%**), Research and Development (**-13%**), and General and Administrative (**-40%**) expenses, largely due to lower headcount and consulting fees[146](index=146&type=chunk)[148](index=148&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) OneSpan's cash and cash equivalents increased to **$63.9 million** as of March 31, 2024, with **$27.0 million** from operations, improving liquidity - Cash and cash equivalents increased to **$63.9 million** at March 31, 2024, from **$42.5 million** at December 31, 2023[161](index=161&type=chunk)[162](index=162&type=chunk) - Cash provided by operating activities was **$27.0 million** for Q1 2024, more than double the **$13.2 million** generated in Q1 2023, primarily due to higher net income and a large decrease in accounts receivable[168](index=168&type=chunk) - Working capital increased to **$42.0 million** at March 31, 2024, from **$31.5 million** at December 31, 2023[169](index=169&type=chunk) [Key Business Metrics and Non-GAAP Financial Measures](index=32&type=section&id=Key%20Business%20Metrics%20and%20Non-GAAP%20Financial%20Measures) OneSpan's key metrics show strong performance, with ARR growing **9% to $154.6 million** and Adjusted EBITDA at **$19.8 million** - Annual Recurring Revenue (ARR) was **$154.6 million** at March 31, 2024, a **9% increase** from **$141.3 million** at March 31, 2023, driven by an increase in subscription contracts[181](index=181&type=chunk) - Net Retention Rate (NRR) was **107%** at March 31, 2024, compared to **108%** at March 31, 2023[183](index=183&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (loss) | $13,468 | $(8,356) | | Interest income, net | $(101) | $(503) | | Provision for income taxes | $1,034 | $689 | | Depreciation and amortization | $2,082 | $1,319 | | Long-term incentive compensation | $1,621 | $3,923 | | Restructuring and other related charges | $1,516 | $706 | | Other non-recurring items | $171 | $585 | | **Adjusted EBITDA** | **$19,791** | **$(1,637)** | [Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in OneSpan's market risk were reported during Q1 2024, referring to the Annual Report on Form 10-K for details - There have been no material changes in the company's market risk during the first quarter of 2024[189](index=189&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) OneSpan's CEO and CFO concluded disclosure controls were effective as of March 31, 2024, with no material changes to internal controls during Q1 - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[190](index=190&type=chunk) - No material changes were made to the company's internal control over financial reporting during the first quarter of 2024[191](index=191&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) OneSpan is involved in various legal proceedings, but management does not anticipate a material adverse impact on financial results - The company does not expect ongoing legal proceedings to have a material adverse impact on its financial results[193](index=193&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to OneSpan's risk factors were reported for the quarter, consistent with the prior Annual Report on Form 10-K - No material changes to risk factors were reported for the quarter[195](index=195&type=chunk) [Issuer Purchases of Equity Securities](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) OneSpan did not repurchase common stock in Q1 2024; **$15.8 million** remained available under the program expiring May 11, 2024 - The company did not purchase any of its shares during the first quarter of 2024[196](index=196&type=chunk) - As of March 31, 2024, approximately **$15.8 million** remained available for repurchase under the stock repurchase program, which was authorized until May 11, 2024[196](index=196&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and the 2024 Management Incentive Plan - Key exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and the 2024 Management Incentive Plan (Exhibit 10.1)[197](index=197&type=chunk)[198](index=198&type=chunk)

"I am very proud of the OneSpan team's performance in the first quarter, which resulted in a strong topline, enhanced profitability and positive cash flow generation," stated OneSpan interim CEO, Victor Limongelli. "Since I've taken the helm in January, we have continued to find opportunities for additional cost reductions, as well as operational efficiencies later in the year, totaling incremental savings of approximately $10 million on an annualized basis. These savings, combined with our strong Q1 perfor ...

Financial Data and Key Metrics Changes - The company reported an 11% year-over-year revenue growth to $63 million in Q4 2023, with an annual revenue increase of 7% to $235.1 million for the full year [26][72] - Annual Recurring Revenue (ARR) grew 11% year-over-year to $155 million, with subscription revenue increasing 19% to $106.4 million for the full year [35][48] - Adjusted EBITDA for Q4 2023 was $11.2 million, representing an 18% margin, the highest quarterly adjusted EBITDA margin in several years [26][76] - GAAP net income per share was $0.01 in Q4 2023, compared to a GAAP net loss per share of $0.08 in the same period last year [75] Business Line Data and Key Metrics Changes - The Digital Agreements segment saw a 17% revenue growth in Q4 2023, while the Security Solutions segment grew by 10% [72] - Subscription ARR for Digital Agreements grew 18% to $49 million, while Security Solutions subscription ARR grew 19% to $75 million [57][54] - DIGIPASS hardware token revenue increased 16% in Q4 2023, benefiting from contracts that closed earlier than expected [49][56] Market Data and Key Metrics Changes - Revenue mix by region in Q4 2023 was 49% from EMEA, 34% from the Americas, and 17% from Asia Pacific, showing a slight shift from the previous year [60][61] - The company noted strong visibility into DIGIPASS orders from large banking customers, while mid-market visibility remains less certain due to macroeconomic conditions [30][43] Company Strategy and Development Direction - The company is focused on operational efficiency and has made strategic changes, including sunsetting low ROI solutions and restructuring to align costs with growth [33][40] - Plans to introduce new products and rebuild the channel network to drive top-line growth were highlighted, with a commitment to achieving the rule of 40 [31][33] - The company aims to achieve annualized cost savings of $64 million to $65 million by the end of 2024, up from previous projections [47][71] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of customer relationships, particularly with major banks, and noted the team's effective execution amid changes [7][24] - The company anticipates continued challenges in the mid-market banking sector but expects to leverage its competitive advantages for growth [30][41] - Future guidance for 2024 includes revenue expectations in the range of $238 million to $246 million, with ARR projected between $160 million and $168 million [101] Other Important Information - The company achieved annualized cost savings of over $58 million for 2023, with a headcount reduction of approximately 5% [27][71] - The transition of identity verification solutions from the security business unit to digital agreements is expected to impact ARR and NRR in Q1 2024 [62] Q&A Session Summary Question: What surprised management the most since joining the company? - Management highlighted the strength of customer relationships, particularly with top banks, as a significant asset [7] Question: What are the opportunities for driving higher levels of growth? - Management indicated a focus on operational efficiency while exploring adjacent markets for growth, emphasizing a cautious approach to hiring [106] Question: What is the expected trend for maintenance and support revenue? - Management expects maintenance and support revenue to continue declining due to the transition from legacy contracts to subscription models [48][103]

November 8, 2023 OneSpan – The Digital Agreements Security Company Employees (9/30/23) PROPRIETARY AND CONFIDENTIAL. ALL RIGHTS RESERVED 4 Revenue Breakdown Geographic Split Our Vision A world of trusted digital customer interactions and transactions Our Solution Portfolio… MOBILE SECURITY VERIFY AUTHENTICATE INTERACT TRANSACT & SIGN VAULT …and Support High Value B2B & B2C Transactions Digital Agreements Market 2-3x larger than E-Signature E-Signature Market $5.3B IDV and Authentication Market $900M OSPN Re ...

Financial Data and Key Metrics Changes - Second quarter revenue increased by 6% to $55.7 million, with subscription revenue growing by 16% to $23 million, driven by a 20% increase in e-signature SaaS revenue and a 13% increase in security software revenue [13][86] - Adjusted EBITDA was negative $3.8 million compared to negative $1.5 million in the same period last year, primarily due to investments in sales and marketing [14][89] - Operating income was $8.5 million with an operating margin of 19%, consistent with the previous year [16] - ARR grew by 8% year-over-year to $144 million, with subscription contracts growing by 16% to $112 million [88] Business Line Data and Key Metrics Changes - Digital agreements segment saw ARR grow by 7% year-over-year to $49 million, with subscription ARR increasing by 9% to $43 million [71] - Security solutions segment ARR grew by 9% year-over-year to $96 million, with subscription ARR increasing by 20% to $69 million [90] - The decline in perpetual maintenance ARR is expected to continue as legacy contracts shift to subscription [90] Market Data and Key Metrics Changes - Revenue mix by region in Q2 2023 was 48% from EMEA, 33% from the Americas, and 19% from Asia Pacific, compared to 45%, 37%, and 19% in the same regions in Q2 last year [32] - Increased deal scrutiny and longer sales cycles were noted, particularly in the digital agreements segment, impacting sales and pipeline conversion rates [67][88] Company Strategy and Development Direction - The company is focusing on a five-pillar solution strategy to secure the entire digital transaction lifecycle, emphasizing identity verification and secure transactions [8] - Plans for substantial rightsizing, primarily related to headcount, are in place to achieve adjusted EBITDA targets for 2024 [9] - The company aims to achieve 20% to 23% adjusted EBITDA margin for the full year 2024, with a focus on balancing growth and profitability [24][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the macroeconomic environment has affected orders, particularly in the mid-market banking sector, and emphasized the need for efficient execution [10][25] - The company is committed to achieving the Rule of 40, targeting a mix of profitability and growth [43] - Increased scrutiny in deal-making was noted, particularly for new contracts, which has led to delays in decision-making [54][67] Other Important Information - The company plans to return up to $20 million in capital to shareholders by the end of 2023 through stock repurchases or dividends [24] - Actions taken in Q2 resulted in annualized cost savings of $7.9 million, with a target of $50 million to $55 million in total annualized cost savings by the end of 2025 [28] Q&A Session Summary Question: What is driving the improvement in ARR? - Management indicated that the improvement is partly due to easier comparisons and the maturation of sales and marketing efforts, although macroeconomic factors also play a role [4][41] Question: Can you provide details on cost cuts? - Cost cuts will primarily impact sales and marketing, with a focus on refining product-related decisions to enhance efficiency [20][60] Question: What is the outlook for revenue growth in 2024? - The company expects low to mid-single digits revenue growth for 2024, with ARR growth anticipated to be similar [59] Question: How will the company achieve the targeted EBITDA margins? - Management expressed confidence in achieving the targeted EBITDA margins through operational rigor and cost structure adjustments [49][50]

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