OneSpan (OSPN)2022-08-02 22:42Financial Data and Key Metrics Changes - The company reported a 21% year-over-year growth in Annual Recurring Revenue (ARR) to $134 million, with subscription contracts growing 35% to $98 million, accounting for approximately 73% of total ARR [21][22] - Revenue increased by 1% to $53 million, driven by a 26% growth in subscription revenue to $20 million, while perpetual-based software maintenance and non-recurring revenues decreased as expected [22][24] - Gross margin remained stable at 67%, with an increase in higher-margin digital agreement revenue offset by a product mix shift within the security solutions segment [22][24] - GAAP net loss per share was $0.23, compared to $0.17 in the same quarter of 2021, while non-GAAP net loss per share was $0.10, down from $0.40 year-over-year [26] Business Line Data and Key Metrics Changes - Digital Agreements ARR grew 27% to $45 million, with subscription ARR increasing 34% to $40 million, and revenue rising 10% to $10.5 million [27] - Security Solutions ARR grew 18% to $89 million, with subscription ARR increasing 35% to $57 million, while total revenue decreased 1% to $42 million due to expected declines in legacy deal flow [29] Market Data and Key Metrics Changes - Revenue mix by region showed 45% from EMEA, 37% from the Americas, and 19% from Asia Pacific, compared to 47%, 33%, and 20% in the same regions last year [33] Company Strategy and Development Direction - The company is focused on building a digital agreement security company, aiming to protect enterprises throughout the transaction lifecycle, from identity verification to secure storage [11][12] - A strategic transformation plan was announced, with the first reporting of results from two new segments: digital agreements and security solutions, aiming for accelerated growth in digital agreements and cash flow in security solutions [12][14] - The company plans to double its direct sales force by the end of fiscal year 2023 and improve new enterprise logo acquisition through enhanced sales enablement and cross-selling efforts [16] Management's Comments on Operating Environment and Future Outlook - Management noted that foreign currency exchange headwinds impacted revenue, estimating that Q2 revenue would have been $3.2 million higher without this impact, representing a year-over-year growth rate of 7% [20] - The company affirmed its full-year 2022 guidance, expecting total revenue to meet or exceed 2021 levels, ARR growth of 16% to 18%, and adjusted EBITDA losses between $4 million and $7 million [34][35] Other Important Information - The company achieved annualized cost savings of $11.8 million as of June 30, 2022, nearing the high end of its cost reduction plan [24] - The company ended Q2 2022 with $98 million in cash and no long-term debt, having used $15 million in operations during the quarter [32] Q&A Session Summary Question: What were the differentiators in winning esign deals and how did security bookings perform? - Management noted healthy demand for Digipass solutions and emphasized the importance of a unified go-to-market strategy to increase new logos in the enterprise segment [40][41] Question: Have there been any changes in customer behavior or sales cycles in Europe? - Management indicated no material decline in demand, with slight upticks noted, particularly in mission-critical security solutions for online banking [51][52] Question: Why is there a step down in EBITDA loss expected in the second half? - Management explained that severance costs and timing of sales and marketing expenses would impact the EBITDA figures, with savings accruing towards the end of the period [60][61] Question: What interest is being seen in the virtual room product? - Management reported significant interest in the virtual room product, with plans to integrate it into the unified go-to-market strategy as the enterprise sales team ramps up [64] Question: Is ARR growth expected to bottom in Q4 and then reaccelerate? - Management anticipates that ARR growth will bottom in Q4 and begin to reaccelerate in Q1 as new sales initiatives take effect [66]