OneSpan (OSPN) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Annual recurring revenue (ARR) grew 21% year-over-year to $131 million, with SaaS subscription and term-based subscription contracts growing 36% and accounting for approximately 72% of total ARR [12][13] - Total recurring revenue increased 22% year-over-year to$ 35 million, representing 95% of software and services revenue [12][13] - Adjusted EBITDA improved to $0.2 million from a negative$ 5.3 million year-over-year, with an adjusted EBITDA margin of 0.5% compared to negative 10.4% in the previous year [15][16] - GAAP earnings per share were $0.13, compared to a loss per share of$ 0.23 in the first quarter of 2021 [16] Business Line Data and Key Metrics Changes - E-signature, SaaS, and term-based subscription revenue increased 40% year-over-year, with SaaS subscription revenue growing 20% to $10 million [12][13] - Term-based subscription revenue grew 65% to$ 13 million, benefiting from multi-year e-signature on-premises renewals [12] - Maintenance revenue declined 5% year-over-year to $12 million as the company migrated to more recurring software license models [13] Market Data and Key Metrics Changes - Revenue mix by region in Q1 2022 was 47% from EMEA, 33% from the Americas, and 20% from AsiaPac, compared to 53%, 33%, and 14% respectively in the same quarter of the previous year [16] Company Strategy and Development Direction - The company plans to operate as one team with a unified go-to-market strategy, focusing on digital agreements and security solutions [9][10] - There is an emphasis on accelerating growth in the digital agreements category, including e-signature and virtual room solutions, while also returning total security to growth [9][10] - The company aims to integrate security technologies into digital agreement solutions as a key differentiator in the market [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position to drive growth in digital agreements and cybersecurity markets, highlighting a strong customer base [10] - The company expects full-year 2022 revenue to meet or exceed 2021 levels, with an update on adjusted EBITDA outlook to be provided at the upcoming Investor Day [18] Other Important Information - The company has completed most action items in its cost reduction plan, achieving cost reductions of$ 2.7 million in Q1 2022 [15] - The company ended Q1 2022 with $120 million in cash and no long-term debt [16] Q&A Session Summary Question: Impact of Russia-Ukraine tensions on business - Management indicated minimal exposure to Russia, having stopped sales into the country months prior, and noted increased demand for hardware tokens in Europe for security purposes [20][21] Question: Directional commentary on adjusted EBITDA - Management stated that they are still reviewing adjusted EBITDA numbers and will provide updates during the Investor Day [22][23] Question: Changes in company culture and employee retention - Management reported strong employee reception to the new vision and strategy, with voluntary attrition below industry averages [25] Question: Build-out of the executive team - Management confirmed plans to add several key executive positions, including a Chief Product Officer and Chief Revenue Officer, to strengthen the leadership team [26][27] Question: Subscription revenue performance - Management acknowledged a slight slowdown in subscription revenue growth post-COVID and indicated that deal flow contributions to revenue are relatively small [29][30]