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OneSpan Reports Fourth Quarter and Full Year 2022 Financial Results

  • Fourth quarter revenue decreased 4% year-over-year to $56.6 million; full year revenue increased 2% year-over-year to $219.0 million
  • Fourth quarter subscription revenue increased 28% year-over-year to $23.8 million; full year subscription revenue increased 30% year-over-year to $89.2 million
  • Annual Recurring Revenue (ARR) increased 12% year-over-year to $138.7 million1
  • Net Retention Rate (NRR) of 107%2

OneSpan Inc. (NASDAQ: OSPN), the digital agreements security company, today reported financial results for the fourth quarter and full year ended December 31, 2022.

“We substantially redefined OneSpan during 2022 and ended the year with strong momentum, exceeding our expectations for revenue and adjusted EBITDA,” stated OneSpan CEO, Matt Moynahan. “With significant improvements in operational rigor and financial discipline, we are well positioned to continue our transformational journey. Key priorities for 2023 include new enterprise logo acquisition and market share gains along with profitability and margin expansion discipline.”

Key Financial Results

Fourth Quarter 2022 Financial Highlights

  • Total revenue was $56.6 million, a decrease of 4% compared to $59.2 million for the same quarter of 2021. Changes in foreign exchange rates as compared to the prior year period negatively impacted fourth quarter 2022 revenue by approximately $2.9 million.3 Digital Agreements revenue was $12.4 million, an increase of 15% year-over-year. Security Solutions revenue was $44.2 million, a decrease of 9% year-over-year.
  • ARR increased 12% year-over-year to $138.7 million. Changes in foreign exchange rates as compared to the prior year period negatively impacted ARR by approximately $3.9 million.3
  • Gross profit was $38.0 million, or 67% gross margin, compared to $37.5 million, or 63% in the same period last year.
  • Operating loss was $4.0 million, compared to operating loss of $6.0 million in the same period last year.
  • Net loss was $3.1 million, or $0.08 per diluted share compared to $13.8 million, or $0.35 per diluted share in the same period last year. Non-GAAP net income was $1.2 million, or $0.03 per diluted share, compared to Non-GAAP loss of $9.3 million, or $0.24 per diluted share in the same period last year.4
  • Adjusted EBITDA was $3.2 million compared to $(0.6) million in the same period last year. Changes in foreign exchange rates as compared to the prior year period negatively impacted fourth quarter Adjusted EBITDA by approximately $1.1 million.4
  • Cash, cash equivalents and short-term investments were $98.8 million at December 31, 2022. During the year ended December 31, 2022, we repurchased $5.7 million in shares of our common stock, compared to $7.5 million in shares repurchased during the year ended December 31, 2021.

Full Year 2022 Financial Highlights

  • Total revenue was $219.0 million, an increase of 2% compared to $214.5 million for the same period of 2021. Changes in foreign exchange rates as compared to the prior year period negatively impacted 2022 revenue by approximately $12.2 million.3 Digital Agreements revenue was $48.4 million, an increase of 19% year-over-year. Security Solutions revenue was $170.6 million, a decrease of 2% year-over-year.
  • Gross profit was $148.6 million, or 68% gross margin, compared to $142.9 million, or 67% in the same period last year.
  • Operating loss was $27.1 million, compared to $26.1 million in the same period last year.
  • Net loss was $14.4 million, or $0.36 per diluted share compared to $30.6 million, or $0.77 per diluted share in the same period last year. Non-GAAP net loss was $1.8 million, or $0.05 per diluted share, compared to $16.2 million, or $0.41 per diluted share in the same period last year.
  • Adjusted EBITDA was $6.4 million compared to $(5.1) million in the same period last year. Changes in foreign exchange rates as compared to the prior year period negatively impacted Adjusted EBITDA by approximately $1.1 million.

Recent Business Highlights

  • Announced the acquisition of ProvenDB, which we expect to provide a foundational architecture for future blockchain solutions, including secure vaulting, for Web3. This acquisition closed on February 22, 2023.
  • Introduced a new and disruptive enterprise pricing model for secure digital agreements, enabling simplified, flexible, and cost effective pricing to help customers drive business outcomes without overbuying and under-consuming licenses and transactions at the most favorable price-per-value in the industry.
  • Launched OneSpan Notary to enable notaries and customers to complete agreements and notarize documents in a secure and trusted environment. OneSpan Notary offers a streamlined user experience while offering high levels of security.

Financial Outlook

For the Full Year 2023, OneSpan expects:

  • Revenue to be in the range of $232 million to $242 million, representing a growth rate of 6% - 11%
  • ARR to be in the range of $157 million to $164 million, representing a growth rate of 13% - 18%
  • Adjusted EBITDA to be in the range of $3 million to $6 million4

We are revising our expected long-term financial targets as follows:

  • Revenue to grow at a 12% - 14% CAGR through 2025, as compared to our previous target of 10% - 12%
  • ARR to grow at a 20% or higher CAGR through 2025, consistent with our previous target
  • NRR to exceed 120% exiting 2025, consistent with our previous target
  • Gross profit margin to exceed 70% in 2025, as compared to our previous target of approximately 70%
  • Adjusted EBITDA to be in the range of 10% - 12% in 2025, as compared to our previous target of 8% - 10%

Conference Call Details

In conjunction with this announcement, OneSpan Inc. will host a conference call today, February 28, 2023, at 4:30 p.m. EST. During the conference call, Mr. Matthew Moynahan, CEO, and Mr. Jorge Martell, CFO, will discuss OneSpan’s results for the fourth quarter and full year 2022.

To access the conference call, dial 844-200-6205 for the U.S. or Canada and 1-929-526-1599 for international callers. The access code is 265194.

The conference call is also available in listen-only mode at investors.onespan.com. The recorded version of the conference call will be available on the OneSpan website as soon as possible following the call and will be available for replay for approximately one year.

____________________________________________

1

 

ARR is calculated as the approximate annualized value of our customer recurring contracts with a term of at least one year, as of the measurement date. These include subscription, term-based license, and maintenance contracts and exclude one-time fees. To the extent that we are negotiating a renewal with a customer after the expiration of a recurring contract, we continue to include that revenue in ARR if we are actively in discussion with the customer for a new recurring contract or renewal, or until such customer notifies us that it is not renewing its recurring contract.

2

 

NRR is defined as the approximate year-over-year growth in ARR from the same set of customers at the end of the prior year period. We previously referred to this metric as Dollar-Based Net Expansion (DBNE). There was no change in how we define or calculate NRR as compared to DBNE.

3

 

We calculate the impact of changes in foreign exchange rates by translating the applicable foreign-denominated financial results for the current year monthly period(s) from foreign currency to U.S. dollars using the monthly average foreign exchange rate for the same prior year period(s), and comparing it to the current year translated amounts using the applicable current year monthly average foreign exchange rates.

4

 

An explanation of the use of Non-GAAP financial measures is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of each Non-GAAP financial measure to the most directly comparable GAAP financial measure has also been provided in the tables below. We are not providing a reconciliation of Adjusted EBITDA guidance to GAAP net income, the most directly comparable GAAP measure, because we are unable to predict certain items included in GAAP net income without unreasonable efforts.

About OneSpan

OneSpan helps organizations accelerate digital transformations by enabling secure, compliant, and refreshingly easy customer agreements and transaction experiences. Organizations requiring high assurance security, including the integrity of end-users and the fidelity of transaction records behind every agreement, choose OneSpan to simplify and secure business processes with their partners and customers. Trusted by global blue-chip enterprises, including more than 60% of the world’s largest 100 banks, OneSpan processes millions of digital agreements and billions of transactions in 100+ countries annually.

For more information, go to www.onespan.com. You can also follow @OneSpan on Twitter or visit us on LinkedIn and Facebook.

Forward-Looking Statements

This Press Release contains forward-looking statements within the meaning of applicable U.S. securities laws, including statements regarding the outcomes we expect from our strategic transformation plan; our plans for managing our Digital Agreements and Security Solutions segments; our expectations for our use of technology acquired in our ProvenDB acquisition; the potential benefits, performance and functionality of our products and solutions, including future offerings; our expected financial results for full year 2023; our expected long-term financial targets; and our general expectations regarding our operational or financial performance in the future. Forward-looking statements may be identified by words such as "seek", "believe", "plan", "estimate", "anticipate", “expect", "intend", “target”, "continue", "outlook", "may", "will", "should", "could", or "might", and other similar expressions. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could materially affect our business and financial results include, but are not limited to: our ability to execute our strategic transformation plan; our ability to attract new customers and expand sales to existing customers; our ability to effectively develop and expand our sales and marketing capabilities; our ability to hire, train, and retain sales and other employees necessary to implement our strategic transformation plan; our ability to successfully develop and market new product offerings and enhancements; the loss of one or more large customers; difficulties enhancing and maintaining our brand recognition; competition; lengthy sales cycles; departures of senior management or other key employees; changes in customer requirements; interruptions or delays in the performance of our products and solutions; real or perceived malfunctions or errors in our products; the potential effects of technological changes; economic recession, inflation, and political instability; the impact of the COVID-19 pandemic and actions taken to contain it; our ability to effectively manage third party partnerships, acquisitions, divestitures, alliances, or joint ventures; security breaches or cyber-attacks; claims that we have infringed the intellectual property rights of others; price competitive bidding; changing laws, government regulations or policies; pressures on price levels; component shortages; delays and disruption in global transportation and supply chains; reliance on third parties for certain products and data center services; impairment of goodwill or amortizable intangible assets causing a significant charge to earnings; actions of activist stockholders; and exposure to increased economic and operational uncertainties from operating a global business, as well as other factors described in the “Risk Factors” section of our Annual Report on Form 10-K, as updated by the “Risk Factors” section of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. Our filings with the Securities and Exchange Commission (the “SEC”) and other important information can be found in the Investor Relations section of our website at investors.onespan.com. We do not have any intent, and disclaim any obligation, to update the forward-looking information to reflect events that occur, circumstances that exist or changes in our expectations after the date of this press release, except as required by law.

Unless otherwise noted, references in this press release to “OneSpan”, “Company”, “we”, “our”, and “us” refer to OneSpan Inc. and its subsidiaries.

OneSpan Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Quarters Ended

 

Years Ended

 

December 31,

 

December 31,

 

 

2022

 

2021

 

2022

 

2021

Revenue

 

 

 

 

 

 

 

 

Product and license

 

$

31,930

 

 

$

35,342

 

 

$

121,426

 

 

$

120,358

 

Services and other

 

 

24,692

 

 

 

23,811

 

 

 

97,580

 

 

 

94,123

 

Total revenue

 

 

56,622

 

 

 

59,153

 

 

 

219,006

 

 

 

214,481

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

Product and license

 

 

12,434

 

 

 

15,377

 

 

 

45,106

 

 

 

46,196

 

Services and other

 

 

6,233

 

 

 

6,309

 

 

 

25,330

 

 

 

25,350

 

Total cost of goods sold

 

 

18,667

 

 

 

21,686

 

 

 

70,436

 

 

 

71,546

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

37,955

 

 

 

37,467

 

 

 

148,570

 

 

 

142,935

 

 

 

 

 

 

 

 

 

 

Operating costs

 

 

 

 

 

 

 

 

Sales and marketing

 

 

15,756

 

 

 

16,092

 

 

 

60,949

 

 

 

62,730

 

Research and development

 

 

8,139

 

 

 

11,715

 

 

 

41,735

 

 

 

47,414

 

General and administrative

 

 

16,003

 

 

 

14,234

 

 

 

55,552

 

 

 

53,031

 

Impairment of intangible assets

 

 

 

 

 

 

 

 

3,828

 

 

 

 

Restructuring and other related charges

 

 

1,482

 

 

 

 

 

 

9,482

 

 

 

 

Amortization of intangible assets

 

 

584

 

 

 

1,385

 

 

 

4,139

 

 

 

5,888

 

Total operating costs

 

 

41,964

 

 

 

43,426

 

 

 

175,685

 

 

 

169,063

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(4,009

)

 

 

(5,959

)

 

 

(27,115

)

 

 

(26,128

)

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

398

 

 

 

(3

)

 

 

595

 

 

 

(1

)

Other (expense) income, net

 

 

1,010

 

 

 

(964

)

 

 

14,827

 

 

 

(14

)

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(2,601

)

 

 

(6,926

)

 

 

(11,693

)

 

 

(26,143

)

Provision for income taxes

 

 

496

 

 

 

6,847

 

 

 

2,741

 

 

 

4,441

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(3,097

)

 

$

(13,773

)

 

$

(14,434

)

 

$

(30,584

)

 

 

 

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

(0.35

)

 

$

(0.36

)

 

$

(0.77

)

Diluted

 

$

(0.08

)

 

$

(0.35

)

 

$

(0.36

)

 

$

(0.77

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

39,906

 

 

 

39,458

 

 

 

40,143

 

 

 

39,614

 

Diluted

 

 

39,906

 

 

 

39,458

 

 

 

40,143

 

 

 

39,614

 

OneSpan Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 

 

 

December 31,

 

 

2022

 

2021

 

 

 

 

 

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

96,501

 

 

$

63,380

 

Short term investments

 

 

2,328

 

 

 

35,108

 

Accounts receivable, net of allowances of $1,600 in 2022 and $1,419 in 2021

 

 

65,132

 

 

 

56,612

 

Inventories, net

 

 

12,054

 

 

 

10,345

 

Prepaid expenses

 

 

6,222

 

 

 

7,594

 

Contract assets

 

 

4,520

 

 

 

4,694

 

Other current assets

 

 

10,783

 

 

 

9,356

 

Total current assets

 

 

197,540

 

 

 

187,089

 

Property and equipment, net

 

 

12,681

 

 

 

10,757

 

Operating lease right-of-use assets

 

 

8,022

 

 

 

9,197

 

Goodwill

 

 

90,514

 

 

 

96,174

 

Intangible assets, net of accumulated amortization

 

 

12,482

 

 

 

21,270

 

Deferred income taxes

 

 

1,901

 

 

 

3,786

 

Other assets

 

 

11,942

 

 

 

13,998

 

Total assets

 

$

335,082

 

 

$

342,271

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

17,357

 

 

$

8,204

 

Deferred revenue

 

 

64,637

 

 

 

54,617

 

Accrued wages and payroll taxes

 

 

18,345

 

 

 

16,607

 

Short-term income taxes payable

 

 

2,438

 

 

 

1,103

 

Other accrued expenses

 

 

7,664

 

 

 

7,668

 

Deferred compensation

 

 

373

 

 

 

877

 

Total current liabilities

 

 

110,814

 

 

 

89,076

 

Long-term deferred revenue

 

 

6,269

 

 

 

9,125

 

Long-term lease liabilities

 

 

8,442

 

 

 

10,180

 

Long-term income taxes payable

 

 

2,484

 

 

 

5,054

 

Deferred income taxes

 

 

2,565

 

 

 

1,286

 

Other long-term liabilities

 

 

1,197

 

 

 

7,770

 

Total liabilities

 

 

131,771

 

 

 

122,491

 

Stockholders' equity

 

 

 

 

Preferred stock: 500 shares authorized, none issued and outstanding at December 31, 2022 and 2021

 

 

 

 

 

 

Common stock: $.001 par value per share, 75,000 shares authorized; 40,764 and 40,593 shares issued; 39,726 and 40,001 shares outstanding at December 31, 2022 and 2021, respectively

 

 

40

 

 

 

40

 

Additional paid-in capital

 

 

107,305

 

 

 

100,250

 

Treasury stock, at cost, 1,038 and 592 shares outstanding at December 31, 2022 and 2021, respectively

 

 

(18,222

)

 

 

(12,501

)

Retained earnings

 

 

128,738

 

 

 

143,173

 

Accumulated other comprehensive loss

 

 

(14,550

)

 

 

(11,182

)

Total stockholders' equity

 

 

203,311

 

 

 

219,780

 

Total liabilities and stockholders' equity

 

$

335,082

 

 

$

342,271

 

OneSpan Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

 

Years Ended December 31,

 

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

Net loss from operations

 

$

(14,434

)

 

$

(30,584

)

Adjustments to reconcile net loss from operations to net cash used in operations:

 

 

 

 

Depreciation and amortization of intangible assets

 

 

7,066

 

 

 

8,926

 

Impairment of intangible assets

 

 

3,828

 

 

 

 

Gain on sale of equity-method investment

 

 

(14,810

)

 

 

 

Deferred tax benefit

 

 

1,637

 

 

 

2,823

 

Stock-based compensation

 

 

8,642

 

 

 

4,354

 

Allowance for doubtful accounts

 

 

184

 

 

 

(2,705

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(9,705

)

 

 

2,047

 

Inventories, net

 

 

(2,168

)

 

 

2,209

 

Contract assets

 

 

52

 

 

 

3,787

 

Accounts payable

 

 

9,261

 

 

 

2,716

 

Income taxes payable

 

 

(1,140

)

 

 

(2,525

)

Accrued expenses

 

 

2,197

 

 

 

3,089

 

Deferred compensation

 

 

(504

)

 

 

(725

)

Deferred revenue

 

 

8,173

 

 

 

9,713

 

Other assets and liabilities

 

 

(4,065

)

 

 

(5,870

)

Net cash used in operating activities

 

 

(5,786

)

 

 

(2,745

)

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of short term investments

 

 

(15,812

)

 

 

(59,925

)

Maturities of short term investments

 

 

48,550

 

 

 

51,149

 

Additions to property and equipment

 

 

(4,996

)

 

 

(2,169

)

Additions to intangible assets

 

 

(29

)

 

 

(35

)

Sale of equity-method investment

 

 

18,874

 

 

 

 

Net cash provided by (used in) investing activities

 

 

46,587

 

 

 

(10,980

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Repurchase of common stock

 

 

(5,721

)

 

 

(7,471

)

Tax payments for restricted stock issuances

 

 

(1,587

)

 

 

(2,923

)

Net cash used in financing activities

 

 

(7,308

)

 

 

(10,394

)

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(372

)

 

 

(895

)

 

 

 

 

 

Net increase (decrease) in cash

 

 

33,121

 

 

 

(25,014

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

64,227

 

 

 

89,241

 

Cash, cash equivalents, and restricted cash, end of period

 

$

97,348

 

 

$

64,227

 

Segment Information

In May 2022, we announced a three-year strategic transformation plan that begins on January 1, 2023. We believe this transformation plan will enable us to build on our strong solution portfolio and market position, enhance our enterprise go-to-market strategy, accelerate revenue growth, and drive efficiencies to support margin expansion and increased profitability. In conjunction with the strategic transformation plan and to enable a more efficient capital deployment model, effective with the quarter ended June 30, 2022, we began reporting under the following two lines of business, which are our reportable operating segments: Digital Agreements and Security Solutions. We expect to manage Digital Agreements for accelerated growth and market share gains and Security Solutions for cash flow given its more modest growth profile.

  • Digital Agreements. Digital Agreements consists of solutions that enable our clients to secure and automate business processes associated with their digital agreement and customer transaction lifecycles that require consent, non-repudiation and compliance. These solutions, which are largely cloud-based, include our OneSpan Sign e-signature solution and recently introduced OneSpan Notary and Virtual Room solutions. As our transformation plan progresses, we expect to include other cloud-based security modules associated with the secure transaction lifecycle of identity verification, authentication, virtual interaction and transactions, and secure digital vaulting (storage) in the Digital Agreements segment. This segment also includes costs attributable to our transaction cloud platform.
  • Security Solutions. Security Solutions consist of our broad portfolio of software products and/or software development kits (SDKs) that are used to build applications designed to defend against attacks on digital transactions across online environments, devices and applications. These solutions, which are largely on-premises software products, include identity verification, multi-factor authentication and transaction signing, such as mobile application security, mobile software tokens, and Digipass authenticators that are not cloud connected devices.

Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue, sales and marketing, research and development, amortization and restructuring and other related expenses that are incurred directly by a segment. Unallocated corporate costs include costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment. Financial results by operating segment are included below under Segment and consolidated operating results.

Segment and consolidated operating results (in thousands, except percentages)(unaudited):

 

 

 

Quarters Ended

 

Years Ended

 

December 31,

December 31,

(In thousands, except percentages)

 

2022

 

2021

 

2022

 

2021

Digital Agreements

 

 

 

 

 

 

 

 

Revenue

 

$

12,446

 

 

$

10,831

 

 

$

48,401

 

 

$

40,551

 

Gross profit

 

$

9,819

 

 

$

8,254

 

 

$

37,488

 

 

$

29,557

 

Gross margin

 

 

79

%

 

 

76

%

 

 

77

%

 

 

73

%

Operating income (loss)

 

$

2,525

 

 

$

415

 

 

$

5,348

 

 

$

(1,612

)

 

 

 

 

 

 

 

 

 

Security

 

 

 

 

 

 

 

 

Revenue

 

$

44,176

 

 

$

48,322

 

 

$

170,605

 

 

$

173,930

 

Gross profit

 

$

28,136

 

 

$

29,212

 

 

$

111,082

 

 

$

113,378

 

Gross margin

 

 

64

%

 

 

60

%

 

 

65

%

 

 

65

%

Operating income

 

$

10,652

 

 

$

9,785

 

 

$

32,051

 

 

$

35,395

 

 

 

 

 

 

 

 

 

 

Total Company:

 

 

 

 

 

 

 

 

Revenue

 

$

56,622

 

 

$

59,153

 

 

$

219,006

 

 

$

214,481

 

Gross profit

 

$

37,955

 

 

$

37,466

 

 

$

148,570

 

 

$

142,935

 

Gross margin

 

 

67

%

 

 

63

%

 

 

68

%

 

 

67

%

 

 

 

 

 

 

 

 

 

Statements of Operations reconciliation:

 

 

 

 

 

 

 

 

Segment operating income

 

$

13,177

 

 

$

10,200

 

 

$

37,399

 

 

$

33,783

 

Corporate operating expenses not allocated at the segment level

 

 

(17,186

)

 

 

16,159

 

 

 

64,514

 

 

 

59,911

 

Total Company operating loss

 

$

(4,009

)

 

$

(5,959

)

 

$

(27,115

)

 

$

(26,128

)

Revenue by major products and services (in thousands, unaudited):

 

 

 

Quarters Ended

 

 

December 31, 2022

 

December 31, 2021

 

 

Digital

 

Security

 

Digital

 

Security

Agreements

Solutions

Agreements

Solutions

(In thousands)

 

 

 

 

 

 

 

 

Subscription (1)

 

$

           11,301

 

$

           12,492

 

$

              9,082

 

$

              9,490

Maintenance and support

 

 

                   998

 

 

              10,372

 

 

                1,240

 

 

              11,745

Professional services and other (2)

 

 

                   147

 

 

                1,760

 

 

                   509

 

 

                2,613

Hardware products

 

 

                      —

 

 

              19,552

 

 

                      —

 

 

              24,474

Total Revenue

 

$

           12,446

 

$

           44,176

 

$

           10,831

 

$

           48,322

   

 

 

Years Ended

 

 

December 31, 2022

 

December 31, 2021

 

 

Digital

 

Security

 

Digital

 

Security

Agreements

Solutions

Agreements

Solutions

(In thousands)

 

 

 

 

 

 

 

 

Subscription (1)

 

$

           42,029

 

$

           47,124

 

$

           33,283

 

$

           35,224

Maintenance and support

 

 

                5,451

 

 

              42,894

 

 

                5,709

 

 

              45,567

Professional services and other (2)

 

 

                   921

 

 

                7,087

 

 

                1,494

 

 

              13,703

Hardware products

 

 

                      —

 

 

              73,500

 

 

                      65

 

 

              79,436

Total Revenue

 

$

           48,401

 

$

         170,605

 

$

           40,551

 

$

         173,930

(1)

 

Subscription includes cloud and on-premises subscription revenue, previously referred to as “subscription” and “term-based software licenses”, respectively.

(2)

 

Professional services and other includes perpetual software licenses revenue, which was less than 2% of total revenue for both the three and twelve months ended December 31, 2022, and approximately 5% of total revenue for both the three and twelve months ended December 31, 2021.

Non-GAAP Financial Measures

We report financial results in accordance with GAAP. We also evaluate our performance using certain Non-GAAP financial metrics, namely Adjusted EBITDA, Non-GAAP Net Income (Loss) and Non-GAAP Diluted Net Income (Loss) Per Share. Our management believes that these measures, when taken together with the corresponding GAAP financial metrics, provide useful supplemental information regarding the performance of our business, as further discussed in the descriptions of each of these Non-GAAP metrics below.

These Non-GAAP financial measures are not measures of performance under GAAP and should not be considered in isolation or as alternatives or substitutes for the most directly comparable financial measures calculated in accordance with GAAP. While we believe that these Non-GAAP financial measures are useful for the purposes described below, they have limitations associated with their use, since they exclude items that may have a material impact on our reported results and may be different from similar measures used by other companies. Additional information about the Non-GAAP financial measures and reconciliations to their most directly comparable GAAP financial measures appear below.

Adjusted EBITDA

We define Adjusted EBITDA as net income before interest, taxes, depreciation, amortization, long-term incentive compensation, and certain non-recurring items, including acquisition related costs, lease exit costs, rebranding costs, and non-routine shareholder matters. We use Adjusted EBITDA as a simplified measure of performance for use in communicating our performance to investors and analysts and for comparisons to other companies within our industry. As a performance measure, we believe that Adjusted EBITDA presents a view of our operating results that is most closely related to serving our customers. By excluding interest, taxes, depreciation, amortization, long-term incentive compensation, impairment of intangible assets, restructuring costs, and certain other non-recurring items, we are able to evaluate performance without considering decisions that, in most cases, are not directly related to meeting our customers’ requirements and were either made in prior periods (e.g., depreciation, amortization, long-term incentive compensation, non-routine shareholder matters), deal with the structure or financing of the business (e.g., interest, one-time strategic action costs, restructuring costs, impairment charges) or reflect the application of regulations that are outside of the control of our management team (e.g., taxes). In addition, removing the impact of these items helps us compare our core business performance with that of our competitors.

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands, unaudited)

 

 

 

Quarters Ended

 

Years Ended

 

December 31,

December 31,

 

 

2022

 

2021

 

2022

 

2021

Net loss

 

$

(3,097

)

 

$

(13,773

)

 

$

(14,434

)

 

$

(30,584

)

Interest (expense) income, net

 

 

(398

)

 

 

3

 

 

 

(595

)

 

 

1

 

Provision for income taxes

 

 

496

 

 

 

6,847

 

 

 

2,741

 

 

 

4,441

 

Depreciation and amortization of intangible assets

 

 

1,375

 

 

 

2,166

 

 

 

7,066

 

 

 

8,926

 

Long-term incentive compensation

 

 

3,197

 

 

 

1,581

 

 

 

8,813

 

 

 

5,202

 

Impairment of intangible assets

 

 

 

 

 

 

 

 

3,828

 

 

 

 

Restructuring and other related charges

 

 

1,482

 

 

 

 

 

 

9,482

 

 

 

 

Other non-recurring items (1)

 

 

127

 

 

 

2,618

 

 

 

(10,505

)

 

 

6,951

 

Adjusted EBITDA

 

$

3,182

 

 

$

(558

)

 

$

6,396

 

 

$

(5,063

)

(1) For the three months ended December 31, 2022, other non-recurring items consist of $0.1 million of outside services related to our strategic action plan.

 

For the year ended December 31, 2022, other non-recurring items consist of $4.3 million of outside services related to our strategic action plan, and a $(14.8) million non-operating gain on the sale of our investment in Promon AS.

 

For the three months ended December 31, 2021, other non-recurring items consist of $2.6 million of outside service costs related to our strategic action plan.

 

For the year ended December 31, 2021, other non-recurring items consist of $3.5 million of outside service costs related to our strategic action plan, $2.8 million of outside service costs related to the proxy contest that took place in 2021 and the related $0.7 million settlement with Legion Partners.

Non-GAAP Net Income (Loss) and Non-GAAP Diluted Net Income (Loss) Per Share

We define Non-GAAP Net Income (Loss) and Non-GAAP Diluted Net Income (Loss) Per Share as net income (loss) or diluted net income (loss) per share, as applicable, before the consideration of long-term incentive compensation expenses, the amortization of intangible assets, impairment of intangible assets, restructuring costs, and certain other non- recurring items. We use these measures to assess the impact of our performance excluding items that can significantly impact the comparison of our results between periods and the comparison to competitor results.

Long-term incentive compensation for management and others is directly tied to performance, and this measure allows management to see the relationship of the cost of incentives to the performance of the business operations directly if such incentives are based on that period’s performance. To the extent that such incentives are based on performance over a period of several years, there may be periods that have significant adjustments to the accruals in the period that relate to a longer period of time, which can make it difficult to assess the results of the business operations in the current period. In addition, the Company’s long-term incentives generally reflect the use of restricted stock unit grants or cash awards, while other companies may use different forms of incentives that have different cost impacts, which makes a comparison difficult. We exclude amortization of intangible assets as we believe the amount of such expense in any given period may not be correlated directly to the performance of the business operations and that such expenses can vary significantly between periods as a result of new acquisitions, the full amortization of previously acquired intangible assets, or the write down of such assets due to an impairment event. However, intangible assets contribute to current and future revenue, and related amortization expense will recur in future periods until expired or written down.

We also exclude certain non-recurring items including one-time strategic action costs and non-recurring shareholder matters, as these items are unrelated to the operations of our core business. By excluding these items, we are better able to compare the operating results of our underlying core business from one reporting period to the next.

We make a tax adjustment based on the above adjustments resulting in an effective tax rate on a Non-GAAP basis, which may differ from the GAAP tax rate. We believe the effective tax rates we use in the adjustment are reasonable estimates of the overall tax rates for the Company under its global operating structure.

Reconciliation of Net Loss to Non-GAAP Net Income (Loss)

(in thousands, except per share data)

(unaudited)

 

 

 

Quarters Ended

 

Years Ended

December 31,

 

December 31,

 

 

2022

 

2021

 

2022

 

2021

Net loss

 

$

(3,097

)

 

$

(13,773

)

 

$

(14,434

)

 

$

(30,584

)

Long-term incentive compensation

 

 

3,197

 

 

 

1,581

 

 

 

8,813

 

 

 

5,202

 

Amortization of intangible assets

 

 

584

 

 

 

1,385

 

 

 

4,139

 

 

 

5,888

 

Impairment of intangible assets

 

 

 

 

 

 

 

 

3,828

 

 

 

 

Restructuring and other related charges

 

 

1,482

 

 

 

 

 

 

9,482

 

 

 

 

Other non-recurring items (1)

 

 

127

 

 

 

2,618

 

 

 

(10,505

)

 

 

6,951

 

Tax impact of adjustments (2)

 

 

(1,078

)

 

 

(1,117

)

 

 

(3,151

)

 

 

(3,608

)

Non-GAAP net income (loss)

 

$

1,215

 

 

$

(9,306

)

 

$

(1,828

)

 

$

(16,151

)

 

 

 

 

 

 

 

 

 

Non-GAAP net income (loss) per share

 

$

0.03

 

 

$

(0.24

)

 

$

(0.05

)

 

$

(0.41

)

 

 

 

 

 

 

 

 

 

Shares

 

 

40,396

 

 

 

39,458

 

 

 

40,143

 

 

 

39,614

 

(1)

 

See the footnotes to the Reconciliation of Net Loss to Adjusted EBITDA for a description of the components of other non-recurring items for each period presented.

(2)

 

The tax impact of adjustments is calculated as 20% of the adjustments in all periods.

Copyright© 2023 OneSpan North America Inc., all rights reserved. OneSpan™ is a registered or unregistered trademark of OneSpan North America Inc. or its affiliates in the U.S. and other countries.

Contacts

Investor Contact:

Joe Maxa

Vice President of Investor Relations

+1-312-766-4009

joe.maxa@onespan.com

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