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OneSpan Reports Results for Fourth Quarter and Full Year 2020; Exceeds Full Year 2020 Revenue Guidance

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OneSpan reported its fourth quarter and full-year 2020 results, revealing a challenging year with a 15% decline in total revenue to $215.7 million. However, the company saw a significant increase in annual recurring revenue (ARR), which grew by 29%, surpassing its long-term target. The fourth quarter revenue of $52.9 million marked a 25% decrease from the previous year, attributed to customers accelerating purchases in 2019 due to regulatory compliance. Despite these challenges, gross margins improved, and the company plans to focus on recurring revenue growth in 2021, projecting ARR growth between 22% and 26%.

Positive
  • ARR grew 29%, nearing high-end goal of 25%-30% growth.
  • 66% of software revenues were recurring, up from 49% the previous year.
  • Adjusted EBITDA for full year was $14.2 million, or 7% of revenue.
Negative
  • Total revenue decreased by 15% year-over-year.
  • Fourth quarter revenue fell 25% compared to Q4 2019.
  • GAAP operating loss of $5.3 million for the full year.

OneSpan Inc. (NASDAQ: OSPN), the global leader in securing remote banking transactions, today reported financial results for the fourth quarter and full year ended December 31, 2020.

"Improved demand for mobile security and continued strong demand for e-signature solutions resulted in record bookings of recurring revenue contracts and stronger than forecast revenue in the fourth quarter,” stated OneSpan CEO, Scott Clements. “For the full year, ARR grew 29%, near the high-end of our multi-year goal of 25%-30% average growth; 66% of software revenues were recurring, up from 49% in the prior year; and software and services contributed a record 62% of total revenue. In 2021, we expect continued strong growth in ARR and recurring revenue along with a modest decline in hardware revenue. As we near completion of our transition to a recurring revenue led sales model in 2021, we are continuing to invest in our solution portfolio and in expanding our market presence to deliver long-term growth with increasing profitability.”

Fourth Quarter and Full Year 2020 Financial Highlights5

  • Revenue for the fourth quarter of 2020 was $52.9 million, a decrease of 25% from $70.5 million for the fourth quarter of 2019. Revenue for the full year 2020 was $215.7 million, a decrease of 15% from $253.5 million for the full year 2019. Year-over-year revenue comparisons were affected by the one-time positive impact on full year 2019 revenue of many customers accelerating purchases to comply with the Payment Services Directive 2 (PSD2) regulation and our accelerated transition from perpetual licenses to recurring revenue in 2020.
  • Gross profit was $39.3 million for the fourth quarter of 2020 and $152.3 million for the full year 2020. Gross profit was $49.2 million for the fourth quarter of 2019 and $171.5 million for the full year 2019. Gross margin for the fourth quarter of 2020 was 74% and for the full year 2020 was 71%. Gross margin for the fourth quarter of 2019 was 70% and for the full year 2019 was 68%.
  • GAAP operating loss for the fourth quarter of 2020 was $2.0 million, and for the full year 2020 was $5.3 million. GAAP operating income for the fourth quarter of 2019 was $5.4 million, and for the full year 2019 was $14.2 million.
  • GAAP net loss for the fourth quarter of 2020 was $1.8 million, or $0.04 per share, and was $5.5 million, or $0.14 per share, for the full year 2020. GAAP net income for the fourth quarter of 2019 was $4.6 million, or $0.11 per diluted share. GAAP net income for the full year 2019 was $7.9 million, or $0.20 per diluted share.
  • Adjusted EBITDA for the fourth quarter of 2020 was $3.2 million, or 6% of revenue, and for the full year 2020 was $14.2 million, or 7% of revenue. Adjusted EBITDA for the fourth quarter of 2019 was $12.8 million, or 18% of revenue, and for the full year 2019 was $31.8 million or 13% of revenue.
  • Non-GAAP net income for the fourth quarter of 2020 was $1.4 million or $0.03 per diluted share, and for the full year 2020 was $6.6 million, or $0.16 per diluted share. Non-GAAP net income for the fourth quarter of 2019 was $9.1 million or $0.23 per diluted share, and for the full year 2019 was $20.7 million or $0.52 per diluted share.
  • Cash, cash equivalents and short-term investments at December 31, 2020 totaled $115.3 million compared to $112.7 million and $109.8 million at September 30, 2020 and December 31, 2019, respectively.
  • During the fourth quarter of 2020, OneSpan repurchased 250,000 shares of its common stock totaling $5.0 million at an average price of $20.10 per share.

______________________

  1. Recurring revenue is comprised of subscription, term-based software licenses, and maintenance revenue.
  2. ARR is calculated as the annualized value of our customer recurring contracts with a term of at least one-year, as of the measuring 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.
  3. Dollar-based net expansion rate (“DBNE”) is defined as the year-over-year growth in ARR from the same set of customers at the end of the prior year period.
  4. An explanation of the use of non-GAAP measures is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in tables below.
  5. 2019 results have been revised to correct for certain immaterial errors. For additional information, see the “Revision of Prior Period Financial Statements” section of this press release.

Full Year 2021 Outlook

For the Full Year 2021, OneSpan currently expects:

  • ARR growth of 22% to 26%
  • Recurring revenue in the range of $120 million to $125 million
  • Total revenue in the range of $215 million to $225 million
  • Adjusted EBITDA approximately break-even

Conference Call Details

In conjunction with this announcement, OneSpan Inc. will host a conference call today, February 23, 2021, at 4:30 p.m. EST. During the conference call, Mr. Scott Clements, CEO, and Mr. Mark Hoyt, CFO, will discuss OneSpan’s results for the fourth quarter and full year 2020.

To access the conference call, dial 866-270-1533 for the U.S. or Canada and 1-412-317-0797 for international callers. The conference ID number is 10150842.

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.

About OneSpan

OneSpan helps protect the world from digital fraud by establishing trust in people’s identities, the devices they use and the transactions they carry out. We do this by making digital banking accessible, secure, easy and valuable. OneSpan’s Trusted Identity platform and security solutions significantly reduce digital transaction fraud and enable regulatory compliance for more than 10,000 customers, including over half of the top 100 global banks. Whether through automating agreements, detecting fraud or securing financial transactions, OneSpan helps reduce costs and accelerate customer acquisition while improving the user experience. Learn more at OneSpan.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of applicable U.S. securities laws, including statements regarding the potential benefits, performance and functionality of our products and solutions, including future offerings; our expectations, beliefs, plans, operations and strategies relating to our business and the future of our business; our strategic plans regarding our portfolio, including acquisitions and dispositions; and our expectations regarding our financial performance in the future. Forward-looking statements may be identified by words such as "seek", "believe", "plan", "estimate", "anticipate", “expect", "intend", "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: market acceptance of our products and solutions and competitors’ offerings; the potential effects of technological changes; the impact of the COVID-19 pandemic and actions taken to contain it; our ability to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio actions; the execution of our transformative strategy on a global scale; the increasing frequency and sophistication of hacking attacks; claims that we have infringed the intellectual property rights of others; changes in customer requirements; price competitive bidding; changing laws, government regulations or policies; pressures on price levels; investments in new products or businesses that may not achieve expected returns; 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 those factors described in the “Risk Factors” section of our Form 10-K. 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.

OneSpan Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Twelve Months Ended

 

 

December 31,

 

December 31,

 

 

2020

 

2019 (1)

 

2020

 

2019 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Product and license

 

$

29,093

 

 

$

50,638

 

 

$

132,986

 

 

$

183,313

 

Services and other

 

 

23,835

 

 

 

19,893

 

 

 

82,705

 

 

 

70,171

 

Total revenue

 

 

52,928

 

 

 

70,531

 

 

 

215,691

 

 

 

253,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

 

 

 

Product and license

 

 

8,442

 

 

 

16,427

 

 

 

41,820

 

 

 

63,393

 

Services and other

 

 

5,224

 

 

 

4,947

 

 

 

21,619

 

 

 

18,569

 

Total cost of goods sold

 

 

13,666

 

 

 

21,374

 

 

 

63,439

 

 

 

81,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

39,262

 

 

 

49,157

 

 

 

152,252

 

 

 

171,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

16,727

 

 

 

16,924

 

 

 

60,856

 

 

 

61,503

 

Research and development

 

 

10,016

 

 

 

10,035

 

 

 

41,194

 

 

 

42,463

 

General and administrative

 

 

12,487

 

 

 

14,357

 

 

 

46,338

 

 

 

43,897

 

Amortization of intangible assets

 

 

2,073

 

 

 

2,419

 

 

 

9,122

 

 

 

9,470

 

Total operating costs

 

 

41,303

 

 

 

43,735

 

 

 

157,510

 

 

 

157,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

(2,041

)

 

 

5,422

 

 

 

(5,258

)

 

 

14,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

15

 

 

 

315

 

 

 

404

 

 

 

747

 

Other income (expense), net

 

 

547

 

 

 

1,184

 

 

 

1,434

 

 

 

(527

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(1,479

)

 

 

6,921

 

 

 

(3,420

)

 

 

14,409

 

Provision for income taxes

 

 

277

 

 

 

2,336

 

 

 

2,035

 

 

 

6,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,756

)

 

$

4,585

 

 

$

(5,455

)

 

$

7,864

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

0.11

 

 

$

(0.14

)

 

$

0.20

 

Diluted

 

$

(0.04

)

 

$

0.11

 

 

$

(0.14

)

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

39,990

 

 

 

40,076

 

 

 

40,035

 

 

 

40,050

 

Diluted

 

 

39,990

 

 

 

40,176

 

 

 

40,035

 

 

 

40,136

 

(1)

2019 results have been revised to correct for certain immaterial misstatements. For additional information, see the “Revision of Prior Period Financial Statements” section of this press release.

OneSpan Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

2020

 

2019 (1)

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and equivalents

 

$

88,394

 

 

$

84,282

 

Short term investments

 

 

26,859

 

 

 

25,511

 

Accounts receivable, net of allowances of $4,135 in 2020 and $2,524 in 2019

 

 

57,537

 

 

 

62,405

 

Inventories, net

 

 

13,093

 

 

 

19,819

 

Prepaid expenses

 

 

7,837

 

 

 

6,198

 

Contract assets

 

 

7,202

 

 

 

5,240

 

Other current assets

 

 

6,256

 

 

 

6,346

 

Total current assets

 

 

207,178

 

 

 

209,801

 

Property and equipment, net

 

 

11,835

 

 

 

11,454

 

Operating lease right-of-use assets

 

 

11,356

 

 

 

10,580

 

Goodwill

 

 

97,552

 

 

 

94,612

 

Intangible assets, net of accumulated amortization

 

 

27,196

 

 

 

36,209

 

Deferred income taxes

 

 

7,030

 

 

 

7,863

 

Contract assets - non-current

 

 

1,877

 

 

 

3,355

 

Other assets

 

 

11,179

 

 

 

8,668

 

Total assets

 

$

375,203

 

 

$

382,542

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

5,684

 

 

$

10,835

 

Deferred revenue

 

 

43,417

 

 

 

30,338

 

Accrued wages and payroll taxes

 

 

13,649

 

 

 

15,415

 

Short-term income taxes payable

 

 

2,618

 

 

 

7,410

 

Other accrued expenses

 

 

8,334

 

 

 

8,786

 

Deferred compensation

 

 

1,602

 

 

 

1,028

 

Total current liabilities

 

 

75,304

 

 

 

73,812

 

Long-term deferred revenue

 

 

11,730

 

 

 

15,259

 

Long-term lease liabilities

 

 

12,399

 

 

 

11,299

 

Other long-term liabilities

 

 

10,423

 

 

 

8,297

 

Long-term income taxes payable

 

 

6,095

 

 

 

6,958

 

Deferred income taxes

 

 

1,912

 

 

 

4,623

 

Total liabilities

 

 

117,863

 

 

 

120,248

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock: 500 shares authorized, none issued and outstanding at December 31, 2020 and 2019

 

 

 

 

 

 

Common stock: $.001 par value per share, 75,000 shares authorized; 40,353 and 40,207 shares issued; 40,353 and 40,207 shares outstanding at December 31, 2020 and 2019, respectively

 

 

40

 

 

 

40

 

Additional paid-in capital

 

 

98,819

 

 

 

96,109

 

Treasury stock, at cost, 250 and 0 shares outstanding at December 31, 2020 and 2019, respectively

 

 

(5,030

)

 

 

 

Retained earnings

 

 

173,731

 

 

 

179,440

 

Accumulated other comprehensive loss

 

 

(10,220

)

 

 

(13,295

)

Total stockholders' equity

 

 

257,340

 

 

 

262,294

 

Total liabilities and stockholders' equity

 

$

375,203

 

 

$

382,542

 

(1)

2019 results have been revised to correct for certain immaterial misstatements. For additional information, see the “Revision of Prior Period Financial Statements” section of this press release.

OneSpan Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

2020

 

2019 (1)

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss) from operations

 

$

(5,455

)

 

$

7,864

 

Adjustments to reconcile net income (loss) from operations to net cash provided by (used in) operations:

 

 

 

 

 

 

Depreciation, amortization, and impairment of intangible assets

 

 

12,003

 

 

 

11,545

 

Loss on disposal of assets

 

 

118

 

 

 

69

 

Deferred tax benefit

 

 

(1,487

)

 

 

(1,624

)

Stock-based compensation

 

 

4,740

 

 

 

3,368

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

6,792

 

 

 

(3,414

)

Inventories, net

 

 

6,725

 

 

 

(5,391

)

Contract assets

 

 

(191

)

 

 

1,740

 

Accounts payable

 

 

(5,237

)

 

 

3,628

 

Income taxes payable

 

 

(5,642

)

 

 

158

 

Accrued expenses

 

 

(3,124

)

 

 

(1,286

)

Deferred compensation

 

 

574

 

 

 

(334

)

Deferred revenue

 

 

8,342

 

 

 

1,465

 

Other assets and liabilities

 

 

(3,236

)

 

 

456

 

Net cash provided by operating activities

 

 

14,922

 

 

 

18,244

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of short term investments

 

 

(34,060

)

 

 

(33,839

)

Maturities of short term investments

 

 

32,630

 

 

 

31,399

 

Additions to property and equipment

 

 

(3,101

)

 

 

(7,453

)

Other

 

 

(133

)

 

 

 

Net cash provided by (used in) investing activities

 

 

(4,664

)

 

 

(9,893

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Repurchase of common stock

 

 

(5,030

)

 

 

 

Tax payments for restricted stock issuances

 

 

(2,030

)

 

 

(569

)

Net cash used in financing activities

 

FAQ

What were OneSpan's financial results for Q4 2020?

OneSpan reported Q4 2020 revenue of $52.9 million, a 25% decrease from $70.5 million in Q4 2019.

What is the annual recurring revenue (ARR) growth rate for OneSpan in 2020?

OneSpan's ARR grew by 29% in 2020.

What is the forecast for OneSpan's revenue in 2021?

OneSpan expects total revenue in the range of $215 million to $225 million for 2021.

What was OneSpan's GAAP net loss in 2020?

OneSpan reported a GAAP net loss of $5.5 million for the full year 2020, or $0.14 per share.

When will OneSpan hold its conference call to discuss financial results?

OneSpan will host a conference call on February 23, 2021, at 4:30 p.m. EST.

OneSpan Inc.

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