OneSpan Reports Results for Second Quarter 2021 and First Six Months of 2021

OneSpan Inc. (NASDAQ: OSPN), the global leader in securing remote banking transactions, today reported financial results for the second quarter and six months ended June 30, 2021.

In a separate press release today, the Company announced several leadership changes designed to accelerate its strategic evolution. Steven Worth, who previously served as Interim Chief Financial Officer, General Counsel and Chief Compliance Officer, has been named Interim Chief Executive Officer, taking over for Scott Clements, who has left the Company and resigned from the Board. John Bosshart, who serves as Chief Accounting Officer, has assumed the additional role of Interim Chief Financial Officer. In addition, OneSpan’s Board of Directors announced that Al Nietzel has been appointed Chair of the Board. Mr. Nietzel assumed the Chair role from John N. Fox Jr., who has retired from the Board consistent with his previously disclosed plans.

“We continued to make progress in our transition to a recurring revenue business driven by growth in excess of 50% across both our e-signature and mobile security offerings,” stated OneSpan Interim CEO, Steven Worth. “However, we are seeing slower progress with some of our other solutions and expect increased labor costs, gross margin pressure, and some pandemic resurgence to pressure results for the remainder of the year. We are committed to addressing these challenges head on, and will review our products and investments, optimize our operations, and focus our efforts to accelerate the pace of change to drive improved performance.”

Second Quarter 2021 Financial Highlights

  • Revenue for the second quarter of 2021 was $52.3 million, a decrease of 5% from $55.0 million for the second quarter of 2020. Revenue for the first six months of 2021 was $103.1 million, a decrease of 7% from $111.3 million for the first six months of 2020.
  • Gross profit for the second quarter of 2021 was $35.8 million and $71.3 million for the first six months of 2021. Gross profit for the second quarter of 2020 was $36.7 million and $77.0 million for the first six months of 2020. Gross margin for the second quarter of 2021 was 68% and for the first six months of 2021 was 69%. Gross margin for the second quarter of 2020 was 67% and for the first six months of 2020 was 69%.
  • GAAP operating loss for the second quarter of 2021 was $8.9 million, and for the first six months of 2021 was $18.2 million. GAAP operating loss for the second quarter of 2020 was $1.7 million, and for the first six months of 2020 was $0.9 million.
  • GAAP net loss for the second quarter of 2021 was $6.7 million, or $0.17 per share, and $15.8 million, or $0.40 per share for the first six months of 2020. GAAP net loss for the second quarter of 2020 was $2.0 million, or $0.05 per share. GAAP net loss for the first six months of 2020 was $2.0 million, or $0.05 per share.
  • Non-GAAP net income (loss) for the second quarter of 2021 was $(1.8) million or $(0.04) per diluted share, and for the first six months of 2021 was $(8.0) million or $(0.20) per diluted share. Non-GAAP net income for the second quarter of 2020 was $0.8 million or $0.02 per diluted share, and for the first six months of 2020 was $4.0 million, or $0.10 per diluted share.
  • Adjusted EBITDA for the second quarter of 2021 was $(1.0) million and for the first six months of 2021 was $(6.2) million. Adjusted EBITDA for the second quarter of 2020 was $3.1 million, and for the first six months of 2020 was $8.3 million.
  • Cash, cash equivalents and short-term investments at June 30, 2021 totaled $109.3 million compared to $115.2 million and $115.3 million at March 31, 2021 and December 31, 2020, respectively.

Outlook

For the Full Year 2021, OneSpan currently expects:

  • Total revenue in the range of $205 million to $215 million as compared to our prior guidance of $215 million to $225 million.
  • Recurring revenue in the range of $115 million to $120 million as compared to our prior guidance of $120 million to $125 million
  • ARR growth of 17% to 20% as compared to our prior guidance of 22% - 26%.
  • And Adjusted EBITDA in the range of negative $12 million to negative $15 million as compared to our prior guidance of approximately break-even.

Conference Call Details

In conjunction with this announcement, OneSpan Inc. will host a conference call today, August 4, 2021, at 4:30 p.m. EST. During the conference call, Mr. Steven Worth, interim CEO, and Mr. John Bosshart, interim CFO, will discuss OneSpan’s results for the second quarter and first six months of 2021.

To access the conference call, dial 844-802-2443 for the U.S. or Canada and 1-412-902-4277 for international callers. The conference ID number is 10158182.

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

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

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 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.

5

We are not providing a reconciliation to GAAP net income as the most directly comparable GAAP measure because we are unable to predict certain items contained in the GAAP measure without unreasonable efforts.

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 execute. We make 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 half of the top 100 global banks and thousands of financial institutions around the world. Whether 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 our expectations for 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 most recent Annual Report on 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

Six months ended

June 30,

June 30,

2021

2020

2021

2020

Revenue

Product and license

$

28,378

$

35,384

$

56,823

$

73,644

Services and other

23,899

19,570

46,229

37,680

Total revenue

52,277

54,954

103,052

111,324

Cost of goods sold

Product and license

9,589

12,576

19,130

23,314

Services and other

6,881

5,649

12,662

10,981

Total cost of goods sold

16,470

18,225

31,792

34,295

Gross profit

35,807

36,729

71,260

77,029

Operating costs

Sales and marketing

15,997

14,694

34,376

29,553

Research and development

12,096

10,541

24,340

20,535

General and administrative

15,039

10,846

27,590

23,114

Amortization of intangible assets

1,534

2,335

3,107

4,689

Total operating costs

44,666

38,416

89,413

77,891

Operating loss

(8,859

)

(1,687

)

(18,153

)

(862

)

Interest income, net

2

126

6

333

Other income, net

1,029

509

667

171

Loss before income taxes

(7,828

)

(1,052

)

(17,480

)

(358

)

Provision (benefit) for income taxes

(1,143

)

973

(1,644

)

1,663

Net loss

$

(6,685

)

$

(2,025

)

$

(15,836

)

$

(2,021

)

Net loss per share

Basic

$

(0.17

)

$

(0.05

)

$

(0.40

)

$

(0.05

)

Diluted

$

(0.17

)

$

(0.05

)

$

(0.40

)

$

(0.05

)

Weighted average common shares outstanding

Basic

39,694

40,028

39,692

40,059

Diluted

39,694

40,028

39,692

40,059

OneSpan Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, unaudited)

June 30,

December 31,

2021

2020

ASSETS

Current assets

Cash and equivalents

$

66,530

$

88,394

Short term investments

42,726

26,859

Accounts receivable, net of allowances of $3,147 in 2021 and $4,135 in 2020

45,762

57,537

Inventories, net

9,498

13,093

Prepaid expenses

7,823

7,837

Contract assets

5,243

7,202

Other current assets

9,860

6,256

Total current assets

187,442

207,178

Property and equipment, net

11,468

11,835

Operating lease right-of-use assets

10,035

11,356

Goodwill

97,842

97,552

Intangible assets, net of accumulated amortization

24,227

27,196

Deferred income taxes

8,942

7,030

Contract assets - non-current

1,634

1,877

Other assets

12,738

11,179

Total assets

$

354,328

$

375,203

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

6,918

$

5,684

Deferred revenue

43,058

43,417

Accrued wages and payroll taxes

15,146

13,649

Short-term income taxes payable

997

2,618

Other accrued expenses

10,190

8,334

Deferred compensation

571

1,602

Total current liabilities

76,880

75,304

Long-term deferred revenue

10,676

11,730

Long-term lease liabilities

11,154

12,399

Other long-term liabilities

10,195

10,423

Long-term income taxes payable

5,042

6,095

Deferred income taxes

1,736

1,912

Total liabilities

115,683

117,863

Stockholders' equity

Preferred stock: 500 shares authorized, none issued and outstanding at March 31, 2021 and December 31, 2020

Common stock: $.001 par value per share, 75,000 shares authorized; 40,200 and 40,103 shares issued; 40,200 and 40,103 shares outstanding at June 30, 2021 and December 31, 2020, respectively

40

40

Additional paid-in capital

99,223

98,819

Treasury stock, at cost, 361 and 250 shares outstanding at June 30, 2021 and December 31, 2020, respectively

(7,938

)

(5,030

)

Retained earnings

157,917

173,731

Accumulated other comprehensive loss

(10,597

)

(10,220

)

Total stockholders' equity

238,645

257,340

Total liabilities and stockholders' equity

$

354,328

$

375,203

OneSpan Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

Six months ended June 30,

2021

2020

Cash flows from operating activities:

Net loss from operations

$

(15,836

)

$

(2,021

)

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

Depreciation and amortization of intangible assets

4,582

6,097

Loss on disposal of assets

19

53

Deferred tax benefit

(2,194

)

(319

)

Stock-based compensation

2,634

2,210

Changes in operating assets and liabilities:

Accounts receivable, net

11,021

7,528

Inventories, net

3,585

3,376

Contract assets

1,974

(2,026

)

Accounts payable

1,280

(5,025

)

Income taxes payable

(2,652

)

(5,870

)

Accrued expenses

3,660

(791

)

Deferred compensation

(1,031

)

13

Deferred revenue

(931

)

2,990

Other assets and liabilities

(4,927

)

(1,834

)

Net cash provided by operating activities

1,184

4,381

Cash flows from investing activities:

Purchase of short term investments

(32,253

)

(14,645

)

Maturities of short term investments

16,100

13,340

Additions to property and equipment

(1,208

)

(2,167

)

Other

(17

)

(48

)

Net cash used in investing activities

(17,378

)

(3,520

)

Cash flows from financing activities:

Repurchase of common stock

(2,908

)

Tax payments for restricted stock issuances

(2,230

)

(1,179

)

Net cash used in financing activities

(5,138

)

(1,179

)

Effect of exchange rate changes on cash

(511

)

20

Net decrease in cash

(21,843

)

(298

)

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

89,241

85,129

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

$

67,398

$

84,831

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

Three months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

Hardware products

$

19,451

$

24,188

$

37,119

$

43,926

Term-based software licenses

5,922

4,990

13,899

14,194

Perpetual software licenses

3,005

6,206

5,805

15,524

Product and license

$

28,378

$

35,384

$

56,823

$

73,644

Subscription

9,824

6,133

18,229

11,840

Professional services

1,041

1,326

2,443

2,747

Maintenance, support, and other

13,034

12,111

25,556

23,093

Services and other

$

23,899

$

19,570

$

46,228

$

37,680

Total revenue

$

52,277

$

54,954

$

103,051

$

111,324

Recurring Revenue (in thousands, unaudited):

Three months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

Subscription

$

9,824

$

6,133

$

18,229

$

11,840

Term-based software licenses

5,922

4,990

13,899

14,194

Maintenance, support, and other

13,034

12,111

25,557

23,093

Total Recurring Revenue

$

28,780

$

23,234

$

57,685

$

49,127

Non-GAAP Financial Measures

We report financial results in accordance with GAAP. We also evaluate our performance using certain non-GAAP operating metrics, namely Adjusted EBITDA, non-GAAP Net Income and non-GAAP diluted EPS. Our management believes that these measures provide useful supplemental information regarding the performance of our business and facilitates in comparison to our historical operating results.

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 within the context described below, they are in fact incomplete and are not measures that should be used to evaluate our full performance or our prospects. Such an evaluation needs to consider all of the complexities associated with our business including, but not limited to, how past actions are affecting current results and how they may affect future results, how we have chosen to finance the business, and how taxes affect the final amounts that are or will be available to stockholders as a return on their investment. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are found 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, and certain 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, lease exit costs, non-routine shareholder matters), deal with the structure or financing of the business (e.g., interest, acquisition related costs, rebranding costs) or reflect the application of regulations that are outside of the control of our management team (e.g., taxes). Similarly, we find that the comparison of our results to those of our competitors is facilitated when we do not consider the impact of these items.

Reconciliation of Net Income to Adjusted EBITDA

(in thousands, unaudited)

Three months ended

Six months ended

June 30,

June 30,

2021

2020

2021

2020

Net loss

$

(6,685

)

$

(2,025

)

$

(15,836

)

$

(2,021

)

Interest income, net

(2

)

(126

)

(6

)

(333

)

Benefit for income taxes

(1,143

)

973

(1,644

)

1,663

Depreciation and amortization of intangible assets

2,272

3,078

4,582

6,097

Long-term incentive compensation

1,567

1,165

3,109

2,880

Non-recurring items (1)

3,025

3,573

Adjusted EBITDA

$

(966

)

$

3,065

$

(6,222

)

$

8,286

(1) Non-recurring items include $2.3 million and $2.7 million of outside service costs related to the proxy contest for the three and six months ended June 30, 2021, respectively, as well as the related $0.7 million settlement with Legion Partners Holdings, LLC.

Non-GAAP Net Income & Non-GAAP Diluted EPS

We define non-GAAP net income and non-GAAP diluted EPS, as net income or EPS before the consideration of long-term incentive compensation expenses, the amortization of intangible assets, and certain 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 competitors.

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 the cost of which is determined on a different basis, 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 impacts of tax reform, acquisition related costs, rebranding costs, lease exit 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 Income to Non-GAAP Net Income

(in thousands, unaudited)

Three months ended

Six months ended

June 30,

June 30,

2021

2020

2021

2020

Net loss

$

(6,685

)

$

(2,025

)

$

(15,836

)

$

(2,021

)

Long-term incentive compensation

1,567

1,165

3,109

2,880

Amortization of intangible assets

1,534

2,335

3,107

4,689

Non-recurring items (1)

3,025

3,573

Tax impact of adjustments (2)

(1,225

)

(700

)

(1,958

)

(1,514

)

Non-GAAP net income (loss)

$

(1,784

)

$

775

$

(8,005

)

$

4,034

Non-GAAP net income (loss) per share

$

(0.04

)

$

0.02

$

(0.20

)

$

0.10

Weighted average number of shares used to compute Non-GAAP diluted earnings per share

39,694

40,028

39,692

40,059

(1) Non-recurring items include $2.3 million and $2.7 million of outside service costs related to the proxy contest for the three and six months ended June 30, 2021, respectively, as well as the related $0.7 million settlement with Legion Partners Holdings, LLC.

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

Copyright© 2021 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

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.