Yahoo Finance OneSpan Inc (OSPN) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth and Improved ...
Revenue: Grew 13% year-over-year to $65 million.
Adjusted EBITDA: $20 million, representing 31% of revenue.
ARR Growth: Increased 9% year-over-year to $155 million.
Cash from Operations: Generated $27 million.
End-of-Quarter Cash: $64 million.
Security Solutions Revenue: Grew 9% year-over-year.
Digital Agreements Revenue: Grew 25% year-over-year.
Subscription Revenue: Grew 34% to $40 million.
First Quarter Gross Margin: Improved to 73% from 68% year-over-year.
GAAP Net Income Per Share: $0.35, compared to a net loss per share of $0.21 year-over-year.
Non-GAAP Earnings Per Share: $0.43, compared to a non-GAAP loss per share of $0.09 year-over-year.
Adjusted EBITDA Margin: Improved to 30.5% from negative 3% year-over-year.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
OneSpan Inc (NASDAQ:OSPN) exceeded internal revenue and adjusted EBITDA expectations for Q1 2024, with revenue growing 13% year-over-year to $65 million.
Adjusted EBITDA was $20 million, or 31% of revenue, showcasing strong profitability and operational efficiency.
Annual Recurring Revenue (ARR) grew 9% year-over-year to $155 million, demonstrating solid growth in the company's subscription-based revenue.
The company generated $27 million in cash from operations and ended the quarter with $64 million in cash, indicating healthy cash flow management.
Both business units, Security Solutions and Digital Agreements, reported strong quarters with significant year-over-year revenue growth and improved profitability.
Negative Points
DIGIPASS hardware revenue declined as expected, which could indicate challenges in the hardware segment.
The company noted that seasonal software and hardware revenue patterns suggest more modest revenue growth and profit margins in Q2 and the second half of the year.
Despite strong Q1 results, the company has maintained its previously-issued revenue and ARR guidance for 2024, suggesting caution about future performance.
Net retention rate (NRR) was impacted by a few percentage points due to timing of contract expirations related to sunset products, which could affect customer retention metrics.
The macro-environment in Europe was described as weaker, which might pose challenges for revenue growth in this significant market.
Q & A Highlights
Q: How do you feel about your visibility on your pipeline for both the next quarter and the second half of the year? A: Victor T. Limongelli, Interim CEO of OneSpan Inc., mentioned that the company has a good view into Q2, with continued strong performance in many regions, particularly APAC. However, visibility into Q4 is less clear due to the timing of revenue, which typically comes later in the year.
Q: Can you touch on any linearity you saw throughout Q1, or if there were any one-time items besides those mentioned? A: Victor T. Limongelli highlighted that the significant one-time item in Q1 was the delayed renewals that closed earlier than expected, contributing notably to the quarter's performance. He also mentioned the company's focus on operational excellence and cost structure, which influenced the decision to increase adjusted EBITDA guidance for the year.
Q: Regarding the growth rates of Digital Agreements versus Security Solutions for the remainder of the year, do you have any different views? A: Jorge A. Garcia Martell, CFO, explained that the growth in Digital Agreements was partly due to the shift of the IDV business, contributing modestly to revenue and ARR. He expects gradual increases in SaaS components and mentioned that security growth would likely continue from expansions, with security software growth being more mature due to the scale of existing operations.
Q: How did the gross margin benefit this quarter, and should we expect changes in the coming quarters? A: Victor T. Limongelli confirmed that the gross margin was helped by a lower volume of hardware, which is expected to change with higher hardware revenue in future quarters.
Q: Are you seeing any changes in your customers' willingness to take on more subscription costs given the current macro environment? A: Victor T. Limongelli noted that the macro environment is decent but not strong, with some regional variations. He mentioned that the environment in Europe was a bit weaker, while North America felt relatively stable.
Q: Can you provide insights on how the land-and-expand approach is trending? A: Victor T. Limongelli referred to the Net Retention Rate (NRR) as a measure of the success of the land-and-expand strategy, which was reported at 107%. Jorge added that adjustments due to sunsetting products slightly clouded this figure.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
