OneSpan Inc. (NASDAQ: OSPN), a global leader in software for
trusted identities, e-signatures and secure transactions, today
reported financial results for the third quarter and nine months
ended September 30, 2018.
“Third quarter revenue growth was lower than expected due to
order timing resulting in approximately $2 million of revenue being
recognized early in the fourth quarter,” stated OneSpan CEO Scott
Clements. “The timing of this revenue does not affect our full year
2018 guidance. During the quarter, mobile security software revenue
grew by 50% and subscription revenue by 38%. We continue to make
significant progress executing our Trusted Identity Strategy to
secure digital customer journeys for financial institutions. We
have numerous pilots, proofs-of-concept and initial deployments
worldwide and a robust product release roadmap over the next
several quarters.”
Third Quarter and First Nine Months 2018 Financial
Highlights
- Revenue for the third quarter of 2018 was $52.5 million,
an increase of 3% from $51.1 million for the third quarter of
2017. Revenue for the first nine months of 2018 was
$147.5 million, an increase of 6% from $138.8 million for
the first nine months of 2017.
- Gross margin for the third quarter of 2018 was 66% and for the
first nine months of 2018 was 71%. Gross margin for the third
quarter of 2017 was 72% and for the first nine months of 2017 was
71%.
- GAAP operating loss for the third quarter of 2018 was $3.1
million, and for the first nine months of 2018 was $4.1 million.
GAAP operating income for the third quarter of 2017 was $5.1
million, and for the first nine months of 2017 was $5.0
million.
- Adjusted EBITDA for the third quarter of 2018 was $1.0 million,
or 2% of revenue, and for the first nine months of 2018 was $12.5
million, or 8% of revenue. Adjusted EBITDA for the third quarter of
2017 was $8.8 million, or 17% of revenue, and for the first nine
months of 2017 was $16.5 million, or 12% of revenue.1
- GAAP net loss for the third quarter of 2018 was $0.9 million,
or $0.02 per share. GAAP net loss for the first nine months of 2018
was $0.1 million, or $0.00 per share. This compares to GAAP net
income of $2.8 million, or $0.07 per share for the third quarter of
2017, and $3.4 million, or $0.09 per share for the first nine
months of 2017.
- Non-GAAP net income for the third quarter of 2018 was $1.7
million, or $0.04 per diluted share, and for the first nine months
of 2018 was $10.1 million, or $0.25 per diluted share. Non-GAAP net
income for the third quarter of 2017 was $5.5 million, or $0.14 per
diluted share, and for the first nine months of 2017 was $11.3
million, or $0.28 per diluted share.1
- Cash, cash equivalents and short-term investments at September
30, 2018 totaled $91.9 million compared to $101.4 million and
$158.4 million at June 30, 2018 and December 31, 2017,
respectively.
1 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.
Recent Business Highlights
- OneSpan customers continued to adopt Mobile Security Suite
(MSS) solutions including enhanced features such as behavioral
biometric authentication and facial recognition. Year-to-date MSS
revenue growth approximated 60%.
- The company received its first purchase order from a major
Asian bank for its FIDO-compliant software authentication solution.
OneSpan is a board member of the FIDO Alliance which was formed to
address the lack of interoperability among strong authentication
technologies. The first phase of OneSpan’s project with the Asian
bank will go live during the fourth quarter of 2018.
- OneSpan recently demonstrated advances in cloud-based risk
analytics, identity verification and e-signatures for digital
account opening, and digital mortgage closing using blockchain
technology at Money20/20 USA 2018.
- The company was awarded the top spot for overall customer
satisfaction in the G2 Crowd Grid Report for E-Signature for the
tenth consecutive time. The report ranks the top ten e-signature
solutions and OneSpan Sign (formerly eSignLive) scored higher than
all other solutions including DocuSign and Adobe Sign.
Guidance for Full Year
2018
OneSpan is reaffirming guidance for the full year 2018 as
follows:
- Revenue is expected to be in the range of $201 million to $211
million; and
- Adjusted EBITDA is expected to be in the range of $15 million
to $19 million.
Conference Call Details
In conjunction with this announcement, OneSpan Inc. will host a
conference call today, October 30, 2018, at 4:30 p.m. EDT/21:30
CET. During the conference call, Mr. Scott Clements, CEO, and Mr.
Mark Hoyt, CFO, will discuss OneSpan’s results for the third
quarter and first nine months of 2018.
To access the conference call, dial 866-354-0181 for the U.S. or
Canada and 1-409-217-8086 for international callers. The conference
ID number is 3062409.
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 enables financial institutions and other organizations
to succeed by making bold advances in their digital transformation.
We do this by establishing trust in people’s identities, the
devices they use, and the transactions that shape their lives. We
believe that this is the foundation of enhanced business enablement
and growth. More than 10,000 customers, including over half of the
top 100 global banks, rely on OneSpan solutions to protect their
most important relationships and business processes. From digital
onboarding to fraud mitigation to workflow management, OneSpan’s
unified, open platform reduces costs, accelerates customer
acquisition, and increases customer satisfaction. Learn more about
OneSpan at OneSpan.com and
on Twitter, 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 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 acquisitions to date and our strategy related to future
acquisitions; 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", and statements that an event or
result "may", "will", "should", "could", or "might" occur or be
achieved and any other similar expressions. The forward-looking
statements include, but are not limited to, our financial outlook
for 2018, and the information included under the caption “Guidance
for Full Year 2018”. These forward-looking statements involve risks
and uncertainties, as well as assumptions which, 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; our
ability to effectively identify, purchase and integrate
acquisitions; 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; exposure to increased economic and operational
uncertainties from operating a global business as well as those
factors set forth in our Form 10-K (and other forms) filed with the
Securities and Exchange Commission. In particular, we direct you to
the risk factors contained under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Form 10-K. Our SEC filings and other
important information can be found on 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.
OneSpan Inc.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except per share
data)(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended |
|
Nine months
ended |
|
|
|
September 30, |
|
September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and license |
|
$ |
36,882 |
|
|
$ |
38,421 |
|
|
$ |
105,362 |
|
|
$ |
104,454 |
|
Services and other |
|
|
15,613 |
|
|
|
12,705 |
|
|
|
42,119 |
|
|
|
34,331 |
|
Total revenue |
|
|
52,495 |
|
|
|
51,126 |
|
|
|
147,481 |
|
|
|
138,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and license |
|
|
14,321 |
|
|
|
12,083 |
|
|
|
32,897 |
|
|
|
32,668 |
|
Services and other |
|
|
3,631 |
|
|
|
2,397 |
|
|
|
9,363 |
|
|
|
7,511 |
|
Total cost of goods sold |
|
|
17,952 |
|
|
|
14,480 |
|
|
|
42,260 |
|
|
|
40,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
34,543 |
|
|
|
36,646 |
|
|
|
105,221 |
|
|
|
98,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
16,039 |
|
|
|
13,956 |
|
|
|
46,938 |
|
|
|
42,997 |
|
Research and development |
|
|
8,992 |
|
|
|
5,493 |
|
|
|
22,805 |
|
|
|
17,669 |
|
General and administrative |
|
|
10,184 |
|
|
|
9,882 |
|
|
|
32,168 |
|
|
|
26,323 |
|
Amortization / impairment of intangible assets |
|
|
2,442 |
|
|
|
2,203 |
|
|
|
7,387 |
|
|
|
6,603 |
|
Total operating costs |
|
|
37,657 |
|
|
|
31,534 |
|
|
|
109,298 |
|
|
|
93,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(3,114 |
) |
|
|
5,112 |
|
|
|
(4,077 |
) |
|
|
5,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
|
258 |
|
|
|
386 |
|
|
|
991 |
|
|
|
1,016 |
|
Other income (expense), net |
|
|
246 |
|
|
|
(185 |
) |
|
|
2,025 |
|
|
|
402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(2,610 |
) |
|
|
5,313 |
|
|
|
(1,061 |
) |
|
|
6,432 |
|
Provision (benefit) for income taxes |
|
|
(1,702 |
) |
|
|
2,558 |
|
|
|
(943 |
) |
|
|
2,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(908 |
) |
|
$ |
2,755 |
|
|
$ |
(118 |
) |
|
$ |
3,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.02 |
) |
|
$ |
0.07 |
|
|
$ |
(0.00 |
) |
|
$ |
0.09 |
|
Diluted |
|
$ |
(0.02 |
) |
|
$ |
0.07 |
|
|
$ |
(0.00 |
) |
|
$ |
0.09 |
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
39,922 |
|
|
|
39,811 |
|
|
|
39,924 |
|
|
|
39,792 |
|
Diluted |
|
|
39,922 |
|
|
|
39,821 |
|
|
|
39,924 |
|
|
|
39,802 |
|
OneSpan Inc.CONDENSED
CONSOLIDATED BALANCE SHEETS(in thousands,
unaudited)
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and equivalents |
|
$ |
91,935 |
|
|
$ |
78,661 |
|
Short term investments |
|
|
— |
|
|
|
79,733 |
|
Accounts receivable, net of allowances of $841 in
2018 and $520 in 2017 |
|
|
42,534 |
|
|
|
48,126 |
|
Inventories, net |
|
|
15,307 |
|
|
|
12,040 |
|
Prepaid expenses |
|
|
5,201 |
|
|
|
3,876 |
|
Contract assets |
|
|
6,653 |
|
|
|
— |
|
Other current assets |
|
|
7,309 |
|
|
|
5,501 |
|
Total current assets |
|
|
168,939 |
|
|
|
227,937 |
|
Property and equipment: |
|
|
|
|
|
|
Furniture and fixtures |
|
|
7,560 |
|
|
|
5,655 |
|
Office equipment |
|
|
10,905 |
|
|
|
13,084 |
|
Total Property and equipment: |
|
|
18,465 |
|
|
|
18,739 |
|
Accumulated depreciation |
|
|
(11,989 |
) |
|
|
(13,963 |
) |
Property and equipment, net |
|
|
6,476 |
|
|
|
4,776 |
|
Goodwill |
|
|
94,672 |
|
|
|
56,332 |
|
Intangible assets, net of accumulated
amortization |
|
|
46,540 |
|
|
|
37,888 |
|
Deferred income taxes |
|
|
4,911 |
|
|
|
5,460 |
|
Contract assets - non-current |
|
|
4,407 |
|
|
|
— |
|
Other assets |
|
|
7,476 |
|
|
|
5,229 |
|
Total assets |
|
$ |
333,421 |
|
|
$ |
337,622 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
3,456 |
|
|
$ |
8,144 |
|
Deferred revenue |
|
|
28,344 |
|
|
|
33,295 |
|
Accrued wages and payroll taxes |
|
|
11,711 |
|
|
|
11,643 |
|
Short-term income taxes payable |
|
|
1,600 |
|
|
|
3,673 |
|
Other accrued expenses |
|
|
10,683 |
|
|
|
7,746 |
|
Deferred compensation |
|
|
1,120 |
|
|
|
1,652 |
|
Total current liabilities |
|
|
56,914 |
|
|
|
66,153 |
|
Long-term deferred revenue |
|
|
5,254 |
|
|
|
7,019 |
|
Other long-term liabilities |
|
|
6,125 |
|
|
|
5,919 |
|
Long-term income taxes payable |
|
|
9,141 |
|
|
|
12,848 |
|
Deferred income taxes |
|
|
6,111 |
|
|
|
7,753 |
|
Total liabilities |
|
|
83,545 |
|
|
|
99,692 |
|
Stockholders' equity |
|
|
|
|
|
|
Common stock: $.001 par value per share, 75,000
shares authorized; 40,261 and 40,086 issued and outstanding at
September 30, 2018 and December 31, 2017,
respectively |
|
|
40 |
|
|
|
40 |
|
Additional paid-in capital |
|
|
93,224 |
|
|
|
90,307 |
|
Accumulated income |
|
|
168,409 |
|
|
|
156,151 |
|
Accumulated other comprehensive loss |
|
|
(11,797 |
) |
|
|
(8,568 |
) |
Total stockholders' equity |
|
|
249,876 |
|
|
|
237,930 |
|
Total liabilities and stockholders'
equity |
|
$ |
333,421 |
|
|
$ |
337,622 |
|
OneSpan Inc.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, |
|
|
|
2018 |
|
|
2017 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(118 |
) |
|
$ |
3,438 |
|
|
Adjustments to reconcile net income (loss) to net
cash provided: |
|
|
|
|
|
|
|
Depreciation, amortization, and impairment of
intangible assets |
|
|
9,066 |
|
|
|
7,893 |
|
|
Loss (gain) on disposal of assets |
|
|
(49 |
) |
|
|
227 |
|
|
Deferred tax expense (benefit) |
|
|
(3,020 |
) |
|
|
73 |
|
|
Stock-based compensation |
|
|
2,916 |
|
|
|
1,901 |
|
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
6,183 |
|
|
|
3,854 |
|
|
Inventories, net |
|
|
(3,267 |
) |
|
|
(97 |
) |
|
Contract assets |
|
|
(2,892 |
) |
|
|
— |
|
|
Accounts payable |
|
|
(5,258 |
) |
|
|
(2,808 |
) |
|
Income taxes payable |
|
|
(8,433 |
) |
|
|
(2,089 |
) |
|
Accrued expenses |
|
|
(911 |
) |
|
|
2,096 |
|
|
Deferred compensation |
|
|
(541 |
) |
|
|
(656 |
) |
|
Deferred revenue |
|
|
(405 |
) |
|
|
2,093 |
|
|
Other assets and liabilities |
|
|
(2,476 |
) |
|
|
(876 |
) |
|
Net cash provided by (used in) operating activities |
|
|
(9,205 |
) |
|
|
15,049 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchase of short term investments |
|
|
— |
|
|
|
(168,731 |
) |
|
Maturities of short term investments |
|
|
80,000 |
|
|
|
155,000 |
|
|
Purchase of Dealflo, net of cash acquired |
|
|
(53,065 |
) |
|
|
— |
|
|
Additions to property and equipment |
|
|
(3,410 |
) |
|
|
(1,323 |
) |
|
Other |
|
|
— |
|
|
|
(462 |
) |
|
Net cash provided by (used in) investing activities |
|
|
23,525 |
|
|
|
(15,516 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Tax payments for restricted stock issuances |
|
|
(399 |
) |
|
|
(257 |
) |
|
Net cash used in financing activities |
|
|
(399 |
) |
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
(647 |
) |
|
|
640 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
13,274 |
|
|
|
(84 |
) |
|
Cash and equivalents, beginning of period |
|
|
78,661 |
|
|
|
49,345 |
|
|
Cash and equivalents, end of period |
|
$ |
91,935 |
|
|
$ |
49,261 |
|
|
Revenue by major products and services (in
thousands, unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
|
|
2018 |
|
2017* |
|
2018 |
|
2017* |
Hardware products |
|
$ |
27,056 |
|
$ |
26,606 |
|
$ |
69,123 |
|
$ |
73,607 |
Software licenses |
|
|
9,826 |
|
|
11,815 |
|
|
36,239 |
|
|
30,847 |
Subscription |
|
|
4,161 |
|
|
3,023 |
|
|
10,949 |
|
|
7,634 |
Professional services |
|
|
1,594 |
|
|
1,354 |
|
|
3,715 |
|
|
3,384 |
Maintenance, support and other |
|
|
9,858 |
|
|
8,328 |
|
|
27,455 |
|
|
23,313 |
Total Revenue |
|
$ |
52,495 |
|
$ |
51,126 |
|
$ |
147,481 |
|
$ |
138,785 |
* Prior period amounts are presented under ASC 605 and ASC
985-605
Impact of ASC 606 Adoption (in thousands,
unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2018 |
|
Nine months ended
September 30, 2018 |
|
|
As Reported |
|
Adjustments |
|
Balances without the
adoption of Topic 606 |
|
As Reported |
|
Adjustments |
|
Balances without the
adoption of Topic 606 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and license |
|
$ |
36,882 |
|
|
$ |
1,425 |
|
|
$ |
38,307 |
|
|
$ |
105,362 |
|
|
$ |
1,350 |
|
|
$ |
106,712 |
|
Services and other |
|
|
15,613 |
|
|
|
(1,959 |
) |
|
|
13,654 |
|
|
|
42,119 |
|
|
|
(4,350 |
) |
|
|
37,769 |
|
Total revenue |
|
|
52,495 |
|
|
|
(534 |
) |
|
|
51,961 |
|
|
|
147,481 |
|
|
|
(3,000 |
) |
|
|
144,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and license |
|
|
14,321 |
|
|
|
(83 |
) |
|
|
14,238 |
|
|
|
32,897 |
|
|
|
451 |
|
|
|
33,348 |
|
Services and other |
|
|
3,631 |
|
|
|
— |
|
|
|
3,631 |
|
|
|
9,363 |
|
|
|
— |
|
|
|
9,363 |
|
Total Cost of goods sold |
|
|
17,952 |
|
|
|
(83 |
) |
|
|
17,869 |
|
|
|
42,260 |
|
|
|
451 |
|
|
|
42,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
34,543 |
|
|
|
(451 |
) |
|
|
34,092 |
|
|
|
105,221 |
|
|
|
(3,451 |
) |
|
|
101,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
16,039 |
|
|
|
235 |
|
|
|
16,274 |
|
|
|
46,938 |
|
|
|
842 |
|
|
|
47,780 |
|
Total operating costs |
|
|
37,657 |
|
|
|
235 |
|
|
|
37,892 |
|
|
|
109,298 |
|
|
|
842 |
|
|
|
110,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(3,114 |
) |
|
|
(686 |
) |
|
|
(3,800 |
) |
|
|
(4,077 |
) |
|
|
(4,293 |
) |
|
|
(8,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes |
|
|
(2,610 |
) |
|
|
(686 |
) |
|
|
(3,296 |
) |
|
|
(1,061 |
) |
|
|
(4,293 |
) |
|
|
(5,354 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
|
(1,702 |
) |
|
|
1,490 |
|
|
|
(212 |
) |
|
|
(943 |
) |
|
|
(277 |
) |
|
|
(1,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(908 |
) |
|
$ |
(2,176 |
) |
|
$ |
(3,084 |
) |
|
$ |
(118 |
) |
|
$ |
(4,016 |
) |
|
$ |
(4,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
|
$ |
(0.02 |
) |
|
|
|
|
$ |
(0.08 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
$ |
(0.10 |
) |
Diluted EPS |
|
$ |
(0.02 |
) |
|
|
|
|
$ |
(0.08 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
$ |
(0.10 |
) |
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 comparisons to our historical operating results. We
believe these non-GAAP operating metrics provide additional tools
for investors to use to compare our business with other companies
in the industry.
These non-GAAP measures are not measures of performance under
GAAP and should not be considered in isolation, as alternatives or
substitutes for the most directly comparable financial measures
calculated in accordance with GAAP. While we believe that these
non-GAAP measures are useful within the context described below,
they are in fact incomplete and are not a measure 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
shareholders as a return on their investment. Reconciliations of
the non-GAAP measures to the most directly comparable GAAP
financial measures are found below.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss) before interest,
taxes, depreciation, amortization, long-term incentive
compensation, and certain other non-recurring items, including
acquisition related costs, lease exit costs, rebranding costs, and
accruals for legal contingencies. 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 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, lease
exit costs, reversal of a prior period legal contingency accrual),
or 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 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 |
|
Nine months
ended |
|
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net income (loss) |
|
$ |
(908 |
) |
|
$ |
2,755 |
|
|
$ |
(118 |
) |
|
$ |
3,438 |
|
Interest income, net |
|
|
(258 |
) |
|
|
(386 |
) |
|
|
(991 |
) |
|
|
(1,016 |
) |
Provision (benefit) for income taxes |
|
|
(1,702 |
) |
|
|
2,558 |
|
|
|
(943 |
) |
|
|
2,994 |
|
Depreciation, amortization / impairment of
intangible assets |
|
|
3,046 |
|
|
|
2,635 |
|
|
|
9,066 |
|
|
|
7,893 |
|
Long-term incentive compensation |
|
|
1,633 |
|
|
|
1,267 |
|
|
|
4,383 |
|
|
|
3,199 |
|
Reversal of legal accrual |
|
|
(900 |
) |
|
|
— |
|
|
|
(900 |
) |
|
|
— |
|
Rebranding costs |
|
|
39 |
|
|
|
— |
|
|
|
561 |
|
|
|
— |
|
Acquisition related costs |
|
|
— |
|
|
|
— |
|
|
|
1,087 |
|
|
|
— |
|
Lease exit costs |
|
|
— |
|
|
|
— |
|
|
|
315 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
950 |
|
|
$ |
8,829 |
|
|
$ |
12,460 |
|
|
$ |
16,508 |
|
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 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 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 which have significant adjustments to the accruals in
the period but which relate to a longer period of time, and 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
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 exclude certain other non-recurring items including
acquisition related costs, rebranding costs, lease exit costs, and
reserves for certain legal contingencies 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 |
|
Nine months
ended |
|
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net income (loss) |
|
$ |
(908 |
) |
|
$ |
2,755 |
|
|
$ |
(118 |
) |
|
$ |
3,438 |
|
Long-term incentive compensation |
|
|
1,633 |
|
|
|
1,267 |
|
|
|
4,383 |
|
|
|
3,199 |
|
Amortization / impairment of intangible
assets |
|
|
2,442 |
|
|
|
2,203 |
|
|
|
7,387 |
|
|
|
6,603 |
|
Reversal of legal accrual |
|
|
(900 |
) |
|
|
— |
|
|
|
(900 |
) |
|
|
— |
|
Rebranding costs |
|
|
39 |
|
|
|
— |
|
|
|
561 |
|
|
|
— |
|
Acquisition related costs |
|
|
— |
|
|
|
— |
|
|
|
1,087 |
|
|
|
— |
|
Lease exit costs |
|
|
— |
|
|
|
— |
|
|
|
315 |
|
|
|
— |
|
Tax impact of adjustments* |
|
|
(643 |
) |
|
|
(694 |
) |
|
|
(2,567 |
) |
|
|
(1,960 |
) |
Non-GAAP net income |
|
$ |
1,663 |
|
|
$ |
5,531 |
|
|
$ |
10,148 |
|
|
$ |
11,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted EPS |
|
$ |
0.04 |
|
|
$ |
0.14 |
|
|
$ |
0.25 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used to compute Non-GAAP diluted
earnings per share |
|
|
40,062 |
|
|
|
39,821 |
|
|
|
40,046 |
|
|
|
39,802 |
|
*The tax impact of adjustments is calculated as 20% of the
adjustments in all periods
Copyright© 2018 OneSpan North America Inc., all rights reserved.
OneSpan™, the “O” logo, “BE BOLD. BE SECURE.”™, and DEALFLO™ are
registered or unregistered trademarks of OneSpan North America Inc.
or its affiliates in the U.S. and other countries. Any other
trademarks cited herein are the property of their respective
owners.
For more information contact:Joe MaxaM: +1-612‑247‑8592O:
+1-312-766-4009 joe.maxa@onespan.com
Source: OneSpan Inc.
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