Fourth Quarter Financial Results
OneSpan Inc. (NASDAQ: OSPN), a global leader in software for
trusted identities, e-signatures and secure transactions, today
reported financial results for the fourth quarter and full year
ended December 31, 2018.
“We had a very strong fourth quarter with revenue up 19% on
solid contributions across our portfolio of software, services and
hardware,” stated OneSpan CEO, Scott Clements. “For the year, we
exceeded the high-end of our revenue and adjusted EBITDA guidance.
Subscription revenue grew 50% and our mobile security software
license revenue grew more than 50%. We booked initial orders for
Intelligent Adaptive Authentication in 2018, and we expect this and
other new Trusted Identity solutions, including Risk Analytics and
our upcoming digital account opening offering to contribute to
revenue as 2019 progresses.”
Fourth Quarter and Full Year 2018 Financial
Highlights
- Revenue for the fourth quarter of 2018 was $64.8 million,
an increase of 19% from $54.5 million for the fourth quarter
of 2017. Revenue for the full year 2018 was $212.3 million, an
increase of 10% from $193.3 million for the full year
2017.
- Gross margin for the fourth quarter of 2018 was 65% and for the
full year 2018 was 69%. Gross margin for the fourth quarter of 2017
was 66% and for the full year 2017 was 70%.
- GAAP operating income for the fourth quarter of 2018 was $4.1
million, and for the full year 2018 was less than $0.1 million.
GAAP operating income for the fourth quarter of 2017 was $1.2
million, and for the full year 2017 was $6.2 million.
- Adjusted EBITDA for the fourth quarter 2018 was $9.1 million,
or 14% of revenue, and for the full year 2018 was $21.6 million, or
10% of revenue. Adjusted EBITDA for the fourth quarter of 2017 was
$6.4 million, or 12% of revenue, and for the full year 2017 was
$22.9 million, or 12% of revenue.1
- GAAP net income for the fourth quarter of 2018 was $4.0
million, or $0.10 per diluted share. GAAP net income for the full
year 2018 was $3.8 million, or $0.10 per diluted share. This
compares to a GAAP net loss of $25.8 million, or $0.65 per share
for the fourth quarter of 2017, and GAAP net loss of $22.4 million,
or $0.56 per share for the full year 2017.
- Non-GAAP net income for the fourth quarter of 2018 was $6.8
million, or $0.17 per diluted share, and for the full year 2018 was
$14.5 million, or $0.36 per diluted share. Non-GAAP net income for
the fourth quarter of 2017 was $5.7 million, or $0.14 per diluted
share, and for the full year 2017 was $17.0 million, or $0.43 per
diluted share.1
- Cash, cash equivalents and short-term investments at December
31, 2018 totaled $99.2 million compared to $91.9 million and $158.4
million at September 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 launched Intelligent Adaptive Authentication (IAA) with
initial sales in 2018. IAA brings together risk analytics, mobile
security, multi-factor authentication, biometrics, and many other
technologies to create a smart and dynamic authentication process
where a precise level of security is applied to each
transaction.
- The Company released its stand-alone AI-based Risk Analytics
solution to address the growing problems of account takeover and
new account fraud. Risk Analytics uses machine learning to protect
online and mobile channels as well as meet PSD2 compliance
requirements for transaction risk analysis. Both IAA and Risk
Analytics have significant project pipelines.
- Javelin Strategy & Research named OneSpan the winner of its
“2018 Best in Class Mobile Biometrics Platform” award. OneSpan
finished ahead of eleven of its peers and was recognized for
offering a one-stop shop for biometric authentication, cutting-edge
features, and a flexible platform with a variety of configurable
implementation options.
Outlook for Full Year 2019
- Revenue is expected to be in the range of $229 million to $237
million
- Adjusted EBITDA is expected to be in the range of $22 million
to $27 million
Conference Call Details
In conjunction with this announcement, OneSpan Inc. will host a
conference call today, February 19, 2019, at 4:30 p.m. EST/22:30
CET. 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 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 5977315.
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 2019, and the information included under the caption “Outlook
for Full Year 2019”. 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.
|
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|
|
|
|
|
|
|
|
OneSpan Inc.CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except per share
data)(unaudited) |
|
|
|
Three months ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Product
and license |
|
$ |
47,615 |
|
$ |
42,803 |
|
$ |
152,977 |
|
$ |
147,257 |
Services
and other |
|
|
17,184 |
|
|
11,703 |
|
|
59,303 |
|
|
46,034 |
Total
revenue |
|
|
64,799 |
|
|
54,506 |
|
|
212,280 |
|
|
193,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
Product
and license |
|
|
17,809 |
|
|
15,665 |
|
|
50,706 |
|
|
48,333 |
Services
and other |
|
|
4,744 |
|
|
2,933 |
|
|
14,107 |
|
|
10,444 |
Total
cost of goods sold |
|
|
22,553 |
|
|
18,598 |
|
|
64,813 |
|
|
58,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
42,246 |
|
|
35,908 |
|
|
147,467 |
|
|
134,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
16,867 |
|
|
15,997 |
|
|
63,805 |
|
|
58,994 |
Research
and development |
|
|
9,392 |
|
|
5,450 |
|
|
32,197 |
|
|
23,119 |
General
and administrative |
|
|
9,421 |
|
|
11,077 |
|
|
41,589 |
|
|
37,400 |
Amortization / impairment of intangible assets |
|
|
2,465 |
|
|
2,206 |
|
|
9,852 |
|
|
8,809 |
Total
operating costs |
|
|
38,145 |
|
|
34,730 |
|
|
147,443 |
|
|
128,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
4,101 |
|
|
1,178 |
|
|
24 |
|
|
6,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income,
net |
|
|
274 |
|
|
415 |
|
|
1,265 |
|
|
1,431 |
Other income, net |
|
|
239 |
|
|
356 |
|
|
2,264 |
|
|
758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
4,614 |
|
|
1,949 |
|
|
3,553 |
|
|
8,381 |
Provision (benefit) for
income taxes |
|
|
650 |
|
|
27,786 |
|
|
(293) |
|
|
30,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,964 |
|
$ |
(25,837) |
|
$ |
3,846 |
|
$ |
(22,399) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.10 |
|
$ |
(0.65) |
|
$ |
0.10 |
|
$ |
(0.56) |
Diluted |
|
$ |
0.10 |
|
$ |
(0.65) |
|
$ |
0.10 |
|
$ |
(0.56) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
39,957 |
|
|
39,829 |
|
|
39,932 |
|
|
39,802 |
Diluted |
|
|
40,055 |
|
|
39,829 |
|
|
40,046 |
|
|
39,802 |
|
|
|
|
|
|
|
OneSpan Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS(in thousands,
unaudited) |
|
|
|
|
|
|
|
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and
equivalents |
|
$ |
76,364 |
|
$ |
78,661 |
Short
term investments |
|
|
22,789 |
|
|
79,733 |
Accounts
receivable, net of allowances of $1,152 in 2018 and $520 in
2017 |
|
|
62,367 |
|
|
48,126 |
Inventories, net |
|
|
14,428 |
|
|
12,040 |
Prepaid
expenses |
|
|
4,733 |
|
|
3,876 |
Contract
assets |
|
|
7,962 |
|
|
— |
Other
current assets |
|
|
5,705 |
|
|
5,501 |
Total
current assets |
|
|
194,348 |
|
|
227,937 |
Property
and equipment: |
|
|
|
|
|
|
Furniture
and fixtures |
|
|
7,613 |
|
|
5,655 |
Office
equipment |
|
|
11,059 |
|
|
13,084 |
Total
Property and equipment: |
|
|
18,672 |
|
|
18,739 |
Accumulated depreciation |
|
|
(12,422) |
|
|
(13,963) |
Property
and equipment, net |
|
|
6,250 |
|
|
4,776 |
Goodwill |
|
|
91,841 |
|
|
56,332 |
Intangible assets, net of accumulated amortization |
|
|
45,462 |
|
|
37,888 |
Deferred
income taxes |
|
|
5,601 |
|
|
5,460 |
Contract
assets - non-current |
|
|
3,316 |
|
|
— |
Other
assets |
|
|
8,400 |
|
|
5,229 |
Total assets |
|
$ |
355,218 |
|
$ |
337,622 |
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts
payable |
|
$ |
7,202 |
|
$ |
8,144 |
Deferred
revenue |
|
|
34,412 |
|
|
33,295 |
Accrued
wages and payroll taxes |
|
|
13,673 |
|
|
11,643 |
Short-term income taxes payable |
|
|
6,905 |
|
|
3,673 |
Other
accrued expenses |
|
|
9,524 |
|
|
7,745 |
Deferred
compensation |
|
|
1,762 |
|
|
1,652 |
Total
current liabilities |
|
|
73,478 |
|
|
66,152 |
Long-term
deferred revenue |
|
|
10,672 |
|
|
7,019 |
Other
long-term liabilities |
|
|
7,075 |
|
|
5,919 |
Long-term
income taxes payable |
|
|
7,620 |
|
|
12,848 |
Deferred
income taxes |
|
|
2,661 |
|
|
7,753 |
Total
liabilities |
|
|
101,506 |
|
|
99,691 |
Stockholders' equity |
|
|
|
|
|
|
Common
stock: $.001 par value per share, 75,000 shares authorized; 40,225
and 40,086 issued and outstanding at December 31, 2018
and 2017, respectively |
|
|
40 |
|
|
40 |
Additional paid-in capital |
|
|
94,280 |
|
|
90,307 |
Accumulated income |
|
|
172,378 |
|
|
156,152 |
Accumulated other comprehensive loss |
|
|
(12,986) |
|
|
(8,568) |
Total
stockholders' equity |
|
|
253,712 |
|
|
237,931 |
Total liabilities and stockholders' equity |
|
$ |
355,218 |
|
$ |
337,622 |
|
|
|
|
|
|
|
|
OneSpan Inc.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands, unaudited) |
|
|
|
|
|
|
|
|
|
|
For the years ended
December 31, |
|
|
|
2018 |
|
2017 |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net
income (loss) from operations |
|
$ |
3,846 |
|
$ |
(22,399) |
|
Adjustments to reconcile net income (loss) from operations to net
cash provided by (used in) operations: |
|
|
|
|
|
|
|
Depreciation, amortization, and impairment of intangible
assets |
|
|
12,138 |
|
|
10,601 |
|
Loss
(gain) on disposal of assets |
|
|
(49) |
|
|
185 |
|
Deferred
tax expense (benefit) |
|
|
(7,314) |
|
|
13,053 |
|
Stock-based compensation |
|
|
3,972 |
|
|
3,466 |
|
Changes
in assets and liabilities, net of effect of acquisitions: |
|
|
|
|
|
|
|
Accounts
receivable, net |
|
|
(14,696) |
|
|
(8,428) |
|
Inventories, net |
|
|
(2,388) |
|
|
5,380 |
|
Contract
assets |
|
|
(3,110) |
|
|
— |
|
Accounts
payable |
|
|
(1,475) |
|
|
(1,013) |
|
Income
taxes payable |
|
|
(2,684) |
|
|
11,926 |
|
Accrued
expenses |
|
|
2,050 |
|
|
2,514 |
|
Deferred
compensation |
|
|
109 |
|
|
(77) |
|
Deferred
revenue |
|
|
10,317 |
|
|
3,704 |
|
Other
assets and liabilities |
|
|
(1,357) |
|
|
(1,285) |
|
Net cash provided by
(used in) operating activities |
|
|
(641) |
|
|
17,627 |
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Purchase
of short term investments |
|
|
(22,820) |
|
|
(178,658) |
|
Maturities of short term investments |
|
|
80,000 |
|
|
195,000 |
|
Purchase
of Dealflo, net of cash acquired |
|
|
(53,065) |
|
|
— |
|
Additions
to property and equipment |
|
|
(3,685) |
|
|
(3,088) |
|
Other |
|
|
— |
|
|
(456) |
|
Net cash provided by
investing activities |
|
|
430 |
|
|
12,798 |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Tax
payments for restricted stock issuances |
|
|
(694) |
|
|
(640) |
|
Net cash used in
financing activities |
|
|
(694) |
|
|
(640) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
|
(1,392) |
|
|
(469) |
|
|
|
|
|
|
|
|
|
Net increase (decrease)
in cash |
|
|
(2,297) |
|
|
29,316 |
|
Cash and equivalents,
beginning of period |
|
|
78,661 |
|
|
49,345 |
|
Cash and equivalents,
end of period |
|
$ |
76,364 |
|
$ |
78,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by major products and services (in thousands,
unaudited): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, |
|
Twelve months ended
December 31, |
|
|
2018 |
|
2017* |
|
2018 |
|
2017* |
Hardware products |
|
$ |
36,437 |
|
$ |
32,261 |
|
$ |
105,560 |
|
$ |
105,867 |
Software licenses |
|
|
11,178 |
|
|
10,542 |
|
|
47,417 |
|
|
41,390 |
Subscription |
|
|
4,477 |
|
|
2,662 |
|
|
15,426 |
|
|
10,296 |
Professional
services |
|
|
2,028 |
|
|
1,507 |
|
|
5,743 |
|
|
4,891 |
Maintenance, support
and other |
|
|
10,679 |
|
|
7,534 |
|
|
38,134 |
|
|
30,847 |
Total
Revenue |
|
$ |
64,799 |
|
$ |
54,506 |
|
$ |
212,280 |
|
$ |
193,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* Prior
period amounts are presented under ASC 605 and ASC 985-605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of ASC 606 Adoption (in thousands,
unaudited): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
2018 |
|
Twelve months ended December 31,
2018 |
|
|
As Reported |
|
Adjustments |
|
Balanceswithout theadoption ofTopic
606 |
|
As Reported |
|
Adjustments |
|
Balanceswithout theadoption ofTopic
606 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
and license |
|
$ |
47,615 |
|
$ |
1,015 |
|
$ |
48,630 |
|
$ |
152,977 |
|
$ |
2,365 |
|
$ |
155,342 |
Services
and other |
|
|
17,184 |
|
|
(1,422) |
|
|
15,762 |
|
|
59,303 |
|
|
(5,772) |
|
|
53,531 |
Total
revenue |
|
|
64,799 |
|
|
(407) |
|
|
64,392 |
|
|
212,280 |
|
|
(3,407) |
|
|
208,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
and license |
|
|
17,809 |
|
|
154 |
|
|
17,963 |
|
|
50,706 |
|
|
605 |
|
|
51,311 |
Services
and other |
|
|
4,744 |
|
|
— |
|
|
4,744 |
|
|
14,107 |
|
|
— |
|
|
14,107 |
Total
Cost of goods sold |
|
|
22,553 |
|
|
154 |
|
|
22,707 |
|
|
64,813 |
|
|
605 |
|
|
65,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
42,246 |
|
|
(561) |
|
|
41,685 |
|
|
147,467 |
|
|
(4,012) |
|
|
143,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
16,867 |
|
|
266 |
|
|
17,133 |
|
|
63,805 |
|
|
1,108 |
|
|
64,913 |
Total
operating costs |
|
|
38,145 |
|
|
266 |
|
|
38,411 |
|
|
147,443 |
|
|
1,108 |
|
|
148,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
|
4,101 |
|
|
(827) |
|
|
3,274 |
|
|
24 |
|
|
(5,120) |
|
|
(5,096) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
taxes |
|
|
4,614 |
|
|
(827) |
|
|
3,787 |
|
|
3,553 |
|
|
(5,120) |
|
|
(1,567) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for
income taxes |
|
|
650 |
|
|
(88) |
|
|
562 |
|
|
(293) |
|
|
(365) |
|
|
(658) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,964 |
|
$ |
(739) |
|
$ |
3,225 |
|
$ |
3,846 |
|
$ |
(4,755) |
|
$ |
(909) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
|
$ |
0.10 |
|
|
|
|
$ |
0.08 |
|
$ |
0.10 |
|
|
|
|
$ |
(0.02) |
Diluted EPS |
|
$ |
0.10 |
|
|
|
|
$ |
0.08 |
|
$ |
0.10 |
|
|
|
|
$ |
(0.02) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income (loss) |
|
$ |
3,964 |
|
$ |
(25,837) |
|
$ |
3,846 |
|
$ |
(22,399) |
Interest
income, net |
|
|
(274) |
|
|
(415) |
|
|
(1,265) |
|
|
(1,431) |
Provision
(benefit) for income taxes |
|
|
650 |
|
|
27,786 |
|
|
(293) |
|
|
30,780 |
Depreciation, amortization / impairment of intangible assets |
|
|
3,072 |
|
|
2,708 |
|
|
12,138 |
|
|
10,601 |
Long-term
incentive compensation |
|
|
1,708 |
|
|
2,173 |
|
|
6,091 |
|
|
5,372 |
Reversal
of legal accrual |
|
|
— |
|
|
— |
|
|
(900) |
|
|
— |
Rebranding costs |
|
|
— |
|
|
— |
|
|
561 |
|
|
— |
Acquisition related costs |
|
|
— |
|
|
— |
|
|
1,087 |
|
|
— |
Lease
exit costs |
|
|
— |
|
|
— |
|
|
315 |
|
|
— |
Adjusted EBITDA |
|
$ |
9,120 |
|
$ |
6,415 |
|
$ |
21,580 |
|
$ |
22,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 impacts
of tax reform, 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 |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income (loss) |
|
$ |
3,964 |
|
$ |
(25,837) |
|
$ |
3,846 |
|
$ |
(22,399) |
Long-term
incentive compensation |
|
|
1,708 |
|
|
2,173 |
|
|
6,091 |
|
|
5,372 |
Amortization / impairment of intangible assets |
|
|
2,465 |
|
|
2,206 |
|
|
9,852 |
|
|
8,809 |
Reversal
of legal accrual |
|
|
— |
|
|
— |
|
|
(900) |
|
|
— |
Rebranding costs |
|
|
— |
|
|
— |
|
|
561 |
|
|
— |
Acquisition related costs |
|
|
— |
|
|
— |
|
|
1,087 |
|
|
— |
Lease
exit costs |
|
|
— |
|
|
— |
|
|
315 |
|
|
— |
Impact of
tax reform* |
|
|
(488) |
|
|
28,075 |
|
|
(2,996) |
|
|
28,075 |
Tax
impact of adjustments** |
|
|
(835) |
|
|
(876) |
|
|
(3,401) |
|
|
(2,836) |
Non-GAAP net
income |
|
$ |
6,814 |
|
$ |
5,741 |
|
$ |
14,455 |
|
$ |
17,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted
EPS |
|
$ |
0.17 |
|
$ |
0.14 |
|
$ |
0.36 |
|
$ |
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares used to compute Non-GAAP diluted earnings per share |
|
|
40,055 |
|
|
39,829 |
|
|
40,046 |
|
|
39,802 |
*The tax reform impact for the year ended December 31, 2018
includes a $2.5 million measurement period adjustment for the
quarter ended September 30, 2018 that was disclosed in our Form
10-Q for that period, but which was not reflected in the
adjustments to determine non-GAAP net income in our earnings
release for that period.
**The tax impact of adjustments is calculated as 20% of the
adjustments in all periods.
Copyright© 2019 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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