OneSpan Inc.

Ladies and gentlemen, welcome to the One Span Q4 2022 Earnings Conference Call. My name is Glenn, and I'll be the moderator for today's call. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on a telephone keypad. I'll now hand you over to your host, Joe Master, VP, Investor Relations. Joe, please go ahead. Thank you, Operator.

Hello, everyone, and thank you for joining the One Span fourth quarter and full year 2022 Earnings Conference Call. My name is Joe Maxa, and I am the VP of investor relations. This call is being webcast and can be accessed on the investor relations section of OneSpan's website at investors.onespan.com. Joining me on the call today is Matt Moynihan, our chief executive officer, and Jorge Martel, our chief financial officer. This afternoon, after market close, OneSpan issued a press release announcing the results for our fourth quarter and full year 2022. To access a copy of the press release and other investor information, please visit our website. Following our prepared comments today, we will open the call for questions. Please note that statements made during this conference call that relate to future plans, events, or performance, including the outlook for full year 2023 and our long-term financial targets, are forward-looking statements. These statements involve risks and uncertainties and are based on current assumptions. Consequently, Actual results could differ materially from the expectations expressed in these forward-looking statements. I direct your attention to today's press release and the company's filings with the U.S. Securities and Exchange Commission for discussion of such risks and uncertainties. Also note that certain financial measures that may be discussed on this call are expressed on a non-GAAP basis and have been adjusted from a related GAAP financial measure. We have provided an explanation for and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the earnings press release. In addition, please note that the date of this conference call is February 28, 2023. Any forward-looking statements and related assumptions are made as of this date. Except as required by law, we undertake no obligation to update these statements as a result of new information or future events or for any other reason. I will now turn the call over to Matt.

Thank you, Joe. Hello, everyone. Thank you for joining us on the call today. I want to start off by acknowledging and congratulating our talented employees for delivering a strong quarter and year driven by significant improvement in operational rigor and financial discipline. I'm very proud of the team for their dedication and execution during a year that substantially redefined the company and resulted in a return to top line growth and profitable adjusted EBITDA. Our solid 2022 results came during the year where we defined and began executing on a new strategy to become the enterprise-class digital agreement security company. We restructured the company to align to our go-forward strategy, executed significant cost savings initiatives, rationalized our product portfolio, and navigated through a more challenging and uncertain macroeconomic environment, all following two years of negative top-line growth. Our mindset has changed. We are laser-focused on sustainable growth and profitability. and our momentum is building across both dimensions. Let's dig a little deeper. Onespan is known for its enterprise-class products. In fact, the strength of our products, along with the market opportunity before us, is why I joined the company 15 months ago and why many of our employees have joined over this past year. Our employees are excited. We are moving from a product company to a problem-solving company for our customers, and they see what I see, which is an opportunity to transform Onespan into a faster growing and much larger company that is a strategic partner to enterprises around the globe. We have great assets and great people as our foundation to build upon, and we are just getting started. The strong effort and commitment from the team over the last several quarters has me convinced we are well positioned for continued success as we execute our multi-year growth plan. In Q4, we completed the build out of our transformational leadership team to bring scale experience to the company. I feel very good about each and every executive in their ability to significantly strengthen our ability to execute across their respective functional areas. We are increasing the size of and enterprise experience in our quota-carrying sales force. We are on track to double the size of the team by the end of the year. Following our sales kickoff in early January, appropriately themed The Power of One, our sales team is now unified across the globe with every individual having the ability to sell our entire portfolio. And we have completed the realignment and go-to-market focus around our One Spend 1000 program that prioritizes growth at our largest 1000 enterprise customers and new logo target accounts. We are prioritizing new logo growth this year through compensation plans and incentive structures, and equally important, through increased investment in our marketing function to drive brand awareness and new logo acquisition at the top half of the customer pyramid, all designed to increase our average deal size. Turning briefly to our financials, I'm pleased we delivered a strong fourth quarter and exceeded our full year 2022 revenue and adjusted EBITDA guidance. We also had strong bookings in the quarter and for the year. Protecting high value, high assurance B2B and B2C transactions remains a top priority for our customers, even in a challenging macroeconomic environment. Like last quarter, sales cycles in some Asian and European regions were longer in Q4 as compared to historical periods. Overall, the sales cycle for our solutions ticked down slightly from the third quarter. Fourth quarter and full year 2022 revenues were $57 million and $219 million, respectively. For the year, revenue grew 2% despite supply chain challenges and foreign currency headwinds, excluding the FX impact of approximately $12 million for the full year 2022, FY 2022 revenue grew 8%. Annual recurring revenue grew 12%, excluding the FX impact of approximately $4 million. ARR grew 15%. And we were profitable on an adjusted EBITDA basis for the quarter and year, reaching $3.2 million in Q4 and $6.4 million for the year. Jorge will provide additional details on our results during his financial review in a few minutes. But before that, I would like to highlight a few significant customer wins during the quarter to give you a sense as to how and why customers are using our solutions. We displaced a major e-cigarette competitor at a large auto collision repair company. This company is digitizing their retail deployment and was impressed by our favorable price per value and lack of nickel and dime pricing. A top four bank in the United States increased its number of mobile security suite licenses due to an expansion of mobile banking users This bank is using our authentication and transaction sign-in technology to mitigate fraud by preventing man-in-the-middle attacks. And a longtime European bank and mobile security suite customer upgraded their banking infrastructure and selected our cloud authentication service. They further selected our identity verification solution to identify and onboard customers. Cross-selling our capabilities into our install base to deliver more complete solutions is a top priority in fiscal year 23. We are also executing against our product strategy and recently made three meaningful announcements designed to strengthen our ability to accelerate revenue. Two weeks ago, we announced OneSpan Notary, our next generation, all-in-one, digitally native service that enables notaries and end users to complete digital agreements conveniently and securely. OneSpan Notary integrates several OneSpan technologies, including identity verification, e-signature, and secure video conferencing to offer the highest level of security. Similar to our e-signature solutions, OneSpan Notary offers the ability to private label the solution to mitigate fraud and security risks from phishing attacks. It also ensures our customer's brand is out front, resulting in a trusted user experience from start to finish. We are currently in early availability program, and general availability is planned for next month. Earlier this month, we announced a new and exciting enterprise pricing model for digital agreement customers. This is consistent with our strategy to offer advanced technology and services at the most favorable price per value in the market. By accessing the OneSpan transaction cloud platform, organizations have the ability to choose the consumption model that works best for their business, including unlimited enterprise-wide transactions or unlimited enterprise-wide end-user options. We believe this new approach will not only enable our customers to secure customer-facing and revenue-generating business processes, but will ensure they are not overbuying and under-consuming, therefore eliminating the unpredictability and dissatisfaction associated with transaction pricing by our largest competitor. And last month, we announced the acquisition of ProvenDB to bring secure storage and vaulting for documents based on blockchain technology. We plan to integrate ProvenDB's technology with our transaction cloud platform to provide an end-to-end assurance model, which includes secure e-vaulting for documents and artifacts that require the highest levels of compliance and assurance. I believe the e-vaulting category presents a significant opportunity as the market responds to Web3 security threats. Having met with top customers across the globe, I have strong conviction that we are on the right path with our five-pillar solution strategy of verify, authenticate, interact, transact, and eVault. Lastly, before turning the call over to Jorge, I would like to provide a few comments on the OneSpan Transaction Cloud Platform. I will then come back and provide closing comments before opening the call for questions. Our Transaction Cloud Platform enables us to integrate our leading services to create new innovative solutions, such as OneSpan Notary. We plan to modularize our entire digital agreements portfolio, resulting in the ability to secure the entire digital transaction lifecycle by seamlessly weaving together identity verification, authentication, high assurance virtual collaboration, e-signature, and secure transaction e-vaulting for our customers. We believe the time is right for this approach as organizations begin to think about transitioning to Web3 technologies and need to address the global regulations associated with identity and data privacy. The Transaction Cloud platform is based on the premise of open platforms that enable our customers and partners to tap into software and services through a shared infrastructure and automation when and where they want it. This enables our customers to benefit from operational efficiencies and reduce security risk while focusing their limited resources on maximizing business outcomes and delivering a compelling customer experience. With that, I'll turn the call over to Jorge. Jorge?