Q1 2020 Earnings Call
Ladies and gentlemen, please standby your conference call will begin momentarily once again, ladies and gentlemen, thank you for your patience and please standby.
[music].
Ladies and gentlemen, thank you for standing by and welcome to scan one first quarter 2020 earnings conference call. At this time, all participants are no listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
If you require any further assistance. Please press star Zero I would now like Dan The conference over to your Speaker today Mr., Joe Maxa director of Investor Relations. Sir. Please go ahead.
Thank you Michelle Hello, everyone and thank you for joining the ones been first quarter 2020 earnings Conference call. This call is being webcast and can be accessed on the Investor Relations section of one cents web site at investors that one span dot com.
Joining me on the call today, it's got Clemens once bench, Chief Executive Officer, and work with our Chief Financial Officer.
This afternoon after market close once been issued a press release announcing results for our first quarter 2020 to access a copy of the press release and other 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 for performance, including the guidance for full year 2020 are forward looking statements. We have tried to identify these statements by using words, such as believes anticipates plans expects projects and similar words.
These statements involve risks and uncertainties and are based on current expectations.
Consequently, actual actual results could differ materially from the expectations expressed in these forward looking statements I.
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.
Please note that certain financial measures that may be discussed on this call are expressed in non-GAAP basis and have been adjusted from a related GAAP financial measure.
We have provided an explanation and reconciliations of these non-GAAP financial measures for the most directly comparable GAAP financial measures <unk> earnings press release.
In addition, please note that the date of this conference call is May step 2020, any forward looking statements and related assumptions are made as of this state.
Except as expressly required by the federal Securities laws, we undertake no obligation to update these statements as a result of new information or future events or for any other reason.
At this time I will turn the call over to Scott.
Joe Thanks, very much a good afternoon, everyone and thank you for a joining us here today from wherever you are.
One span or a reported an outstanding first quarter of 2020 with 19% year over year revenue growth and a significant increase in profitability. A Q1 continued the strong momentum in software and services that began in the middle of 2019.
And we saw favorable impact later in the quarter related to the global pandemic with some orders accelerated from Q2.
Our total software and services revenue grew 58% to $37 million and accounted for a record 65% of total revenue in the quarter.
As you know our strategy is to transition toward a majority recurring revenue during the 2020 to 2022 period.
Recurring revenue grew 62% in the first quarter to a record $26 million.
Looking at profitability adjusted EBITDA improved by $8 million year over year to $5 million on higher revenue and gross margin, partially offset by higher operating expenses.
Mark will give you additional detail on both the top and Bottomline drivers in just a moment.
I'd like to spend a few minutes on how the pandemic is affecting our core customers.
Banks are seeing sharp increases in digital channel banking activities and hacking attacks, they're telling us this than it is evident in various studies as well.
JD power found online banking log ins grew 40% month over month in the first three weeks of April and that among the four largest banks in the U.S. The use of mobile banking increased from 63% of their customers in 2019, 72% of their customers, so far and 2020.
The study also found that many people surveyed began using mobile banking for the first time since the krona virus pandemic started.
We believe these trends are an acceleration of longer term financial services industry trends and bode well for the future digital banking and once fan.
And in other recent study I take group interviewed fraud executives at North American financial institutions and found that most expect to see increases in online and mobile fraud losses. This year.
One large financial institution revised its fraud loss per day per a projection sorry from a decrease of 8% before the pandemic two an increase of 10% to 15% now.
Our digital banking fraud prevention and secure account opening technologies enable the proper functioning of the financial system around the world and I've never been more important than they are right now.
We're also benefiting from increasing demand for electronic signatures and saw a spike in transaction volume in order activity late in the quarter and into Q2.
Notable sales activity included a large mid six figure annual contract win over and E signature competitor in a dramatic increase in usage from the U.S. small business administration office of disaster assistance.
A.
Sample of our ability to quickly respond and <unk> to deliver value to our customers. The CEO of a community Bank said quote I'm very pleased with one stansky signing process for the Paycheck protection program loans, they set us up and less than 24 hours.
And it has been a game changer for us I would highly recommend them and quote the bank was able to process more than 225 loans totaling nearly $50 million. The very next day meeting their deadline to fund these loans.
Let me turn briefly to our cloud first trusted identity solution portfolio the value of our opportunity pipeline of opportunities increase nearly 60% from last year at this time.
With a growing contribution from our secure agreement automation offering over the last two quarters secure agreement automation helps institutions opened new customer accounts online by integrating identity verification with these signature on top of the T.I.D. workflow engine.
I'll now turn the call over to Mark he'll provide some further financial information about the quarter and then I'll come back to provide some closing comments along with our 2020 outlook before opening the call to questions Mark.
Thank you Scott It really was an outstanding quarter when I when I joined you in fact, and all of our once and associates around the world for powering through University of this pandemic to service our customers total revenue for the first quarter of 2020 grew 19% to $56 million.
Product and license revenue grew 20% $38 million and services and other revenue grew 16% to $18 million.
Revenue by major products and services were as follows.
Software license revenue grew 145% to $19 million with both mobile security and server software contributing to the rapid girls.
Subscription revenue grew 11% to $6 million.
Total software revenue, including software licenses and subscriptions through.
Grew 90% to $24 million.
Maintenance support and other revenue increased 13% and.
Hardware revenue declined 19% to $20 million this quarter in line with our expectations.
This quarter, we disclose our term based software license revenue in order to will provide you with a more detailed look at a rapidly growing recurring revenue, which includes subscription time based licenses and maintenance revenue.
Term licenses grew 750% to $9 billion from the same period last year end as Scott mentioned.
Our recurring revenue grew 62% to a record $26 million in the corner.
Well its margin for the first quarter 2020 was 72% compared to 70% in the prior quarter and 66% in the first quarter of 2019.
The increase in gross margin is primarily attributed to product mix with software and services contributing 65% of revenue in the first quarter versus 55% in the fourth quarter of 2019 and 49% in the quarter first quarter of last year.
Operating expenses for the first quarter 2020 were $39 billion, an increase of 6% from 37 million before than Q1 last year.
Increase was primarily driven by DNA with investments in areas like I T financial in HR processes, along with bolstering our information security.
This was partially offset by a decrease in travel expenses across the company.
We expect operating expenses for the full year to normalize over the remaining three quarters with higher growth in sales and marketing and R&D and lower growth in DNA.
Adjusted EBITDA for or adjusted earnings before interest taxes, depreciation amortization long term common long term incentive compensation and nonrecurring items.
With $5 million for $8 million higher than in the first quarter of 2019.
Hi, good EBITDA margin was 9% compared to a negative 5%.
First quarter of last year.
GAAP earnings per share.
Or zero in the first quarter 220, 20 compared to a loss of 14 cents in the fourth quarter of 2019.
Non-GAAP earnings per share, which excludes long term incentive compensation amortization nonrecurring items and the impact of tax adjustments was eight cents in the fourth quarter 2020, compared to a loss of seven cents in the first quarter of last year.
We ended the first quarter with $105 million in cash cash equivalents and short term investments.
Appeared to 110 million at the end of last year.
Cash utilized in operations was $2 million in the quarter.
Geographically our revenue mix for the first quarter included 60% from EMEA, 22% in the Americas and 18% from the Asiapac region.
This compares to 54% 27% of 19% in the same regions in Q1 2019, respectively.
Ill now turn the meeting back to you Scott.
Hi, Thanks, a lot mark.
The financial services industries response to the pandemic is accelerating the adoption of mobile and cloud technologies and it'll be anti fraud technologies that are needed to protect those channels.
Our market, leading position range of identity security fraud prevention, and he signature solutions and our ability to deliver on a global basis, our powering our software and services growth as we transition to a recurring revenue model.
And our strong balance sheet allows us to continue investing in the future of our business through the current period.
After great start to the year, we expect continued strong growth in software and services in Q2, so not necessarily at the same elevated growth rate of Q1.
And this the growth will be partially offset by the expected decline in hardware as projected in our 2020 financial planning guidance.
We remain optimistic about our growth opportunities, but like most companies, we see a dynamic global environment with substantial economic uncertainty in the second half of 2020.
We will further or continue to evaluate our outlook for the second half from 2020 Sq to develops and will provide an update on our next earnings call.
So for now we're comfortable reiterating our guidance for the year.
Revenue in the range of $255 million to $265 million and adjusted EBITDA in the range of $24 million to $28 million.
Finally, the health and safety of our one span colleagues as a top priority for us and I really want to thank them for transitioning quickly and efficiently to the remote work environment.
We're continuing to support our valued customers and delivering strong revenue growth. The IP investments. We've made over the last year are really paying off for us right now.
So with that the Mark and I will be happy to take your questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your Touchtone telephone.
Your question has been answered you must remember yourself from they can't please press the pound keen to prevent any background noise. We ask that you. Please post your line I'm you. Once your question has been stated.
My first question comes from the line of Kathryn.
Tripconnect with Dougherty. Your line is open. Please go ahead [laughter] Oh, thank you for to great quarter. Thank you for taking my question together.
Yeah, really nicely CB, 800% growth here.
What I wanted to dig into a little bit is can you provide.
More color around the four revenue segments, the fast growth versus the perpetual.
Mark you want go ahead, you ought to take that we're obviously not all in the same place, though we're of course.
Yeah.
[laughter] I feel good Hello, Catherine you know, we can go a little bit more detailed this quarter for the first time, because I'm super excited with the the extra disclosures that we're putting in our earnings press release on page seven Catherine you can see that we called out our term based software licenses.
And that means that you can or if you look at our license Hill lessons revenue you can also see what I'll perpetual licenses are so you can see that the growth we've had in subscription and in term license and in perpetual a and as we mentioned during the call. We saw tremendous growth in term licenses year over year with growing from 9.2 million going to 9.2 million from a million last.
Here.
Okay got it I didn't I didn't get to that part of it alright, that's why don't like.
The other question.
Any gross margin color you can you give us on that different revenue stream that you have yeah. We're a the gross margins we saw in our software services lines were in the low Eightys again, this quarter and to the market that we saw in our hardware business lines, where in the low Fiftys, which is also similar with previous quarters.
The growth we saw in our total gross margin up to 72% over last year is really attributed to the mix shifting towards software and services.
Okay excellent and then.
Right.
Congrats for the years or any way you can do you ever color I.
Great that you're maintaining your revenue when there are uncertain times, but can you give us some color on how you look at hardware versus I've ever that recurring revenue growth and what to expect there.
Last year you had.
I I break down your memory got everything coming in in September because of the yes.
Regulatory issues that came through and Im actually I'm wondering if you're seeing any changes in how you're looking at revenue contribution in 2020.
Catherine Scott maybe give you a couple of comments on that the I think first of all I would note that Ah this quarterly spread of revenue over the course of the year will be I would say much more normal than it was last year. So you as you rightly called out the PST to.
Deadline or impact in September last year that had a definitely elevated.
Contribution revenue contribution in the third quarter last year, I think we'll see in a much more normal pattern. This year with the second half delivering you know some meaningfully more than the first half, but certainly more balance than what we saw.
In a in 20 2019 and also more balanced it typically balance between Q3, Q4, Q4, as usually our largest quarter and I would expect that to be the case.
Again this year based on what we know right now.
I think in terms of the drivers of that we we'd have talked about hardware a you know over the over the longer term being down in the you know kind in the mid single, maybe higher single digits, but but certainly going to be more than that this year coming off of.
The really robust a year, we had for hardware last year. So we I would expect hardware revenues to be similar in this kind of in the same range. They were in 2018, a in in 2020, and then we will see obviously that offset or more than offset.
Software and services growth. So that's I think that's the pattern that we would expect and we don't see any any reason to to change that view right now.
There are a lot of moving parts I think as you know anybody who's your I'm trying to run a business right now knows there a lot of moving parts in the economy and you know differences between the different regions of the world and so on we see a lot of strength right now and consumer banking.
Helping both Ah our security software businesses as well as or E signature.
Business when we as we look forward into the second half of the year. You know businesses are not doing a lot of business right now many of them. So that's probably a little bit of a little bit of a negative that we might expect to come out in the second half for the year, but we'll have to see that's a that's a much smaller part of our revenue stream and consumer banking.
And but those are a couple of things that we do need to keep an eye on as well as you know the timing of when different regions or start to recover from you know essentially the shut down right now.
Alright, Thank you very much for that explanation.
Mhm.
Thank you and our next question comes from the line of break out with.
I'd be T.I.T. Your line is open. Please go ahead.
Hey, Thanks for taking the it's taking the questions and congratulations on the corner.
Thank you maybe to start off the term license contribution it's just a lot higher than what we had expected.
How sustainable is that before making was there anything unusual in the quarter like any multiyear deals or emergency spending or just just anything like that that that helps or performance there in Q1.
Murky many oneh some details to this but I you know I think there was a as I mentioned I think in the and the comments that Theres, probably is a little bit of pull in from Q2 into Q1.
And we did see a little bit of an uptick I think in terms of some demand that that affected the first quarter and Ah I don't think those patterns are generally going to change a lot going into the second quarter, but I you know I think the you know that really high level of grew.
Growth that we saw year over year will not probably not be quite as strong as it was a in the first quarter, we do expect to see another another good quarter.
In a in Q2 and I think as I mentioned, a a little better go I think you know it looks fairly similar to a as a percentage of total your revenues. We saw as we saw last year in the second quarter. So I don't think there's anything I really unusual there's always a little bit of ER revenue that moves a back.
And fourth across the you know the end of quarter line that can move us a few percentage points, one way or the other but outside of that I don't think there's anything that I would remark on mark anything you have to add to that.
Just a little bit more color and Greg kind of you alluded to it or what do you have multiyear deals that were quoted here in the answer is yes, we do.
And I'll remind everybody that oh, Rev. Rec can be lumpy because of six six so we had a couple of three year deals that could come in in Q1, they were not unexpected or they do that means 62% of those that revenue is recognized in the first quarter. So that will lead to some higher numbers here in Q1, there Scott just mentioned so.
There's still some lumpiness in that recurring revenue line and that term license line.
Got it okay. That's that's really good color and then just one more if I can certain something is that the higher growth software businesses. Both on the license and subscription side I'm not sure. If you can get this call me, but like just what historically has been sort of a split and growth from new verse.
Since existing customer isn't just just how do you see that changing over the course of the year.
Yeah. Our business is is really driven a lot by existing customers, then expanded use or a new purchases by existing customers. We did we have seen over the last couple of years the increased contribution from new customers.
In a in terms of our growth. It's frankly, it's an area, where we can do better and.
And we have a lot of new things to sell and we have a lot of reasons talk to new customers more than we've had really ever before so we are really driven today, mostly by existing customers by selling new solutions to existing customers or selling no more of the solutions they already use and that they rely on so.
I think where we're seeing this Ah you know frankly without any outsized contribution from new customers, but it's an area, where we have a lot of effort and I think we'll see some real benefit from new customers as we go through the year.
Perfect. Okay. Thank you very much.
Thank you.
Thank you and again, ladies and gentlemen, if you wish to ask a question at this time. Please press Star then one.
Our next question comes from the line and game sort of dorm with Sidoti and company. Your line is open. Please go ahead.
Hi, everyone that and congratulations on another great quarter.
Oh, Dan welcome Tammy.
Okay, [laughter] I guess, if I'm not last commentary around the house, so you're ramping up the Salesforce and I'd just ask software and software based salespeople how has that been asked sort of that trending and then how has that working from home environment.
We have impacted their productivity.
Yeah, so when a when we think about this year you may recall on you know that we've described this previously that we are we did intense make some.
Meaningful incremental investments in sales and marketing and in 2020 after being a little little cautious on that I would say in 2019 is you're rolling out though some of these new solutions or we are we're on track with that we our plan is roughly to add about 30% to our quota carrying sales for.
First a we got about half of that I think go so far this year and I'm going a little bit more to go some more to go here in the second quarter I would expect it will be largely through that in the in the second quarter in terms of adding those resources. So I would say everything's pretty on track for that we are.
We are continuing to be a I would say active and aggressive in executing our business plan and bringing on the talent that we require to grow our business and and and satisfy you know and expanded set of customers. So that's a I think that's going along just fine. We've got a lot a you know a lot of.
Great sales training materials and sales enablement from our marketing team.
And we are making incremental investments also in the marketing side and lead generation of this year or we have shifted that investment a little bit because of the you know the present situation some of the.
Live events that we would have posted or attended obviously aren't happening. So we have shifted or some of that investment away from those areas in March for digital and online lead generation and.
So far that's been pretty productive I would say, we're going to continue to watch that enough.
If it we don't feel like we're getting a bank for the box and we want to spend that money, but so far it looks a little okay.
Okay. Thank you appreciate additional color and I think you mentioned.
Yeah, I know, that's kinda decline because it had an influx from that from that new regulation and in Europe.
At Bad and you mentioned that there might be I I've annual cycle coming up that are you seeing anything in terms of that that might.
Not a inc. and impose such an ass not on into how hardware stuff that you had expected this year.
I, we don't see anything at this point that would I think change the outlook in a positive or negative direction. You know for that matter I think we've got a reasonably good handle on it. These.
These are refresh cycles are always very very difficult to time and know exactly how that's going to go I wouldn't be surprised if given the current situation you know that in some case might even gets pushed out a little bit but we also have a customers who really haven't used authentication before who are really really need up.
So we you know we're seeing some of that happening and I think when you sort of balance those things out where.
We think we're on track with our expectation for this year.
Yeah, obviously continue to look at that through the second quarter and see if theres any reason for us to.
Change that view in the upward or downward direction, but so far I think we're pretty much where we expected to be on hardware.
Okay. Thank you and then the next one is sort of housekeeping you mentioned, our operating expenses, you expect to sales and marketing research and development to tick up a bit to ended DNA to come down a bit was that correct.
That's CREZ exactly right on.
Okay.
Great. Thank you.
Thanks.
Thank you and I'm showing no further questions at this.
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to assess <unk> first quarter 2020 earnings conference call.
All participants are not listen only mode. After the speakers presentation, there will be a question and answer session.
Good question. During this session you will need a press star one on your telephone.
If you require any further assistance. Please press star Zero I would now like Dan The conference over to your Speaker today, Mr., Joe Maxa director of Investor Relations Sir.
Please go ahead.
Thank you Michelle Hello, everyone and thank you for joining the one spend first quarter 2020 earnings conference call. This call is being webcast and can be accessed on the Investor Relations section of one stands web site at investors don't want to spend dot com.
Joining me on the call today, It's got Clements, one spends chief Executive Officer, and recorded our Chief Financial Officer.
This afternoon after market close once been issued a press release announcing results for our first quarter 2020 to access a copy of the press release and other 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 guidance for full year 2020 or forward looking statements. We have tried to identify these statements by using words, such as believes anticipates plans expects projects and somewhat worse.
These statements involve risks and uncertainties and are based on current expectations.
Consequently, actual actual results could differ materially from the expectations expressed in these forward looking statements I.
I direct your attention to todays press release, and the company's filings with the U.S. Securities and Exchange Commission for discussion of such risks and uncertainties.
Please 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 and reconciliations of these non-GAAP financial measures to them.
It's directly comparable GAAP financial measures the earnings press release.
In addition, please note that the date of this conference call isn't they fell 2020 any forward looking statements and related assumptions are made as of this state.
Except as expressly required by the federal Securities laws.
Undertake no obligation to update these statements as a result of new information or future events or for any other reason.
At this time I will turn the call over to Scott.
But.
Joe well, thanks, very much a good afternoon, everyone and thank you for joining us here today from wherever you are.
One span reported an outstanding first quarter of 2020 with 19% year over year revenue growth and a significant increase in profitability. A Q1 continued the strong momentum in software and services that began in the middle of 2019.
We saw and we saw favorable impact.
Late in the quarter related to the global pandemic with some orders accelerated from Q2.
Our total software and services revenue grew 58% to $37 million and accounted for a record 65% of total revenue in the quarter.
As you know our strategy is to transition toward a majority recurring revenue during the 2020 to 2020 Twoq period.
Recurring revenue grew 62% in the first quarter to a record $26 million.
Looking at profitability adjusted EBITDA improved by $8 million year over year to $5 million on higher revenue and gross margin, partially offset by higher operating expenses.
Mark will give you additional detail on both the top and Bottomline drivers in just a moment.
I'd like to spend a few minutes on how the pandemic is affecting our core customers.
Banks are seeing sharp increases in digital channel banking activities and hacking attacks, they're telling us this than it is evident in various studies as well.
JD power found online banking log ins grew 40% month over month and the first three weeks of April and that among the four largest banks in the U.S. The use of mobile banking increased from 63% of their customers in 2019, 72% of their customers so far in 2020.
The study also found that many people survey began using mobile banking for the first time since the krona virus pandemic stuff.
Started.
We believe these trends are an acceleration of longer term financial services industry trends and bode well for the future digital banking and once fan.
And another.
The recent study I'd say group interviewed fraud executives at North American financial institutions, and found that most expect to see increases and online and mobile fraud losses. This year.
One large financial institution revised its fraud loss per day per a projection sorry from a decrease of 8% before the pandemic due an increase of 10% to 15% now.
Our digital banking fraud prevention and secure account opening technologies enable the proper functioning of the financial system around the world and I've never been more important than they are right now.
We're also benefiting from increasing demand for electronic signatures and saw a spike in transaction volume in order activity late in the quarter and into Q2.
Notable sales activity included a large mid six figure annual contract win over Andy signature competitor in a dramatic increase in usage from U.S. small business administration office of disaster assistance.
As an example of our ability to quickly respond and deliver value to our customers. The CEO of a community Bank said quote Im very pleased with one stands you signing process for the Paycheck protection program loans, they set us up in less than 24 hours.
And it has been a game changer for us I would highly recommend them and quote.
The bank was able to process more than 225 loans totaling nearly $50 million. The very next day meeting their deadline to fund these loans.
Let me turn briefly to our cloud first trusted identity solution portfolio the value of our opportunity pipeline of opportunities increase nearly 60% from last year at this time.
With a growing contribution from our secure agreement automation offering over the last two quarters secure agreement automation helps institutions opened new customer accounts online by integrating identity verification with the signature on top of the T. I'd workflow engine.
I'll now turn the call over to Mark ill provide some further financial information about the quarter and then I'll come back to provide some closing comments along with our 2020 outlook before opening the call to questions Mark.
Thank you Scott.
He was an outstanding quarter and I want to join you and thanking all bar once and associates around the world for powering through University of this pandemic to service our customers.
Total revenue for the first quarter of 2020 grew 19% to $56 million.
Product and license revenue grew 20% to $38 million and services and other revenue grew 16% to $18 million.
Revenue by major products and services were as follows.
Software license revenue grew 145% to $19 million with both mobile security and server software contributing to the rapid growth.
Subscription revenue grew 11% to $6 million.
Total software revenue, including software licenses and subscriptions.
Hi present, the $24 million.
Maintenance.
Support and other revenue increased 13% and.
Good where revenue declined 19% to $20 million this quarter in line with our expectations.
This quarter, we disclose our Tom Baker software license revenue.
Older tool to provide you with a more detailed look in a rapidly growing recurring revenue, which includes subscription time based licenses and maintenance revenue.
Term licenses grew 760% to $9 million from the same period last year end as Scott mentioned.
Our recurring revenue grew 62% to a record $26 million in the corner.
Gross margin for the fourth quarter 2020.
72% compared to 70% in the prior quarter and 66% in the first quarter of 2019.
The increase in gross margin is primarily attributed to product mix with software and services contributing 65% of revenue in the first quarter versus 55% in the fourth quarter of 2019 and 49% in the quarter first quarter of last year.
Operating expenses for the first quarter 2020 were $39 million, an increase of 6% from 37 million reported in Q1 last year.
The increase was primarily driven by DNA with investments in areas like ITC financial on HR processes, along with bolstering our information security.
This was partially offset by decrease in travel expenses across the company.
We expect operating expenses for the full year to normalize over the remaining three quarters with higher growth in sales and marketing and R&D.
Lower growth in GNS.
Adjusted EBITDA or or adjusted earnings before interest taxes, depreciation amortization long term comp and long term incentive compensation a nonrecurring items.
Well $5 million for $8 million higher than in the first quarter of 2019.
Adjusted EBITDA margin was 9% compared to a negative 5%.
The first quarter of last year.
GAAP earnings per share.
Our euro in the first quarter 220, 20 compared to a loss of 14 cents in the first quarter of 2019.
Non-GAAP earnings per share, which excludes long term incentive compensation amortization nonrecurring items and the impact of tax adjustments was eight cents in the fourth quarter 2020, compared to a loss of seven cents in the first quarter of last year.
We ended the first quarter with $105 million in cash cash equivalents and short term investments.
Compared to 110 billion at the end of last year.
Cash utilized and operations was $2 million in the quarter.
Geographically our revenue mix for the first quarter included 60% from EMEA, 22% in the Americas and 18% on the Asiapac region.
This compares to 54% 27% of 19% in the same regions in Q1 2019, respectively.
I now turn the meeting back to you Scott.
Hi, Thanks, a lot mark.
The financial services industries response to the pandemic is accelerating the adoption of mobile and cloud technologies and of the anti fraud technologies that are needed to protect those channels.
Our market, leading position range of identity security fraud prevention, and you signature solutions and our ability to deliver on a global basis, our powering our software and services growth as we transition to a recurring revenue model.
And our strong balance sheet allows us to continue investing in the future of our business through the current period.
After great start to the year, we expect continued strong growth in software and services in Q2, so not necessarily at the same elevated growth rate of Q1.
And this the growth will be partially offset by the expected decline in hardware as projected in our 2020 financial planning guidance.
We remain optimistic about our growth opportunities, but like most companies, we see a dynamic global environment with substantial economic uncertainty in the second half of 2020.
We will further or continue to evaluate our outlook for the second half from 2020 as Q2 develops and will provide an update on our next earnings call.
So for now we're comfortable reiterating our guidance for the year.
Revenue in the range of $255 million to $265 million and adjusted EBITDA in the range of $24 million to $28 million.
Finally, the health and safety of our one span colleagues as a top priority for us and I really want to thank them for transitioning quickly and efficiently to the remote work environment, while continuing to support our valued customers and delivering strong revenue growth.
The investments we've made over the last year are really paying off for us right now.
So with that Mark and I will be happy to take your questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press star one on your Touchtone telephone. If your question has been answered a stream of yourself from the Q. Please press the pound key to prevent any background noise. We asked you. Please post your line on mute. Once your question has been stated.
Our first question comes from the line of Kathryn.
Nick with Dougherty. Your line is open. Please go ahead [laughter] Oh, thank you for to a great quarter. Thank you for taking my question Kevin.
Yeah, really nice licensing be 100% growth here.
And I wanted to dig into a little bit is can you provide.
More color around the four revenue segments, the fast growth versus the perpetual.
Mark go ahead, you I take that we're obviously not on the same place. So we're a core.
Yeah.
[laughter] I feel good Hello Kathryn.
You know we can go a little bit more detailed this quarter for the first time, because I'm Super excited with the extra disclosures that we're putting in our earnings press release on page seven Catherine you can see that we called out our term based software licenses.
And that means that you can or if you look at our license to license revenue you can also see what I'll perpetual licenses are so you can see the growth we've had in subscription and in term license and in perpetual.
As we mentioned during the call we saw tremendous growth in term licenses year over year with growing from 9.2 million going to 9.2 million from a million last year.
Okay got it I didn't I didnt get to that part of it alright, that's why don't like.
The other question was any gross margin color you can give us on the different revenue stream that you have yeah. We're a the gross margins we saw in our software services.
Lines were in the low Eightys again, this quarter and the margins that we saw in our hardware business lines, where in the low Fiftys, which is also similar with previous quarters. The growth we saw in our total gross margin up to 72%.
Over last year is really attributed to the mix shifting towards software and services.
Okay excellent and then.
Right.
And to the rest of year is there anyway, you can give us color.
I think it's great that you're maintaining your revenue when there are uncertain times, but can you give us some color on how you look at hardware versus either that recurring revenue growth and what to expect there because last year you had.
Upside down here remember got everything coming and then in September because of the yep. Thank you.
Great Tory issues that came through and Airmax I'm wondering if you're seeing any changes in how you're looking at revenue contribution in 2020.
Catherine Scott I'll, maybe give you a couple of comments on that the I think first of all I would note that this quarterly spread of revenue over the course of the year will be.
I would say much more normal than it was last year.
So you you rightly called out the PST to deadline impact in September last year that had definitely elevated the.
Contribution revenue contribution that third quarter last year, I think we'll see a much more normal pattern. This year with the second half delivering some.
Meaningfully more than the first half, but certainly more balance than what we saw.
In in 20, 2019, and also more balanced typically balance between Q3 in Q4 Q4, as usually our largest quarter and I would expect net new the case.
Again this year based on what we know right now.
I think in terms of the drivers of that.
We are we have talked about hardware.
Over the over the longer term being down in that kind of the mid single, maybe higher single digits, but but certainly going to be more than that this year coming off of.
Really robust year, we have for hardware last year. So we I would expect hardware revenues to be similar in this kind of in the same range. They were in 2018 in in 2020.
And then we will see obviously that offset or more than offset.
By software and services growth. So thats I think thats the pattern that we would expect and we don't see any any reason to add to change that view right now.
There are a lot of moving parts I think is anybody who's your I'm trying to run a business right now no is there a lot of moving parts in the economy and differences between the different regions of the world and so on you see a lot of strength right now and consumer banking.
Helping both our security software.
Businesses as well as our E signature.
Business when we as we look forward into the second half of the year businesses are not doing a lot of business right now many of them. So that's probably a little bit of a little bit of a negative that we might expect to come out in the second half for the year, but well have to see that's a that's a much smaller part of our revenue stream and consumer bank.
But those are a couple of things that we do need to keep an eye on as well as.
The timing of when different regions start to recover from.
Essentially the shutdown right now.
Alright, Thank you very much for that explanation.
Mhm.
Thank you and our next question comes from the line of Greg how with.
Hi, BTI GE. Your line is open. Please go ahead.
Great. Thanks for taking the thanks for taking the questions and congratulations on the corner.
Thank you maybe start off by the term license contribution is just a lot higher than what we'd expected.
How sustainable is that before making was there anything unusual in the corner like any multiyear deals or emergency spending or just just anything like that that helps or performance there in Q1.
Mark you may want to add some details to this but I think there was a as I mentioned I think in the and the comments that Theres, probably is a little bit of pull in from Q2 into Q1.
We did see a little bit of an uptick I.
I think in terms of some demand that.
That affected the first quarter.
And I don't think those patterns are generally going to change a lot going into the second quarter.
But I I think the.
That really high level of growth that we saw year over year will not probably not be quite as strong as it was in the first quarter, we do expect to see another another good quarter.
In in Q2.
And I think as I mentioned, a little better go I think you know it looks fairly similar to.
As a percentage of total your revenues we saw as we saw last year in the second quarter.
So I don't think Theres anything really unusual there's always a little bit of.
Revenue that moves back and forth across the you know the end of quarter line that can move us a few percentage points, one way or the other but outside of that I don't think theres anything that I would remark on mark anything you have to add to that.
Just a little bit more color and Greg kind of you alluded to it or what do you have multiyear deals that were included here in the answer is yes, we do.
And I'll remind everybody that oh, Rev. Rec can be lumpy because of six sixtyl. We had a couple of three year deals that could come in in Q1, they were not unexpected.
Do that means 62% of those that revenue is recognized in the first quarter. So that will lead to some higher numbers here in Q1 that Scott just mentioned so there's still some lumpiness in that recurring revenue line and that term license line.
Got it okay, and that's really good color and then just one more if I can.
So in terms of news that the higher growth software businesses, both on the license and subscription side.
I'm not sure can you give us color, but like just what historically has been sort of the split and growth from new versus existing customer isn't just just how do you see that changing over the course of the year.
Yeah. Our business is is really driven a lot by existing customers and expanded use our new purchases by existing customers. We did we have seen over the last couple of years increased contribution from new customers.
In in terms of our growth.
Frankly, it's an area, where we can do better and and and we have a lot of new things to sell and we have a lot of reasons talk to new customers more than we've had really ever before so.
We are really driven today, mostly by existing customers by selling new solutions to existing customers or selling more of the solutions. They already use and that they rely on so I think where we're seeing this frankly without any outsized contribution from new customers, but it's an.
Area, where we have a lot of effort and I think we'll see some real benefit from new customers as we go through the year.
Perfect. Okay. Thank you very much.
Thank you.
Thank you and again, ladies and gentlemen, if you wish to ask a question at this time. Please press Star then one.
Our for our next question comes from the line of and Jane sort of dorm with Sidoti and company. Your line is open. Please go ahead.
Hi, everyone that and congratulations on another great quarter.
Oh, Dan welcome Tammy.
Okay.
Hi, just trying to follow up on that last commentary around this house, so you're ramping up to Salesforce and I'd, just ask software and software based salespeople how has that been asked sort of that trending and them. How has the working from home environment, that's sort of impacted their productivity.
Yeah.
Yeah. So when when we think about this year you may recall on yet that we've described previously that we we did intense makes some.
Meaningful incremental investments in sales and marketing and in 2020 after being a little.
A little cautious on that I would say in 2019 as you're rolling out some of these new solutions.
We are we're on track with that we our plan is roughly to add about 30% to our quota carrying sales force.
We got about half of that I think so far this year and I'm going a little bit more to go some more to go here in the second quarter I would expect it will be largely through that in the in the second quarter in terms of adding those resources. So I would say everything's pretty on track for that we are.
We are continuing to be I would say active and aggressive in executing our business plan and bringing on the talent that route require to grow our business and and and satisfy you know and expanded set of customers. So that's a I think thats going along just fine we've got a lot.
A lot of great sales training materials and sales enablement from our marketing team.
And we are making incremental investments also in the marketing side and lead generation of this year, we have shifted that investment a little bit because of the the present situation some of the.
Live events that we would have hosted or attended obviously aren't happening. So we have shifted or some of that investment away from those areas in March for digital and online lead generation and.
So far that's been pretty productive I would say, we're going to continue to watch that net.
But we don't feel like we've gotten a bank for the box and we want to spend that money, but so far it looks.
Okay.
Okay. Thank you appreciate additional color and I think it mentioned.
Yeah in terms of hardware I know, that's kind of decline because it had an influx from that from that new regulation and in Europe.
That bad and you mentioned that there might be I, when youre cycle coming off that are you seeing anything in terms of that that might.
Not a inc. impose such an acid on in the hardware sales that you had expected this year.
I, we don't see anything at this point that would I think change the outlook in a positive or negative direction. You know for that matter I think we've got a reasonably good handle on it sees.
These are refresh cycles are always very very difficult to time and know exactly how thats going to go I wouldn't be surprised if given the current situation you know that in some case might even gets pushed out a little bit but.
We also have a customers who really havent used authentication before who are really really need authentication. So we we're seeing some of that happening and I think when you sort of balance those things out where you know we think we're on track with our expectation for this year, we're going to obviously continue to look at that through the second quarter and see if theres any.
The reason for us to.
Change that view in the upward or downward direction, but so far I think we're pretty much where we expected to be on hardware.
Okay. Thank you and then the next one is sort of housekeeping you mentioned the operating expenses.
At the sales and marketing research and development to tick up a bit to ended January to come down a bit Melissa correct.
That's great is exactly right on.
Okay, great. Thank you that's all for me.
Thanks I know.
Thank you Ken I'm showing no further questions at this time and I would like to turn the conference back over to Mr., Scott Clemens for any further remarks.
Okay, well. Thank you very much I know, we had quite a few people on the line today I really appreciate all of you dialing in and.
We'll have a chance talked to many of you over the next few days I'm sure. We're we're very pleased about the quarter that we just had and I think that demand.
The things that this company has always done is to secure digital transactions for primarily for banking and financial services I think in the world that were end, obviously, that's a very valued set of capabilities.
And it's not new but it is an acceleration I think and we expect this to have a I think long lasting and positive impacts for our business was more and more people experience and use a digital channel banking.
We think many of those people will continue to do so in that ultimately will be good for ones fan. So thanks, everybody for calling in really appreciate it again, thanks to our one spend that colleagues around the world for.
Making that happened despite the challenges thanks, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.