Q4 2022 OneSpan Inc Earnings Call

Speaker 1: That.

Speaker 2: Ladies and gentlemen, welcome to the OneSpank 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 it over to host Joe Master VP Investor Relations. Joe, please go ahead.

Speaker 3: Thank you, operator. Hello, everyone, and thank you for joining the OneSpan 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.

Speaker 3: Joining me on the call today is Matt Moynihan, our chief executive officer, and Jorge Martel, our chief financial officer. This afternoon, after market closed, 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. In our prepared comments today, we will open the call for questions.

Speaker 3: 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.

Speaker 3: These statements involve risks and uncertainties and are based on current assumptions.

Speaker 3: Consequently, actual results could differ materially from the expectations expressed in these forward-working statements.

Speaker 3: I direct your attention to today's press release and the company's filing with the U.S. Securities and Exchange Commission for discussion of such risks and uncertainties.

Speaker 3: 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.

Speaker 3: 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.

Speaker 3: I will now turn the call over to Matt.

Speaker 3: 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.

Speaker 3: 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 e-vitra.

Speaker 3: 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.

Speaker 3: 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.

Speaker 3: 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.

Speaker 3: 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.

Speaker 3: Our employees are excited. We are moving from a product company to a problem-solving company for our customers.

Speaker 3: 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.

Speaker 3: 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.

Speaker 3: 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.

Speaker 3: 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.

Speaker 3: And we have completed the realignment and go-to-market focus around our 1-Spin 1000 program that prioritizes growth at our largest 1000 enterprise customers and new logo target accounts.

Speaker 3: We are prioritizing new logo growth this year through compensation plans and incentive structures.

Speaker 3: 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.

Speaker 3: 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.

Speaker 4: Like last quarter, sales cycles in some Asian and European regions were longer in Q4 as compared to historical periods.

Speaker 4: Overall, the sales cycle for our solutions ticked down slightly from the third quarter.

Speaker 4: Fourth quarter and full year 2022 revenues.

Speaker 4: were $57 million and $219 million, respectively.

Speaker 4: 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%.

Speaker 4: Here 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%.

Speaker 4: 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.

Speaker 4: Jorge will provide additional details on our results during this financial review in a few minutes.

Speaker 4: 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-signature competitor at a large auto collision repair company. This company is digitizing their retail deployment and was impressed by our favorable price per value in lack of nickel and dime pricing.

Speaker 4: A top four bank in the United States increased its number of mobile security suite licenses.

Speaker 4: A four-bank in the United States increases its number of mobile security suite licenses due to an expansion of mobile banking users.

Speaker 4: This bank is using our authentication and transactions on technology to mitigate fraud by preventing man-of-the-middle attacks. And a long-time European bank and mobile security suite customer upgraded their banking infrastructure and selected our cloud authentication service.

Speaker 4: 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.

Speaker 4: We are also executing against our product strategy and recently made three meaningful announcements designed to strengthen our ability to accelerate revenue.

Speaker 4: 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.

Speaker 4: to offer the highest level of security. Similar to our e-cignature solutions, one-span-node re-offers the ability to private label a solution to mitigate fraud and security risks from fishing attacks. It also ensures our customers brand is out fun, resulting in a trusted user experience from start to finish.

Speaker 4: 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.

Speaker 4: 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.

Speaker 4: We believe this new approach will not only enable our customers to secure customer facing revenue generating business processes.

Speaker 4: but will ensure they are not overbuying and underconsuming, 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.

Speaker 4: We plan to integrate ProvenDB's technology with our transaction cloud platform to provide an end-to-end assurance model which includes secure revolting for documents and artifacts that require the highest levels of compliance and assurance.

Speaker 4: 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 e-vault.

Speaker 4: Lastly, before turning the call over to Jorge, I would like to provide a few comments on the one-span transaction cloud platform. I will then come back and provide closing comments before opening the call for questions.

Speaker 4: Our Transaction Cloud platform enables us to integrate our leading services to create new innovative solutions, such as One-Span Notary. We plan to modularize our entire digital agreements portfolio, resulting in the ability to secure the entire digital transaction lifecycle.

Speaker 4: 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.

Speaker 4: 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.

Speaker 4: 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.

Speaker 4: With that, I'll turn the call over to Jorge. Jorge? Thank you, Matt. Good afternoon, everybody. I am pleased that we reported another solid quarter, largely driven by improved operational discipline and execution in the business. For the full year 2022.

Speaker 3: We exceeded our revenue and adjusted EBITDA guidance and met the low end of our ARR guidance provided to you last quarter.

Speaker 3: ARR grew 12% year-over-year to 139 million. Including the FX impact of approximately 4 million, ARR would have been 15% higher year-over-year.

Speaker 3: ARR specific to subscription contracts grew 22% to $105 million and accounted for approximately 76% of total ARR. Net retention rate or NRR was 107%.

Speaker 3: We define NRR as the year-over-year growth in ARR from existing customers. We previously referred to this metric as dollar-based net expansion or DB&E. There is no change in how we define or calculate NRR as compared to DB&E.

Speaker 3: ARR and NRR were impacted by effects, longer sales cycles in certain international regions, timing related to contract renewals, and as mentioned last quarter, a few lost contracts, some customers' right sizing volumes to reflect post-pandemic levels, and product portfolios, sunset, and decisions which we expect will impact us for the next few quarters.

Speaker 3: Fourth quarter revenue decreased 4% to $56.6 million as compared to the same period last year. This is primarily due to a strong comparable in last year's Q4 as a result of a significant number of hardware delivery orders.

Speaker 3: moving from Q3 to Q4 2021 to the supply chain disruptions. Q4 2022 revenue was also negatively impacted by effects and delays in certain hardware delivery orders moving to the first half of 2023 also related supply chain constraints.

Speaker 3: Excluding the impact of FX of $2.9 million, Q4 revenue would have been $59.5 million or 1% higher compared to last year's Q4. For the full year 2022, revenue grew 2% to $219 million.

Speaker 3: Excluding the FXP impact of approximately 12 million, revenue would have been 8% higher as compared to 2021. Subscription revenue grew 28% to 23.8 million in the fourth quarter and 30% to 89.2 million for the full year 2022.

Speaker 3: Fourth quarter gross margin was 67% compared to 63% in the prior year quarter. The year-over-year improvement is largely related to a more favorable product mix. Operating loss in the fourth quarter was $4 million and included $1.5 million of non-recurring expenses related to our restructuring plan.

Speaker 3: This compares to a loss of 6 million in the fourth quarter of 2021. Fourth quarter operating expenses benefited from our cost reduction plans, lower payroll related expenses as a result of lower headcount, increased R&D software capitalization costs.

Speaker 3: and by approximately $1.4 million from Genya C&SX as compared to last year, offset partially by increases in travel, long-term incentive compensation, and bonus accruals.

Speaker 3: Regarding our cost reduction plan, as a reminder, last year we completed Phase I, resulting in $11.8 million of annualized savings near the high end of our $10 to $12 million spectrum range. Phase II began in May of last year and will continue through 2025. Annualized savings for Phase II were $10.1 million as of December 31, 2022.

Speaker 3: net loss per share of $0.35 and $0.77 in the same periods of 2021.

Speaker 3: Non-cap earnings per share, which excludes long-term incentive compensation, amortization, non-recurring items including the impairment of intangible assets, restructuring charges, and the impact of tax adjustments was 3 cents in the fourth quarter.

Speaker 3: respectively. Fourth quarter adjusted EBITDA and adjusted EBITDA margin was 3.2 million and 6% as compared to negative 0.6 million and negative 1% in the same period of last year. Full year 2022 adjusted EBITDA and adjusted EBITDA margin was 6.5 million and 6.5 million

Speaker 3: capitalized software costs, and favorable product mix towards higher margin subscription solutions. I'll now discuss our digital agreement segment's results.

Speaker 3: Digital agreements ARR grew 18% year-over-year to $47 million.

Speaker 3: Excluding changes in FX, ARR grew 19%. Fourth quarter and full year 2022 revenue grew 15% and 19% to 12.4 million and 48.4 million respectively as compared to the same periods last year. Excluding changes in FX.

Speaker 3: fourth quarter and full year 2022 revenue grew 16% and 20% respectively.

Speaker 3: Subscription ARR grew 22% to $42 million. For the fourth quarter and full year 2022, subscription revenue grew 24% to $11.3 million and 26% to $42 million respectively.

Speaker 3: The vast majority of subscription revenue recognized in the quarter and year was ratable. I want to remind you that we had a large multi-year on-premise e-signature contract in the first quarter of 2022, which will not repeat this year. The quarter growth margin was 79% compared to 76% in the prior year.

Speaker 3: higher gross margin and lower operating expenses where the primary drivers often improve performance.

Speaker 3: As discussed previously, we plan to increase investments in digital agreements, including the hiring of additional talent to drive top-line growth, to increase sales and product development. We also plan to increase investments in lead generation to create brand awareness and accelerate sales pipeline growth. Therefore, we expect operating expenses to increase in future quarters.

Speaker 3: Turn into our Secure Resolution Segment Results. ARR grew 9% year over year to 92 million. Excluding changes in FX, ARR grew to 13%.

Speaker 3: Fourth quarter and full year 2022 revenue declined 9% and 2% to $44.2 million and $170.6 million respectively as compared to the same periods last year. In fact, fourth quarter revenue declined 3%.

Speaker 3: and full year 2022 revenue grew 5%. Subscription ARR grew 22% to $63 million. For the fourth quarter and full year 2022, subscription revenue grew 32% and 34% to $12.5 million and $47.1 million, respectively.

Speaker 3: driven by expansion contracts from existing customers for authentication, transaction signing, and actually solutions. Growth in subscription brevity in both periods was offset by expected decreases in perpetual software licenses and related maintenance, the sunsetting of products, and the rise of

Speaker 3: delays in certain DigiPass token shipments to the first half of 2023, and changes in foreign currency. Regarding electronic component shortages discussed last quarter, that resulted in delayed DigiPass token shipments to the first half of 2023.

Speaker 3: We believe that our efforts to increase stock and optimize customer delivery plans will enable us to return to normalize delivery levels beginning in the second half of 2023. PUE 4 grows margin was 64% compared to 60% in the same period last year. Changing product mix, including an increase in subscription revenue and a decrease in Digital Pass told consumers.

Speaker 3: was the primary factor impacting the increase in gross margin. The increase in gross margin was partially offset by an increase in electronic component prices using DigiPass tokens. Operating income was $10.7 million and operating margin was 24%, as compared to $9.8 million and 20% last year.

Speaker 3: and short-term investments compared to $98 million at the end of 2021 and $94 million at the end of last quarter.

Speaker 3: We generated 8 million of cash flows from operations during the quarter, primarily related to impermanence and networking capital.

Speaker 3: We generated $8 million of cash flows from operations during the quarter, primarily related to improvements in networking capital. We have no long-term debt.

Speaker 3: Geographically, our revenue mix by region in the fourth quarter of 2022 was largely consistent with the prior two quarters. Forty-six percent came from EMEA, 37 percent from the Americas, and 18 percent from Asia Pacific. This compares to 53 percent, 30 percent, and 18 percent from the same regions in the fourth quarter of last year respectively. For the full year 2022, we have straddled a few Fueliodic

Speaker 3: The revenue mixed by region was 46 percent from EMEA, 35 percent from the Americas, and 19 percent from Asia Pacific, compared to 49 percent, 32 percent, and 19 percent from the same regions in 2021, respectively. Thank you for turning to guidance. I want to remind you that 2023 will be a new year.

Speaker 3: as a year progresses, which we expect to result in increased growth and profitability in the second half of 2023 as compared to the first half of the year and in some growth in 2024 and 2025.

Speaker 3: For the full year 2023, we expect the following. Revenue will be in the range of $232 to $242 million, representing a growth rate of 6 to 11 percent. ARR to be in the range of $157 to $164 million, representing a growth rate of 6 to 11 percent.

Speaker 3: a growth rate of 13 to 18%, and adjusted EBITDA to be in the range of three to $6 million. I'm also pleased to provide an update to our three-year financial targets announced in May 2022. We are currently forecasting revenue to grow out of 12 to 14.

Speaker 3: percent CAGR through 2025 as compared to our previous target of 10 to 12 percent. ARR to grow at a 20 percent or higher CAGR through 2025 consistent with our previous target. NRR to exceed 120 percent exiting 2025 consistent with our previous target. Gross profit margin to exceed 70 percent in 2025.

Speaker 4: include new enterprise logo acquisition and expanding our relationship with our installed base customers by cross-selling our entire solution portfolio to deliver complete solutions.

Speaker 4: We have a great enterprise class product set, are bringing new advanced services like One-Span notary to market, have an excellent core employee base to build upon, and recently launched a disruptive pricing model to assist us to capture market share.

Speaker 4: These ingredients, combined with the investments we are making, and our focus on operational rigor and financial discipline, are all part of our multi-year plan to drive sustainable growth and profitability.

Speaker 4: I'm very proud of the team and the great progress we've made on our journey to become the clear leader in digital agreement security. Of course, anchored by our global security DNA, our new transaction cloud platform, and of course, the most importantly.

Speaker 2: people. Jorge and I will now be happy to take your questions. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star for about one on the telephone keypad now. When preparing to ask your question, please ensure your phone is unmuted locally.

Speaker 3: We have our first question, it comes from Gray Povil from BTIG. Gray, your line is now open. Okay, great. Thank you for taking the question. Yeah, just a couple on my side. Maybe to start off, just how do you feel about the visibility you have on your pipeline and the demand environment today versus six months ago?

Speaker 4: And then within the product lines, where do you feel like you have the most confidence on trend lines? Is it on the digital agreement side or in the security business? I can take that, Jorge. Maybe you can provide color there. So on the visibility side, I would say obviously security business has been there for 30 years. So obviously a slower growth industry for us.

Speaker 4: but deep customer relationships. So just because of the long-term history and the data points that we have, I would say the visibility is greater in security. Digital agreements, the green shoots are coming out of the bamboo. We have shown that when the right enterprise seller speaks to the right enterprise customer, our enterprise class product wins. And all the patterns that you would expect to see associated with the increase in deal size, et cetera, et cetera happen.

Speaker 4: And that is why we're so focused, laser focused on new logo acquisition at the top after the pyramid. And so good long term visibility with security, the short term visibility that we do have with the behaviour of our digital agreements product when we sell it to the right customer.

Speaker 4: is everything you'd expect, and now we just need to go build a broader pipeline and new local acquisition digital agreements to get similar visibility to that we have over our 30-year history in security. But I do believe we've made significant progress year over year in improving that visibility. Understood. Okay, that's really helpful. And then with the new pricing model on the digital agreements cloud, how does your pricing stack up to your main competitor? I know...

Speaker 4: obviously in one of the larger customers in North America. And so the price the pricing model is really designed to solve two ills with the way this market operates. You know one span much like our larger competitor priced off transactions or the equivalent of an envelope.

Speaker 4: It's almost imagine going back to the early days of e-signature and walking into a company and asking them to predict how many signatures they have on contracts. It's almost impossible to do that yet asking them to sign up for a volume and to pay for it up front. Very, very difficult. So what we're seeing now post-COVID and more than normal run rate maturing market, but I would say still early innings is we see the unpredictability and the ability to determine how many signatures are going to happen.

Speaker 4: and then an unmoaness by the current pricing model when they get driven into, you know, they get driven into contraction at the end of a contract. And so this pricing model has really designed to eliminate both of those, the two greatest sources of dissatisfaction in the marketplace. And so I'm very bullish on this, I think in a macroeconomic environment like this, we will be able to enable significant cost savings in what is a maturing market and drive market share shift. Okay, very helpful. Thank you very much.

Speaker 4: by the current pricing model when they get driven into, you know, they get driven into contraction at the end of a contract. And so this pricing model has really designed to eliminate both of those, the two greatest sources of dissatisfaction in the marketplace. And so I'm very bullish on this, I think in a macroeconomic environment like this, we will be able to enable significant cost savings in what is a maturing market and drive market share shift. Okay, very helpful. Thank you very much. Thank you.

Speaker 3: Our next question comes from Rudy Kessinger from DA Davidson. Rudy, your line is now open. Hey guys, thanks for taking my questions. I'm curious, I know you're only given annual guidance, but just how should we think about the ARR growth trend line, I guess, throughout the year? Is 12% growth in Q4 going to mark a bottom or does it potentially still tip down another couple of points before re-accelerating throughout next year? I can take that, Matt. I already think we're asking the question.

Speaker 3: So as you pointed out, so the way we think about ARRG point is that 12% was growth, nominal turn and 15% constant turn and see, we guided to 12 to 13% last quarter. We gave a 3 to 4% interest of FX. So there's a few factors to think about in 2023, particularly the first half of the year. The only one is we signaled and they gave us some turning contraction that we saw. We expected and we had a materialized last quarter. We're going to have that impact for the next few quarters.

Speaker 3: We also, as you know, we've done some of the products to feed the decisions that we made. And so, you know, three products, deal flow risk analytics and the on-premise of the deal agreements. And so those few factors will continue to impact us for the next few quarters, really into 2023 until it bleeds out. Now the other thing that we're also doing is converting, in the case of deal flow, for for example, we're converting, trying to convert those customers into anything that's a solution that we've been successful, but not everybody's going to convert. And so we have some, some headwins from that perspective. The other component, including to consider here, the conversion from perpetual term, perpetual to term, return revenue.

Speaker 3: So that is almost complete at this point in time. So you have that dynamic factoring as well. And then just lastly, when you think about the 12%, as I said, 3.9 million WAFs, depending what the macro does in 2023 and nobody has a crystal ball, so that could be a headwind or a tailwind for us. And so that's my response here really. Matt, do you have any thoughts on that? Yeah, the only one we're hard at work operationalizing, new logo acquisition and getting more hands into the, and getting more products into the hands of our sellers. Right, and so OneSpan Notary, which has general availability next week. You know, every bank in the world has a notary. You know, we're very excited about the ability to go, reach out to our install base for the new product line.

Speaker 3: You said you're still on target double headcount by the end of this year I guess you know last quarter you said you were up 20% since May What do you have an update on that figure just just how much you've added since May and then on the reps you've added Curious how they're ramping versus your expectations and then in the existing tenured reps I'm curious You know I know it's still early days since you've kind of unified the sales teams, but have you seen any increases in productivity? Just what have you seen there?

Speaker 4: Yeah, so we're up north of 50% from where we were in May. So we're tracking slightly ahead of plan to where we would want to be entering into the month of February . So I feel good about that. I personally am interviewing every single sales executive coming into the company and also meeting with them within the first 30 days. And I can tell you, obviously we've had great sellers here over the course of time at OneSpan, but I can tell you that the new type of talent that we're bringing in, particularly with enterprise application experience.

Speaker 4: is really augmenting our current security sellers in a great complimentary way. So I would say it's early days obviously given the number of new heads that have come in in the past three or four months, but there's nothing to suggest that we're not tracking according to plan and we'll continue to give updates over the course of the year. Great, thanks for taking the question. Thank you. We have the next question comes from Lake Matiasi from Craig Harlem. Lake, your door is now open.

Speaker 4: Hi, this is Nick on, for Chad Bennett. Thanks for taking our questions. Matt, maybe if you could expand on your product vision when you talk about Web 3, including the recent acquisition of ProvenDB. And if you could comment on the extent this product roadmap is being defined by what you're hearing from your customers. Sure, sure. Yeah, no, it's very interesting. So, you know, I believe, and I've been in cyber for 25 years, that the security market is going to fundamentally change. And you've seen it happen with the explosion and that identity over the past 10 years. And I with markets like identity and access management that have been around for 30 years, really getting prominence because the security threat has moved to the end user. Most of enterprise security companies focus on protecting enterprise assets, laptops, cloud payloads, network interfaces.

Speaker 4: What have you even Norton, Nani virus and McAfee which are consumer products are protecting the laptops not the end user. And so we've seen this explosion and you can look at what's happening with Microsoft and some of the tech providers from the identity market in general. Understanding who you're doing business with is paramount. The first attack service was employees trying to break into companies. It is now going to move to the end user level. Any time a new customer is onboarded or a partner is onboarded to a company and every company wants more online and more customers. This trend is not going to stop. They become an attack service and or regulatory risk.

Speaker 4: And so this is really taking all of our capabilities, breaking the bone, and resetting them in a way where we can be the first enterprise security company and it helps any company that's doing business online have a trust model that begins with engaging in an unknown customer and partner and weaving that security through the identity process, the authentication process. If that engagement model requires virtual interaction, transacting with our e-signature, and then ultimately securing the artifact of that transaction in a blockchain-like environment so that it's immutable is really what I believe is needed when you think about transacting business in the web with the world of deepfakes and increasingly asset classes coming into attack that are represented in the forms of documents and other types of audit and compliance records. And so that's exactly what we're trying to do. We're just taking it from the employee level, which has created a multi-billion identity market.

Speaker 4: and moving it to the customer level and making sure that that attack surface is secure and which is increasingly challenging for security companies, we, because we sit in the customer flow, are able to do it with the best user experience in the market. And we're very excited by this. This five-pillar service strategy is resonating and now we've just got to go execute because the market, I believe, is moving in our direction.

Great. And then, besides the change to the digital agreement enterprise pricing model, have you made or do you plan to make any other pricing or packaging changes to other products? We will be coming out with bundles. We are moving more towards a modularized portfolio where you would purchase a base access fee to our transaction cloud platform and then can upsell or cross-sell additional seats and licenses and or capabilities. So you can think of a proven DB type of technology just to visualize.

with. And so that would be a good example of taking ProvenDB, bolting it on to our eSignature package and having it be a true competitive discriminator for us at the end of the day. For any enterprise that has a transaction of consequence, and any large enterprise out there certainly has some of that regard. So that is the way we do plan on bringing new products to market more.

additional services and add-ons that can be bolted together based on the transaction requirements. Got it. Thanks for taking the questions. Thank you. Thank you, Nick. As a reminder, ladies and gentlemen, if you would like to ask any further question, please press star followed by one on the telephone keypad now. The next question comes from Anya Stolstorm from C-Volt. Anya, your slide is now open.

Hi, thank you for taking my question. So, I'm so curious to see that you're taking up your longer term growth targets, but what is the confidence in doing so in this kind of environment? Excuse me, the question was about the rep. So, let's go ahead and say thank you. Yeah, the question was about raising our long-term targets met. So, I'm very curious.

I think from a disability perspective, as we said, 2023 is going to be an investment for both sales and marketing, bringing quarter-bearing sellers, driving the demand generation, market awareness, etc. We have a lot more disability. Obviously, this is still early in the three-year plan, but we feel confident about the quality of the team that's coming on board from a sales perspective, the demand that we're seeing as well for our products.

and the market that we are in, particularly the e-signature market which is growing double digits as you know. So that's from a top line perspective. So new logo is a priority. And we have, as I said, cross selling is a big opportunity as well for us in terms of e-signature to our huge customer install base in the security portfolio that we have. And then the pricing model also designed to gain market share. So we have those 3 headwinds to give going into the long-term plan. And then from a cost perspective, we have a lot more visibility into our cost structure today that we did 6 months ago, 7 months ago, 9 months ago.

We have identified a number of projects that we are working on that will help us drive that profitable growth that we've been mentioning. I feel pretty bullish about that. I feel pretty bullish as well about executing on the $20 to $25 million of phase 2 savings. As I mentioned earlier, we exited 2022 with north of $10 million of the $20 to $25 million. And I think there's more to go and get there. So we've just got to be financial disciplined. I think that mentality is here to stay. The executive team, myself, Matt will align in terms of what that means. And it's just about execution. So Matt, do you have any thoughts on that? No, I agree. Thank you. Okay, thank you. And in terms of acquisitions, what can we expect?

than our honor. I don't believe that there is a game changing acquisition that needs to be done for us to complement our portfolio, but being strategic and operating the stick in this market makes absolute sense from me and how it's at a board of degrees with that.

I don't believe that there is a game-changing acquisition that needs to be done for us to complement our portfolio, but being strategic and operating the stick in this market makes absolute sense from me and how to board a board of agrees with that. Okay, thank you. That was also me.

Thank you. Thank you. As a reminder ladies and gentlemen, if you would like to ask any further question, please press star followed by one on tap on keypad now. We have no further questions.

for your time today.