OneSpan Inc
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
OSPN$21.59-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001628280-24-020067
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001628280-24-034222
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 158 previous paragraphs and 163 current paragraphs.
90 unchanged; 62 reworded; 10 added; 6 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
•In June 2024, we made the decision to stop any incremental development investments supporting our previously acquired blockchain technology and related commercial efforts, which resulted in write-offs of such acquired technology and related capitalized software.
Current report
(1) Professional services and other includes perpetual software licenses revenue, which was approximately 1% of total revenue for both the three and six months ended June 30, 2024 and approximately 1% of total revenue for both the three and six months ended June 30, 2023.
Current report
•Security Solutions revenue increased $1.6 million, or approximately 4%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in Security Solutions revenue was primarily attributable to an increase in demand for authentication solutions from existing customers, partially offset by modest declines in maintenance revenue as we transition legacy perpetual contracts to subscription licenses. Changes in foreign exchange rates for the three months ended June 30, 2024 compared to the same period in 2023 negatively impacted Security Solutions revenue by $0.2 million. For the six months ended June 30, 2024, Security Solutions revenue increased $6.0 million, or 7%, which was driven by an increase in demand for authentication solutions from existing customers, partially offset by modest declines in maintenance revenue, identity verification revenue, and lower quantities of hardware devices sold. Changes in foreign exchange rates for the six months ended June 30, 2024 compared to the same period in 2023 favorably impacted Security Solutions revenue by $0.1 million.
Current report
Research and development expenses for the three months ended June 30, 2024 decreased by $1.7 million, or 17%, compared to the three months ended June 30, 2023. Research and development expenses for the six months ended June 30,
Current report
Restructuring and other related charges for the three months ended June 30, 2024 decreased by $4.1 million, or 71%, compared to the three months ended June 30, 2023, driven by more significant headcount reduction, the termination of the Chicago lease, and discontinuing investments in our Digipass CX product during the three months ended June 30, 2023, partially offset by capitalized software and acquired technology write-offs incurred in 2024. Restructuring and other related charges for the six months ended June 30, 2024 decreased by $3.3 million, or 51%, compared to the six months ended June 30, 2023. The decrease was also driven by more significant headcount and the termination of the Chicago lease during the six months ended June 30, 2023, partially offset by capitalized software and acquired technology write-offs incurred in 2024.
Current report
Provision for Income Taxes
Current report
(3) Includes write-offs of intangible assets and property and equipment, net of $0.8 million and $1.0 million, respectively, for the three and six months ended June 30, 2024 and $0 for both the three and six months ended June 30, 2023. Costs are recorded in "Services and other cost of goods sold" and "Restructuring and other related charges," respectively, on the condensed consolidated statements of operations.
Current report
(4) For the three months ended June 30, 2024, other non-recurring items consist of $0.9 million of fees related to non-recurring projects.
Current report
For the three months ended June 30, 2023, other non-recurring items consist of $1.6 million of inventory impairment charges and $0.4 million of fees related to non-recurring projects.
Current report
For the six months ended June 30, 2024, other non-recurring items consist of $1.1 million of fees related to non-recurring projects.
Removed paragraphs (6)
Previous report
Leadership Change
Previous report
On January 4, 2024, our Board of Directors appointed Victor Limongelli as Interim Chief Executive Officer, effective immediately. Mr. Limongelli is a seasoned software executive who most recently served as Chief Executive Officer at BQE Software, a private SaaS company providing billing, accounting, and similar functionality to professional services firms.
Previous report
Mr. Limongelli replaced Matthew Moynahan, whose employment as the Company’s President and Chief Executive Officer was terminated without cause on January 4, 2024 immediately prior to Mr. Limongelli’s appointment. Under his previously disclosed Amended and Restated Employment Agreement, dated February 27, 2023 (the "Employment Agreement"), subject to Mr. Moynahan’s timely execution and non-revocation of a separation and release agreement, which includes a release of claims against the Company and its affiliates, Mr. Moynahan is entitled to receive the payments and benefits associated with a termination without cause as set forth in the Employment Agreement.
Previous report
•Security Solutions revenue increased $4.4 million, or approximately 9%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in Security Solutions revenue was primarily attributable to higher on-premises term subscription revenue from existing customer expansions, and customer conversions from perpetual to term license contracts, partially offset by lower volumes of hardware sold, and to a lower extent, identity verification revenue which is now presented in Digital Agreements starting this quarter. Changes in foreign exchange rates for the three months ended March 31, 2024 compared to the same period in 2023 favorably impacted Security Solutions revenue by $0.3 million.
Previous report
Restructuring and other related charges for the three months ended March 31, 2024 increased by $0.8 million, or 112%, compared to the three months ended March 31, 2023, driven by additional headcount reductions executed during the three months ended March 31, 2024.
Previous report
Provision (benefit) for Income Taxes
Reworded paragraphs (62)
Previous wording
This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of OneSpan for the periods ended March 31, 2024 and 2023 as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”).
Current wording
This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of OneSpan for the three- and six-month periods ended June 30, 2024 and 2023 as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”).
Previous wording
Our solutions help our customers ensure the integrity of the people and records associated with digital agreements, transactions, and interactions in industries including banking, financial services, healthcare, and professional services. We are trusted by global blue-chip enterprises, including more than 60% of the world’s largest 100 banks, and we process millions of digital agreements and billions of transactions in more than 100 countries annually.
Current wording
Our solutions help our customers ensure the integrity of the people and records associated with digital agreements, transactions, and interactions in industries including banking, financial services, healthcare, and professional services. We are trusted by global blue-chip enterprises, including more than 60% of the world’s 100 largest banks, and we process millions of digital agreements and billions of transactions in more than 100 countries annually.
Previous wording
•Digital Agreements. Digital Agreements consists of solutions that enable our clients to secure and automate business processes associated with their digital agreement and customer transaction lifecycles that require consent, non-repudiation and compliance. These solutions, which are largely cloud-based, include OneSpan Sign e-signature, OneSpan Notary, Identity Verification, and OneSpan Trust Vault. This segment also includes costs attributable to our transaction cloud platform.
Current wording
•Digital Agreements. Digital Agreements consists of solutions that enable our clients to secure and automate business processes associated with their digital agreement and customer transaction lifecycles that require consent, non-repudiation and compliance. These solutions, which are largely cloud-based, include OneSpan Sign e-signature, OneSpan Notary, and Identity Verification. This segment also includes costs attributable to our transaction cloud platform.
Previous wording
On August 3, 2023, our Board of Directors approved the 2023 Actions. We have incurred and expect to continue to incur restructuring charges in connection with the 2023 Actions, most of which are related to employee transition and severance payments and employee benefits, with a significantly smaller amount of charges related to vendor contract termination and rationalization actions. We currently expect that we will incur restructuring charges of approximately $2.5 million to $4.5 million related to the 2023 Actions in future periods, substantially all of which relate to employee transition and severance payments.
Current wording
On August 3, 2023, our Board of Directors approved the 2023 Actions. We have incurred and expect to continue to incur restructuring charges in connection with the 2023 Actions, most of which are related to employee transition and severance payments and employee benefits, with a significantly smaller amount of charges related to vendor contract termination and rationalization actions. We currently expect that we will incur restructuring charges of approximately $1.0 million to $2.0 million related to the 2023 Actions in future periods, substantially all of which relate to employee transition and severance payments.
Previous wording
•We have reduced headcount by eliminating approximately 290 redundant positions and incurred severance, related benefits, and retention pay costs.
Current wording
•We have reduced headcount by eliminating approximately 320 redundant positions and incurred severance, related benefits, and retention pay costs.
Previous wording
•In June 2023, we vacated our Chicago leased office space and abandoned the underlying leases, and, in future periods, plan to further align our real estate footprint with the Company's operating needs. We recorded lease termination costs, non-cash impairment charges related to the vacated location's fixed assets, and a gain on the underlying right-of-use asset and liability write-off.
Current wording
•In June 2023, we vacated our Chicago leased office space and abandoned the underlying leases, and, in future periods, plan to further align our real estate footprint with the Company's operating needs. We recorded lease termination costs, write-offs related to the vacated location's fixed assets, and a gain on the underlying right-of-use asset and liability write-off.
Previous wording
•In June 2023, we made the decision to discontinue investments in its Digipass CX product, which resulted in non-cash impairment charges for capitalized software and write-offs of inventories.
Current wording
•In June 2023, we made the decision to discontinue investments in our Digipass CX product, which resulted in write-offs of capitalized software.
Previous wording
Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates during the three months ended March 31, 2024 compared to the comparable prior year period resulted in an increase in operating expenses of approximately $0.1 million.
Current wording
Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates during the three months ended June 30, 2024 compared to the comparable prior year period resulted in a decrease in operating expenses of approximately $0.1 million. We estimate the change in currency rates during the six months ended June 30, 2024 compared to the comparable prior year period resulted in a decrease in operating expenses of approximately $0.1 million.
Previous wording
The comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans. Long-term incentive plan compensation expense includes both stock-based incentives and an immaterial amount of cash-based incentives. During the three months ended March 31, 2024 and 2023, operating expenses included $1.6 million and $3.9 million, respectively, of expenses related to stock-based and long-term incentive plans.
Current wording
The comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans. Long-term incentive plan compensation expense includes both stock-based incentives and an immaterial amount of cash-based incentives. During the three months ended June 30, 2024 and 2023, operating expenses included $2.0 million and $4.6 million, respectively, of expenses related to stock-based and long-term incentive plans. During the six months ended June 30, 2024 and 2023, operating expenses included $3.6 million and $8.5 million, respectively, of expenses related to stock-based and long-term incentive plans.
Previous wording
•General and administrative. General and administrative expenses consist primarily of personnel costs, legal, consulting and other professional fees, and long-term incentive compensation. We expect general and administrative expenses to decrease in absolute dollars as we continue to implement the 2023 Actions, although our general and administrative expenses may fluctuate as a percentage of total revenue.
Current wording
•General and administrative. General and administrative expenses consist primarily of personnel costs, legal, consulting and other professional fees, and long-term incentive compensation. We expect general and administrative expenses to decrease in absolute dollars (excluding non-recurring items) as we continue to implement the 2023 Actions, although our general and administrative expenses may fluctuate as a percentage of total revenue.
Previous wording
•Amortization of intangible assets. Acquired intangible assets are amortized over their respective amortization periods and are periodically evaluated for impairment.
Current wording
•Amortization of intangible assets. Acquired intangible assets are amortized over their respective amortization periods and are periodically evaluated for impairment or changes in estimated useful life.
Previous wording
•Restructuring and related charges. Restructuring and other related charges consist of employee costs which include severance and related benefits incurred from headcount reductions as part of our restructuring plan and the 2023 Actions; real estate rationalization costs incurred to optimize our real estate footprint which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs incurred to advance our operating model which include impairments of capitalized software assets no longer in use; and vendor rationalization costs for contractually committed services the Company is no longer utilizing. We plan to incrementally incur additional restructuring costs through December 31, 2025, when the restructuring plan terminates and the 2023 Actions are completed.
Current wording
•Restructuring and related charges. Restructuring and other related charges consist of employee costs which include severance, retention pay, and related benefits incurred from headcount reductions as part of our restructuring plan, including the 2023 Actions; real estate rationalization costs incurred to optimize our real estate footprint which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs incurred to advance our operating model which include write-offs of capitalized software assets no longer in use; write-offs of acquired blockchain technology and related capitalized software due to the discontinuation of incremental development investments and related commercial efforts; and vendor rationalization costs for contractually committed services the Company is no longer utilizing. We plan to incrementally incur additional restructuring costs through December 31, 2025, when the restructuring plan terminates and the 2023 Actions are completed.
Previous wording
Interest income, net, consists of income earned on our cash equivalents and short-term investments. Our cash equivalents and short-term investments are invested in short-term instruments at current market rates.
Current wording
Interest income, net, consists of income earned on our cash equivalents. Our cash equivalents are invested in short-term instruments at current market rates.
Previous wording
As the majority of our revenues are generated outside of the U.S., our consolidated effective tax rate is strongly influenced by the effective tax rate of our foreign operations. Changes in the effective rate related to foreign operations reflect changes in the geographic mix of earnings and the tax rates in each of the countries in which it is earned. The statutory tax rate for the primary foreign tax jurisdictions ranges from 11% to 35%.
Current wording
As the majority of our earnings are generated outside of the U.S., our consolidated effective tax rate is strongly influenced by the effective tax rate of our foreign operations. Changes in the effective rate related to foreign operations reflect changes in the geographic mix of earnings and the tax rates in each of the countries in which it is earned. The statutory tax rate for the primary foreign tax jurisdictions ranges from 11% to 35%.
Previous wording
During the three months ended March 31, 2024 and 2023, we generated approximately 84% and 80% of our revenues and incurred approximately 61% and 56% of our operating expenses, respectively, outside of the U.S. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian Dollar exchange rate, can have a significant impact on our revenue and operating expenses.
Current wording
During the three months ended June 30, 2024 and 2023, we generated approximately 85% and 83% of our revenues and incurred approximately 60% and 55% of our operating expenses, respectively, outside of the U.S. During the six months ended June 30, 2024 and 2023, we generated approximately 84% and 82% of our revenues and incurred approximately 61% and 55% of our operating expenses, respectively, outside of the U.S. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian Dollar exchange rate, can have a significant impact on our revenue and operating expenses.
Previous wording
While the majority of our revenue is generated outside of the U.S., a significant amount of our revenue earned during the three months ended March 31, 2024 was denominated in U.S. Dollars. For the three months ended March 31, 2024, approximately 53% of our revenue was denominated in U.S. Dollars, 43% was denominated in Euros and 4% was denominated in other currencies. For the three months ended March 31, 2023, approximately 53% of our revenue was denominated in U.S. Dollars, 42% was denominated in Euros and 5% was denominated in other currencies.
Current wording
While the majority of our revenue is generated outside of the U.S., a significant amount of our revenue earned during the six months ended June 30, 2024 was denominated in U.S. Dollars. For the six months ended June 30, 2024, approximately 54% of our revenue was denominated in U.S. Dollars, 42% was denominated in Euros and 4% was denominated in other currencies. For the six months ended June 30, 2023, approximately 52% of our revenue was denominated in U.S. Dollars, 43% was denominated in Euros and 5% was denominated in other currencies.
Previous wording
The financial position and the results of operations of our foreign subsidiaries, with the exception of our subsidiaries in Switzerland, Singapore and Canada, are measured using the local currency as the functional currency. The functional currency for our subsidiaries in Switzerland, Singapore and Canada is the U.S. Dollar. Accordingly, assets and liabilities of our foreign subsidiaries are translated into U.S. Dollars using current exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments arising from differences in exchange rates generated a comprehensive loss of $1.7 million during the three months ended March 31, 2024. For the three months ended March 31, 2023, translation adjustments arising from differences in exchange rates generated a comprehensive gain of $1.7 million.
Current wording
The financial position and the results of operations of our foreign subsidiaries, with the exception of our subsidiaries in Switzerland, Singapore and Canada, are measured using the local currency as the functional currency. The functional currency for our subsidiaries in Switzerland, Singapore and Canada is the U.S. Dollar. Accordingly, assets and liabilities of our foreign subsidiaries are translated into U.S. Dollars using current exchange rates as of the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments arising from differences in exchange rates generated a comprehensive loss of $0.5 million and $2.1 million during the three and six months ended June 30, 2024, respectively. For the three and six months ended June 30, 2023, translation adjustments arising from differences in exchange rates generated a comprehensive gain of $1.0 million and $2.7 million, respectively.
Previous wording
Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other (expense) income, net. Foreign exchange transaction gains (losses) aggregated $0.1 million and $(0.2) million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other (expense) income, net. Foreign exchange transaction gains aggregated $0.1 million and $0.2 million for the three and six months ended June 30, 2024, respectively. For the three and six months ended June 30, 2023, losses resulting from foreign currency transactions were $0.2 million and $0.4 million, respectively.
Previous wording
Revenue by products and services allocated to the segments for the three months ended March 31, 2024, and 2023 is as follows:
Current wording
Revenue by products and services allocated to the segments for the three and six months ended June 30, 2024, and 2023 is as follows:
Previous wording
Total revenue increased by $7.2 million, or 13%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Changes in foreign exchange rates as compared to the same period in 2023 favorably impacted revenue by approximately $0.4 million.
Current wording
Total revenue increased by $5.2 million, or 9%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Changes in foreign exchange rates as compared to the same period in 2023 negatively impacted revenue by approximately $0.2 million. For the six months ended June 30, 2024, revenue increased by $12.4 million, or 11%, compared to the six months ended June 30, 2023. Changes in foreign exchange rates as compared to the same period in 2023 favorably impacted revenue by approximately $0.1 million.
Previous wording
•Digital Agreements revenue increased $2.9 million, or 25%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in Digital Agreements revenue was primarily attributable to higher cloud subscription revenue from existing customer expansions, and to a lower extent, identity verification revenue which started being presented in Digital Agreements this quarter. Changes in foreign currency rates compared to the same period in 2023 favorably impacted Digital Agreements revenue by less than $0.1 million for the three months ended March 31, 2024.
Current wording
•Digital Agreements revenue increased $3.6 million, or 30%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. For the six months ended June 30, 2024, Digital Agreements revenue increased $6.5 million, or 28%. The increase in Digital Agreements revenue for both periods was primarily attributable to existing customer expansions and new logos. Changes in foreign currency rates compared to the same period in 2023 negatively impacted Digital Agreements revenue by less than $0.1 million for the three months ended June 30, 2024. Changes in foreign currency rates compared to the same period in 2023 favorably impacted Digital Agreements revenue by less than $0.1 million for the six months ended June 30, 2024.
Previous wording
Revenue by Geographic Regions: We classify our sales by customer location in three geographic regions: 1) EMEA, which includes Europe, Middle East and Africa; 2) the Americas, which includes sales in North, Central, and South America; and 3) Asia Pacific (APAC), which includes Australia, New Zealand, and India. The breakdown of revenue in each of our major geographic areas was as follows:
Current wording
Revenue by Geographic Regions: We classify our sales by customer location in three geographic regions: 1) EMEA, which includes Europe, Middle East and Africa; 2) the Americas, which includes sales in North, Central, and South America; and 3) Asia Pacific (APAC), which also includes Australia, New Zealand, and India. The breakdown of revenue in each of our major geographic areas was as follows:
Previous wording
For the three months ended March 31, 2024, revenue generated in EMEA was $4.0 million, or 14%, higher than the same period in 2023, primarily due to an increase in on-premises term subscription revenue from existing customer expansions in authentication and mobile solutions, including the conversions from perpetual to term license contracts, partially offset by lower hardware revenue and security application solutions.
Current wording
For the three months ended June 30, 2024, revenue generated in EMEA was $1.3 million, or 5%, lower than the same period in 2023, primarily due to a decrease in mobile solution products and lower hardware volumes from existing customers. For the six months ended June 30, 2024, revenue generated in EMEA was $2.7 million, or 5%, higher than the same period in 2023, primarily due to an increase in on-premises term subscription revenue from existing customer expansions in authentication products, partially offset by lower hardware revenue and mobile application security solutions.
Previous wording
For the three months ended March 31, 2024, revenue generated in the Americas was $0.8 million, or 4%, higher than the three months ended March 31, 2023. The increase was primarily driven by an increase in Digital Agreements revenue and authentication and mobile solutions, partially offset by lower hardware revenue.
Current wording
For the three months ended June 30, 2024, revenue generated in the Americas was $2.8 million, or 15%, higher than the three months ended June 30, 2023. The increase was primarily driven by an increase in Digital Agreements revenue. For the six months ended June 30, 2024, revenue generated in the Americas was $3.6 million, or 9%, higher than the same period in 2023, primarily due to an increase in Digital Agreements revenue and software authentication products, partially offset by lower hardware revenue.
Previous wording
For the three months ended March 31, 2024, revenue generated in APAC was $2.4 million, or 25%, higher than the three months ended March 31, 2023. The increase was driven by customer expansion in authentication and mobile solutions, and higher customer purchase volumes of hardware products and a higher average selling price.
Current wording
For the three months ended June 30, 2024, revenue generated in APAC was $3.8 million, or 35%, higher than the three months ended June 30, 2023. For the six months ended June 30, 2024, revenue generated in APAC was $6.1 million, or 30%, higher than the same period in 2023. The increase for both periods was driven by customer expansion in authentication and mobile solutions, higher customer purchase volumes of hardware products, and a higher average selling price.
Previous wording
The following table presents cost of goods sold for our products and services for the three months ended March 31, 2024 and 2023:
Current wording
The following table presents cost of goods sold for our products and services for the three and six months ended June 30, 2024 and 2023:
Previous wording
The cost of product and license revenue decreased by $1.6 million, or 14%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in cost of goods sold for the three months ended March 31, 2024 was driven primarily by a decrease in hardware revenue and lower third-party license costs.
Current wording
The cost of product and license revenue decreased by $2.8 million, or 20%, and $4.4 million, or 17% during the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. The decrease in cost of product and license revenue for both the three and six months ended June 30, 2024 was driven primarily by flat to lower hardware revenue and lower third-party license costs, and the $1.6 million inventory non-cash impairment recognized in the prior year in conjunction with the discontinuation of investments in our Digipass CX product.
Previous wording
The cost of services and other revenue increased by $0.7 million, or 10%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in cost of services for the three months ended March 31, 2024 was largely due to higher cloud platform costs related to higher volume usage and an increase in depreciation expense associated with capitalized internally-developed software costs.
Current wording
The cost of services and other revenue increased by $1.9 million, or 26%, and $2.6 million, or 18%, during the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. The increase in cost of services for both three and six months ended June 30, 2024 was largely due to higher cloud platform costs related to higher volume usage and the write-off associated with acquired technology and capitalized internally-developed software costs due to the decision to discontinue investment in blockchain technology.
Previous wording
Gross profit increased $8.1 million, or 21%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Gross profit margin was 73% for the three months ended March 31, 2024, compared to 68% for the three months ended March 31, 2023. The change in profit margin was driven primarily by higher revenue and the changes in costs of revenues discussed above.
Current wording
Gross profit increased $6.0 million, or 18%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Gross profit margin was 66% for the three months ended June 30, 2024, compared to 62% for the three months ended June 30, 2023. Gross profit increased $14.2 million, or 19% during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Gross profit margin was 70% for the six months ended June 30, 2024, compared to 65% for the six months ended June 30, 2023. The change in profit margin was driven primarily by higher revenue and the changes in costs of revenues discussed above.
Previous wording
The majority of our inventory purchases are denominated in U.S. Dollars. Our sales are denominated in various currencies, including the Euro. The impact of changes in currency rates are estimated to have had an unfavorable impact on overall cost of goods sold of less than $0.1 million for the three months ended March 31, 2024. Had currency rates during the three months ended March 31, 2024 been equal to rates in the comparable period of 2023, the gross profit margin would have been less than 1 percentage point higher, driven by the favorable currency rate impact to revenue.
Current wording
The majority of our inventory purchases are denominated in U.S. Dollars. Our sales are denominated in various currencies, including the Euro. The impact of changes in currency rates are estimated to have had an favorable impact on overall cost of goods sold of less than $0.1 million for the three months ended June 30, 2024 and no impact on overall cost of goods sold for the six months ended June 30, 2024. Had currency rates during the three months ended June 30, 2024 been equal to rates in the comparable period of 2023, the gross profit margin would have been less than 1 percentage point lower, driven by the unfavorable currency rate impact to revenue. Had currency rates during the six months ended June 30, 2024 been equal to rates in the comparable period of 2023, the gross profit margin would have been less than 1 percentage point higher, driven by the favorable currency rate impact to revenue.
Previous wording
•Digital Agreements gross profit increased $1.4 million, or 17%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven by higher overall revenue, partially offset by higher cloud platform costs and higher depreciation of capitalized software costs. Digital Agreements gross margin for the three months ended March 31, 2024 was 69%, compared to 73% for the three months ended March 31, 2023. The decrease in gross margin is primarily the result of an increase in depreciation of capitalized software in the current quarter compared to prior year.
Current wording
•Digital Agreements gross profit increased $1.2 million, or 13%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Digital Agreements gross margin for the three months ended June 30, 2024 was 63%, compared to 72% for the three months ended June 30, 2023. For the six months ended June 30, 2024, Digital Agreements gross profit increased $2.6 million, or 15%, compared to the comparable period in 2023. Digital Agreements gross margin for the six months ended June 30, 2024 was 66%, compared to 73% for the six months ended June 30, 2023. The increase in gross profit for both periods was driven by higher overall revenue, partially offset by higher cloud platform costs, higher depreciation of capitalized software costs, The decrease in gross margin for both periods is primarily the result of an increase in depreciation of capitalized software costs, including the write-off of the previously capitalized software, as compared to prior year.
Previous wording
•Security Solutions gross profit increased $6.7 million, or 22%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, driven primarily by higher on-premises term subscription revenue, and lower third-party license costs. Security Solutions gross margin for the three months ended March 31, 2024 was 74%, compared to 67% for the three months ended March 31, 2023. The increase in gross margin was primarily due to more favorable revenue mix between software and hardware, as well as lower third-party license costs.
Current wording
•Security Solutions gross profit increased $4.9 million, or 19%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, driven primarily by an increase in subscription revenue. Security Solutions gross margin for the three months ended June 30, 2024 was 67%, compared to 59% for the three months ended June 30, 2023. The increase in gross margin was primarily due to lower overall costs and the inventory impairment recognized in the prior year period. For the six months ended June 30, 2024, Security Solutions gross profit increased $11.6 million, or 20%, compared to the comparable period in 2023. The increase in gross profit was driven by an increase in subscription revenue, lower third-party license costs, and inventory impairments recognized in the prior year period. Security Solutions gross margin for the six months ended June 30, 2024 was 71%, compared to 63% for the six months ended June 30, 2023. The increase in gross margin was primarily due to more favorable revenue mix between software and hardware, more favorable customer mix in our hardware business, lower third-party license costs, and inventory impairments recognized in the prior year period.
Previous wording
Operating expenses decreased by $14.1 million, or 30%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. For the three months ended March 31, 2024, changes in foreign exchange rates negatively impacted operating expenses by approximately $0.1 million as compared to the same period in 2023.
Current wording
Operating expenses decreased by $19.4 million, or 37%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. For the three months ended June 30, 2024, changes in foreign exchange rates favorably impacted operating expenses by approximately $0.1 million as compared to the same period in 2023. Operating expenses decreased by $33.5 million, or 34%, during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. For the six months ended June 30, 2024, changes in foreign exchange rates favorably impacted operating expenses by approximately $0.1 million as compared to the same period in 2023.
Previous wording
Sales and marketing expenses for the three months ended March 31, 2024 decreased by $7.1 million, or 35%, compared to the three months ended March 31, 2023. The decrease was driven primarily by lower employee compensation costs which included decreases in commissions, salaries, and benefits as a result of headcount reductions, along with decreased travel and entertainment and consulting expenses.
Current wording
Sales and marketing expenses for the three months ended June 30, 2024 decreased by $9.2 million, or 47%, compared to the three months ended June 30, 2023. Sales and marketing expenses for the six months ended June 30, 2024 decreased by $16.3 million, or 41%, compared to the six months ended June 30, 2023. The decreases were driven primarily by lower employee compensation costs which included decreases in commissions, salaries, and benefits as a result of headcount reductions, along with decreased marketing costs and travel and entertainment expenses.
Previous wording
Average full-time sales, marketing, support, and operating employee headcount for the three months ended March 31, 2024 was 183 compared to 355 for the three months ended March 31, 2023. Average headcount was 48% lower for the three months ended March 31, 2024 compared to the same period in 2023.
Current wording
Average full-time sales, marketing, support, and operating employee headcount for the three and six months ended June 30, 2024 was 166 and 175, respectively, compared to 380 and 368 for the three and six months ended June 30, 2023, respectively. Average headcount was 56% and 52% lower for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.
Previous wording
Research and development expenses for the three months ended March 31, 2024 decreased by $1.2 million, or 13%, compared to the three months ended March 31, 2023, driven primarily by lower compensation costs as a result of lower headcount and lower consulting expenses related to our strategic transformation plan, partially offset by increased bonus expenses for the three months ended March 31, 2024, primarily due to 2022 true-up bonus adjustments recorded during Q1 2023 that lowered bonus expense for that period.
Current wording
2024 decreased by $3.0 million, or 15%, compared to the six months ended June 30, 2023. The decrease in expense was driven primarily by lower compensation costs as a result of lower headcount and lower consulting expenses related to our strategic transformation plan partially offset by lower year over year capitalized software.
Previous wording
Average full-time research and development employee headcount for the three months ended March 31, 2024 was 250 compared to 316 for the three months ended March 31, 2023. Average headcount was 21% lower for the three months ended March 31, 2024 compared to the same period in 2023.
Current wording
Average full-time research and development employee headcount for the three and six months ended June 30, 2024 was 239 and 245, respectively, compared to 319 and 317 for the three and six months ended June 30, 2023, respectively. Average headcount was 25% and 23% lower for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.
Previous wording
General and administrative expenses for the three months ended March 31, 2024 decreased by $6.6 million, or 40%, compared to the three months ended March 31, 2023. The decrease in expense for the three months ended March 31, 2024 as compared to the prior year period was largely driven by lower employee compensation costs which included a decrease in salaries, payroll taxes, and related benefits as a result of lower headcount. Also, stock-based compensation expense was lower due to lower headcount, the termination of our former CEO, and timing of granting the 2024 annual equity awards to employees (expected in the second quarter of 2024). Finally, consulting fees related to our strategic transformation plan incurred during the period were lower compared to the three months ended March 31, 2023.
Current wording
General and administrative expenses for the three months ended June 30, 2024 decreased by $4.3 million, or 27%, compared to the three months ended June 30, 2023. General and administrative expenses for the six months ended June 30, 2024 decreased by $10.9 million, or 34%, compared to the six months ended June 30, 2023. The decrease in expense for the both the three and six months ended June 30, 2024 as compared to the prior year period was largely driven by lower employee compensation costs, which included a decrease in salaries, payroll taxes, and related benefits as a result of lower headcount. Also, stock-based compensation expense was lower due to lower headcount, including the termination of our former CEO, and lower annual equity awards granted to employees. These decreases were offset by higher bonus accruals and other non-recurring expenses.
Previous wording
Average full-time general and administrative employee headcount for the three months ended March 31, 2024 was 111 compared to 147 for the three months ended March 31, 2023. Average headcount was 24% lower for the three months ended March 31, 2024 compared to the same period in 2023.
Current wording
Average full-time general and administrative employee headcount for the three and six months ended June 30, 2024 was 101 and 106, respectively, compared to 149 and 148 for the three and six months ended June 30, 2023, respectively. Average headcount was 32% and 28% lower for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.
Previous wording
Amortization of intangible assets expense for the three months ended March 31, 2024 increased by less than $0.1 million, or 2%, compared to the three months ended March 31, 2023.
Current wording
Amortization of intangible assets expense for the three months ended June 30, 2024 increased by less than $0.1 million, or 0%, compared to the three months ended June 30, 2023. Amortization of intangible assets expense for the six months ended June 30, 2024 increased by less than $0.1 million, or 1%, compared to the six months ended June 30, 2023.
Showing the first 40 of 62 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
•Security Solutions operating income for the three months ended June 30, 2024 was $20.7 million, which was a year-over-year increase of $12.2 million, or 143%, from the three months ended June 30, 2023. Operating income for the six months ended June 30, 2024 was $46.6 million, which was a year-over-year increase of