Onespan Inc. · NASDAQ:OSPN
Onespan — Proxy Contest (May 2021)
111 slides from Onespan's proxy contest presentation, May 21, 2021
Slide 1: Stockholder Communications
© oneSpan Stockholder Communications Investor Presentation ay, 2001 (OneSpan Investor Presentation ‘Stockholder Letters May 9.2021 OneSpan Letter to Stockholders, i, 2021 Onespan Letter to Stockholders pemanescna Stay Informed ‘ign up for emails, omcanaicmatence ic)
Slide 2: Serving Our Customers' Needs and Building Value for Shareholders
May 19, 2021 Serving Our Customers’ Needs and Building Value for Shareholders www.OneSpanValue.com
Slide 3: Important Information: Forward-Looking Statements
2 Important Information Forward - Looking Statements This presentation contains forward - looking statements within the meaning of applicable U.S. securities laws. Forward - looking sta tements may be identified by words such as “seek,” “believe,” “plan,” “estimate,” “anticipate,” “expect,” “intend,
Slide 4: What is Legion's Proxy Contest About?
3 What is Legion’s Proxy Contest About? After years of constructive engagement between OneSpan and Legion, during which OneSpan evaluated all of Legion’s suggestions (and adopted many of them), is Legion now entitled to replace half of OneSpan’s independent directors (even though it has offered virt
Slide 5: Table of Contents
4 Table of Contents I Executive Summary 5 II Overview of OneSpan and Our Strategy Evolution 17 III OneSpan is Delivering Value to Shareholders 35 IV The Board Has the Right Skills and Has Taken the Right Actions 44 V The Hardware Component of Our Authentication Business Remains Integral to Our Solut
Slide 6: Overview of OneSpan
5 -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% 7/28/17 1/28/18 7/28/18 1/28/19 7/28/19 1/28/20 7/28/20 1/28/21 OneSpan S&P 500 Overview of OneSpan (Nasdaq: OSPN) Headquarters Chicago Market Cap (as of 4/30/21) 1 $1.1Billion Enterprise Value (as of 4/30/21) 1 $975M 2020 Revenue 1 $216M 2020 Net I
Slide 7: Executive Summary
6 Executive Summary OneSpan has been executing a multi - year transformation from an authentication business to a trusted identity solutions provider The OneSpan Board has been refreshed with new directors who bring skills and experience that fit our business Through our transformation, OneSpan has
Slide 8: Executive Summary, Continued
7 Executive Summary, Continued Legion’s principal idea ( until May 17 when it shifted demands again ) – selling the hardware component of our authentication business – is based on spreadsheet math, not real - world competitive dynamics or customer needs Given OneSpan’s transformation and our respons
Slide 9: OneSpan Today – Two Key Business Areas
8 OneSpan Today – Two Key Business Areas AUTHENTICATION & DIGITAL IDENTITY SECURE PROCESS DIGITIZATION Mobile Security Hardware Authenticators On - Premises SaaS END POINTS HOST Adding intelligence to authentication through real - time risk assessment in order to match authentication needs with tran
Slide 10: Overview of Engagement With Legion Partners
9 Overview of Engagement With Legion Partners • Over the last three years, management has met with Legion representatives by phone or in person over 40 times • Nearly all of Legion’s demands have been (and continue to be) disclosure related • Legion has become more aggressive over time , initially e
Slide 11: OneSpan's Track Record of Engagement with Legion and Thoughtful Actions
10 OneSpan’s Track Record of Engagement with Legion and Thoughtful Actions 2018 2019 2020 2021 During 2018 , OneSpan held at least 10 meetings with Legion, discussing: • Company valuation • Investor communications • Governance • Board representation During 2019 , OneSpan held at least 10 meetings wi
Slide 12: Despite Our Engagement and Progress, Legion Continues to Have Complaints
11 Despite Our Engagement and Progress, Legion Continues to Have Complaints LEGION’S CLAIM / COMPLAINT ONESPAN’S RESPONSE OneSpan’s TSR underperforms peers and is undervalued relative to peers The peer groups chosen by Legion consist of much larger and established software companies (see slides 37 a
Slide 13: Legion's Revolving Door of Suggestions
12 Legion’s Revolving Door of Suggestions “Transform into a software pure play” and sell the Company’s “Hardware segment” ¹ “Monetize $400 million of value” and sell the Company’s “eSignature SaaS business” ¹ Redesign OneSpan’s executive compensation programs, including to: o Use “software - o
Slide 14: Legion Has Abandoned Its Core Strategy Suggestion
13 Legion Has Abandoned Its Core Strategy Suggestion Legion’s February 25, 2021 Letter Legion’s Investor Presentation May 2021 1 Legion’s May 17, 2021 Investor Presentation, page 99 [emphasis added]. Legion has been advocating for a sale of the hardware component of our authentication business for n
Slide 15: Legion's Current (Remaining) Suggestions for Improving OneSpan
14 Legion’s Current (Remaining) Suggestions for Improving OneSpan “Create a detailed capital allocation framework” Executive compensation plan should be tied to software profitability (N.B. it is) STRATEGY OPERATIONS DISCLOSURE GOVERNANCE Reduce the number of countries in which OneSpan operate
Slide 16: Shareholders Should Support OneSpan's Nominees
15 PRIVILEGED AND CONFIDENTIAL Shareholders Should Support OneSpan’s Nominees OUR BOARD HAS DRIVEN CHANGE OUR BOARD IS BEST POSITIONED TO CONTINUE D RI V IN G ON E S P A N’ S T R A NSFOR M A T IO N • In 2016, our Board approved a multi - year transformation strategy to e x te n d O n e S p a n ’ s s
Slide 17: Regarding Our Relationship with Legion
16 Regarding Our Relationship with Legion PRIVILEGED AND CONFIDENTIAL PREPARED AT THE DIRECTION OF COUNSEL Legion is seemingly frustrated when OneSpan : • Adopts one of Legion’s suggestions (they claim we are just “ being reactive ”); • Acts without Legion’s prompt (they claim we are taking a “ defe
Slide 18: Overview of OneSpan and Our Strategy Evolution
Overview of OneSpan and Our Strategy Evolution
Slide 19: OneSpan Has Evolved Significantly Since Its Formation in 1991
18 OneSpan Has Evolved Significantly Since Its Formation in 1991 Over the next 26 years, as CEO, Mr. Hunt guided the business to becoming a critical supplier of hardware - based identity authentication solutions worldwide 1991 - 2017 TODAY Founder - led organization Professional executives with soft
Slide 20: Legion Has Been Complimentary of Our Transformation (Privately)
19 Legion Has Been Complimentary of Our Transformation (Privately) [T]he Company’s transformation has been impressive to - date…” Quarterly Letter to Legion’s Investors, April 12, 2019
Slide 21: OneSpan Is a Valued Partner to Leading Banks, Enterprises and Governments
20 OneSpan Is a Valued Partner to Leading Banks, Enterprises and Governments Other Financial Services Insurance Banking Other Healthcare Government Canada
Slide 22: Authentication Products and Solutions
21 • Hardware authenticators (“tokens”) like Digipass GO and Cronto devices are easy - to - use hardware devices. With the press of a button, Digipass displays a dynamic one - time password (“OTP”) that can be used in combination with another form of authentication, like a user’s static password, to
Slide 23: Customers Increasingly Authenticating Users with Mobile Phone Authentication
22 Our Customers Are Increasingly Authenticating Users with Mobile Phone Authentication 17% 83% 2015 Mobile Security % Hardware % Increased Focus on Mobile Security Mobile Security Licenses and Hardware Devices Sold Cumulative Mobile Security Licenses Sold (in millions) Banking Customers & Employee
Slide 24: OneSpan's Strategy Evolution Beyond Authentication
23 OneSpan’s Strategy Evolution Beyond Authentication 2018 2019 2020 2021 2022 2023 2024 2025 TID LAUNCH; REBRAND; BIZ TRANSFORM PLATFORM DEVELOPMENT FOCUS ON INNOVATION ADJACENCY EXPANSION RECURRING REVENUE TRANSITION Launch of Trusted Identity Strategy and Re - branding as OneSpan • Rebranded the
Slide 25: Our Portfolio of Solutions Enables Us to Meet the Needs of Our Customers
24 Our Portfolio of Solutions Enables Us to Meet the Needs of Our Customers Identity Verification Cloud Authentication Risk Analytics eSignature eSignature Mobile App Protection Mobile App Protection Mobile App Protection Mobile Security Software Mobile Security Software Mobile Security Software Two
Slide 26: OneSpan Sign, Virtual Room, Identity Verification, Mobile Security Suite
25 OneSpan Sign supports a broad range of eSignature requirements from simple to complex and from the occasional agreement to processing tens of thousands of transactions. Customers can white label the software to reinforce their brand for a seamless signing experience OneSpan Sign Virtual Room is a
Slide 27: Newer Services Are Rapidly Changing Our Revenue Mix
26 >85 % Recurring 2 76 % Recurring <50 % Recurring 2 <60 % Recurring 2 Newer Services Are Rapidly Changing Our Revenue Mix 62% 38% 2020 Software & Services Hardware Strong Double - Digit ARR Growth 1 ~120% Dollar - Based Net Expansion Rate 1 Target >85% of S&S Revenue Recurring by 2022 1 During qua
Slide 28: We Strategically Reallocated Our Resources to Drive Growth
27 We Strategically Reallocated Our Resources to Drive Growth Realigned Our Salesforce to Support New Solutions Quota Carrying Salespeople Software & Services Only Software & Services and Hardware • As our business has evolved, we have had to adapt our salesforce to learn how to sell complex solutio
Slide 29: Management and Our Board Have Driven Operational Change
28 Management and Our Board Have Driven Operational Change We have executed on a complex, multi - year global business transformation; the critical tasks were proactively planned and accomplished by our executive team Until May 17, 2021, Legion’s recommendations have not included a single operationa
Slide 30: Ample Opportunity for Growth Within Our Existing Customer Base
29 82% 98% 47% 72% 80% 63% 24% 12% 0% 20% 40% 60% 80% 100% 120% Server Authentication Authentication Tokens Mobile Security E-Signature Cloud-based Security Software 2015 2020 • Our installed base has shifted over time as more customers adopt our Mobile Security, eSignature and Cloud Software soluti
Slide 31: Our Financial Results Provide Evidence of Our Successful Transformation
30 • Improving demand for mobile security and continued strong growth in our eSignature solutions resulted in record bookings of recurring revenue contracts last year • Recurring revenue now accounts for more than 85% of total software and services revenue on a run - rate basis Our Financial Results
Slide 32: FY 2020 Financial Highlights
31 FY 2020 Financial Highlights >40 % Growth in Bookings of Recurring Revenue Contracts $104M Annual Recurring Revenue (ARR) 1 29 % ARR Growth 120 % Dollar - Based Net Expansion (DBNE) 2 Rate 66 % of Software Revenues Were Recurring >50 % Subscription and Term ARR Growth Source: Company data. Dollar
Slide 33: We Expect Our Momentum to Continue in 2021
32 • We are well on our way to materially completing our transition to recurring software revenue by the end of 2021 We Expect Our Momentum to Continue in 2021 Y/Y Revenue Sources ($M) Y/Y Software & Services Revenue ($M) 1 OneSpan guidance. 47% 56% 15% 9% 38% 35% $0 $50 $100 $150 $200 $250 2020 202
Slide 34: Industry Analysts Recognize the Progress We Have Made
33 Industry Analysts Recognize the Progress We Have Made We are encouraged by the strong annual recurring revenue (ARR) growth of 29% year over year in 2020. In addition, [recurring revenue] accounted for 76% of total software and services revenue in 2020, a year ahead of the originally targeted tim
Slide 35: Legion Has Recognized that Progress Also
34 …and Legion Has Recognized that Progress Also [W]e … recognize the Board and management’s efforts to transform the Company from a languishing legacy hardware provider into a next - generation mobile and identity security software player …” June 14, 2019 ¹ OneSpan has undergone a major transformat
Slide 36: OneSpan Is Delivering Value to Shareholders
OneSpan Is Delivering Value to Shareholders
Slide 37: OneSpan's TSR Has Been Competitive During Our Transformation
36 OneSpan’s TSR Has Been Competitive During Our Transformation 1 Source: FactSet. Data as of April 30, 2021. 2 Scott Clements’ tenure as CEO began on July 28, 2017. 1 - Year Total Shareholder Returns 1 2 - Year Total Shareholder Returns 1 3 - Year Total Shareholder Returns 1 TSR During Scott Clemen
Slide 38: Legion's Peer Groups Are Artificial and Comprised of Companies Unlike OneSpan
37 Legion’s “Peer Groups” Are Artificial and Comprised of Companies Unlike OneSpan 1 “Companies Added by Legion” include CrowdStrike Holdings, DocuSign, Okta, Palo Alto Networks, Fortinet, Zscaler , Cloudflare, Splunk, Dynatrace, Check Point Software Technologies, NICE, Proofpoint, Mimecast, Ping Id
Slide 39: Legion's Additions and Subtractions from Our Peer Group are Disingenuous
38 Legion’s Additions and Subtractions from Our Peer Group are Disingenuous 1 Source: FactSet and company filings. Revenue data from last full fiscal year reported as of April 30, 2021. Market cap data a s o f April 30, 2021. Proxy Peer Group excludes ForeScout Technologies and MobileIron, which are
Slide 40: We Have Added New Disclosures as Our Business Became More Software-Focused
39 As Our Business Has Become More Software/SaaS - Focused, We Have Added New Disclosures Recurring Revenue • Comprised of subscription, term - based software licenses and maintenance revenue • Enables investors to better understand and track our transition story May 2019 Go - to - Market Approach •
Slide 41: OneSpan Has Provided Shareholders With Additional Disclosures
40 As our business model and revenue mix have evolved, we have endeavored to provide additional disclosures to our shareholders, some of which were suggested by Legion and other investors OneSpan Has Provided Shareholders With Additional Disclosures 1 Sources: Legion’s June 14, 2018 and August 21, 2
Slide 42: As the Business Evolves, Our Valuation Is Expected to Shift As Well
41 As the Business Evolves, Our Valuation Is Expected to Shift As Well Revenue Contribution EV/NTM Revenue Multiple Recurring Software & Services Non - Recurring Software & Services Hardware Source: FactSet. EV/NTM Revenue data as of April 30, 2021. Sidoti research May 5, 2021; Needham research May
Slide 43: OneSpan Has Performed Well for Shareholders During the Transformation
42 - 5% 12% 14% 19% 28% -10% -5% 0% 5% 10% 15% 20% 25% 30% Nutanix Radware Cisco Palo Alto Networks - 0.3x 1.0x 1.7x 1.9x 2.3x -0.5x 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x Nutanix Radware Cisco Palo Alto Networks OneSpan Has Performed Well for Shareholders During the Transformation Annualized Total Sharehold
Slide 44: Legion's Transition Case Study Shows Our Impressive Performance
43 -40% -20% 0% 20% 40% 60% 80% 100% 120% OSPN NUAN Legion’s Transition “Case Study” Shows Our Impressive Performance TSR fro m January 1, 2018 to June 30, 2020 1 • Nuance’s transformation was driven largely by divestitures ; the company sold its legacy document imaging unit, its mobile operator ser
Slide 45: The Board Has the Right Skills and Has Taken the Right Actions
The Board Has the Right Skills and Has Taken the Right Actions
Slide 46: Our Board Has Evolved Over Time
45 Our Board Has Evolved Over Time JUNE 2021 NOMINEES JUNE 2016 NOMINEES Ken Hunt Michael Cullinane John Fox Jean Holley Matthew Moog Marc Boroditsky 2019 Scott Clements 2017 Garry Capers NEW 2021 John Fox 2005 Jean Holley 2006 Marianne Johnson NEW 2020 Matthew Moog 2012 Alfred Nietzel NEW 2020 Marc
Slide 47: Our Board Has Added Eight New Directors Since 2017
46 Our Board Has Added Eight New Directors Since 2017; Six Since 2019 ¹ Arthur Gilliland left the Board to pursue an executive position in cybersecurity. ² Naureen Hassan left the Board to pursue a position in the public sector that did not permit her to serve on a public company board. ³ On Februar
Slide 48: Our Director Searches Have Identified Great Candidates
47 PRIVILEGED AND CONFIDENTIAL Our Director Searches Have Identified Great Candidates O u r n e w Boa r d ca n d i da tes w e r e s ele c ted o n t h e b as is o f s kills a n d me r it, n o t p e rso n a l r el a t i o n s h i p s PREPARED AT THE DIRECTION OF COUNSEL OneSpan has a thorough vetting
Slide 49: Our Director Searches Have Identified Great Candidates (Timeline)
48 Our Director Searches Have Identified Great Candidates 2018/2019 Process 2019/2020 Process 2020 Process for Audit Committee Chair Successor 2021 Process Search timeline and evaluation of Legion candidates • Aug 2018: Search began • Fall 2018: Interviews • Early 2019: Assessment of candidates (inc
Slide 50: Recent Board Appointments Bring Relevant Skills and Experience
49 Recent Board Appointments Bring Relevant Skills and Experience ▪ Chief Revenue Officer of Twilio, a cloud communications platform as a service company ▪ Former President & COO of Authy , a software authentication company that was acquired by Twilio in 2015 ▪ Previously held senior roles at Oracle
Slide 51: Our Board Has the Right Skills and Experiences to Guide Our Transition
50 Our Board Has the Right Skills and Experiences to Guide Our Transition Boroditsky Capers Clements Fox Holley Johnson Moog Nietzel Zenner TOTALS Technology/Software/ SaaS Industry ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 9 Financial Technology Platforms/R&D/ Innovation ✓ ✓ ✓ ✓ ✓ 5 Operational/Change Management ✓ ✓ ✓ ✓ ✓
Slide 52: Director Nominee Biographies
51 MARC D. BORODITSKY Director Since 2019 JOHN N. FOX, JR. Chair of the Board Director Since 2005 GARRY L. CAPERS Director Since 2021 Director Nominee Biographies • Strong background in cloud communications and security software, sales and marketing, finance, product management and operations • Has
Slide 53: Director Nominee Biographies (continued)
52 JEAN K. HOLLEY Director Since 2006 SCOTT M. CLEMENTS President and CEO Director Since 2017 MARIANNE JOHNSON Director Since 2020 • Brings the perspective of a global executive with experience across multiple areas including acquisitions and divestitures, cybersecurity, cloud computing, engineering
Slide 54: Director Nominee Biographies (continued)
53 • Extensive domestic and international financial experience in multiple industries, including in the software and SaaS sectors • Served as CFO of CDK Global, Inc. (NASDAQ: CDK), the largest global provider of integrated technology and digital marketing solutions for the automotive retail and vehi
Slide 55: Strong Governance Underpins Our Commitment to Shareholders
54 Strong Governance Underpins Our Commitment to Shareholders Independent, Diverse and Refreshed Board Shareholder Rights and Accountability Compensation Aligned With Strategy Commitment to Corporate Responsibility • 6 of our 9 nominees are new since 2017 • 5 nominees added to the Board since 2019 •
Slide 56: OneSpan's Recent Strategic Acquisitions Have Added Value
55 $85M $400M $0M $50M $100M $150M $200M $250M $300M $350M $400M $450M Silanis Technology (2015) OneSpan Sign (2021) OneSpan’s Recent Strategic Acquisitions Have Added Value Legion Believes OneSpan Sign – Which We Acquired Six Years Ago for $85 Million – Is Now Worth $400 Million ¹ 1 Legion’s Letter
Slide 57: The Board Has Overseen Value-Enhancing Acquisitions
56 The Board Has Overseen Value - Enhancing Acquisitions Year Purchase Price Company Strategic Importance 2013 $22 million Cronto • Cronto was a leader in the field of secure visual transaction authentication and signature solutions for online banking • Allowed us to win the largest hardware deal in
Slide 58: Finance and Strategy Committee
57 • The Committee is chaired by Dr. Marc Zenner, a former investment banker with extensive experience advising hundreds of the world’s largest public companies on capital allocation, business configuration and other matters • The Committee has a broad mandate to: – Provide recommendations impacting
Slide 59: Legion Has Abandoned Its Demand That We Sell eSignature
58 Legion Has Abandoned Its Demand That We Sell eSignature Legion’s Investor Presentation May 2021 1 1 Legion’s May 17, 2021 Investor Presentation at 99. Legion’s August 18, 2020 Letter “The Board should immediately pursue a divestiture of the eSignature business, OneSpan Sign, while market conditio
Slide 60: Board Strategic Alternatives Process for eSignature
59 June 2020: Our Board discussed various strategic alternatives, as Legion has requested September 2020: Our Board formed a new Finance and Strategy Committee and engaged an independent financial advisor to perform an independent valuation of the Company’s hardware authentication, eSignature and se
Slide 61: Legion Falsely Claims Credit on Executive Compensation
60 Legion Falsely Claims Credit on Executive Compensation Legion did not even mention the term “executive compensation” once in over 100 pages of public and private letters and presentations, prior to its proxy filing in March 2021 1 Legion’s May 17, 2021 Investor Presentation at 122. “BARNHILL ERA”
Slide 62: We Modified Our Incentive Plans to Align Compensation and Strategy
61 We Modified Our Incentive Plans to Align Compensation and Strategy Realigned Incentive Plans to Support Our Strategy • As our business and strategy have evolved, so too has our approach to incentive compensation • Previous versions of our CEO’s compensation plan focused heavily on revenue as a me
Slide 63: Compensation is Aligned with Performance
62 Compensation is Aligned with Performance Pay - for - Performance Alignment Alignment with Shareholders Risk Mitigation • 88% of our CEO’s target compensation opportunity for 2020 was at - risk • A majority of CEO compensation is tied to the achievement of objective financial performance metrics •
Slide 64: Legion's Claims Regarding Compensation Are New and Misguided
63 Legion’s Claims Regarding Compensation Are New and Misguided PSU Metrics Were Aligned with Our Revenue Mix When Adopted • Legion had never voiced any concerns to us regarding the structure of our executive compensation plans 1 • In its presentation, Legion highlights the 2018 - 2020 LTIP awards i
Slide 65: Our Employees Attest to Our Strong Culture
64 Our Employees Attest to Our Strong Culture “OneSpan has built a great culture regarding relationships, training, benefits and structure for employees. It is one of the best companies I've ever worked.” – Account Executive, February 18, 2021 “During the Corona crisis we are experiencing the true c
Slide 66: The Hardware Component of Our Authentication Business Remains Integral
The Hardware Component of Our Authentication Business Remains Integral to Our Solutions Set
Slide 67: Authentication Deployments Are Driven By Customer Needs
66 Authentication Deployments Are Driven By Customer Needs OneSpan offers hardware and mobile authentication options Customers choose to deploy a hardware authenticator, a mobile authenticator or both, depending on their specific requirements and working style Both options use OneSpan’s on - premise
Slide 68: Our Largest Customers Buy Both Hardware and Mobile Authentication
67 Our Largest Customers Buy Both Hardware and Mobile Authentication Customer Rank (by Revenue) Hardware Tokens Mobile Authentication Combined Server/ Service UK - based Global Bank 1 ض ض ض US - based Global Bank 2 ض ض ض Asia - based Global Bank 3 ض ض ض Europe - based Global Bank 4 ض ض ض Europe - ba
Slide 69: Our Broad Solution Set Enables Us to Grow Revenue from Existing Customers
68 2018 2019 2020 Hardware Non-Recurring Software & Services Recurring Software & Services • We have excellent penetration of the top global banks, including 60 of the top 100 in the US, Europe and Japan, with authentication solutions, which always involve installing software on the bank’s servers o
Slide 70: Most of Our Competitors Offer Both Hardware and Mobile Authentication
69 Most of Our Competitors Offer Both Hardware and Mobile Authentication Competitor Hardware Tokens Mobile Authentication Key Industries Served ض ض Financial services; mobile/telecommunications; government; healthcare; transportation ض ض Financial services; technology; transportation ض ض Financial s
Slide 71: Hardware Authentication Remains an Important Option for Advanced Security
70 Hardware Authentication Remains an Important Option for Advanced Security 1 Source: c|net article March 15, 2021 “ Twitter locks down with better hardware security key option ”; c|net article July 23, 2018: “ A physical key is the secret to Google employees’ online security ”; Link to Intel artic
Slide 72: Legion's Idea to Sell Hardware Leaves Critical Questions Unanswered
71 • How will we maintain OneSpan’s status as an approved vendor at top financial institutions if we sell the hardware component of our authentication business or our economic rights to it? • A new approval process requires an extensive security audit process and the negotiation of a master services
Slide 73: Legion's Rationale for Selling Hardware Authentication Was Misguided
72 Legion’s Rationale for Selling Hardware Authentication Was Misguided Selling the hardware component of our authentication business would immediately transform OneSpan into a pure play software company and likely “rerate” OneSpan’s stock price closer to peer levels • First and foremost, we need a
Slide 74: Hardware Is Not a Structural Impediment to a Fair Valuation
73 Hardware Is Not a “Structural Impediment” to a Fair Valuation 80% 20% 73% 27% 74% 26% “Our bull case valuation is supported by SOTP analysis…” Morgan Stanley Research Note, August 1, 2018 “Piper Jaffray analyst James Fish … notes … his sum - of - the - parts valuation exercise on the company's va
Slide 75: Legion's Claim That Investors Can't Value OneSpan Is Contradicted
74 Legion’s Claim That Investors Can’t Value OneSpan Is Contradicted By Its Own Work • Legion easily performs a SOTP valuation on OneSpan using our current disclosures • Other market participants, including sell - side analysts, also regularly calculate a SOTP as a component of their valuation metho
Slide 76: Divesting the Hardware Part of Our Authentication Business Is Not Optimal
75 Divesting the Hardware Part of Our Authentication Business Is Not Optimal at This Time Source: Legion’s Letter to Stockholders, February 25, 2021. • Other investors and sell - side analysts are able to value OneSpan without difficulty today • As we continue to execute our transformation to a clou
Slide 77: Legion's Proxy Contest Is Unnecessary; Its Nominees Are Not The Right Fit
Legion’s Proxy Contest Is Unnecessary; Its Nominees Are Not The Right Fit
Slide 78: Legion's Proxy Contest Is Unnecessary
77 • OneSpan has engaged constructively with Legion since April 2018, even before Legion disclosed any ownership of OneSpan’s stock • Our Board and management have carefully considered and adopted Legion’s recommendations that have made sense and at the times when they have made sense • Our Board ha
Slide 79: We Have Been Responsive to Legion's Calls for Board Change
78 We Have Been Responsive to Legion’s Calls for Board Change June 2018 “New perspectives [are] important given [the Company’s] recent transition.” 1 • Since Legion’s initial presentation to OneSpan management, the Company has added 6 new directors 2 • Two longer - tenured directors have stepped dow
Slide 80: Legion Has Previously Been Supportive of Our Board Appointments
79 Legion Has Previously Been Supportive of Our Board Appointments [We are] pleased to see the Board take steps in the right direction to better align the experiences and skillsets of [the Board] with the challenges and opportunities the [Company] is facing today.” Email from Sagar Gupta to OneSpan
Slide 81: Legion's Previous Candidates Were Inferior to the Directors OneSpan Recruited
80 Legion’s Previous Candidates Were Inferior to the Directors OneSpan Recruited Legion Candidate Experience Director Selected Experience 2018 / 2019 Candidate A • SVP of Business and Corporate Development at a large cybersecurity company • OneSpan offered to add this candidate to the Board in excha
Slide 82: We Have Adopted Many of Legion's Other Suggestions
81 We Have Adopted Many of Legion’s Other Suggestions When Appropriate Investor Communications • OneSpan should host an investor day • Legion can help OneSpan garner interest from sell - side analysts • OneSpan should begin producing a quarterly presentation with earnings x OneSpan held its first in
Slide 83: We Have Adopted Many of Legion's Other Suggestions, Continued
82 We Have Adopted Many of Legion’s Other Suggestions When Appropriate, Continued Director Sales / Stock Ownership • Directors have sold stock at indiscriminate prices and during blackout periods x This is untrue; only one director has sold shares over the last five years, and those transactions occ
Slide 84: Legion's Recent Claims Contradict Its Previous Statements
83 Legion’s Recent Claims Contradict Its Previous Statements Financial Performance The Company has been “producing commendable financial results” 1 (August 2019) “After years of chronic underperformance , we believe the time has come for stockholders to # ProtectOneSpan from the Board’s longstanding
Slide 85: John Fox: Chair of the Board
84 • As Chair of the Board, John has played a key role in overseeing the Company’s transformation, leveraging his extensive experience in developing growth strategies, project management, human capital and compensation and organizational process enhancement • John is the former Vice Chairman of Delo
Slide 86: Jean Holley: Director
85 • Jean is the former Chief Information Officer of Brambles Limited, where she was directly responsible for leadership on technology trends and industry futures including the Internet of Things (IoT), Big Data/Analytics, cyber security and disruptive technologies • Brambles manages the world’s lar
Slide 87: Matthew Moog: Director
86 • A veteran tech entrepreneur, Matt has founded, led and scaled multiple technology companies, including Viewpoints (now known as PowerReviews ), a software and data platform serving 1,000+ leading brands and retailers • Matt currently serves as Interim CEO of Chicago Public Media, a globally rec
Slide 88: Marc Zenner: Director
87 • Marc previously led J.P. Morgan’s global Corporate Finance Advisory group; he also served as global head of Citigroup’s Financial Strategy Group and US Head of the Financial Markets Advisory group within ABN AMRO’s Financial Markets Division • Marc has advised hundreds of public company boards
Slide 89: Legion's Nominees Are Not Additive to Our Board
88 Legion’s Nominees Are Not Additive to Our Board • Mr. Gupta is a 33 - year - old career hedge fund analyst who, as far as we know, has never operated a business of any kind • We have engaged with Mr. Gupta directly on many occasions; he still does not understand fundamental aspects of our busines
Slide 90: Legion's Nominations Are Inconsistent With Legion's Stated Goals
89 Legion’s Nominations Are Inconsistent With Legion’s Stated Goals “…[W]e strongly believe the lack of… a shareholder friendly perspective on the Board has contributed to the Company’s unacceptable valuation disconnect as well as the lack of meaningful action to address the underlying drivers.” 1 •
Slide 91: Legion's Aggressive Personal Attacks Are Littered With Misleading Claims
90 Legion’s Aggressive Personal Attacks Are Littered With Misleading Claims • “John Fox possesses no modern technology experience” 1 • “[I]t is unsurprising that as Chair of the Compensation Committee for 15 years, OneSpan’s executive compensation programs remain antiquated” 1 • Mr. Fox spent his ca
Slide 92: Legion's Aggressive Personal Attacks Are Littered With Misleading Claims (continued)
91 Legion’s Aggressive Personal Attacks Are Littered With Misleading Claims • “Matthew Moog lacks scaled, public tech experience” 1 • “The Board lacks pertinent capital allocation expertise… Matthew Moog, member of the Finance & Strategy Committee, [is] not the answer” 1 • Mr. Moog founded three fas
Slide 93: Legion's Claims About Our Board's Actions and Responsiveness Are Wrong
92 Legion’s Claims About Our Board’s Actions and Responsiveness Are Wrong “We have watched the Board consistently dismiss several ideas to unlock stockholder value…” 1 • We have welcomed Legion’s input, been responsive and adopted many of Legion’s suggestions, including by enhancing our financial di
Slide 94: We Don't Segment Report Hardware Because It Is Not a Segment
93 • OneSpan has repeatedly explained to Legion that the hardware component of our authentication business is a piece of a solutions set; it is not a separate “business,” and it is not a separate “segment” – Frequently, our authentication customer purchases hardware, mobile authentication software a
Slide 95: Legion's Claims Are Misleading
94 Legion’s Investor Presentation Is Misleading Legion claims that “utilizing the average [of peer company TSR] is a widely accepted practice.” 1 • ISS typically uses medians for peer group TSR calculations • Legion itself used medians for TSR calculations in a prior activist campaign (e.g., in its
Slide 96: Legion's Claims Are Misleading (Valuation)
95 Legion’s Investor Presentation Is Misleading OneSpan should be valued 75% higher and would be if only the Company would disclose more information about the hardware component of its authentication business • Legion arrives at this conclusion by averaging the ARR multiples of companies that are ve
Slide 97: Legion's Public Letters and Presentations Show Our Progress
96 Legion’s Public Letters and Presentations Show Our Progress Legion’s August 18, 2020 Letter Legion’s Investor Presentation May 17, 2021 1 1 Legion’s May 17, 2021 Investor Presentation at page 45. Legion’s own analysis repeatedly shows OneSpan’s significant progress in achieving market recognition
Slide 98: Conclusion
Conclusion
Slide 99: What Is Legion's Proxy Contest About?
98 What Is Legion’s Proxy Contest About? After years of constructive engagement between OneSpan and Legion, during which OneSpan evaluated all of Legion’s suggestions (and adopted many of them), is Legion now entitled to replace half of OneSpan’s independent directors (even though it has offered vir
Slide 100: OneSpan Has Been Very Responsive to Legion's Requests
99 OneSpan Has Been Very Responsive to Legion’s Requests x Improved analyst coverage ; 5 analysts now cover OneSpan , up from 3 analysts when Legion first invested x Improved financial disclosures and provided better insight into our go - to - market strategy, customer base, long - term growth drive
Slide 101: Legion's Big Ideas Over the Last Year: Where Are We Now?
100 Legion’s “Big Ideas” Over the Last Year: Where Are We Now? • “Immediately pursue a divestiture” of the eSignature business Ran a full strategic sale process with an investment bank; bids were inadequate • No further mention of this idea • Effectively: “Never mind” • “Initiate a strategic review
Slide 102: Shareholders Should Support the Company's Nominees
101 Shareholders Should Support the Company’s Nominees The Board and management team devised a new strategy to extend OneSpan into additional trusted identity and security services over time OneSpan used (and continues to use) its market position in multi - factor authentication to grow its busi
Slide 103: Please Vote the BLUE Card FOR OneSpan's Director Candidates
102 Please Vote the BLUE Card FOR OneSpan’s Director Candidates Brokers and Banks: (212) 929 - 5500 All Others Call Toll - Free: (800) 322 - 2885 Email: OneSpan@mackenziepartners.com THE ONESPAN BOARD OF DIRECTORS We strongly urge stockholders to vote the BLUE proxy card FOR our highly qualified and
Slide 104: Appendix
Appendix
Slide 105: Leadership Team
104 Leadership Team Scott M. Clements Chief Executive Officer and President Mark Hoyt Chief Financial Officer, Treasurer and Executive Vice President Steven Worth General Counsel, Chief Compliance Officer and Corporate Secretary John Gunn Vice President, Sales and Marketing Tracy McCarthy Chief Huma
Slide 106: We Engaged With Legion Regarding Board Refreshment in 2018 and 2019
105 We Engaged With Legion Regarding Board Refreshment in 2018 and 2019 November/December 2018 , Legion provided OneSpan with the names of three individuals to be considered for our Board January 2019 , OneSpan informed Legion that the Company’s executive search firm would be in contact with Legion’
Slide 107: We Continued Our Engagement With Legion Throughout 2020
106 We Continued Our Engagement With Legion Throughout 2020 January 2020 , OneSpan and Legion entered into a short - term non - disclosure agreement to discuss the Board’s composition and potential Board candidates under consideration; the Board interviewed one of Legion’s candidates in San Francisc
Slide 108: We Continued to Engage With Legion to Find a Resolution in 2021
107 We Continued to Engage With Legion to Find a Resolution in 2021 February 2021 , Legion nominated three candidates for election to the Board at the Company’s 2021 annual meeting March 2021 , the Board commenced a search for Ms. Hassan’s replacement after her March 1, 2021 resignation following th
Slide 109: Explanation of Transformation Peer Selection
108 Nutanix, Radware , Cisco and Palo Alto Networks are all publicly traded technology companies that have been transitioning their businesses awa y f rom hardware - focused products towards software and services. We believe that the transitions that this select group of companies ha ve undertaken a
Slide 110: Reconciliation of 2020 Adjusted EBITDA to 2020 GAAP Net Income (Loss)
109 Reconciliation of 2020 Adjusted EBITDA to 2020 GAAP Net Income (Loss) Non - GAAP Financial Measure Reconciliation We report financial results in accordance with GAAP. We also evaluate our performance using certain non - GAAP operating metrics, namely Adjusted EBITDA. Our management believes that
Slide 111: Many Companies Withdrew Guidance During the Pandemic
6 Many Companies Withdrew Guidance During the Pandemic Over half of S&P 500 has shelved or cut guidance since coronavirus – tracker More than half of the companies in the S&P 500 have withdrawn or lowered financial guidance over COVID - 19, after 19 more companies in the large - cap index cut or sus