Key Summary: On August 14, 2023, Legion Partners Asset Management (8.7%) sent a letter to the Board criticizing the company's shift from growth to cash flow optimization and recommending targeting 30%+ Adjusted EBITDA Margins by 2024, increasing capital returns to $50+ million, and exploring a sale. They estimated OneSpan's potential 2024 valuation at $19-26 per share. On November 15, 2023, Legion Partners (7.7%) affirmed its commitment as long-term shareholders, believing significant value remains to be unlocked.Market Cap: $410 million | OneSpan Inc., together with its subsidiaries, designs, develops, and markets digital solutions for identity, security, and business productivity worldwide.
On August 14, 2023, Legion Partners Asset Management (8.7%) sent a letter to the Board expressing concerns about the company's shift from growth to cash flow optimization. The letter criticized this change for diverting attention from the company's strengths and lacking the necessary urgency for achieving fair market value or maximizing a near-term sale price. Legion Partners made three main recommendations: target 30%+ Adjusted EBITDA Margins by 2024, increase capital returns to $50+ million, and explore the possibility of selling the company.
Valuation insight
Legion Partners believes OneSpan has the potential to generate $70 to 80 million of 2024E Adjusted EBITDA (based on 30-34% margins) with high free cash flow conversion given minimal capital expenditures needed and no interest expense. Utilizing a range of 10-12x EV / EBITDA multiples applied to this profit range yields an implied valuation per share of roughly $19-26, representing ~80-140% upside from current levels.
On November 15, 2023, Legion Partners Asset Management (7.7%) stated that it intends to remain large, long-term stockholders of the company and continues to believe there is significant value to be unlocked at the company. Source
Past
In May 2021, the company announced that it has entered into an agreement with Legion Partners pursuant to which two of Legion’s independent director nominees, Sarika Garg and Michael McConnell, were appointed to the Board.
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