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OneSpan Inc. (NASDAQ:OSPN)
Q4 2019 Earnings Call
Mar 03, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the OneSpan fourth-quarter and fiscal-year 2019 earnings conference call. [Operator instructions] As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Joe Maxa, director of investor relations. Please go ahead, sir.

Joe Maxa -- Director of Investor Relations

Thank you, Jonathan. Hello, everyone, and thank you for joining the OneSpan fourth-quarter and full-year 2019 earnings conference call. My name is Joe Maxa, and I am the director 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.

With me on the call today is Scott Clements, OneSpan's chief executive officer; and Mark Hoyt, our chief financial officer. This afternoon, after market close, OneSpan issued a press release announcing results for our fourth-quarter and full-year 2019. To access a copy of the press release and other investor information, please visit our website. Following our prepared comments today, we will open the call for questions.

Please note that statements made during this conference call that relate to future plans, events or performance, including the guidance for full-year 2020, are forward-looking statements. We have tried to identify these statements by using words such as believes, anticipates, plans, expects, projects and other words, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. I direct your attention to today's press release and the company's filings with the U.S.

Securities and Exchange Commission for a discussion of such risks and uncertainties. Please note that certain financial measures that may be discussed on this call are expressed on a non-GAAP basis and have been adjusted from related GAAP financial measures. We have provided an explanation and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the earnings press release. In addition, please note that the date of this conference call is March 3, 2020.

Any forward-looking statements and related assumptions are made as of this date. Except as expressly required by the federal securities laws, we undertake no obligation to update these statements as a result of new information or future events or for any other reason. At this time, I will turn the call over to Scott.

Scott Clements -- Chief Executive Officer

Thanks very much, Joe, and good afternoon, everyone. We had a very good fourth quarter and an outstanding 2019. We achieved record revenue for the year, reflecting the growth investments we've made in our company over the last few years and a favorable market environment for our products and solutions. Our software license revenue reached record levels, powered by growth in Mobile Security.

And overall, our software offerings are generating significant market demand with strong bookings growth in 2019 and an expanded pipeline of Trusted Identity solution opportunities. Now, let me provide you a few fourth-quarter and full-year 2019 highlights. Revenue in the fourth quarter of 2019 increased 10% over a strong fourth quarter of 2018 to $71 million, driven by increased demand for Mobile Security and e-signature solutions, offset by the expected decline in hardware revenue. In the quarter, our key drivers of software revenue, Mobile Security and e-signature, each grew in excess of 50%.

Software and services orders overall grew by more than 50%. For the full year, we exceeded the high end of our previously increased revenue and adjusted EBITDA guidance. Revenue grew to 20% to a record $255 million. And of course, this translated into higher-than-forecasted profitability and cash flow.

I'd like to touch on two important developments in our product strategy. As projected, we completed during the fourth quarter the launch of important new features for OneSpan Sign. These include a new modern user experience that incorporates OneSpan's common UX design language, improved enterprise administration features and capabilities designed to address the needs of customers in Europe and Asia. These enhancements strengthen the competitive position and the growth outlook for OneSpan Sign in 2020 as we've communicated to you previously.

We also recently announced our OneSpan Cloud Authentication offering, which we refer to as a OCA. OCA, along with our Mobile Security, allows banks to operate a simple and effective large-scale cloud-based authentication system. OCA provides an entry point into our cloud offerings for new customers, who can then add other TID solutions as their needs expand. OCA is the final major piece of our overall Trusted Identity solution portfolio, and our product focus in 2020 is now to optimize and enhance the already launched TID portfolio solutions based on customer feedback and our vision for the future.

I'll now turn the call over to Mark to provide further financial information about the quarter and the full year, and then I'll come back for additional comments and 2020 guidance before opening the call to questions. Mark?

Mark Hoyt -- Chief Financial Officer

Thank you, Scott. Total revenue for the fourth quarter of 2019 grew 10% to $71 million. Product and license revenue grew 7% to $51 million, and services and other revenue grew 16% to $20 million. For the full year of 2019, as Scott mentioned, revenue increased 20% to $255 million and exceeded the high end of our $248 million to $250 million updated guidance range given in October.

We benefited from strong double-digit growth in software licenses, subscriptions, and as we previously shared, strong hardware revenue related to the September deadline for PSD2 compliance. In the fourth quarter, software license revenue grew 73% and to a record $19 million. For the year, software licenses grew 21% to a record $57 million. Subscription revenue grew 37% to $6 million in Q4.

And for the year, it grew 44% to $22 million. Total software revenue, including licenses and subscriptions, grew 63% to a record $25 million in the fourth quarter and grew 26% to another record $79 million for the year. Maintenance, support and other revenue increased 11%. And for the year, hardware revenue declined 13% to $32 million in the fourth quarter, in line with our expectations.

Hardware revenue increased 20% to $127 million for the full year. Gross margin for the fourth quarter of 2019 was 70%, compared to 67% in the prior quarter and 65% for the fourth quarter of 2018. The increase in gross margin was primarily attributed to product mix with software and service contributing 55% of revenue in Q4 of 2019 versus 47% in the prior quarter and 44% in the fourth quarter of 2018. Operating expenses for the fourth quarter of 2019 were $44 million, an increase of 15% from $38 million reported in Q4 of last year.

Operating expenses for the full year increased 7% to $157 million. Adjusted EBITDA, or adjusted earnings before interest, taxes, depreciation, amortization, long-term incentive compensation and nonrecurring items, was $13 million, $4 million higher than in the fourth quarter of 2018. Adjusted EBITDA margin was 19%, compared to 14% in the fourth quarter of last year. For the year, adjusted EBITDA totaled $33 million, exceeding our updated guidance range of $26 million to $28 million.

GAAP earnings per share was $0.13 in the fourth quarter of 2019, compared to $0.10 for the fourth quarter of 2018. Non-GAAP earnings per share, which excludes long-term incentive compensation, amortization, nonrecurring items and the impact of tax adjustments, was $0.24 in the fourth quarter of 2019, compared to $0.17 in the fourth quarter of last year. Moving over to the balance sheet, we ended the fourth quarter with $110 million in cash, cash equivalents and short-term investments, compared to $99 million at the end of last year. Cash generated from operations for the year totaled $18 million.

Geographically, our revenue mix for the fourth quarter included 55% from EMEA, 26% from the Americas and 19% from the Asia-Pac region. This compares to 59%, 23% and 18% in the same regions in Q4 2018, respectively. I'll turn the meeting back to you, Scott.

Scott Clements -- Chief Executive Officer

Thanks very much, Mark. It's a great time for OneSpan as we enter the next phase of our transformation in 2020 through 2022. With our expanded portfolio of Trusted Identity solutions and the strong growth momentum in our software and services offerings during the second half of 2019, his is the ideal time to accelerate our transition through recurring revenue business model. Our goal is for the majority of our revenue to be of a recurring nature by the end of 2022.

While some customers are not yet ready to move to cloud services in the banking sector for mission-critical and regulated use cases, virtually all are planning to make that shift over the next few years. Throughout 2019, we prepared for this transition with the development of new cloud-first TID solutions, the necessary implementation of modern financial systems capable of efficiently managing recurring revenue contracts and by designing a fundamental shift in our sales compensation model to encourage sales of term and subscription contracts. Now in 2020, we have realigned our sales structure and are significantly expanding our sales force with software-experienced people who will sell only software and services. This is expected to accelerate the company's software revenue growth, improve the predictability of revenues over time, increase profitability and elevate the value of our company.

Now, I'll discuss our outlook for 2020. As I'm sure you've seen with other companies that have moved to recurring revenue business models, the transition to recurring revenue at the expense of perpetual licenses will impact our full-year 2020 financial results. The increased focus on recurring revenue contracts will result in a revenue growth headwind of approximately 3 to 5 percentage points. In 2020, we expect the following to occur: number one, software and services revenue growth will more than offset the declines in hardware revenue.

Hardware revenue will likely approximate 2018 levels after the PSD2-driven demand in 2019. Software and services will contribute a majority of our total revenue, 55% to 60% in 2020, and we expect that trend to continue through 2022 and after. Recurring revenue composed of subscription, term license and software maintenance will grow in the strong double digits, approximately consistent with the long-term outlook that we gave in December of last year. Adjusted EBITDA will also be impacted by the transition to recurring revenue and increased investment in R&D and sales and marketing to capture global growth.

This will partially offset -- be partially offset by increasing gross margin as the business mix shifts to a higher proportion of revenue from software solutions and less from hardware products. Finally, number four, strong growth in recurring revenue bookings in 2020 are expected. We plan to provide relevant bookings growth visibility, beginning with our first-quarter earnings release. And as we noted at our investor day in December, we will provide additional detail for our software and services revenue streams as we report 2020 results.

For the full year, our financial guidance is revenue in the range of $255 million to $265 million and adjusted EBITDA in the range of $24 million to $28 million. For modeling purposes, we expect Q1 revenue as a percent of full-year 2020 revenue to be similar to last year's first-quarter revenue as a percent of full-year 2019 revenue. Now, let me comment on the coronavirus and its potential impact on our company. As most of you know, our hardware production is in China.

While there remains uncertainty about the global spread and impact of the virus, our contracted factories have largely returned to production after the extended Chinese New Year holidays. We currently expect a limited first-quarter impact to hardware revenues, and we'll continue to monitor the outlook for future quarters. We have not presently seen any effect on our software sales. We will continue to assess the potential for a broader impact of demand if it appears the coronavirus will cause a more substantial deterioration in the global economic outlook.

In the meantime, we're actively engaging with our global employees to ensure both their safety and to limit any possible disruption to the company's operations. Finally, I'd also like to refer you to the other press release of today concerning the expansion of our board of directors. Today, we announced the addition of two new directors, Ms. Naureen Hassan and Ms.

Marianne Johnson, who bring decades of banking, financial and cloud technology experience at leading companies. Naureen Hassan was the chief digital officer at Morgan Stanley wealth management with responsibility for Morgan Stanley wealth management's digital transformation strategy, focused on modernizing how the firm interacts with clients. In this role, she led product development teams in building digital marketing capabilities, consumer-facing technologies and artificial intelligence-enabled platforms. Ms.

Johnson is an executive vice president and chief product officer, driving innovation and technology advancements at privately held Cox Automotive, one of the largest automotive service companies in the world, providing cloud-based technology solutions for the automotive, wholesale and retail marketplace. She also has substantial background and experience in financial services and payments industries. These appointees bring depth in the design, development and delivery of secure digital services at scale. Over the past year, the OneSpan board has added four new directors with experience and skills that directly align with the needs of our evolving business.

So thank you for listening. And with that, Mark and I will be happy to take your questions.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from the line of Dan Ives with Wedbush Securities. Your question please.

Dan Ives -- Wedbush Securities -- Analyst

Thank you. To begin, great job. Just sort of walk through the transition and just maybe talk -- look, I mean, just talk about what you think is the biggest challenge as you get through this transition. Also, maybe just talk about some customers.

I mean, obviously, feedback seems pretty positive, maybe to what you're seeing also the ability to cross-sell to the broader platform. Thanks.

Scott Clements -- Chief Executive Officer

Yes. Dan, thanks for the question. If I think about the challenges that we have in 2020, I think there are a couple of things. I think the -- we are executing this transition to recurring revenue.

We're accelerating the transition recurring revenue that had already been happening. I think as you can see from our 2019 results that we shared with you today, that transition is already under way, and we expect that to continue in 2019 -- I think during 2020. I think the challenge is really in managing the customer relationship here. We are focused on shifting as much of our customer base to a recurring revenue model as we can.

Nevertheless, we know that this is not a simple matter for financial institutions, particularly large financial institutions. They have a range of regulatory, security policy issues that have to be addressed in order for them to make the shift from on-premise and perpetual license products and solutions to cloud-based recurring revenue offerings, and it's not like a corporate enterprise who can simply make that decision and go. Banks have a more sophisticated or complex, I should say, operating environment with our regulations on depth to deal with. Nevertheless, the outlook and the trend is very clear.

The economics are a powerful driver of this shift, both in terms of the fact in the sense that banks want to start consuming solutions as they use them and as they need them, just like almost every other sector of business in the economy. And they certainly are seeing cost pressure and also competitive pressure from digital-only banks that are becoming more and more prevalent, really, in every region of the world and have a fundamentally lower cost structure. So these are the things that I think are kind of the irresistible force over the next few years that is going to really drive banks to move toward recurring revenue models. That's why we recognized this two, three years ago when we really started down this path that it would -- there was going to be a convergence that was going to happen three years ago, and not a lot of banks are moving in this direction.

But now many, many are, and that includes in every region of the world in which we operate, which is pretty much all of them. They -- we are seeing this trend play out. So we have to find the right balance between encouraging that transition but also realizing that we aren't -- we don't want to leave our customers behind. And where if a customer really is just not ready, we will try to deliver an on-premise solution to their needs.

So I think just getting that, bringing on the new sales talent that we plan for in 2020, making them productive, getting them productive, helping them to contribute to the growth in 2020 and forward, these are the things that I think are going to require the right level of effort. And -- but I kind of touched on this in the script, and I want to reemphasize that we have prepared for this. We have been preparing for this for really the last two years in terms of not only our products but also our operating infrastructure, IT systems, our business model, our sales compensation. All of these things, we have been aligning and preparing for this.

So I'm confident that we are going to make good progress and be successful at this. We understand the impact that this will have, we believe, and we hope will have to the value of our company, and we are very focused on taking the steps to ensure that this company is recognized for the value that it's delivering to customers and the value that it's delivering to investors.

Dan Ives -- Wedbush Securities -- Analyst

Yes. Really insightful answer.

Operator

Thank you. Our next question comes from the line of Catharine Trebnick from Dougherty. Your question please.

Catharine Trebnick -- Dougherty and Company -- Analyst

Thanks for taking my question. So can you split out a couple of things for me, so I can better understand the dynamics. The hardware versus software expectations for 2020, just on a 55%, 60%, can you restate that?

Scott Clements -- Chief Executive Officer

Yes. So I'll correct it. Mark, you certainly bolster, whatever. We -- the transition or the shift of the company's revenue away from hardware and toward software and services is going to accelerate in 2020, and that's for really two reasons.

Of course, one is that we believe hardware revenues are -- will decline in 2020. And on the other hand, we will see very strong growth in software and services during that time period, particularly in the recurring revenue category, software category. So that's what drives to a ratio of 55% to 60% of the company's revenue would be -- we expect in software and services in 2020. We also noted in the description earlier that we expect hardware to decline to something in the neighborhood of what revenues were in 2018 after we got the burst in demand from PSD2 in 2019, and our goal and our plan is to more than offset that with growth in software and services, although I want to just also note including a headwind that we will have related to the transition toward more recurring revenue and away from perpetual license revenue.

We think that's about a 3% to 5% headwind on the top line in 2020. And that variation around that really ties back to what I said in answer to Dan's question, which is not every customer is ready to make that move toward cloud and recurring. So there's going to be -- there's a little uncertainty about which customers and how many will move how fast and all of that. So we think that's a reasonable range of what's going to happen and that the financials that we have guided to are a reasonable set of financials that understand the -- what will happen with hardware.

The headwind we have on transitioning to more recurring revenue and then the really strong growth and the solid growth that we will see in our software offerings, particularly in light -- in term license and subscription. Yes.

Catharine Trebnick -- Dougherty and Company -- Analyst

Yes. So just in general, if I look back at your analyst day and the numbers I did on my base case, so what you're really saying is the hardware is probably going to fall a little bit harder than you expected in 2020. So when we modeled, maybe -- so I like can do the details off-line, I just want to make sure I understand that. And then -- and your recurring, you expect that to pick up a little bit faster.

You had said at the analyst day, think about 25% to 30% CAGR from '19 through '22. Is that safe to say that that recurring revenue is still going to have that good clip even with the headwind or not?

Scott Clements -- Chief Executive Officer

Yes. The -- actually, the headwind on the total software really relates to less perpetual --

Catharine Trebnick -- Dougherty and Company -- Analyst

And the Mobile Security, the software licensing piece of it.

Mark Hoyt -- Chief Financial Officer

Well, let me just jump in. So when we talk about headwinds, it's really on the total software revenue. When we make that shift from perpetual to term, you have some short-term pain for long-term gain, and you have less short-term revenue from perpetual than you would that we would under term. So that's what we mean by headwind, Catharine.

Catharine Trebnick -- Dougherty and Company -- Analyst

OK. No, that helps. And then just any insight into the new solutions and how much you expect them to contribute this year? And which ones do you feel are most -- are going to do the best for you this year? And then I promise I won't ask any more questions.

Scott Clements -- Chief Executive Officer

No. That's quite all right. I just wanted to touch on a couple of the other things you mentioned. We do, I think, in terms of the compound average guidance we gave in New York for 2020 through 2022, that is still our outlook for the business.

And I think, hopefully, you will see that and certainly in the recurring revenue category this year. We do expect that to be at or near the range which we communicated in New York. And I think as far as hardware is concerned, I think to the degree that it maybe is coming down a little bit more than, I don't know that it's more than our expectations. But maybe more than the expectations to some really relates to the fact that it did so much better in 2019 than we originally expected, for sure, and that strength continued through most of the year.

So I think I just wanted to sort of note those two items. And what was your final question?

Mark Hoyt -- Chief Financial Officer

It was products?

Catharine Trebnick -- Dougherty and Company -- Analyst

Yes. Which products do you think are the new ones that I think are going to be your -- really the ones that you think will do the best for you this year?

Scott Clements -- Chief Executive Officer

I would touch on probably three areas that I think are going to be strong based on the work that we've done in 2019. I do think that OneSpan Sign is going to have a very good 2020. We already saw that start to happen in the fourth quarter of 2019 and had a very good fourth quarter. We have, as I noted and I've mentioned before, we made significant investments in that product line at the organization that supports that product line, so I think we feel very good about that.

Mobile Security will continue to be, I think, a very successful and strong product for us. And then I think when we turn to sort of the Trusted Identity solutions, there are probably a couple that are most -- maybe will have the biggest impact, I think one of those is intelligent and adaptive authentication. That represents the largest portion of the opportunity pipeline for the TID solutions. The other one that I think is going to be really interesting is the Secure Agreement Automation offering.

We just released the new modernized version of that in the latter part of 2019. We've already rolled that new version out with a major customer in Europe, and I think that's going to be one that we're going to continue to -- all of these, really, we're going to continue to build, develop them in 2020. But those are the ones that I'm probably the most excited about.

Catharine Trebnick -- Dougherty and Company -- Analyst

All right. Thank you very much, Scott.

Operator

Thank you. Our next question comes from the line of Matthew Galinko with National Securities. Your question please.

Matthew Galinko -- National Securities -- Analyst

Hey, good afternoon, guys. Thanks for taking my questions. You mentioned adding some sales reps. I'm curious with, I guess, with regards to the dedicated software folks that you're looking to hire, do you have many on board today? Or is that sort of aspirational over the course of 2020? And can you kind of just give a little bit more color on the linearity of those ads? What kind of competition do you see for adding those sorts of salespeople and maybe just adding a little bit in terms of when you see the R&D spend increasing throughout the year?

Scott Clements -- Chief Executive Officer

Sure. So first of all, I think in terms of adding the new salespeople, we have been working at since the fourth quarter, really. Our goal is to get as many of those qualified people onboard as quickly as we can. To the point that you made, Matt, that's not always easy.

It is a full-employment economy, and we do have the need for people who have a very good set of qualifications and the right attitude and the right mindset for succeeding in our business that we think we have an attractive value proposition to those sellers. In fact, we've had just in the last couple of months, we've had at least a couple of salespeople who left us a year or so ago come back as they've seen the story develop and the solution portfolio build. They've come back. We just came off our global sales meeting, annual global sales meeting in Lisbon last week.

We had 200 of our people there in Lisbon for looking at all of the things related to our business in 2020, and I have to say that the level of engagement and excitement was really outstanding. So that confirms for me that the story and the message that we have as a value proposition to attracting talent salespeople is pretty good. And we now have a track record, I would say, over the last two, three years of achieving our objectives from a sales and a growth point of view. So I think there's increasing evidence for our internal salespeople and those that we want to join the company that they can be successful and they can make money being part of OneSpan.

So I think that's the way that I would respond to what you said. Let me add also that we have made already over the last few years significant changes and upgrades to the sales organization. We've turned over something in the neighborhood of 40% to 50% of the sales organization in 2018 and 2019 and are bringing in people who have enterprise software experience and security experience in many cases. So this is a continuation of a process that has been under way a majority -- a number -- a significant number in the already existing salespeople are becoming software-only sales people.

And then the rest, for the most part, are what we would call a hybrid salesperson who has -- maybe they have accounts where there is a substantial amount of hardware authenticator business, but they also have a set of goals and objectives in their quota that are specifically related to our software and services offering. So nobody on the sales team gets a pass on selling software. But we are, over time, shifting the character and the capabilities of the sales force to really be very directly focused on driving these solutions, which are really the future of the company. All the things you asked about, but if I didn't, please repeat.

Matthew Galinko -- National Securities -- Analyst

Yes. No, sorry. It was a pretty full question, and I appreciate the color. I guess, the follow-up to that would just be you also mentioned investment in the R&D line so just curious when we should expect that to hit over the course of the year.

Scott Clements -- Chief Executive Officer

Do you want to take that, Mark? I think it's pretty even actually, but...

Mark Hoyt -- Chief Financial Officer

It is pretty even. We saw a lot of growth in the R&D line in 2019 that will be tempered back in 2020 but still will be growing as we continue to invest in R&D, but it's not at the same rate as 2019.

Scott Clements -- Chief Executive Officer

Yes. We've got an overall sort of opex growth around 10% in year over year. If we sort of break that down, that's, again, with G&A being -- this is not a precise answer, but mostly flat, with R&D up in kind of high single, low double digits, I believe. And then -- and sales and marketing will grow actually the fastest.

So if you went back and looked at 2019, we saw R&D growing faster than sales and marketing. In fact, sales and marketing overall was only up a little bit in 2019. But as we have now made the investment to bring these new solutions into the marketplace and we're beginning to execute this transition to more recurring revenue, the time was right now for us to step back on the pedal with respect to both our sales capacity and also our marketing effort in terms of lead generation, sales enablement of brand development around the OneSpan brand. So we do think very clearly about the right timing for these investments.

We don't want to invest in the wrong time -- at the wrong time and one area or another that ends up and kind of pushing on a rope. So I think we've tried to be very thoughtful in constraining sales and marketing last year while we built the portfolio. And now that we are further along in that, really making some incremental investment in sales and marketing, but we continue to improve the product. We're not that the software business.

That part never ends. So that's the idea.

Matthew Galinko -- National Securities -- Analyst

Thanks, appreciate it.

Scott Clements -- Chief Executive Officer

Thanks.

Operator

Thank you. Our next question comes from the line of Anja Soderstrom with Sidoti & Company. Your question please.

Anja Soderstrom -- Sidoti and Company -- Analyst

Hi, guys. Thank you for taking my question. Congratulations on a great quarter and to the great year. Can you hear me?

Scott Clements -- Chief Executive Officer

Yes, yes. Sure.

Anja Soderstrom -- Sidoti and Company -- Analyst

OK, great. I just wanted to follow up on this transition, transition this year to the software and SaaS service from -- you talked about the financial institution warming up to maybe going away from on-prem. Sort of where are you in that discussion? Is it a matter of them wanting to go onboard with it? It's hard for them because of the regulatory and the policies. Or are they still warming up to the idea? Or sort of where are you in those discussions?

Scott Clements -- Chief Executive Officer

Yes, I think it's all over the map, really. When we look at -- and it's not exactly like you might think it would look like, and I'll explain that in a moment. But we have some -- particularly some of the digital banks and some of the banks in North America who are really moving full speed ahead in that direction in a number of cases. And often, a lot of times, that's because I think the institutions in North America have already had a little bit more experience with operating critical services and infrastructure in the cloud than maybe they've had in some of the other parts of the world.

And e-signature, for example, it's been pretty common for that to be a cloud offering, or cloud service that banks consume in North America for quite some time. It's much less common when we go to some of the other parts of the world, so it's very institution specific. When I got asked this question maybe 1.5 years ago, I would have said it's going to be North America first, then it will be Europe. And then somewhere down the road, it will be Asia.

What, in fact, is happening is that I think Asia and Europe are more moving together. And in some cases, there are Japanese institutions and in other parts of Asia who are now moving -- really moving forward quite briskly toward using cloud-based services for security and authentication and some of the things that we are offering. So I think in Europe, the regulatory environment is more significant, I would say. And there are -- the European banking authority has published certain guidelines around banks that want to move their infrastructure to the cloud.

And so I think particularly the large banks in Europe are probably the most cautious in this regard, and probably after them comes the Asian institutions and then made the U.S. or North American institutions are pretty good. Latin America is actually were pretty fast, too. We are seeing a lot of opportunities in Latin America, so it wasn't super numerical or anything, but it's -- that's why we're kind of giving a range on the headwind for this year because it is a little uncertain in which customers will move and how fast and all that.

But as I mentioned earlier, the fundamental economics and the requirements around cost, agility and competitiveness, really made it inevitable that this is going to happen.

Anja Soderstrom -- Sidoti and Company -- Analyst

OK. Thank you for that additional color. And so it's a matter of you having existing customers transitioning. That's where most of the focus are, rather than adding new customers? Is that --

Scott Clements -- Chief Executive Officer

I would say -- I would say it a little differently. The -- and I did mention this, I think, in New York at the investor day that I do think that our existing customer will be the largest set of customers for us on the new solutions. We're very global. We have penetration across lots and lots, 2,000 institutions around the world actually.

So there's no doubt that that existing customer set will be a rich source opportunity for us. But we've also said that, ultimately, we cannot be successful if we aren't driving growth in new logos and new customers, including the new digital banks -- digital-only banks and so on. We have won a number of those in 2019, and we also are working closely with more than one. Several of the digital banking platform companies to take our services through their platforms into our customer base.

So when we look at new logos, I think I probably have checked this number, but I believe the correct statistic is that the number of new logo customers we had in 2019 was 50% more than we had in 2018. And so it's not as large a proportion of our revenue yet as I think it can be, and I'd like it to be. But we are very clearly seeing a trend as we brought new portfolio of offerings of getting more new logos, more new customers across a more diverse set of banks than we have historically.

Operator

[Operator instructions] And this does conclude the question and answer session of today's program. I'd like to hand the program back to Scott Clements, CEO, for any further remarks.

Scott Clements -- Chief Executive Officer

I don't think I have any further remarks, other than maybe I'd just reiterate we -- I think we're at a very, very interesting time for this company, and I'm really looking forward to how we proceed in 2020. We have laid the foundations, I think, for substantial growth and substantial growth in recurring in 2020 and forward. And it wasn't by accident that we got here. It's been a broad effort by the leadership team, the executive team here and our employees, and we're really excited about now seeing the fruits of that in 2020 and forward.

So thanks very much for joining us today, and we look forward to talking to many of you over the next few days.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Joe Maxa -- Director of Investor Relations

Scott Clements -- Chief Executive Officer

Mark Hoyt -- Chief Financial Officer

Dan Ives -- Wedbush Securities -- Analyst

Catharine Trebnick -- Dougherty and Company -- Analyst

Matthew Galinko -- National Securities -- Analyst

Anja Soderstrom -- Sidoti and Company -- Analyst

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