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  "documentTitle": "Legion One Span Presentation May 2021",
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  "notes": "The slide uses a direct quote from a Board letter to frame the contradiction.",
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      "text": "Without understanding the long-term economics of a business, including gross, operating and free cash flow margins, utilizing an EV / Revenue or EV / ARR multiple approach may have its limitations",
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      "text": "In addition, only two sellside analysts (out of five total) utilize a sum-of-the-parts valuation approach, and this was only after Legion published letters including such an analysis",
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      "text": "We do not believe the Board understands the basics of valuation frameworks commonly used for modern public software companies – while many investors will utilize a valuation multiple based on revenue or ARR, these multiples are assigned based on long-term efficiency and profitability",
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      "text": "In addition, many software investors will conduct long-term discounted cash flow (DCF) analyses on a software company by forecasting many years until steady profitability is achieved – the implied forward EV / Revenue based on the DCF’s calculated net present value is typically compared to peers with similar operating profiles and assumptions",
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      "text": "For example, many software investors utilize the “Rule of 40” which combines revenue growth and profit margin together to measure the overall efficiency of a software business – the Rule of 40 metric tends to strongly correlate with a software company’s forward EV / Revenue valuation multiple",
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      "text": "Providing only segment revenue, but not segment profitability, may limit OneSpan’s ability to achieve a full valuation multiple in line with peers for its Software segment",
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      "text": "In the Board's 4/26/21 letter to stockholders, the Company claims that its “investors and sellside analysts can fairly value OneSpan using a sum-of-the-parts approach or other methodologies”",
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      "kind": "source-note",
      "text": "Source: SEC Filings, Legion Partners’ Estimates and meetings with OSPN Management; OSPN Letter to Stockholders (4/26/21); Colliers Research, BTIG Research, D.A. Davidson Research, Sidoti Research, Wedbush Research",
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