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OI

OneSpan Inc. (OSPN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record adjusted EBITDA and margin with subscription strength; revenue modestly declined year-over-year as hardware and maintenance continued to reset with mix shift to SaaS . Non-GAAP EPS of $0.45 and revenue of $63.4M both exceeded consensus; GAAP diluted EPS was $0.37 . EPS and revenue beat Street expectations (EPS $0.325*, revenue $62.6M*) .*
  • Full-year 2025 guidance affirmed: revenue $245–$251M, ARR $180–$186M, and adjusted EBITDA $72–$76M; board declared a $0.12 quarterly dividend payable June 6, 2025 .
  • Security Solutions declined (hardware down; legacy product sunsets) while Digital Agreements grew 9% YoY and turned segmentally profitable; ARR rose 9% YoY to $168.4M and NRR was 107% .
  • Management cited strong bookings to start 2025 and robust cash generation ($29.4M operating cash flow); monitoring FX and up to ~$1M tariff-related cost risk for FY25 while keeping guidance intact .
  • Near-term catalysts: sustained subscription momentum, dividend continuation, and disciplined capital allocation (including potential buybacks/M&A); watch tariff/FX dynamics and hardware demand cadence .

What Went Well and What Went Wrong

What Went Well

  • Record adjusted EBITDA of $23.0M and adjusted EBITDA margin of 36.4%; “We achieved record high adjusted EBITDA of $23 million … adjusted EBITDA reached a record high 36% of revenue.” — CEO Victor Limongelli .
  • Subscription revenue up 9% YoY to $43.6M; ARR up 9% YoY to $168.4M; NRR of 107% signaling healthy expansion within the base .
  • Digital Agreements segment revenue +9% YoY to $15.7M and turned to $3.4M operating income (22% margin) from a loss, reflecting SaaS mix and lower OpEx .
  • Strong cash generation: $29.4M operating cash flow; cash and equivalents up to $105.2M; quarterly cash dividend declared ($0.12/share) . “We generated $29 million in cash from operations and ended the quarter with $105 million in cash on hand.” — CEO .

What Went Wrong

  • Total revenue declined 2% YoY to $63.4M; Security Solutions revenue -5% YoY to $47.7M on hardware and maintenance resets and sunsetted products .
  • Headwinds from sunsetted products were $1.4M in the quarter; similar in Q2, ~$1M total in H2’25 then minimal in 2026, pressuring near-term growth .
  • On-time renewal rate slipped due to two seven-figure deals slipping from Q1 into Q2 (one expanded to a 3-year term); timing pushed ARR impact into Q2+ .
  • FX was a modest headwind in Q1; management remains cautious on FX and macro/tariffs (up to ~$1M incremental costs in FY25) .

Financial Results

Consolidated Performance (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$56.242 $61.171 $63.366
GAAP Diluted EPS ($USD)$0.21 $0.72 $0.37
Non-GAAP Diluted EPS ($USD)$0.33 $0.24 $0.45
Gross Margin (%)74% 74% 74%
Operating Income ($USD Millions)$11.252 $11.806 $17.182
Net Income ($USD Millions)$8.273 $28.788 $14.505
Adjusted EBITDA ($USD Millions)$16.725 $19.838 $23.035

Segment Breakdown (In thousands)

Metric ($USD Thousands)Q1 2024Q1 2025
Security Solutions Revenue50,429 47,713
Security Solutions Gross Margin (%)74% 76%
Security Solutions Operating Income25,878 24,160
Digital Agreements Revenue14,414 15,653
Digital Agreements Gross Margin (%)69% 70%
Digital Agreements Operating Income (Loss)(265) 3,367

Revenue by Major Products and Services — Security Solutions (In thousands)

ComponentQ1 2024Q1 2025
Subscription26,182 28,072
Maintenance & Support10,066 7,984
Professional Services & Other1,605 594
Hardware Products12,576 11,063
Total50,429 47,713

Revenue by Major Products and Services — Digital Agreements (In thousands)

ComponentQ1 2024Q1 2025
Subscription13,812 15,545
Maintenance & Support505 24
Professional Services & Other97 84
Hardware Products— —
Total14,414 15,653

KPIs and Balance Sheet

KPIQ4 2024Q1 2025
ARR ($USD Millions)$167.7 $168.4
NRR (%)106% 107%
Subscription Revenue ($USD Millions)$36.1 $43.6
Cash & Cash Equivalents ($USD Millions)$83.2 $105.2
Cash from Operations ($USD Millions)—$29.4
Dividend per Share ($USD)$0.12 (paid Feb 14, 2025) $0.12 (payable Jun 6, 2025)

Guidance Changes

MetricPeriodPrevious Guidance (Feb 27, 2025)Current Guidance (May 1, 2025)Change
Revenue ($USD Millions)FY 2025$245–$251 $245–$251 Maintained
ARR ($USD Millions)FY 2025$180–$186 $180–$186 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$72–$76 $72–$76 Maintained
DividendQuarterly$0.12 declared program (initiated Dec 2024) $0.12 declared; payable Jun 6, 2025 Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
Subscription Momentum+29% YoY; adjusted EBITDA ramp; narrowing FY24 guidance +32% YoY; profitability surge; dividend initiation +9% YoY; both segments profitable; ARR +9% Sustained growth; moderating YoY comps
Hardware ResetSecurity revenue -11% YoY; hardware softness Hardware -36% YoY in Q4; continued mix shift Ongoing decline tied to mobile-first authentication trends Continuing headwind
Tariffs/MacroNo explicit tariff commentaryGuidance established amid macro; capital discipline Monitoring tariffs (up to ~$1M FY25), FX caution; guidance affirmed Emerging risk; managed
Regional Mix——EMEA 49%, Americas 33%, APAC 18% (unchanged YoY) Stable mix
Security SolutionsStrong margins; segment profit Segment profit; margin improvement Subscription +7%; 51% operating margin; renewal timing issues Profitable; growth depends on expansion
Digital Agreements+18% YoY revenue; margin improvement +8% YoY; profitable in Q4 +9% YoY; operating margin 22%; SaaS mix Improving profitability
Capital Allocation—Dividend initiated Balanced approach; consider buybacks/Dutch auction; targeted M&A (security) Shareholder returns + tuck-in M&A

Management Commentary

  • “We achieved record high adjusted EBITDA of $23 million … adjusted EBITDA reached a record high 36% of revenue.” — Victor Limongelli, CEO .
  • “We generated more than $29 million in cash from operations and adjusted EBITDA was $23 million. ARR grew 9% to $168.4 million, and our net retention rate or NRR was 107%.” — Jorge Martell, CFO .
  • “A single-digit percentage of our hardware revenue has potential tariff exposure … we estimate that we could see up to $1 million of incremental tariff-related costs for the full-year 2025 … we are affirming our previously issued guidance.” — Jorge Martell, CFO .
  • “We will continue to focus on driving towards achieving a Rule of 40 performance level.” — Victor Limongelli, CEO .

Q&A Highlights

  • Tariff exposure modest; EMEA is largest hardware market; some EU production; up to ~$1M cost impact in FY25 based on current announcements .
  • Two seven-figure Security renewals slipped from Q1 to Q2; one expanded to 3-year term; limited ARR impact in Q1 due to April 1 start dates .
  • Bookings solid in Q1 and Q2-to-date; management remains confident while acknowledging late-year visibility is fuzzier .
  • EBITDA margin seasonality: Q1 strongest due to software mix; margins likely dip in Q2 then improve in 2H .
  • Capital allocation: dividend program continues; potential buybacks/Dutch tender; targeted M&A in Security to expand capabilities with large bank base .

Estimates Context

MetricConsensus (Q1 2025)Actual (Q1 2025)Surprise
Revenue ($USD)$62.5768M*$63.3660M +$0.7892M (~+1.3%)*
Primary EPS ($USD)$0.325*$0.45 +$0.125 (~+38.5%)*
# of Estimates (Revenue / EPS)4 / 4*——

Bold beats: revenue and EPS both beat S&P Global consensus. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Subscription-led model delivering durable profitability; watch for sustained NRR >100% and ARR trajectory consistent with guidance midpoint .
  • Security Solutions growth depends on expansion and reduced sunset headwinds; Digital Agreements profitability inflecting provides margin ballast .
  • Near-term risks: hardware demand timing, FX volatility, and incremental tariffs (~$1M FY25); guidance held despite these .
  • Robust cash generation and net-cash position underpin ongoing dividends and optionality for buybacks and targeted M&A (security-focused) .
  • Earnings cadence likely exhibits seasonal margin patterns (Q1 strongest); monitor Q2 hardware levels “similar to prior three quarters” and 2H software growth .
  • Trading setup: positive estimate revisions likely for EPS given beat; narrative anchored on subscription growth, margin discipline, and capital returns; watch macro/tariff headlines as stock-moving variables .
  • Strategic optionality reinforced by recent FIDO initiatives and platform breadth (post-quarter acquisition context) to deepen bank security stack, though integration impacts are beyond Q1 scope .

Additional Press Releases Relevant to Q1 2025

  • Earnings date announcement (Apr 10, 2025) .
  • Investor conference participation (May 6, 2025) .