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OI

OneSpan Inc. (OSPN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered strong profitability with non-GAAP EPS of $0.34 and Adjusted EBITDA of $17.6M, while total revenue declined 2% year over year to $59.8M amid ongoing hardware headwinds .
  • Revenue and non-GAAP EPS modestly beat consensus: revenue $59.84M vs $59.05M* and non-GAAP EPS $0.34 vs $0.293*; GAAP EBITDA missed ($13.0M* vs $15.27M*) given definitional differences versus Adjusted EBITDA . Values retrieved from S&P Global.
  • ARR was $177.8M (+8% y/y), NRR 101%, and the company raised full-year ARR guidance to $186–$192M (from $180–$186M), while maintaining revenue ($245–$251M) and Adjusted EBITDA ($72–$76M) guidance .
  • Strategic catalyst: acquisition of Nok Nok Labs to add FIDO2 passwordless software, enhancing OneSpan’s comprehensive authentication portfolio and cross-sell potential to its large banking base .

What Went Well and What Went Wrong

What Went Well

  • Subscription revenue grew 22% y/y to $36.2M, with Security Solutions subscription +39% y/y and Digital Agreements +5% y/y, supporting 73% gross margin (up 700 bps y/y) .
  • Management raised FY25 ARR guidance to $186–$192M and highlighted strong bookings and cash generation, ending Q2 with $92.9M cash and $6.2M operating cash flow in the quarter .
  • Strategic expansion: “We’re evolving our entire authentication platform to include FIDO standards because we believe passwordless is an important part of the future” (CEO on Nok Nok acquisition), bolstering hardware+software FIDO offerings .

What Went Wrong

  • Total revenue declined 2% y/y to $59.8M, as ongoing shifts to mobile-first authentication reduced hardware sales and maintenance revenue fell due to legacy contract transitions and product sunsetting .
  • GAAP EBITDA lagged consensus ($13.0M* actual vs $15.3M* estimate) even as Adjusted EBITDA improved y/y to $17.6M, reflecting higher stock-based comp and acquisition-related costs; definitional differences complicate comparisons . Values retrieved from S&P Global.
  • ARR contraction at a few customers (≈$3M impact across two accounts) and softer EMEA performance pressured net new ARR momentum in the half; NRR dipped to 101% vs 107% in Q1 .

Financial Results

Summary Metrics vs Prior Year and Prior Quarter

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$60.9 $63.4 $59.8
Gross Margin (%)66% 74% 73%
Operating Income ($USD Millions)$7.6 $17.2 $10.5
Net Income ($USD Millions)$6.6 $14.5 $8.3
Diluted EPS (GAAP)$0.17 $0.37 $0.21
Non-GAAP Diluted EPS$0.31 $0.45 $0.34
Adjusted EBITDA ($USD Millions)$16.2 $23.0 $17.6
Cash & Cash Equivalents ($USD Millions)$83.2 (Dec 31, 2024) $105.2 (Mar 31, 2025) $92.9 (Jun 30, 2025)
Operating Cash Flow ($USD Millions)$2.3 (Q2 2024) $29.4 (Q1 2025) $6.2 (Q2 2025)

Consensus vs Actual (Q2 2025)

MetricConsensusActual
Revenue ($USD Millions)$59.05*$59.84
Non-GAAP EPS ($USD)$0.293*$0.34
EBITDA ($USD Millions, GAAP)$15.27*$13.01*

Values retrieved from S&P Global.

Segment Breakdown

MetricQ2 2024Q2 2025
Security Solutions Revenue ($USD Millions)$45.46 $44.24
Security Solutions Gross Margin (%)67% 74%
Security Solutions Operating Income ($USD Millions)$20.69 $19.80
Digital Agreements Revenue ($USD Millions)$15.46 $15.61
Digital Agreements Gross Margin (%)63% 71%
Digital Agreements Operating Income ($USD Millions)-$0.16 $2.88

Revenue Composition (by Major Products)

CategoryQ2 2024 SecurityQ2 2025 SecurityQ2 2024 Digital AgreementsQ2 2025 Digital Agreements
Subscription ($USD Millions)$14.86 $20.60 $14.79 $15.57
Maintenance & Support ($USD Millions)$9.74 $8.67 $0.49 $0.03
Professional Services & Other ($USD Millions)$1.12 $0.95 $0.19 $0.01
Hardware ($USD Millions)$19.74 $14.02 ——

KPIs

KPIQ2 2024Q2 2025
ARR ($USD Millions)$—$177.8
NRR (%)107% (Q1 2025 reference) 101%
Geography Mix (%)EMEA 41 / Americas 35 / APAC 24 EMEA 39 / Americas 40 / APAC 21
Dividend per Share ($)$—$0.12 declared, payable Sep 5, 2025

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$245–$251 $245–$251 Maintained
ARR ($USD Millions)FY 2025$180–$186 $186–$192 Raised
Adjusted EBITDA ($USD Millions)FY 2025$72–$76 $72–$76 Maintained
Hardware Revenue Timing2H 2025Earlier visibility assumptions2H hardware similar to 1H; majority in Q4; some shipments delayed to 2026 Updated timing
DividendQ3 2025Recurring program$0.12/share payable Sep 5, 2025 Declared

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/Technology initiativesFocus on subscription growth and profitability; platform execution Operational excellence, record operating income; building for the future CTO-led product evolution; Nok Nok acquisition to expand FIDO/passwordless capabilities Strengthening tech portfolio
Supply chain/tariffs/macroNot highlighted in PRNot highlighted in PRTariff impact minimal (few hundred thousand dollars); limited U.S. federal exposure (~2%) Neutral/slight headwind
Product performanceSubscription +32% y/y in Q4; hardware down Subscription +9% y/y; hardware down Subscription +22% y/y; hardware decline continues; mix drives GM expansion Mix shift to software
Regional trendsEMEA traditionally strong Not specifiedEMEA softer; Americas stronger; LATAM bookings strong Americas improving
Regulatory/legalNot discussedNot discussedFIDO Alliance presence via Nok Nok; standards-based authentication Standards positioning
R&D executionRebuilt operating profile Continued cost optimization CTO leadership; increased internal development and targeted M&A Accelerating roadmap

Management Commentary

  • “We reported a strong quarter of profitability and strengthened our product portfolio by acquiring Nok Nok Labs, which broadens our authentication reach by adding FIDO2 passwordless authentication software.” (CEO) .
  • “ARR increased 8% to $177.8 million, including $8.1 million attributed to the acquisition of Nok Nok Labs Inc.” (Press Release) .
  • “Second quarter gross margin was 73%, up from 66% in Q2 of last year… driven by increased software and reduced hardware revenues.” (CFO) .
  • “We now expect total second half 2025 hardware revenue to be similar to the first half with the majority of the second half revenue recognized in the fourth quarter.” (CFO) .
  • “We are well positioned to accelerate top-line growth in 2026 as we continue to drive to a Rule of 40 performance.” (CEO) .

Q&A Highlights

  • Acquisition strategy and cross-sell: Management emphasized Nok Nok as a “tuck-in” technology acquisition aimed at cross-selling FIDO capabilities into OneSpan’s >1,000-bank customer base, with impact more in 2026 as teams align and products integrate .
  • ARR guidance mechanics: ARR raised by $6M despite $8M Nok Nok addition due to contractions (Middle East asset sale) and slower-than-anticipated implementation at a 7-figure ARR customer .
  • Macro/tariffs: Tariff impact minimal (few hundred thousand dollars); limited exposure to U.S. federal (~2% of revenue) .
  • Regional performance: EMEA softer; Americas improved; hardware tougher in back half but bookings pipeline solid; expanded North America security sales coverage .
  • Customer contraction magnitude: ~$3M year-over-year ARR contraction across two customers, pressuring net new ARR in H1 .

Estimates Context

  • Q2 2025 results vs consensus: revenue $59.84M vs $59.05M*; non-GAAP EPS $0.34 vs $0.293*; GAAP EBITDA $13.01M* vs $15.27M* (miss), while Adjusted EBITDA was $17.6M . Values retrieved from S&P Global.
  • Forward context: Q3 2025 consensus revenue $58.18M*, EPS $0.288*, EBITDA $14.92M*; with raised ARR guidance and hardware revenue timing updates, estimates may shift toward higher ARR assumptions and back-half revenue concentration in Q4*. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mix shift to software continued, expanding gross margin to 73% and supporting strong non-GAAP EPS and Adjusted EBITDA despite top-line pressure from hardware declines .
  • Raised FY25 ARR guidance (+$6M) signals durable recurring growth and early benefits from Nok Nok; watch for cross-sell traction across the banking installed base into 2026 .
  • Back-half revenue cadence: hardware now expected to mirror 1H with majority recognized in Q4; near-term trading may hinge on Q3 bookings visibility and Q4 execution .
  • Regionally, Americas strength offsets softer EMEA; focused North America security sales investments should aid momentum .
  • Balance sheet optionality intact: $92.9M cash and new $100M revolver underpin disciplined capital allocation (dividends, targeted M&A) .
  • Consensus modestly underappreciated non-GAAP EPS performance; expect estimate revisions around ARR and subscription trajectory, with definitional clarity needed on EBITDA vs Adjusted EBITDA*. Values retrieved from S&P Global.
  • Strategic narrative: comprehensive FIDO hardware+software stack positions OneSpan as a flexible, standards-based authentication leader amid rising account takeover risk—an underpinning to medium-term growth .