Executive Summary

Q3 2025 delivered resilient profitability amid mixed top-line: revenue grew 1% to $57.1M, gross margin held at 74%, adjusted EBITDA rose 3% to $17.5M (30.7% margin), and non-GAAP EPS was $0.33; GAAP EPS was $0.17 .
Versus Wall Street, OneSpan modestly missed consensus revenue ($57.1M actual vs $58.2M consensus*) but beat on non-GAAP EPS ($0.33 actual vs $0.29 consensus*), driven by cost discipline and segment-level profitability in Digital Agreements; estimates based on S&P Global data*.
FY 2025 guidance was lowered: revenue to $239–$241M (from $245–$251M) and ARR to $183–$187M (from $186–$192M), while adjusted EBITDA was maintained at $72–$76M; split now targets software & services $190–$192M and hardware $49–$50M .
Key catalysts: guidance reset (hardware secular decline and softer expansion activity in EMEA), continued dividend ($0.12), buybacks ($6.3M Q3), and product portfolio expansion (FIDO2 “S3” software via Nok Nok and ThreatFabric partnership) shaping the 2026 growth narrative .

What Went Well and What Went Wrong

What Went Well

Strong profitability and cash generation: adjusted EBITDA of $17.5M (31% margin) and Q3 operating cash flow of $11M; nine-month adjusted EBITDA hit a record $58M and cash from operations $47M .
Software momentum: subscription revenue grew 12% YoY to $37.8M; Security subscription +13% and Digital Agreements +11%; both segments profitable, with Digital Agreements achieving record segment operating income (25% margin) .
Strategic product expansion: acquisition of Nok Nok Labs (FIDO2 software “S3”) closed new logos within four months; ThreatFabric investment adds mobile threat intelligence and fraud risk insights to the stack, bolstering 2026 growth vectors .

What Went Wrong

Guidance cut: FY 2025 revenue lowered by ~$7–$10M and ARR reduced by ~~$3–$5M, primarily due to hardware headwinds (~~$2M impact) and lower-than-expected net expansions in EMEA/APAC security; adjusted EBITDA guidance held .
Hardware revenue decline persisted: Security hardware fell 20% YoY in Q3 as banks in EMEA/APAC continued shifting to mobile-first authentication, diluting total growth despite software strength .
GAAP operating income and EPS declined YoY: GAAP operating income fell to $8.2M (from $11.3M) and GAAP diluted EPS to $0.17 (from $0.21), reflecting higher OpEx (stock-based comp, Knock Nok integration) and non-recurring items .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$56.242	$59.843	$57.056
GAAP Diluted EPS ($)	$0.21	$0.21	$0.17
Non-GAAP EPS ($)	$0.33	$0.34	$0.33
Gross Margin %	74%	73%	74%
Adjusted EBITDA ($USD Millions)	$17.001	$17.638	$17.535

Segment breakdown:

Segment Metric	Q3 2024	Q2 2025	Q3 2025
Security Solutions Revenue ($M)	$40.837	$44.235	$40.322
- Subscription ($M)	$18.603	$20.602	$21.106
- Hardware ($M)	$12.097	$14.016	$9.730
Digital Agreements Revenue ($M)	$15.405	$15.608	$16.734
- Subscription ($M)	$15.045	$15.574	$16.674
- Maintenance ($M)	$0.327	$0.025	$0.026

KPIs:

KPI	Q3 2024	Q2 2025	Q3 2025
ARR ($USD Millions)	$164	$177.8	$180.2
NRR (%)	—	101%	103%
Cash & Equivalents ($USD Millions)	—	$92.9	$85.6
Cash from Operations ($USD Millions)	—	$6.2	$11.0

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	FY 2025	$245–$251	$239–$241	Lowered
Software & Services ($M)	FY 2025	—	$190–$192	Set (detail)
Hardware ($M)	FY 2025	—	$49–$50	Set (detail)
ARR ($M)	FY 2025	$186–$192	$183–$187	Lowered
Adjusted EBITDA ($M)	FY 2025	$72–$76	$72–$76	Maintained
Dividend	Q4 2025	—	$0.12 per share	Maintained

Earnings Call Themes & Trends

Topic	Q1 2025 (prior)	Q2 2025 (prior)	Q3 2025 (current)	Trend
AI/product roadmap	Focus on operational excellence; early commentary on security innovation	Acquired Nok Nok to broaden FIDO2 software; launched FIDO2 hardware keys	S3 (FIDO2) gaining traction; AI to be embedded in Digital Agreements over next 12 months	Building toward 2026 acceleration
Hardware secular decline	Noted shift to mobile-first impacting hardware revenue	Anticipated Q3 hardware headwinds, Q4 improvement; tariffs minimal impact	Q3 hardware -20% YoY; trend persists in EMEA/APAC	Ongoing headwind
Regional mix/macro	EMEA largest hardware market; FX noted	North America security ramping; Europe weaker; Latin America bookings strong	Mix 46% Americas, 38% EMEA, 17% APAC; continued EMEA/APAC hardware declines	Americas improving; EMEA/APAC mixed
Subscription/ARR momentum	ARR +9%; NRR 107%	ARR +8% (incl. $8.1M Nok Nok); NRR 101%	ARR +10% to $180M; NRR 103%	Gradual strengthening
R&D execution/leadership	New CTO hired; cost structure optimized	Portfolio expanded via Nok Nok; credit facility for targeted M&A	Continued R&D investment; ThreatFabric partnership; S3 pipeline building	Disciplined build-out

Management Commentary

“Our software business – now over 80% of the overall business – delivered double-digit subscription revenue growth and ARR growth, and is positioned for additional growth in 2026.” — CEO Victor Limongelli .
“We generated $11 million in operating cash flow during the quarter… and we have no long-term debt as of the end of Q3 2025.” — CFO Jorge Martell .
“We acquired Knock Knock Labs… and in the first four months since the acquisition, we've already closed two new logos for S3.” — CEO Victor Limongelli .
“We are updating our revenue guidance to $239–$241M… and ARR to $183–$187M… maintaining adjusted EBITDA $72–$76M.” — CFO Jorge Martell .

Q&A Highlights

Guidance reduction drivers: ~$2M incremental hardware headwinds and lower net expansion activity in security (primarily EMEA/APAC), with ARR reduction tied to expansions more than new logos .
Margins/OpEx outlook: Gross margin expected similar to last year’s Q4; Knock Nok adds ~$2M run-rate OpEx YoY; modest sequential OpEx increase .
2026 subscription growth: Management aims to accelerate subscription growth beyond 2025; software mix rising to ~82–83% in 2026 .
Competitive dynamics: No major change; competitive position improving with S3; channel partners aiding FIDO2 adoption; FIDO2 hardware keys expected to contribute meaningfully in 2026 .
ARR visibility: Bottoms-up modeling with weekly pipeline reviews; Q4 seasonality expected; optimistic tone but execution remains key .

Estimates Context

Consensus vs actual (S&P Global):

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue Consensus Mean ($USD)	$54.736M*	$59.046M*	$58.181M*
Revenue Actual ($USD)	$56.242M	$59.843M	$57.056M
Primary EPS Consensus Mean ($)	$0.19*	$0.293*	$0.288*
Primary EPS Actual ($)	$0.33	$0.34	$0.33

Values retrieved from S&P Global*.
Implications: modest revenue miss in Q3 (hardware decline, softer net expansions) and clear non-GAAP EPS beat (mix and cost control). FY 2025 consensus ($240.0M revenue*) aligns with updated revenue guidance midpoint ($240M), implying limited estimate resets on revenue but likely downward ARR revisions; EBITDA guidance unchanged suggests minimal EPS estimate impact* .

Key Takeaways for Investors

Profitability intact despite top-line noise: gross margin stable at 74% and adjusted EBITDA margin ~31% underpin cash generation and the dividend program .
Guidance reset de-risks the near term: lowered FY revenue/ARR reflects structural hardware decline and expansion softness; EBITDA held, preserving the earnings base .
Software-led mix shift continues: subscription growth (+12% YoY) and record Digital Agreements margins point to improving quality of revenue .
2026 is the growth inflection narrative: S3 (FIDO2) plus ThreatFabric expand addressable use cases; early logos and channel momentum support accelerating subscription growth next year .
Segment dynamics: Security remains a high-margin engine even with hardware decline; Digital Agreements shows scalable profitability with SaaS transition substantially complete .
Capital allocation discipline: continued $0.12 dividend and buybacks ($6.3M Q3) alongside targeted M&A provide balanced shareholder returns .
Watch EMEA/APAC expansion activity and hardware pacing: these will drive ARR trajectory into Q4 and set the early-2026 baseline .

Notes: All non-estimate figures are sourced from OneSpan’s Q3 2025 8-K/press release, earnings slides, and transcripts as cited. Estimates marked with an asterisk (*) are values retrieved from S&P Global.

OneSpan Inc. (OSPN)·Q3 2025 Earnings Summary