Executive Summary

Q4 delivered solid profitability and cash generation despite a 3% revenue decline: revenue $61.2M (-3% YoY), gross margin 74% (+500 bps YoY), operating income $11.8M, adjusted EBITDA $19.8M; non‑GAAP EPS $0.24 vs GAAP $0.72 (benefit from one‑time tax items) .
Mix shift continued: subscription revenue rose 32% YoY to $36.1M; ARR reached $167.7M (+8% YoY); NRR was 106% .
FY25 outlook introduced: revenue $245–$251M, ARR $180–$186M, adjusted EBITDA $72–$76M; management expects double‑digit subscription growth but continued hardware declines and FX headwinds (euro exposure ~40% of revenue) .
Capital returns initiated: $0.12/share quarterly dividend began Feb 14, 2025; cash and equivalents were $83.2M at year‑end and the board plans a balanced capital allocation (dividends, potential buybacks, organic investment, targeted M&A) .
Stock catalysts: continued margin expansion from software mix and cost discipline, new FY25 guide, and dividend initiation; watch for hardware pressure in EMEA/APAC and any FX impact on reported revenue growth .

What Went Well and What Went Wrong

What Went Well

Strong subscription and ARR performance: Q4 subscription revenue +32% YoY to $36.1M; ARR $167.7M (+8% YoY), NRR 106% (“106%–108%” target band reiterated) .
Profitability inflection: gross margin 74% (+500 bps YoY), operating income $11.8M (vs $1.8M), adjusted EBITDA $19.8M (vs $11.2M); management cited favorable mix (more software, less hardware) and lower OpEx from restructuring .
Cash generation and capital return: ~$12M cash from operations in Q4; $83.2M cash at 12/31; initiated $0.12 quarterly dividend with intent to continue balanced capital allocation .
- CEO: “record high adjusted EBITDA… both business units were again profitable on a fully burdened basis” .

What Went Wrong

Top‑line softness from hardware: total revenue down 3% YoY to $61.2M as Security hardware continued to decline; management expects the trend to persist in 2025 given “mobile‑first” consumer banking in EMEA/APAC .
Digital Agreements gross margin pressure: DA GM 70% in Q4 (vs 75% prior year) on higher cloud platform costs, lower maintenance as SaaS mix shifts, and higher depreciation of capitalized software .
FX headwinds and revenue translation: ~40% of revenue in euros; management highlighted the EUR/USD move as a factor for prudent FY25 revenue guidance (implied ~$5M swing on recent rates) .

Financial Results

Headline results by quarter

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($M)	$60.9	$56.2	$61.2
Gross Margin (%)	66%	74%	74%
Operating Income ($M)	$7.64	$11.25	$11.81
Net Income ($M)	$6.55	$8.27	$28.79
Diluted EPS ($)	$0.17	$0.21	$0.72
Adjusted EBITDA ($M)	$16.15	$16.73	$19.84
Adjusted EBITDA Margin (%)	26.5%	29.7%	32.4%

Notes: Q4 GAAP EPS included ~$0.58/share tax benefit from valuation allowance release, Dealflo liquidation, and IP transfer; non‑GAAP EPS was $0.24 .

Q4 YoY and QoQ

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($M)	$62.93	$56.24	$61.17
Gross Margin (%)	69%	74%	74%
Operating Income ($M)	$1.82	$11.25	$11.81
Net Income ($M)	$0.44	$8.27	$28.79
Diluted EPS ($)	$0.01	$0.21	$0.72
Adjusted EBITDA ($M)	$11.16	$16.73	$19.84
Subscription Revenue ($M)	$27.31	$33.65	$36.12

Segment breakdown (Q4 2024 vs Q4 2023)

Metric	Q4 2023	Q4 2024	YoY
Security Solutions Revenue ($M)	$48.43	$45.46	-6%
Digital Agreements Revenue ($M)	$14.50	$15.71	+8%
Security Solutions Operating Income ($M)	$20.36	$23.29	+14%
Digital Agreements Operating Income ($M)	$(0.71)	$2.61	n.m.
Security Gross Margin (%)	67%	75%	+800 bps
DA Gross Margin (%)	75%	70%	-500 bps

Revenue by major products and services (Q4 2024)

Category ($M)	Security Solutions	Digital Agreements	Total
Subscription	$20.91	$15.21	$36.12
Maintenance & Support	$9.22	$0.42	$9.64
Professional Services & Other	$0.89	$0.09	$0.98
Hardware Products	$14.44	—	$14.44
Total Revenue	$45.46	$15.71	$61.17

Key KPIs and liquidity

KPI	Q2 2024	Q3 2024	Q4 2024
ARR ($M)	$165.3	$163.9	$167.7
NRR (%)	112%	106%	106%
Subscription Revenue ($M)	$29.6	$33.6	$36.1
Cash & Equivalents ($M)	$63.8	$77.5	$83.2
Cash from Operations ($M)	~$2 (Q2)	~$14 (Q3)	~$12 (Q4)

Non‑GAAP reconciliation notes: Q4 non‑GAAP net income $9.74M ($0.24/share) excludes long‑term incentive comp, amortization, restructuring/other items, and one‑time tax benefit; the tax adjustment reflects valuation allowance release, worthless stock deduction, and IP transfer .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	N/A	$245M–$251M	New
ARR	FY 2025	N/A	$180M–$186M	New
Adjusted EBITDA	FY 2025	N/A	$72M–$76M	New
Quarterly Dividend	Recurring	N/A	$0.12/share; first paid Feb 14, 2025	Initiated

Management added qualitative color: double‑digit subscription growth expected in 2025; continued decline in hardware; FX prudence given ~40% euro revenue exposure .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 2024)	Current Period (Q4 2024)	Trend
Mix shift to software/subscription and margins	Software & services ~75% of revenue; subscription +29% in Q2; GM uplift expected; DA nearing profitability . Q3 GM ~74%; subscription +29% .	Subscription +32%; GM 74%; both segments profitable; record adjusted EBITDA .	Improving
Hardware headwinds	Flat in Q2 but expected 2H decline; long‑term pressure from mobile‑first consumers in EMEA/APAC .	Security hardware down; trend to continue in 2025 (banks adopting mobile‑first) .	Negative
ARR/NRR	ARR +15% Q2; NRR 112% (TTM) .	ARR +9% Q3; NRR 106% .	ARR +8.5% for FY; NRR 106% with 106%–108% target .
Cost savings/operational excellence	Cumulative annualized savings ~$73.5M by Q2; target $75M by YE . Further EBITDA guidance raised in Q3 .	Profitability gains sustained; modest 2025 EBITDA/CFO increases as investments resume .	Positive but moderating
Channel ecosystem & workforce auth	Partner build‑out underway; impact “more in future” .	Continued ecosystem expansion; FIDO2 tokens aimed at workforce auth via channel .	Building
FX sensitivity	Not highlighted in Q2/Q3.	EUR exposure (~40% of revenue) cited for prudent FY25 revenue guide .	New headwind
Capital allocation	Board to review cash generation by YE (hint at returns) .	Dividend initiated; balanced approach incl. dividends, possible buybacks, targeted M&A .	Positive for shareholders

Management Commentary

CEO: “We achieved record high adjusted EBITDA in the fourth quarter and for full year 2024… both business units were again profitable on a fully burdened basis” .
CFO: “GAAP net income per share was $0.72… included income tax benefits of $0.58… related to the release of the valuation allowance… sunsetting and liquidation of our Dealflo subsidiary and the transfer of our Security intellectual property” .
Strategy: Focus on higher‑margin software, multiyear term deals, and operational excellence to sustain profitability and cash generation .
Hardware outlook: “We have planned for additional decline in… Consumer Banking Hardware Authentication business” with historical ~8% annual declines; trend embedded in FY25 planning .
FX: “About 40% of our revenue is in euros… the difference between $1.10–$1.11 vs 1.04–1.05 is about $5M… we steered towards being prudent in the revenue guidance for ’25” .

Q&A Highlights

ARR vs revenue guidance: Hardware declines, multiyear term revenue recognition, and end‑of‑life maintenance roll‑offs explain ~10% ARR growth vs ~2% revenue growth guide; subscription growth remains double‑digit .
FX prudence: EUR/USD translation can swing revenue by ~$5M; EBITDA less sensitive given natural expense hedge in Europe .
Hardware trajectory: Continued decline modeled (historical ~8% YoY down); transition to software authentication mitigates but does not eliminate pressure .
NRR expectations: 2025 NRR guided to remain in 106%–108% band; some noise from end‑of‑life products .
Cash flow: 2025 CFO expected to improve modestly while investing in Security software and channels; no long‑term debt .

Estimates Context

We attempted to retrieve Wall Street consensus (S&P Global) for Q4 2024 and FY 2025, but the data was unavailable due to request limits at the time of query. As a result, we cannot present estimate comparisons in this recap. Values would normally be sourced from S&P Global consensus (“Revenue Consensus Mean”, “Primary EPS Consensus Mean”).

Key Takeaways for Investors

Profitability and cash generation are now entrenched: GM at 74% and Q4 adjusted EBITDA margin above 32% reflect sustained mix and cost discipline; both segments profitable .
Growth narrative hinges on software: subscription momentum (+32% YoY in Q4) offsets hardware attrition; FY25 guide embeds double‑digit subscription growth and continued hardware declines .
FX and hardware are the main swing factors for top‑line in 2025; EBITDA should be more resilient given natural hedges and operating leverage .
Dividend initiation signals confidence in durable cash generation; balance sheet strength ($83.2M cash, no long‑term debt) supports ongoing returns and selective M&A .
Watch DA margins: cloud cost inflation and capitalized software amortization weighed on DA GM to 70%; offsetting levers include scale and pricing/mix over 2025 .
Execution focus: Continued renewal discipline (106% NRR), partner/channel build‑out for workforce authentication, and targeted product investments under new CTO should support medium‑term efficiency and growth .

All facts and figures are sourced from OneSpan’s Q4 2024 8‑K/press release and earnings call transcript, plus relevant Q2/Q3 materials, as cited in brackets.

OneSpan Inc. (OSPN)·Q4 2024 Earnings Summary