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Introduction & Market Context
OneSpan Inc (NASDAQ:OSPN) presented its first quarter 2025 results on May 1, showing continued progress in its strategic shift toward subscription-based revenue despite a slight overall revenue decline. The digital security and e-signature solutions provider, with a market capitalization of $570 million, maintains a strong position in the financial services sector with over 60% of the world’s 100 largest banks among its customer base.
The company’s stock closed at $14.66 on May 1, down 1.41% from the previous close of $14.87, reflecting investor caution following the earnings release. This follows a pattern seen after Q4 2024 results when the stock fell 5.03% despite a revenue beat, suggesting ongoing market sensitivity to OneSpan’s transformation progress.
OneSpan’s global footprint spans more than 100 countries with over 4,000 customers across multiple industries, providing a stable foundation for its ongoing business model transition.
Quarterly Performance Highlights
OneSpan reported Q1 2025 revenue of $63 million, representing a 2% year-over-year decline. However, the company achieved 9% growth in subscription revenue, which reached $44 million, demonstrating progress in its strategic shift toward recurring revenue streams. Annual Recurring Revenue (ARR) grew to $168 million, also a 9% increase, with a healthy Net Retention Rate (NRR) of 107%.
The company posted strong profitability metrics with Adjusted EBITDA of $23 million (36% margin) and Non-GAAP EPS of $0.45. OneSpan maintains a solid financial position with $105 million in cash and equivalents and no long-term debt, allowing it to return value to shareholders through a $0.12 dividend.
As shown in the following financial highlights from the presentation:
The company’s revenue composition continues to shift toward higher-margin subscription services across both business segments. While overall revenue declined slightly, the growth in subscription revenue indicates successful execution of OneSpan’s strategic transformation.
Segment Performance Analysis
OneSpan operates through two business units: Security Solutions, which contributes 74% ($180 million) of total revenue, and Digital Agreements, accounting for 26% ($62 million). The segments show divergent performance trajectories, with Security Solutions experiencing a 5% revenue decline while Digital Agreements grew by 9%.
Despite the overall revenue decline in Security Solutions, the segment showed 23% growth in subscription revenue and maintains a robust 49% operating margin. The Digital Agreements segment, where the transition to SaaS is "substantially complete," achieved 16% revenue growth and 23% subscription revenue growth, with a 20% average segment operating margin over the last three quarters.
The following chart illustrates the revenue breakdown and year-over-year changes for both segments:
Both segments demonstrated healthy ARR growth, with Security Solutions up 7% to $107 million and Digital Agreements increasing 12% to $61 million, for a combined ARR of $168 million (9% growth):
The company’s diverse client base spans multiple industries, providing stability and growth opportunities across various market segments:
Profitability and Cost Reduction Success
OneSpan’s most impressive achievement has been its dramatic improvement in profitability. The company has implemented substantial cost reduction initiatives, resulting in cumulative annualized cost savings of $77 million by December 31, 2024, up from $58.5 million at the end of 2023 and just $10 million at the end of 2022.
These cost-cutting measures have driven a remarkable increase in Adjusted EBITDA, which has grown from just $7 million in FY 2022 to a projected $72-76 million for FY 2025, as illustrated in the following chart:
This profitability improvement aligns with information from the Q4 2024 earnings report, which noted Adjusted EBITDA of $73 million for the full year 2024, representing 30% of revenue. The Q1 2025 margin of 36% suggests continued efficiency gains in the current fiscal year.
Forward-Looking Statements & Guidance
For fiscal year 2025, OneSpan provided the following guidance:
The company expects revenue between $245-251 million, representing modest growth from the $243.2 million reported for FY 2024. ARR is projected to reach $180-186 million, continuing the positive trajectory with approximately 7-11% growth from current levels. Adjusted EBITDA guidance of $72-76 million suggests the company expects to maintain the strong profitability improvements achieved through its cost reduction initiatives.
Historical context and the full-year guidance are illustrated in the following chart:
OneSpan’s competitive positioning remains centered on its security expertise, experience in regulated markets, broad authentication portfolio, and enterprise-class e-signature capabilities. The company’s go-to-market strategy focuses on enterprise sales and expanding its partner network, with particular emphasis on financial institutions where it has established strong relationships.
While OneSpan faces challenges in overall revenue growth, its successful transition toward subscription-based models and significant profitability improvements provide a solid foundation for sustainable long-term performance. Investors will likely continue monitoring the balance between revenue growth and margin expansion as key indicators of the company’s transformation progress.
Full presentation:
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