OneSpan Q2 2025 slides: Subscription revenue grows 22% despite overall decline

Introduction & Market Context

OneSpan Inc. (NASDAQ:OSPN), a provider of digital identity and anti-fraud solutions, presented its Q2 2025 results on August 5, showing continued progress in its transition to subscription-based revenue despite an overall revenue decline. The company’s stock edged up 1.37% to $14.80 in after-hours trading, following a 1.92% decline during the regular session.

The cybersecurity firm, which serves over 60% of the world’s 100 largest banks, reported mixed results as it continues to shift away from hardware toward higher-margin software and subscription services. This strategic pivot comes amid increasing global demand for secure digital transaction solutions, particularly in highly regulated industries.

Quarterly Performance Highlights

OneSpan reported Q2 2025 revenue of $60 million, representing a 2% year-over-year decline. However, the company’s subscription revenue grew significantly by 22% to $36 million, highlighting successful execution of its business model transformation.

As shown in the following comprehensive financial overview:

Other key metrics included Annual Recurring Revenue (ARR) of $178 million (up 8% year-over-year), Net Revenue Retention (NRR) of 101%, and Adjusted EBITDA of $18 million, representing a robust 29% margin. The company reported Non-GAAP earnings per share of $0.34, maintained a strong balance sheet with $93 million in cash and no long-term debt, and declared a dividend of $0.12 per share.

These results show a sequential decline from Q1 2025, when the company reported revenue of $63.4 million, EPS of $0.45, and an Adjusted EBITDA margin of 36.4%.

Segment Performance Analysis

OneSpan’s business is divided into two main segments: Security Solutions and Digital Agreements. The detailed breakdown of Q2 2025 revenue growth by segment reveals divergent performance:

Security Solutions, which contributes approximately 74% of total revenue, saw a 3% decline to $44.2 million. However, subscription revenue within this segment increased by 39%, while hardware revenue decreased by 29%, reflecting the company’s strategic shift. The segment’s ARR grew by 9% year-over-year to $114.5 million, bolstered by the recent acquisition of Nok Nok Labs.

The ARR growth across both business segments demonstrates the company’s progress in building a stable recurring revenue base:

Digital Agreements, representing about 26% of total revenue, showed modest 1% growth to $15.6 million. Subscription revenue in this segment increased by 5%, while maintenance and professional services revenue decreased as part of the company’s planned transition. The segment’s ARR grew by 4.5% to $61 million.

Strategic Initiatives & Competitive Positioning

OneSpan’s strategic positioning is built on its extensive customer base across multiple industries, with particular strength in the financial sector. The company serves over 4,000 customers in more than 100 countries, including many of the world’s largest financial institutions.

The following slide illustrates the breadth of OneSpan’s blue-chip customer base:

The company’s competitive differentiation stems from having the broadest authentication portfolio in the industry, enterprise-class e-signature capabilities, and deep expertise in highly regulated markets. The recent acquisition of Nok Nok Labs has expanded OneSpan’s FIDO2 passwordless authentication capabilities, strengthening its position in the security solutions market.

OneSpan’s business is geographically diversified, with 44% of revenue coming from EMEA (primarily Security Solutions), 37% from the Americas (where Digital Agreements revenue exceeds Security), and 19% from APAC (mostly Security).

Updated 2025 Guidance

OneSpan maintained its full-year 2025 revenue guidance of $245 million to $251 million and Adjusted EBITDA guidance of $72 million to $76 million. However, the company raised its ARR guidance from $180-$186 million to $186-$192 million, reflecting confidence in its subscription growth trajectory.

The updated guidance is summarized in the following table:

This guidance suggests that OneSpan expects its business momentum to accelerate in the second half of 2025, particularly in terms of ARR growth. The company’s historical performance and forward guidance are illustrated in this multi-year view:

Conclusion & Forward Outlook

OneSpan’s Q2 2025 results reflect a company in transition, with declining overall revenue but strong growth in high-margin subscription services. The 22% increase in subscription revenue and 8% growth in ARR demonstrate progress in the company’s strategic shift toward recurring revenue streams.

The acquisition of Nok Nok Labs appears to be contributing positively to the Security Solutions segment’s ARR, adding $8 million. Meanwhile, the company’s strong balance sheet, with $93 million in cash and no long-term debt, provides financial flexibility for further strategic initiatives.

While sequential declines in revenue, EPS, and EBITDA margin from Q1 to Q2 2025 may raise some concerns, the increased ARR guidance suggests management confidence in the company’s direction. Investors will likely focus on whether OneSpan can accelerate overall revenue growth while maintaining its subscription momentum in the coming quarters.

Full presentation:

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