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Introduction & Market Context
OneSpan Inc. (NASDAQ:OSPN) presented its third-quarter 2025 results on October 30, revealing a company in transition that continues to shift from hardware to software-based security solutions. The cybersecurity and digital agreement provider, with a market capitalization of $580 million, saw its stock rise 2.31% in aftermarket trading following the release, closing at $15.16.
The company reported earnings per share of $0.33, exceeding analyst expectations of $0.29, despite a slight revenue miss. OneSpan’s strategic pivot toward recurring revenue streams appears to be gaining traction, with subscription revenue growing 12% year-over-year even as the company reduced its full-year guidance.
As shown in the following snapshot of key company metrics:
Quarterly Performance Highlights
OneSpan reported Q3 2025 revenue of $57 million, representing modest 1% year-over-year growth. While this fell slightly short of the forecasted $58.18 million, the company’s subscription revenue showed strong momentum, increasing 12% to $38 million. Annual recurring revenue (ARR) reached $180 million, up 10% from the prior year, with a net revenue retention rate of 103%.
The company’s profitability metrics were particularly strong, with adjusted EBITDA of $18 million representing a 31% margin. Non-GAAP earnings per share came in at $0.33, and the company declared a dividend of $0.12 per share.
The following slide highlights these key financial metrics for the quarter:
OneSpan’s ARR growth demonstrates the company’s successful transition to a more predictable revenue model, with both business segments showing healthy expansion. Security Solutions ARR grew 11% year-over-year to $115.5 million, while Digital Agreements ARR increased 8% to $65 million.
This ARR growth across both business segments is illustrated in the following chart:
Business Segment Analysis
OneSpan operates through two primary business units: Security Solutions and Digital Agreements. Security Solutions, which accounts for 74% of total revenue at $178 million (TTM), focuses on securing digital banking transactions with authentication, fraud prevention, and mobile application protection offerings. Despite a 4% decline in total revenue, this segment showed 23% subscription revenue growth and maintained a strong 47% segment operating margin.
The Digital Agreements division, representing 26% of revenue at $64 million (TTM), provides e-signature, identity verification, and related services. This segment delivered 7% total revenue growth and 11% subscription growth, with a 20% operating margin. According to the presentation, the "transition to SaaS [is] substantially complete" for this division.
The following chart breaks down OneSpan’s revenue by business unit:
CEO Victor Limongelli characterized 2025 as a "foundation-building" year, noting during the earnings call that "2025 has been about putting the pieces in place while continuing to operate with strong profitability to enable growth." He added, "We are working on additional initiatives. While there might not be announcements each and every quarter, we will never be done improving our value proposition to customers."
Revised 2025 Outlook
In a significant update, OneSpan revised its full-year 2025 guidance downward for both revenue and ARR while maintaining its adjusted EBITDA targets. The company now expects revenue between $239-$241 million, down from the previous guidance of $245-$251 million. Similarly, ARR expectations were lowered to $183-$187 million from the prior $186-$192 million range. However, adjusted EBITDA guidance remained unchanged at $72-$76 million.
The revised guidance metrics are clearly presented in this comparison:
During the earnings call, management attributed the reduced revenue guidance to declining hardware sales and lower net expansions. Despite these challenges, the company expressed confidence in its Q4 pipeline and future ARR potential.
The historical revenue and ARR trends, along with the updated guidance, can be seen in this comprehensive chart:
OneSpan’s adjusted EBITDA has shown remarkable improvement over recent years, driven by significant cost reduction initiatives. Cumulative annualized cost savings have increased from $10 million in 2022 to $77 million by the end of 2024, enabling the company to maintain strong profitability despite revenue headwinds.
This dramatic EBITDA improvement is illustrated in the following chart:
Strategic Initiatives & Competitive Position
OneSpan continues to position itself as a trusted security partner to global enterprises, particularly in the banking sector. The company serves over 4,000 customers across more than 100 countries, with more than 60% of the world’s 100 largest banks among its client base.
The company’s competitive differentiation centers on having the broadest authentication portfolio, strong roots in regulated markets, deep expertise in end-user experience, "world-class security DNA," and an established global blue-chip customer base. Its go-to-market strategy focuses on enterprise sales and an expanding partner network.
For the Security Solutions division, OneSpan highlighted expanded FIDO2 passwordless authentication capabilities and enhanced cyber fraud prevention through investment with ThreatFabric. The Digital Agreements division continues to leverage a "land and expand" model with key enterprise-class solutions including e-signatures, identity verification, and add-on offerings like smart forms, remote notary services, and secure storage.
Looking ahead, management indicated that the groundwork laid in 2025 should enable accelerated subscription revenue growth in 2026. However, the company faces ongoing challenges including the decline in hardware revenue, regional difficulties in EMEA and APAC, and competitive pressures in the multi-factor authentication space.
With its stock trading at $15.16, well within its 52-week range of $12.51 to $20.36, OneSpan appears to be navigating its transition effectively despite the near-term guidance adjustments. Investors seem cautiously optimistic about the company’s strategic direction, as evidenced by the positive market reaction to the earnings announcement.
Full presentation:
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