OneSpan (US:OSPN)2025-05-01 21:12Revenue Performance - For the quarter ended March 31, 2025, Security Solutions subscription revenue grew by 7% and Digital Agreements subscription revenue grew by 13% compared to the same quarter in 2024[96]. - Total revenue decreased by $1.5 million, or 2%, to $63.366 million for the three months ended March 31, 2025, compared to $64.843 million for the same period in 2024[131]. - Security Solutions revenue decreased by $2.7 million, or approximately 5%, primarily due to lower volumes of hardware devices sold[136]. - Digital Agreements revenue increased by $1.2 million, or 9%, driven by higher cloud subscription revenue from existing customer expansions[136]. - Annual Recurring Revenue (ARR) increased by 9% to $168.4 million at March 31, 2025, compared to $154.6 million at March 31, 2024[178]. - Net Retention Rate (NRR) remained stable at 107% for both March 31, 2025, and 2024, indicating consistent revenue growth from existing customers[180]. Operating Expenses and Profitability - Operating expenses included $2.8 million related to stock-based and long-term incentive plans for the three months ended March 31, 2025, compared to $1.6 million for the same period in 2024[109]. - Operating expenses decreased by $3.4 million, or 10%, during the three months ended March 31, 2025, compared to the same period in 2024[143]. - Sales and marketing expenses decreased by $1.5 million, or 11%, primarily due to lower employee compensation costs and reduced consulting and marketing expenses[145]. - Research and development expenses decreased by $0.3 million, or 4%, to $7.5 million for the three months ended March 31, 2025, primarily due to lower compensation costs from reduced headcount[147]. - General and administrative expenses decreased by $0.5 million, or 5%, to $9.5 million for the three months ended March 31, 2025, driven by lower employee compensation costs[149]. - Adjusted EBITDA for Q1 2025 was $23.0 million, up from $20.2 million in Q1 2024, representing an increase of approximately 9.0%[183]. - Net income for Q1 2025 was $14.5 million, compared to $13.5 million in Q1 2024, reflecting a year-over-year growth of about 7.7%[182]. - Operating expenses decreased, contributing to the increase in Adjusted EBITDA[183]. Restructuring and Headcount Changes - The company incurred restructuring charges of approximately $0.1 million to $0.6 million related to the 2023 Actions, primarily for employee transition and severance payments[98]. - The company reduced headcount by approximately 335 positions as part of its restructuring plan, incurring severance and related benefits costs[100]. - Average full-time sales, marketing, support, and operating employee headcount decreased by 14% to 158 for the three months ended March 31, 2025, compared to 183 in the same period of 2024[146]. - Average full-time research and development employee headcount decreased by 11% to 222 for the three months ended March 31, 2025, compared to 250 in the same period of 2024[148]. - Average full-time general and administrative employee headcount decreased by 23% to 85 for the three months ended March 31, 2025, compared to 111 in the same period of 2024[150]. - The restructuring plan is expected to continue until December 31, 2025, with the vendor contract component planned for completion by the end of 2025[99]. Foreign Exchange and Market Impact - Approximately 84% of the company's revenues and 58% of its operating expenses were generated outside of the U.S. for the three months ended March 31, 2025[118]. - For the three months ended March 31, 2025, approximately 55% of the company's revenue was denominated in U.S. Dollars, 43% in Euros, and 2% in other currencies[119]. - Changes in foreign exchange rates negatively impacted revenue by approximately $1.1 million for the three months ended March 31, 2025[131]. - Foreign exchange rates negatively impacted Adjusted EBITDA by approximately $0.3 million in Q1 2025[183]. - There were no material changes in market risk during the three months ended March 31, 2025[185]. Cash Flow and Financial Metrics - Cash provided by operating activities was $29.4 million for the three months ended March 31, 2025, an increase from $27.0 million in the same period of 2024[166]. - Interest income increased to $0.7 million for the three months ended March 31, 2025, compared to $0.1 million in the same period of 2024, due to higher average excess cash invested[154]. - Long-term incentive compensation and related payroll tax expense increased to $3.2 million in Q1 2025 from $2.0 million in Q1 2024[182]. - Depreciation and amortization of intangible assets was $2.1 million in Q1 2025, slightly up from $2.1 million in Q1 2024[182]. - Restructuring and other related charges were recorded at $0.4 million for Q1 2025, down from $1.5 million in Q1 2024[182]. - Other non-recurring items amounted to $0.04 million in Q1 2025, compared to $0.17 million in Q1 2024[182]. - Employer payroll taxes related to employee stock-based award transactions were $0.5 million in Q1 2025, compared to $0.4 million in Q1 2024[182]. Strategic Focus - The company aims to drive profitable growth with a focus on high-margin software solutions and continued investment in hardware authentication solutions[92]. - The company processes millions of digital agreements and billions of transactions in over 100 countries annually, serving more than 60% of the world's 100 largest banks[94]. - The company expects gross margins to fluctuate over time due to factors such as average selling price and manufacturing costs[105]. - Gross profit decreased slightly by $0.3 million, or 1%, with a gross margin of 74% for the three months ended March 31, 2025, compared to 73% for the same period in 2024[139]. - Security Solutions gross profit decreased by $1.4 million, or 4%, with a gross margin of 76% for the three months ended March 31, 2025[142]. - Digital Agreements gross profit increased by $1.1 million, or 11%, with a gross margin of 70% for the three months ended March 31, 2025[142].