OneSpan (US:OSPN)2025-10-30 21:17Revenue Performance - Security Solutions subscription revenue grew by 13% and Digital Agreements subscription revenue grew by 11% for the three months ended September 30, 2025, compared to the same period in 2024[126]. - Total revenue for Security Solutions decreased by 1% and 3% for the three and nine months ended September 30, 2025, respectively, due to a shift towards mobile authentication solutions[127]. - For the three months ended September 30, 2025, total revenue was $57.056 million, a slight decrease from $56.242 million in the same period of 2024[161][162]. - For the nine months ended September 30, 2025, total revenue was $180.265 million, compared to $182.008 million for the same period in 2024[162][164]. - Security Solutions segment revenue for the three months ended September 30, 2025, was $40.322 million, while Digital Agreements segment revenue was $16.734 million[161]. - Security Solutions segment revenue for the nine months ended September 30, 2025, was $132.270 million, while Digital Agreements segment revenue was $47.995 million[162]. - Total revenue increased by $0.8 million, or 1%, for the three months ended September 30, 2025, compared to the same period in 2024, while revenue decreased by $1.7 million, or 1%, for the nine months ended September 30, 2025[169]. Profitability and Margins - Gross profit for the three months ended September 30, 2025, was $42.003 million, with a gross margin of 74%[161]. - Operating income for the three months ended September 30, 2025, was $8.227 million, compared to $11.252 million in the same period of 2024[161][162]. - Security Solutions gross profit decreased by $0.5 million, or 2%, during the three months ended September 30, 2025, with a gross margin of 74%[184]. - Digital Agreements operating income for Q3 2025 was $4.2 million, an increase from $3.4 million in Q3 2024, driven by higher gross profit and lower operating expenses[197]. - Adjusted EBITDA for the three months ended September 30, 2025, was $17.5 million, compared to $17.0 million for the same period in 2024, driven by lower costs of goods sold[226]. - For the nine months ended September 30, 2025, Adjusted EBITDA was $58.2 million, an increase from $53.4 million in the same period of 2024[226]. Expenses and Restructuring - The company incurred restructuring charges of approximately $0.1 million to $0.2 million related to the 2023 Actions for the remainder of 2025[133]. - The company reduced headcount by approximately 341 positions as part of the restructuring plan[135]. - Operating expenses included $3.4 million and $2.7 million related to stock-based and long-term incentive plans for the three months ended September 30, 2025, and 2024, respectively[145]. - Operating expenses increased by $3.5 million, or 11%, during the three months ended September 30, 2025, with a negative impact from foreign exchange rates of approximately $0.5 million[182]. - Sales and marketing expenses for Q3 2025 increased by $1.3 million, or 12%, compared to Q3 2024, primarily due to higher employee compensation costs[185]. - Research and development expenses for Q3 2025 increased by $1.3 million, or 17%, compared to Q3 2024, driven by higher compensation and consulting costs related to the acquisition of Nok Nok Labs[187]. - General and administrative expenses for Q3 2025 increased by $0.8 million, or 7%, compared to Q3 2024, largely due to increased stock-based compensation and director fees[189]. - Restructuring charges for the nine months ended September 30, 2025 decreased by $2.7 million, or 70%, compared to the same period in 2024, due to minimal headcount reduction and vendor rationalization costs[191]. Cash Flow and Investments - Cash and cash equivalents as of September 30, 2025 were $85.6 million, up from $83.2 million at December 31, 2024[199][200]. - Net cash used in investing activities for the nine months ended September 30, 2025 was $20.0 million, compared to $7.3 million for the same period in 2024, primarily due to the acquisition of Nok Nok Labs[209]. - Cash provided by operating activities for the nine months ended September 30, 2025 was $46.9 million, an increase from $43.2 million in the same period in 2024[206]. Acquisitions and Strategic Moves - On June 4, 2025, the company acquired Nok Nok Labs, enhancing its passwordless software authentication solutions[136]. - The company entered into a $100.0 million credit agreement on June 23, 2025, with no borrowings outstanding as of September 30, 2025[137]. Foreign Exchange and Geographic Revenue - Foreign exchange rate changes positively impacted total revenue and Security Solutions revenue by approximately $1.3 million for the three months ended September 30, 2025[129]. - Approximately 79% of revenues for the nine months ended September 30, 2025, were generated outside of the U.S.[154]. - For the nine months ended September 30, 2025, 57% of revenue was denominated in U.S. Dollars, 40% in Euros, and 3% in other currencies[155]. - Revenue generated in the Americas increased by $4.0 million, or 18%, for the three months ended September 30, 2025, primarily driven by software authentication products[173]. - Revenue generated in APAC decreased by $2.3 million, or 19%, for the three months ended September 30, 2025, primarily due to lower hardware volumes[175]. Tax and Income - The effective tax rate reflects a geographic mix of earnings, with statutory tax rates for primary foreign jurisdictions ranging from 17% to 30%[153]. - The company’s net income for the three months ended September 30, 2025, was $6.5 million, compared to $8.3 million for the same period in 2024[223]. - Interest income for the nine months ended September 30, 2025 was $1.8 million, an increase from $1.2 million in the same period in 2024, attributed to higher average excess cash invested[194]. Annual Recurring Revenue (ARR) and Retention - As of September 30, 2025, the company reported an Annual Recurring Revenue (ARR) of $180.2 million, a 10% increase from $163.9 million on September 30, 2024, including contributions from the acquisition of Nok Nok Labs[218]. - The Net Retention Rate (NRR) was reported at 103% as of September 30, 2025, down from 106% a year earlier, primarily due to a decrease in expansion contracts[220]. - Changes in foreign exchange rates positively impacted ARR by approximately $0.2 million compared to the prior year[218]. Accounting Policies - The company’s accounting policies are detailed in its Form 10-K for the year ended December 31, 2024[227].