OneSpan (US:OSPN)2025-10-30 21:30Financial Data and Key Metrics Changes - Total revenue grew 1% to $57 million, driven by double-digit organic subscription revenue growth, primarily offset by a reduction in security hardware revenue [11][15] - Annual recurring revenue (ARR) increased 10% to $180 million [9][15] - Adjusted EBITDA was $17.5 million, or 31% of revenue, with record adjusted EBITDA of $58 million for the first nine months of the year, representing 32% of revenue [9][12] Business Line Data and Key Metrics Changes - Software business, now over 80% of overall business, delivered double-digit subscription revenue growth and ARR growth [5][9] - Subscription revenue grew 12%, led by 13% growth in security and 11% growth in digital agreements [11][16] - Digital agreements ARR grew 8% to $65 million, with revenue growing 9% to $16.7 million [19] Market Data and Key Metrics Changes - Revenue mix was 46% from the Americas, 38% from EMEA, and 17% from APAC, compared to 39%, 40%, and 21% respectively in the same quarter last year [20] - Strong performance noted in North America and Latin America, while EMEA and APAC experienced declines in hardware revenues [10][21] Company Strategy and Development Direction - Company is focused on enhancing its product portfolio through internal development, acquisitions, and strategic partnerships [8][13] - The acquisition of Knock Knock Labs and investment in ThreatFabric are aimed at improving product offerings and driving future growth [6][12] - Company aims to achieve a Rule of 40 performance level while maintaining strong profitability and cash generation [9][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the hardware business and lower activity in net expansions, particularly in EMEA and APAC [30][32] - The company updated its revenue guidance for 2025 to a range of $239 million to $241 million, reflecting a modest decline from previous expectations [23][24] - Management remains optimistic about future growth driven by software and services, with expectations for continued improvement in subscription revenue [50][51] Other Important Information - The company returned over $20 million to shareholders in the first nine months of 2025 through share repurchases and dividends [12][13] - The strategic focus remains on mobile authentication and the adoption of FIDO2 protocols, with expectations for significant growth in these areas [6][44] Q&A Session Summary Question: What led to the scale back on revenue and ARR guidance? - Management noted higher headwinds in the hardware business and lower activity in net expansions, particularly in EMEA [30][31] Question: Is the decline in hardware demand a long-term trend? - Management confirmed a long-term shift away from hardware tokens towards mobile authentication, with expectations that hardware will not disappear entirely [35][36] Question: How should gross margin be viewed moving forward? - Management expects gross margin to remain similar to last year's Q4, around 73% [38][39] Question: What products are expected to drive growth in the next 12 to 24 months? - Management highlighted the importance of FIDO2 and mobile authentication technologies as key growth areas [44][45] Question: What is the visibility on late-stage deals and pipeline for Q4? - Management expressed confidence in the Q4 ARR guidance, citing improved visibility and a positive sales environment [66][72] Question: Is the revenue and ARR cut related to gross churn or lower new logos? - Management indicated that the cut was primarily due to lower activity in net expansions, with hardware also contributing to the decline [77][79]