OneSpan Inc. (OSPN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals: strong subscription revenue growth and dividend increase are positives, but flat full-year revenue and reduced guidance for 2025 are concerning. The Q&A section highlights efforts to improve sales and marketing, yet economic uncertainty and declining hardware revenue pose risks. The market might react cautiously, leading to a neutral stock price movement.
Key Financial Performance
Annual Recurring Revenue (ARR) $187 million, up 11.5% year-over-year. This includes 12% growth in Cybersecurity and 10% growth in Digital Agreements. The growth was driven by expansion of licenses, new contracts, and acquisitions.
Q4 Revenue $62.9 million, an increase of 3% compared to last year's Q4. Growth was driven by 11% growth in Digital Agreements, while Cybersecurity revenue was flat year-over-year.
Full Year 2025 Revenue $243.2 million, flat compared to the prior year. Software and services revenue increased by 5.3%, while hardware revenue declined by 16.6% due to a shift to mobile banking and authentication.
Subscription Revenue Q4: $38.6 million, up 7%. Full Year: $156.1 million, up 12%. Growth was driven by increases in both cloud and on-prem authentication software and mobile app shielding software.
Gross Margin Q4: 74%, same as last year. Full Year: 74%, up from 72% in 2024. Improvement was due to favorable product and customer mix.
Adjusted EBITDA Q4: $19.4 million, 30.9% of revenue, down from $20 million (32.7%) last year. Full Year: $77.6 million, 31.9% of revenue, up from $73.4 million (30.2%) in 2024. Changes were due to revenue growth and cost management.
Net Retention Rate 104% in Q4, up from 103% last quarter, indicating strong customer retention and expansion.
Cybersecurity Revenue Q4: $45.4 million, flat year-over-year. Full Year: $177.7 million, down 2.5% due to a decline in hardware revenue, partially offset by 13% growth in subscription revenue.
Digital Agreements Revenue Q4: $17.5 million, up 11%. Full Year: $65.5 million, up 7%. Growth was driven by contract expansions, new contracts, and increased overages.
Cash and Cash Equivalents $70.5 million at the end of 2025, down from $83.2 million in 2024. Cash was used for dividends, share repurchases, and acquisitions.
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Operating Highlights
Build38 Acquisition: OneSpan announced a definitive agreement to acquire Build38 to strengthen its app shielding offering, enabling deeper integration with customers' mobile applications and dynamic updates to detection methods.
AI-driven Capabilities: Plans to integrate AI-driven capabilities into the Digital Agreements (DA) platform to provide deeper insights, streamline decision-making, and enhance integration with customers' environments.
Geographical Revenue Mix: Revenue mix for 2025 was 42% from EMEA, 39% from the Americas, and 19% from Asia Pacific. Growth in Digital Agreements and Cybersecurity software revenue was noted in the Americas, while hardware revenues declined in Europe and Asia Pacific due to mobile-first trends.
Revenue Growth: Annual recurring revenue (ARR) grew 11.5% year-over-year to $187 million, with 12% growth in Cybersecurity and 10% in Digital Agreements. Subscription revenue grew 12% to $156.1 million in 2025.
Profitability: Generated $78 million in adjusted EBITDA for 2025, representing 32% of revenue. Both Cybersecurity and Digital Agreements divisions were solidly profitable.
Cash Generation: Generated nearly $60 million in cash from operations in 2025, with a balanced capital allocation strategy including $32 million returned to shareholders through dividends and buybacks.
Shift to Software: Software and services accounted for 80% of revenue in 2025, up from 76% in 2024, driven by growth in subscription revenue and a decline in hardware revenue.
Targeted M&A: Completed acquisitions of Nok Nok and ThreatFabric, and announced the Build38 acquisition to enhance cybersecurity and app protection capabilities.
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Risk or Challenges
App Shielding Investment: The company recognizes the need to invest more deeply in app shielding due to the evolving threat landscape and increasing sophisticated attacks on mobile applications.
Hardware Revenue Decline: The company faces a long-term secular decline in hardware revenue, particularly in consumer banking tokens, as consumers and banks shift to mobile banking and authentication.
Build38 Acquisition Impact: The pending acquisition of Build38 is expected to dilute adjusted EBITDA in 2026 by $3 million to $4 million, impacting near-term profitability.
Sales and Marketing Investments: Incremental investments of approximately $5.5 million in sales, marketing, and R&D are planned for 2026, which will have a near-term impact on profitability.
Lower Visibility in Cybersecurity Revenue: The company anticipates lower revenue from multiyear term licenses in Cybersecurity due to lower visibility into expansion and conversions from annual licenses.
Economic Uncertainty: The company acknowledges risks and uncertainties in forward-looking statements, which could materially impact actual results.
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Guidance & Outlook
Revenue Projections: For 2026, total revenue is expected to be in the range of $244 million to $249 million, representing 0% to 2% growth. Software and services revenue is projected to grow by 4% to 5%, reaching $201 million to $204 million. Hardware revenue is expected to decline by 8% to 12%, falling to $43 million to $45 million.
Annual Recurring Revenue (ARR): ARR is projected to grow by 3% to 5% year-over-year, reaching $192 million to $196 million in 2026.
Adjusted EBITDA: Adjusted EBITDA for 2026 is expected to be in the range of $64 million to $68 million, inclusive of the impact of the pending Build38 acquisition.
Capital Allocation: The company plans to continue a balanced capital allocation strategy, including potential share repurchases and an 8% increase in the quarterly dividend to $0.13 per share, reflecting an annualized dividend rate of $0.52 per share.
Strategic Investments: The company plans to invest approximately $5.5 million in sales, marketing, and R&D to drive higher software revenue growth. The pending Build38 acquisition is expected to dilute adjusted EBITDA by $3 million to $4 million in 2026.
Market Trends and Growth Drivers: Growth in software and services is expected to be driven by solid performance in Digital Agreements and moderate growth in Cybersecurity. Contributions from newer offerings in Cybersecurity are anticipated to increase as the year progresses. The secular shift away from consumer banking hardware tokens is expected to continue.
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Shareholder Return Plan
Dividend Increase: The Board has approved an increase in the quarterly dividend from $0.12 per share to $0.13 per share, reflecting an annualized dividend rate of $0.52 per share, an 8% increase.
Share Buyback Program: In 2025, the company repurchased approximately 1 million shares of common stock, amounting to $13.1 million.
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Key Q&A
Q:Can you comment on the demand environment at the start of this year compared to the same time period last year?
A:The company finished the previous year strongly, with some business that would have naturally occurred in Q1 being pulled forward. The start of the year is reasonable in terms of building the pipeline. A new CRO was hired in December, and investments in marketing are expected to show benefits in the second half of the year due to a 6- to 9-month sales cycle.
Q:Was the outperformance in hardware revenue in Q4 due to a pull forward, and what are the expectations for hardware business going into 2026?
A:The outperformance in Q4 was not due to hardware but software. Hardware revenue in Q4 landed as expected, at 49%. The decline in hardware revenue is slowing, with a projected 10% decline in 2026 compared to larger declines in previous years. This is attributed to the stabilization of mobile banking usage, which impacts consumer banking tokens.
Q:What is expected from the new CRO in terms of sales and marketing?
A:The new CRO, Shaun, is expected to bring focus and discipline to sales execution, pipeline development, and account reviews. He will also improve lead generation and go-to-market strategies, which are expected to lead to closed business over time, considering the 6- to 9-month sales cycle.
Q:How should we think about further M&A opportunities, and are there any capabilities the company is actively looking for?
A:The company is focused on acquiring valuable technology that solves problems for customers in core areas like authentication or app shielding. They are not looking to buy customers or revenue but rather modern and valuable technology to distribute widely to their customer base. Recent acquisitions, Nok Nok and Build38, align with this strategy.
Q:How does the company view AI as an opportunity or threat?
A:The company sees AI as an opportunity, particularly in areas like app shielding and authentication. While app shielding requires staying ahead of cutting-edge exploits, authentication is critical for consumer interactions. Over the next 3-4 years, the rise of consumer agents interacting with banks and retail is expected to increase the need for authentication, presenting significant opportunities.
Q:Review of Unclear Management Responses
A:None of the questions were avoided or lacked clarity. All responses were direct and provided sufficient detail.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Agreements Cybersecurity
Agreements fact
Build acquisition
Cybersecurity Digital
Cybersecurity software
Cybersecurity subscription
Cybersecurity value
DA offering
Digital Agreements
Jorge
acquisition Build
agent
app shielding
application protection
apps
area Cybersecurity
cash generation
characteristic
consumer authentication
dividend share
division
end user
enterprise
functionality
hardware product
increase overage
party
period increase
platform
product customer
sale marketing
share income
software service
tax benefit
year
OSPN Transcript
OneSpan Inc. (OSPN) Q1 2026 Earnings Call Transcript
Unknown4-30
The earnings call presents a mixed outlook. While there is growth in ARR and Digital Agreements, the decline in GAAP operating income and net income per share, coupled with vague guidance on key metrics like the Rule of 40, suggest a cautious sentiment. The Q&A reveals uncertainties, particularly regarding contract renewals and the Middle East impact. However, shareholder returns and steady cash flow provide some positive offsets. Overall, the sentiment leans towards neutral, with no strong catalysts to suggest significant stock price movement.
OneSpan Inc. (OSPN) Q4 2025 Earnings Call Transcript
Unknown2-26
The earnings call presents mixed signals: strong subscription revenue growth and dividend increase are positives, but flat full-year revenue and reduced guidance for 2025 are concerning. The Q&A section highlights efforts to improve sales and marketing, yet economic uncertainty and declining hardware revenue pose risks. The market might react cautiously, leading to a neutral stock price movement.
OneSpan Inc. (OSPN) Q3 2025 Earnings Call Transcript
Unknown10-30
The earnings call presented a mixed outlook. While there is promising growth in digital agreements and subscription revenue, concerns about hardware revenue decline and scaled-back guidance are notable. The Q&A highlighted management's cautious tone and uncertainties in ARR guidance, which could temper investor enthusiasm. The company's strategic shift towards software and mobile authentication is positive, but the transition may take time. Overall, the sentiment is neutral, reflecting balanced positive and negative factors.
OneSpan Inc. (OSPN) Q2 2025 Earnings Call Transcript
Unknown8-5
The earnings call presents a mix of positive and negative signals. Strong financial performance is evident with record high EBITDA and improved margins. However, there are concerns about declining security solutions revenue, and uncertainties around the impact of the Nok Nok acquisition. The Q&A reveals muted macroeconomic impacts and potential cross-selling opportunities, but lacks clarity on certain risks. These mixed signals suggest a neutral market reaction, with the stock price likely remaining stable in the short term.
OSPN Slides
OneSpan Q4 2025 slides: software shift drives margin gains to 74%2026-02-26
OneSpan Q3 2025 slides: Subscription growth offsets hardware decline as guidance revised2025-10-30
OneSpan Q2 2025 slides: Subscription revenue grows 22% despite overall decline2025-08-05
OneSpan Q1 2025 slides: Subscription growth offsets overall revenue decline2025-05-01
OSPN Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
