Summary
OneSpan reported total revenue of $52.8 million for the quarter ended June 30, 2022, up 1% from the prior-year quarter. Gross profit rose 2% to $35.5 million. Gross margin was 67.3%, up 0.6 percentage points. The company's operating loss narrowed to $8.2 million, and operating margin was negative 15.6%, up 1.3 percentage points. Net loss widened to $9.4 million, and diluted EPS was a loss of $0.23. Deferred revenue was $55.4 million, up 3% year over year. Remaining performance obligations were $63.5 million, up 18%. On a non-GAAP basis, net loss was $4.0 million, or $0.10 per diluted share, and adjusted EBITDA was negative $1.5 million. The gap between GAAP and non-GAAP results reflects long-term incentive compensation, amortization of intangible assets, and non-recurring items such as strategic action and restructuring costs.
The quarter marked a new reporting structure. OneSpan began reporting two operating segments: Digital Agreements and Security Solutions. Management plans to run Digital Agreements for accelerated growth and market share gains, while Security Solutions is managed for cash flow given its more modest growth profile. Annual recurring revenue grew 21% to $134.3 million. The dollar-based net expansion rate was 116%. These metrics suggest the recurring portion of the business is expanding even as total revenue growth remains modest. The company also announced a three-year strategic transformation plan in May 2022. The plan aims to enhance the enterprise go-to-market strategy, expand the direct sales force, and add alliances and partnerships. Restructuring actions are underway, including headcount reductions and severance costs.
Foreign exchange was a meaningful headwind. OneSpan estimates that changes in exchange rates, especially for the Euro, negatively impacted revenue by approximately $3.2 million for the three months ended June 30, 2022 and by $4.8 million for the six months ended June 30, 2022. The same currency moves benefited operating expenses by an estimated $2.0 million and $3.1 million for those periods. Most of the impact was in Security Solutions. The company also cited electronic component shortages and shipping delays as factors affecting Security Solutions revenue, and it warned that these issues may affect revenue in the second half of the year.
For full year 2022, guidance calls for revenue to meet or exceed full year 2021 revenue. The company expects ARR growth of 16% to 18% and adjusted EBITDA in the range of negative $5 million to negative $7 million. The outlook is for the full fiscal year, not the next quarter. Management believes the transformation plan will support margin expansion and increased profitability over time. The company also believes its financial resources are adequate to meet operating needs over the next twelve months.
Risks remain substantial. The transformation plan requires hiring and training sales and other employees, and execution may not proceed as planned. Market acceptance of new products, competition, pricing pressure, and changes in customer requirements could hurt results. Macroeconomic risks include recession, inflation, and political instability. The company also faces risks from the COVID-19 pandemic, cyber-attacks, intellectual property claims, regulatory changes, component shortages, supply chain disruptions, reliance on third parties, and goodwill or intangible asset impairment. Activist stockholders and the complexity of operating a global business add further uncertainty. The company's ability to unlock shareholder value depends on delivering on the strategic plan while managing costs and currency swings.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $52.4M | $59.2M | -11.3% | $50.8M | +3.3% |
| Gross profit | $36.7M | $34.3M | +7.1% | $35.5M | +3.5% |
| Gross margin | 69.9% | 57.9% | +12.0 pp | 69.8% | +0.1 pp |
| Research & development | $13.7M | $11.7M | +17.4% | $12.2M | +12.3% |
| Sales & marketing | $15.9M | $12.9M | +23.4% | $18.4M | -13.5% |
| General & administrative | $14.9M | $14.2M | +4.6% | $12.6M | +18.7% |
| Total operating expenses | $45.9M | $40.2M | +14.2% | $44.7M | +2.6% |
| Operating income (loss) | -$9.2M | -$6.0M | -55.1% | -$9.3M | +0.5% |
| Operating margin | -17.6% | -10.1% | -7.6 pp | -18.3% | +0.7 pp |
| Net income (loss) | $5.2M | -$13.8M | +137.9% | -$9.2M | +157.0% |
| Net margin | 9.9% | -23.3% | +33.2 pp | -18.0% | +28.0 pp |
| Diluted EPS | $0.13 | -$0.35 | +$0.48 | -$0.23 | +$0.36 |
Risks
In May 2022 OneSpan announced a three-year strategic transformation plan, and the filing warns that assumptions about customer acquisition, retention, market needs, and marketing may prove incorrect. Execution risks include challenges growing, training, and incentivizing the salesforce for the new go-to-market approach and difficulties building a sales pipeline, brand awareness, or product distribution channels.
The filing cites a challenging hiring environment and difficulties hiring and retaining employees, and MD&A notes that the previous CEO, CFO, and several other senior executives left during 2021 and early 2022 while the current CEO builds a new executive team. Restructuring actions also reduced headcount, which may strain execution.
Ongoing component shortages and shipping delays affecting Digipass devices could negatively impact revenue and cash flow for the Security Solutions segment, which OneSpan is relying on to help fund growth in Digital Agreements. MD&A states Security Solutions revenue was impacted by electronic component shortages and shipping delays during the three and six months ended June 30, 2022 and may affect second-half revenue.
OneSpan plans to manage Security Solutions for cash flow to help fund Digital Agreements growth, but Security Solutions revenue decreased $0.4 million, or approximately 1%, in the three months ended June 30, 2022 and decreased $2.0 million, or 2%, in the six months ended June 30, 2022 compared to prior-year periods. Security Solutions operating income also decreased $1.4 million, or 14%, in the quarter, which may pressure funding for the transformation.
OneSpan generates approximately 85% of revenue outside the United States, and exchange-rate changes, especially for the Euro, negatively impacted revenue by approximately $3.2 million and $4.8 million for the three and six months ended June 30, 2022 versus the applicable prior-year periods. Those changes also benefited operating expenses by an estimated $2.0 million and $3.1 million over the same periods, with most impact in Security Solutions.
The transformation plan depends on platform- and product-related initiatives, including buildout of a new transaction cloud platform, and the filing warns of difficulties and delays due to staffing and other resource constraints. Such delays could impede the expected acceleration of revenue growth and margin expansion.
The filing warns that economic recession, inflation, political instability or conflict, and changes in foreign exchange rates may negatively affect financial and operating results. MD&A also notes more restrained customer purchasing behavior compared to the height of the COVID-19 pandemic affected Digital Agreements growth.
SaaS KPIs
All quarters →Annual Recurring Revenue (ARR)
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from OneSpan Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.