Summary
OneSpan opened the first quarter of its three-year transformation plan with revenue of $57.6 million, up 9.8% from $52.4 million in the prior-year quarter. The gain came from Security Solutions, where revenue rose 18% year over year, while Digital Agreements revenue fell 13% as the company continued to sunset its on-premises e-signature product. Subscription revenue grew 29% year over year. OneSpan reports results in two segments, Digital Agreements and Security Solutions, and the transformation plan began on January 1, 2023. Management said foreign exchange rates reduced revenue by about $1.3 million in the quarter.
Profitability is the harder story. Gross profit rose 7.1% to $39.3 million, but gross margin slipped to 68.2% from 69.9% a year earlier, a decline of 1.7 percentage points. Management pointed to customer and product mix and higher freight costs. The operating loss narrowed to $8.1 million from $9.2 million, and operating margin improved to negative 14.1% from negative 17.6%. The bottom line swung sharply. Net loss was $8.4 million against net income of $5.2 million in the prior-year quarter, and diluted EPS was $(0.21) versus $0.13. The prior-year quarter included a $14.8 million gain on the sale of the Promon investment that did not repeat. On a non-GAAP basis, net loss was $3.7 million, or $(0.09) per diluted share, and Adjusted EBITDA was $(1.6) million compared with $0.2 million a year earlier.
Cash generation improved. Operating cash flow was $13.2 million, up from $3.7 million in the prior-year quarter, helped by a $33.1 million reduction in accounts receivable. Capital expenditures rose to $3.1 million from $0.3 million. Deferred revenue was $59.8 million, up 2.5%, and remaining performance obligations were $66.2 million, up 10.8%. Annual recurring revenue reached $141.3 million, up 10%, while the net retention rate was 108%, down from 115% a year earlier. Management said its financial resources are adequate to meet operating needs over the next twelve months.
Full-year 2023 guidance puts the top line at $232 million to $242 million, growth of 6% to 11%, ARR at $157 million to $164 million, growth of 13% to 18%, and Adjusted EBITDA at $3 million to $6 million. The company said it is investing in sales and marketing and product development to drive ARR growth in the second half of the year. Sales and marketing expense rose 33%, while research and development expense fell 22%, helped by $2.8 million of capitalized cloud platform costs.
Risks remain substantial. Management flagged uncertain market conditions tied to the Russia-Ukraine conflict, instability in parts of the banking sector, supply chain constraints and inflation. Customers are scrutinizing spending, which has stretched sales cycles. Security Solutions benefited from the timing of certain contract renewals, and management expects that segment's growth to be more modest for the rest of 2023. Digital Agreements swung to a segment operating loss after a change in how expenses are allocated between the two segments. Average research and development headcount was approximately 14% lower than a year earlier, while average sales, marketing, support and operating headcount was 2% lower. The company also closed the ProvenDB acquisition in February 2023, and restructuring actions continue through December 31, 2025.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $57.6M | $56.6M | +1.7% | $52.4M | +9.8% |
| Gross profit | $39.3M | $38.0M | +3.5% | $36.7M | +7.1% |
| Gross margin | 68.2% | 67.0% | +1.2 pp | 69.9% | -1.7 pp |
| Research & development | $9.5M | $8.1M | +16.3% | $13.7M | -31.2% |
| Sales & marketing | $20.0M | $15.8M | +27.0% | $15.9M | +25.9% |
| General & administrative | $16.7M | $16.0M | +4.1% | $14.9M | +11.8% |
| Total operating expenses | $47.4M | $42.0M | +13.0% | $45.9M | +3.3% |
| Operating income (loss) | -$8.1M | -$4.0M | -102.8% | -$9.2M | +12.0% |
| Operating margin | -14.1% | -7.1% | -7.0 pp | -17.6% | +3.5 pp |
| Net income (loss) | -$8.4M | -$3.1M | -169.8% | $5.2M | -260.3% |
| Net margin | -14.5% | -5.5% | -9.0 pp | 9.9% | -24.4 pp |
| Diluted EPS | -$0.21 | -$0.08 | -$0.13 | $0.13 | -$0.34 |
| Net retention rate | 108.0% | 107.0% | +1.0 pp | — | — |
Risks
MD&A states customers increased scrutiny on spending decisions amid inflation, banking-sector instability, supply chain constraints, and geopolitical conflict, resulting in longer sales cycles for both existing and new customer opportunities. Net Retention Rate declined to 108% at March 31, 2023 from 115% at March 31, 2022, reflecting these pressures along with contract-renewal timing and lost contracts.
The three-year strategic transformation plan that began January 1, 2023 involves numerous risks and uncertainties, including the need to enhance enterprise go-to-market strategy, expand the direct salesforce, and drive margin expansion. Sales and marketing expenses increased 33% and general and administrative expenses increased 13% in the three months ended March 31, 2023, supporting the plan but pressuring profitability.
Digital Agreements revenue decreased $1.7 million, or 13%, in the three months ended March 31, 2023, and the segment swung to an operating loss of $6.0 million from operating income of $1.1 million in the prior-year period. The decline was driven by lower on-premises subscription revenue from non-renewals and the strategy to sunset the on-premises e-signature product, while total company net income swung to a loss.
Supply chain constraints and production delays lowered customer purchase volumes of hardware products, while price increases for hardware components and higher freight costs raised cost of product and license revenue by 24% in the three months ended March 31, 2023. These factors contributed to total gross margin declining to 68% from 70%.
The restructuring plan eliminated approximately 100 positions, and average research and development headcount fell about 14% in the three months ended March 31, 2023 versus the prior-year period. The transformation plan depends on hiring, training, and retaining sales and other employees, and forward-looking factors include departures of senior management or other key employees.
Foreign exchange rate changes negatively impacted total revenue by approximately $1.3 million and ARR by approximately $0.9 million in the three months ended March 31, 2023, and negatively impacted Adjusted EBITDA by approximately $1.1 million. The company generates most revenue outside the U.S., leaving results exposed to Euro and Canadian Dollar movements.
SaaS KPIs
All quarters →Annual Recurring Revenue (ARR)
Net Retention Rate (NRR)
Summary, forecast, risks and KPIs are extracted from OneSpan Inc.'s SEC filings for Q1 FY2023 (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 2, 2026.