Summary
OneSpan's fiscal 2026 first quarter showed a split picture. Revenue reached $65.95 million, up 4.1% from the prior-year quarter. Gross profit rose 3.0% to $48.51 million. But operating income fell 13.8% to $14.82 million. Net income dropped 20.3% to $11.56 million. Diluted EPS came in at $0.30, down 18.9%. Gross margin was 73.6%, down 0.8 percentage points from the prior-year quarter. Operating margin was 22.5%, down 4.6 percentage points. The top line grew, yet profit and margins compressed. That is the central tension in the quarter. OneSpan is pushing toward subscription revenue, and the income statement reflects the cost of that transition.
The company said both operating segments were profitable in the quarter. It also said subscription revenue grew in both Cybersecurity and Digital Agreements. Annual recurring revenue was $192.1 million at March 31, 2026, up 14% from $168.4 million at March 31, 2025. Net retention rate was 105%, down from 107% a year earlier. The decline in NRR came from fewer expansion contracts and more contracts that reduced in value, partly offset by lower churn. ARR excludes perpetual licenses, hardware, training, and professional services, so it is not a direct proxy for total revenue. Adjusted EBITDA, a non-GAAP measure, was $21.0 million, down from $23.0 million in the prior-year quarter. The company pointed to higher cost of goods sold, sales and marketing costs, and research and development costs, plus lower product and license revenue, partly offset by higher service and other revenue. Foreign exchange changes helped. A weaker U.S. dollar relative to the Euro favorably impacted total revenue by about $2.7 million and Cybersecurity revenue by about $2.5 million. Those same currency moves increased operating expenses by about $1.0 million.
Cash generation remained solid but slipped. Operating cash flow was $28.17 million, down 4.1% from the prior-year quarter. Capital expenditures were $3.12 million, up 91.9%. Deferred revenue was $63.13 million, up 15.2%. Remaining performance obligations were $98.04 million, up 1.7%. The company closed the Build38 acquisition in February 2026 and acquired Nok Nok Labs in June 2025. Both acquisitions added headcount and costs. Sales and marketing headcount averaged 169, up 7%. Research and development headcount averaged 245, up 10%. General and administrative headcount averaged 91, up 7%. Those additions support the product roadmap but weigh on near-term profitability. Revenue is heavily influenced by the timing of orders and shipments, as well as the timing of customer annual and multi-year renewals. That makes quarter-over-quarter comparisons noisy.
Management's outlook remains focused on profitable, efficient growth in both segments, with an emphasis on subscription revenue. The company expects cost of goods sold to increase in absolute dollars as the business grows, though it may fluctuate as a percentage of revenue. Gross margins are expected to fluctuate based on average selling price, manufacturing costs, and product mix. Operating expenses are generally based on anticipated revenue levels and are fixed over short periods, so small revenue changes can swing operating income. OneSpan believes its financial resources are adequate to meet operating needs over the next twelve months. The company also operates with heavy international exposure. In the quarter, about 79% of revenue and 57% of operating expenses were generated outside the U.S. Revenue was approximately 59% denominated in U.S. Dollars, 38% in Euros, and 3% in other currencies. The main risks include foreign exchange volatility, acquisition integration, customer renewal timing, competition, security breaches, reliance on third parties, and broader economic or trade disruption. The quarter showed growth in recurring revenue and a healthy ARR base, but profit and operating margin declined. Investors will watch whether subscription growth can offset cost pressure and whether NRR stabilizes.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $65.9M | $62.9M | +4.8% | $63.4M | +4.1% |
| Gross profit | $48.5M | $46.3M | +4.8% | $47.1M | +3.0% |
| Gross margin | 73.6% | 73.6% | -0.0 pp | 74.3% | -0.8 pp |
| Research & development | $9.1M | $8.0M | +13.6% | $7.9M | +14.5% |
| Sales & marketing | $12.7M | $12.6M | +0.7% | $11.5M | +10.7% |
| General & administrative | $11.0M | $12.2M | -10.3% | $9.5M | +14.8% |
| Total operating expenses | $33.7M | $33.8M | -0.2% | $29.9M | +12.7% |
| Operating income (loss) | $14.8M | $12.5M | +18.2% | $17.2M | -13.8% |
| Operating margin | 22.5% | 19.9% | +2.5 pp | 27.1% | -4.7 pp |
| Net income (loss) | $11.6M | $43.5M | -73.4% | $14.5M | -20.3% |
| Net margin | 17.5% | 69.2% | -51.7 pp | 22.9% | -5.4 pp |
| Diluted EPS | $0.30 | $1.12 | -$0.82 | $0.37 | -$0.07 |
| Net retention rate | 105.0% | 104.0% | +1.0 pp | 107.0% | -2.0 pp |
Risks
The acquisitions of Nok Nok Labs in June 2025 and Build38 GmbH in February 2026 increased headcount and operating expenses, including higher sales and marketing, research and development, general and administrative, and amortization costs, and contributed to $37.8 million of net cash used in investing activities for the three months ended March 31, 2026. Cash and cash equivalents declined to $49.8 million at March 31, 2026 from $70.5 million at December 31, 2025, and integration of the acquired businesses may continue to pressure results.
Operating income decreased 13.8% to $14.8 million for the three months ended March 31, 2026 from $17.2 million in the prior year period, and operating margin decreased to 22.5% from 27.1%, down 4.6 percentage points. Net income decreased 20.3% and diluted EPS decreased 18.9%, driven by higher operating expenses including headcount and acquisition-related costs.
Changes in foreign exchange rates, especially the weakening U.S. Dollar relative to the Euro, favorably impacted total revenue by approximately $2.7 million for the three months ended March 31, 2026, but increased operating expenses by $1.0 million and unfavorably impacted cost of goods sold by $0.7 million. Translation adjustments generated a comprehensive loss of $1.9 million, and the company may not fully balance Euro-denominated revenue and operating expenses if Euro revenue in Europe continues at current levels or declines.
Revenue is heavily influenced by the timing of orders and shipments and by customer annual and multi-year renewals. For the three months ended March 31, 2026, lower multi-year term license revenue due to timing of customer renewals and lower hardware revenue due to customer and product mix offset part of subscription growth, while EMEA revenue decreased $2.5 million, or 8%, from the prior year period.
Net Retention Rate was 105% at March 31, 2026 compared to 107% at March 31, 2025. The year-over-year change was primarily due to a decrease in expansion contracts and, to a lesser extent, an increase in contracts that reduced in value, partially offset by a reduction in churned contracts, which may slow future growth.
Working capital was $24.9 million at March 31, 2026 compared to $57.6 million at December 31, 2025, driven primarily by decreases in cash and cash equivalents, accounts receivables, and contract assets. Cash and cash equivalents were $49.8 million at March 31, 2026, down from $70.5 million at December 31, 2025, largely due to cash used for the Build38 acquisition and financing activities.
SaaS KPIs
All quarters →Adjusted EBITDA
Annual Recurring Revenue
Summary, forecast, risks and KPIs are extracted from OneSpan Inc.'s SEC filings for Q1 FY2026 (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.