Summary
OneSpan's second quarter of 2021 showed a business still shifting toward recurring revenue while total sales and profitability weakened. Total revenue was $52.3 million, down 5% from the prior-year quarter. For the first six months of 2021, revenue was $103.1 million, down 7%. Gross profit was $35.8 million in the quarter, down 2.5%, and $71.3 million for the six months, down 7.5%. Gross margin was 68.5% in the quarter, up 1.7 percentage points, and 69.1% for the six months, flat. The GAAP operating loss widened to $8.9 million in the quarter and $18.2 million for the six months. GAAP net loss was $6.7 million, or $0.17 per diluted share, and the loss widened. For the six months, GAAP net loss was $15.8 million, or $0.40 per diluted share, and the loss widened. Operating margin was negative 16.9% in the quarter, down 13.9 percentage points, and negative 17.6% for the six months, down 16.8 percentage points.
The recurring side of the model grew. Recurring revenue rose 24% to $28.8 million in the quarter, and annual recurring revenue rose 24% to $111.7 million. Dollar-based net expansion was 116%. For the first six months, recurring revenue increased 17% to $57.7 million. The company said growth exceeded 50% across both its e-signature and mobile security offerings. Hardware and perpetual software license sales remained weak, and the company pointed to slower progress with some other solutions. Revenue in the Americas grew while EMEA and Asia Pacific declined.
Costs rose faster than revenue. Operating expenses increased, driven by higher headcount and personnel costs. Average sales, marketing, support, and operating headcount was 379 in the quarter, up 11%, and 374 for the six months, up 12%. Average research and development headcount was 352 in the quarter and 355 for the six months, up about 12% in both periods. Average general and administrative headcount was 134 in both periods, up about 11% and 13%. The company also cited increased labor costs and gross margin pressure. Operating cash flow was negative $2.4 million in the quarter, down from the prior-year quarter, and $1.2 million for the six months, down from the prior-year period. Capital expenditures were $0.5 million in the quarter, down 30.4%, and $1.2 million for the six months, down 44.3%. Deferred revenue was $53.7 million at June 30, 2021. Remaining performance obligations were $53.8 million, up 42% from the prior-year quarter. Adjusted EBITDA was negative $1.0 million in the quarter, down from $3.1 million, and negative $6.2 million for the six months, down from $8.3 million. Non-GAAP net loss was $1.8 million, or $0.04 per diluted share, compared with non-GAAP net income of $0.8 million, or $0.02 per diluted share. For the six months, non-GAAP net loss was $8.0 million, or $0.20 per diluted share, compared with non-GAAP net income of $4.0 million, or $0.10 per diluted share.
Guidance for the full year 2021 was cut. OneSpan now expects ARR growth of 17% to 20%, down from prior guidance of 22% to 26%. Adjusted EBITDA guidance is negative $12 million to negative $15 million, compared with prior guidance of approximately break-even. The company also lowered its total revenue and recurring revenue guidance ranges, citing an updated second half 2021 outlook. Management announced leadership changes. Steven Worth, previously Interim Chief Financial Officer, General Counsel and Chief Compliance Officer, became Interim Chief Executive Officer, replacing Scott Clements, who left the company and resigned from the Board. John Bosshart, Chief Accounting Officer, added the Interim Chief Financial Officer role. Al Nietzel was appointed Chair of the Board, replacing John N. Fox Jr., who retired.
Risks remain significant. The company cited slower progress with some solutions, increased labor costs, gross margin pressure, and some pandemic resurgence as pressures for the remainder of the year. COVID-19 has lengthened sales cycles and reduced demand for some security solutions, especially hardware authentication products, and delayed implementation of certain software solutions. OneSpan also warned about weaker customer demand, requests for discounts or extended payment terms, customer bankruptcies, supply chain disruption, employee staffing constraints, and government restrictions. Currency is another risk. About 85% of revenue in the quarter and 86% for the six months was generated outside the United States, while about 49% of revenue in both periods was denominated in U.S. dollars. About 67% of operating expenses in the quarter and 69% for the six months were incurred outside the United States. Cybersecurity risk is material for cloud-based solutions. The company reported no cyber incidents in the first six months of 2021 that had a significant impact, but it noted that an incident could substantially impair growth and cause significant monetary and reputational harm. Activist stockholders and the execution of the transformative strategy are also named risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $52.3M | $50.8M | +3.0% | $55.0M | -4.9% |
| Gross profit | $35.8M | $35.5M | +1.0% | $36.7M | -2.5% |
| Gross margin | 68.5% | 69.8% | -1.3 pp | 66.8% | +1.6 pp |
| Research & development | $12.1M | $12.2M | -1.2% | $10.5M | +14.8% |
| Sales & marketing | $16.0M | $18.4M | -13.0% | $14.7M | +8.9% |
| General & administrative | $15.0M | $12.6M | +19.8% | $10.8M | +38.7% |
| Total operating expenses | $44.7M | $44.7M | -0.2% | $38.4M | +16.3% |
| Operating income (loss) | -$8.9M | -$9.3M | +4.7% | -$1.7M | -425.1% |
| Operating margin | -16.9% | -18.3% | +1.4 pp | -3.1% | -13.9 pp |
| Net income (loss) | -$6.7M | -$9.2M | +26.9% | -$2.0M | -230.1% |
| Net margin | -12.8% | -18.0% | +5.2 pp | -3.7% | -9.1 pp |
| Diluted EPS | -$0.17 | -$0.23 | +$0.06 | -$0.05 | -$0.12 |
Risks
COVID-19 has lengthened sales cycles and reduced demand for hardware authentication tokens while delaying software implementations. Total revenue decreased 4.9% in FY2021 Q2 versus the prior-year quarter and 7.4% for the six months ended June 30, 2021, while the operating loss widened to $8.86 million from $1.69 million in the prior-year quarter.
Revenue is concentrated in EMEA and in the banking and finance vertical, so significant changes in the European banking market may materially affect revenue. EMEA revenue was 47% of total revenue in the three months ended June 30, 2021 and declined 12% versus the prior-year period.
A cyber incident involving cloud-based solutions could have a material impact because those solutions process customer information and are expected to provide substantial future growth. No cyber incidents had a significant impact in the first six months of 2021, but the company expects security costs to increase.
The hardware business faces manufacturing, supply chain, shipping, and distribution risks tied to COVID-19. OneSpan experienced delays and increased costs fulfilling hardware orders, and hardware product revenue decreased $4.7 million in the three months ended June 30, 2021 versus the prior-year period.
Approximately 85% of FY2021 Q2 revenue and 86% of six-month revenue was generated outside the United States, while 67% and 69% of operating expenses were incurred outside the United States, so Euro and Canadian Dollar moves can significantly affect results. Currency changes increased revenue by approximately $2.4 million in the quarter and $4.6 million for the six months ended June 30, 2021; without them, gross margin would have been about 5 percentage points lower.
Operating expenses rose due to higher headcount and higher average cost per employee, with sales and marketing headcount 11% higher and research and development headcount about 12% higher in the three months ended June 30, 2021 versus the prior year. Management expects sales and marketing, research and development, and general and administrative expenses to increase in absolute dollars.
SaaS KPIs
All quarters →Annual Recurring Revenue (ARR)
Adjusted EBITDA
Dollar-based net expansion (DBNE)
Recurring Revenue
Summary, forecast, risks and KPIs are extracted from OneSpan Inc.'s SEC filings for Q2 FY2021 (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.