Summary
OneSpan's FY2024 Q3 revenue decreased 4.4% year over year to $56.2 million. Gross profit rose 2.2% to $41.5 million, and gross margin expanded to 73.9% from 69.1%, up 4.8 percentage points. The quarter swung to an operating profit of $11.3 million from an operating loss in the prior-year quarter. Net income was $8.3 million, or $0.21 per diluted share, compared with a net loss in the prior-year quarter. For the first nine months of FY2024, revenue increased 5.7% to $182.0 million. Year-to-date gross profit rose 13.2% to $129.3 million. Year-to-date operating income was $33.0 million, compared with an operating loss in the prior-year period. Year-to-date net income was $28.3 million, or $0.73 per diluted share, compared with a net loss in the prior-year period.
Profitability improved because cost reduction actions lowered operating expenses. Operating margin was 20.0% in the quarter, up 28.2 percentage points year over year. Year to date, operating margin was 18.1%, up 36.0 percentage points. Gross margin for the nine months was 71.0%, up 4.7 percentage points. The company has reduced headcount by eliminating approximately 330 redundant positions. It plans to incur additional restructuring charges through December 31, 2025.
Cash generation was strong. Operating cash flow was $14.0 million in the quarter, up 287.7% from the prior-year quarter. Year to date, operating cash flow was $43.2 million, up 412.5% from the prior-year period. Capital expenditures were $1.95 million in the quarter, down 23.3%, and $7.27 million year to date, down 19.5%. Deferred revenue was $51.35 million, down 7.2% from the prior-year quarter. Remaining performance obligations were $91.04 million, up 31.2% from the prior-year quarter.
Non-GAAP metrics and operating KPIs point to a mix of growth and contraction. Annual recurring revenue increased 9% year over year to $163.9 million. Net retention rate was 106%, down from 108% at September 30, 2023. Adjusted EBITDA was $16.7 million, compared with $6.3 million in the prior-year quarter. Non-GAAP net income was $13.1 million, or $0.33 per diluted share, compared with $3.6 million, or $0.09 per diluted share, in the prior-year quarter. The company said subscription revenue grew while hardware token shipments fell. Digital Agreements grew and Security Solutions declined. ARR growth was driven by an increase in subscription contracts and new logos.
Guidance for the full year 2024 was updated. OneSpan narrowed revenue guidance to $238 million to $242 million from a previous range of $238 million to $246 million. The company affirmed ARR guidance of $166 million to $170 million. It raised Adjusted EBITDA guidance to $65 million to $67 million from a previous range of $55 million to $59 million. Management tied the revenue revision to lower anticipated hardware token shipments, partly offset by stronger subscription revenue. The higher Adjusted EBITDA outlook reflects cost savings and operating leverage. Risks include execution of the business transformation and restructuring plan, unintended costs, employee turnover, customer retention, competition, lengthy sales cycles, security breaches, supply chain disruptions, and foreign exchange fluctuations. The company also faces macroeconomic uncertainty in banking and financial services, which can lengthen sales cycles and increase price sensitivity. The company also said it expects the remaining workforce reductions to occur by the end of 2024.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $56.2M | $60.9M | -7.7% | $58.8M | -4.4% |
| Gross profit | $41.5M | $40.3M | +3.0% | $40.7M | +2.2% |
| Gross margin | 73.9% | 66.2% | +7.7 pp | 69.1% | +4.8 pp |
| Research & development | $7.5M | $8.3M | -9.7% | $10.1M | -25.7% |
| Sales & marketing | $10.1M | $10.5M | -3.5% | $16.7M | -39.2% |
| General & administrative | $11.3M | $11.6M | -1.9% | $11.6M | -1.9% |
| Total operating expenses | $30.3M | $32.7M | -7.4% | $45.5M | -33.4% |
| Operating income (loss) | $11.3M | $7.6M | +47.3% | -$4.8M | +334.7% |
| Operating margin | 20.0% | 12.5% | +7.5 pp | -8.2% | +28.2 pp |
| Net income (loss) | $8.3M | $6.6M | +26.2% | -$4.1M | +300.2% |
| Net margin | 14.7% | 10.8% | +4.0 pp | -7.0% | +21.7 pp |
| Diluted EPS | $0.21 | $0.17 | +$0.04 | -$0.10 | +$0.31 |
| Net retention rate | 106.0% | 112.0% | -6.0 pp | 108.0% | -2.0 pp |
Risks
Macroeconomic uncertainties in the banking and financial services segments led to longer sales cycles and greater price sensitivity. The MD&A cites these conditions as factors that made it harder to build the Digital Agreements sales pipeline and achieve planned growth.
The e-signature market is increasingly mature and competitive, with limited brand awareness for OneSpan and higher pricing aggressiveness from competitors. These pressures made it more difficult to generate demand for Digital Agreements solutions and improve sales force productivity.
Revenue is heavily influenced by the timing of orders, shipments, and customer renewals, reflecting the transactional nature of significant parts of the business. This timing sensitivity can cause quarter-over-quarter volatility, as seen in the current quarter revenue decline of 4.4% versus the prior-year quarter.
The company is executing an updated strategic transformation plan and the 2023 Actions, which carry risks of higher-than-anticipated restructuring charges, operational disruption, litigation or regulatory actions, and employee turnover. OneSpan expects additional restructuring charges of approximately $0.5 million to $1.5 million in future periods.
Digital Agreements gross margin decreased to 72% for the three months ended September 30, 2024 from 75% in the prior-year period, and to 68% for the nine months ended September 30, 2024 from 74%, due to higher cloud platform costs and depreciation, including write-offs of capitalized software. Continued margin compression could pressure profitability as Digital Agreements grows.
Foreign exchange transaction losses aggregated $2.0 million and $1.8 million for the three and nine months ended September 30, 2024, compared with losses of $0.1 million and $0.5 million in the prior-year periods. Management notes it may not be able to fully balance Euro-denominated revenue and operating expenses if Euro revenue continues or declines.
SaaS KPIs
All quarters →Annual Recurring Revenue (ARR)
Adjusted EBITDA
Net Retention Rate (NRR)
Summary, forecast, risks and KPIs are extracted from OneSpan Inc.'s SEC filings for Q3 FY2024 (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.