Summary
OneSpan's fiscal 2025 third quarter showed modest top-line growth but weaker profitability. Total revenue was $57.06 million, up 1.4% from the prior-year quarter. Gross profit rose 1.1% to $42.00 million, while gross margin slipped 0.3 percentage points to 73.6%. Operating income fell 26.9% to $8.23 million, and operating margin dropped 5.6 percentage points to 14.4%. Net income declined 21.3% to $6.51 million. Diluted EPS was $0.17, down $0.04 from the prior-year quarter. Operating cash flow was $11.30 million, down 19.2%. Capital expenditures were $2.54 million, up 29.9%. Deferred revenue rose 3.9% to $53.35 million, and remaining performance obligations increased 12.7% to $102.59 million.
For the first nine months of fiscal 2025, revenue was $180.26 million, down 1.0% from the prior-year period. Gross profit increased 2.9% to $133.06 million, and gross margin improved 2.8 percentage points to 73.8%. Operating income rose 8.8% to $35.92 million, and operating margin expanded 1.8 percentage points to 19.9%. Net income grew 3.8% to $29.36 million. Diluted EPS was $0.76, up $0.03. Operating cash flow was $46.88 million, up 8.4%. Capital expenditures were $6.02 million, down 17.3%.
The quarter's operational picture was mixed. Annual recurring revenue at September 30, 2025 was $180.2 million, 10% higher than $163.9 million a year earlier. Net retention rate was 103%, down from 106%. Adjusted EBITDA was $17.5 million for the quarter, compared with $17.0 million in the prior-year quarter. For the nine months, Adjusted EBITDA was $58.2 million versus $53.4 million. Both reportable segments, Security Solutions and Digital Agreements, were profitable. Management continues to emphasize subscription revenue growth. The mobile-first trend continued to pressure hardware sales, particularly Digipass authenticator devices, as banks shift toward software authentication on mobile devices. Partly offsetting that, some customers moved from single-year to multi-year on-premises term subscription contracts, which can pull license revenue forward. Foreign exchange changes favorably affected total revenue in both periods.
Management's strategic actions included the June 4, 2025 acquisition of Nok Nok Labs, a passwordless authentication provider using FIDO protocols. The deal added technology and headcount to the Security Solutions segment. OneSpan also entered a $100.0 million revolving credit facility on June 23, 2025, with no borrowings outstanding at September 30, 2025. The restructuring plan from 2023 is winding down. Management expects minimal charges for the remainder of 2025 and plans to terminate the plan on December 31, 2025. The company has eliminated about 341 positions under the plan.
Risks remain familiar for a global software and hardware vendor. The filing cites difficulties increasing or maintaining revenue growth, the ability to attract new customers and retain or expand sales to existing ones, and the potential loss of one or more large customers. Competition, lengthy sales cycles, and challenges retaining key employees are also named. Security breaches or cyber-attacks could harm the business. Component shortages, supply chain delays, tariffs, inflation, and economic recession are external threats. Foreign currency fluctuations matter because most revenue and a large share of operating expenses are outside the United States. The company's ability to manage the hardware decline and grow higher-margin subscription revenue will determine whether the nine-month margin gains continue. Management believes its financial resources are adequate to meet operating needs over the next twelve months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $57.1M | $59.8M | -4.7% | $56.2M | +1.4% |
| Gross profit | $42.0M | $44.0M | -4.5% | $41.5M | +1.1% |
| Gross margin | 73.6% | 73.5% | +0.2 pp | 73.9% | -0.3 pp |
| Research & development | $8.8M | $9.4M | -6.9% | $7.5M | +16.8% |
| Sales & marketing | $11.4M | $11.5M | -1.0% | $10.1M | +12.4% |
| General & administrative | $12.2M | $11.8M | +3.2% | $11.3M | +7.1% |
| Total operating expenses | $33.8M | $33.5M | +0.9% | $30.3M | +11.5% |
| Operating income (loss) | $8.2M | $10.5M | -21.7% | $11.3M | -26.9% |
| Operating margin | 14.4% | 17.6% | -3.1 pp | 20.0% | -5.6 pp |
| Net income (loss) | $6.5M | $8.3M | -21.9% | $8.3M | -21.3% |
| Net margin | 11.4% | 13.9% | -2.5 pp | 14.7% | -3.3 pp |
| Diluted EPS | $0.17 | $0.21 | -$0.04 | $0.21 | -$0.04 |
| Net retention rate | 103.0% | 101.0% | +2.0 pp | 106.0% | -3.0 pp |
Risks
Security Solutions revenue decreased 1% for the quarter and 3% year to date as customers adopt mobile-first authentication over Digipass hardware, reducing hardware sales volumes. This trend may continue to pressure Security Solutions revenue.
Operating expenses increased 11% for the quarter while operating income decreased 26.9% and operating margin fell 5.6 percentage points. Because operating expenses are generally fixed over short periods, small revenue variations can cause significant swings in operating income.
Revenue is heavily influenced by timing of orders, shipments, and customer renewals. The shift of certain customers from single-year to multi-year on-premises term subscription contracts can positively impact revenue in a period because license revenue is generally recognized upfront, making period-over-period comparisons volatile.
For the nine months ended September 30, 2025, approximately 79% of revenue and 55% of operating expenses were outside the U.S. Changes in foreign exchange rates favorably impacted revenue by $1.5 million year to date, but translation adjustments generated a $0.9 million comprehensive loss for the quarter, and the company may not fully balance Euro revenue declines with Euro expenses.
Net retention rate declined to 103% at September 30, 2025 from 106% at September 30, 2024, primarily due to a decrease in expansion contracts and an increase in contracts that reduced in value, partially offset by lower churn. Slower expansion may limit recurring revenue growth.
The June 4, 2025 acquisition of Nok Nok Labs increased operating expenses, sales and marketing, research and development, and amortization of intangible assets. Integration challenges or impairment of acquired intangibles could affect results.
Income tax expense was $7.5 million for the nine months ended September 30, 2025 compared to $4.7 million for the prior year period, driven by higher income before taxes, an increase in the effective tax rate from higher nondeductible expenses, and a lower valuation allowance benefit. Changes in geographic earnings mix could continue to affect the effective tax rate.
The restructuring plan, including the 2023 Actions, is scheduled to terminate on December 31, 2025, with vendor contract actions planned for completion by then. The company expects less than $0.1 million to $0.2 million of additional restructuring charges in the remainder of 2025, and execution may disrupt operations.
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 FY2025 (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.