Summary
OneSpan closed fiscal 2023 with a GAAP profit in the fourth quarter, but the full year still showed widening losses. Fourth-quarter revenue was $62.93 million. Gross profit rose 14.5% to $43.47 million, and gross margin was 69.1%. Operating income was $1.82 million, compared with an operating loss of $4.01 million in the prior-year quarter. Net income was $0.44 million, compared with a net loss of $3.10 million in the prior-year quarter. Diluted EPS was $0.01, compared with a loss of $0.08 in the prior-year quarter. For the full year, revenue rose 7.4% to $235.11 million. Gross profit rose 6.2% to $157.72 million. Gross margin was 67.1%, down 0.8 percentage points from the prior year. The full-year operating loss widened to $28.87 million from $27.12 million. The full-year net loss widened to $29.80 million from $14.43 million. Diluted EPS was a loss of $0.74, compared with a loss of $0.36 in the prior year. Operating margin for the full year was -12.3%, up 0.1 percentage points from the prior year.
Cash flow and backlog metrics paint a mixed picture. Fourth-quarter operating cash flow was $3.10 million, down 60.8% from the prior-year quarter. Full-year operating cash flow was -$10.74 million, compared with -$5.76 million in the prior year. Fourth-quarter capital expenditures were $3.45 million, up 40.8% from the prior-year quarter. Full-year capital expenditures were $12.48 million, up 149.9% from the prior year. Deferred revenue at quarter end was $73.48 million, up 3.6% from the prior-year quarter. Remaining performance obligations were $92.44 million, up 19.8% from the prior-year quarter. The RPO growth suggests a healthy pipeline of contracted work, but the negative full-year operating cash flow shows that reported profitability and cash generation remain out of sync.
Non-GAAP metrics offer some encouragement. Annual recurring revenue was $154.6 million, up 11% from $138.7 million at the end of 2022. Net retention rate was 110%, compared with 107% at the end of 2022. Adjusted EBITDA was $11.997 million, compared with $6.396 million in the prior year. The company continues its business transformation and restructuring plan. It reduced headcount by approximately 270 positions. Management completed a substantial majority of the planned workforce reductions by the end of 2023, with most remaining reductions expected over the course of 2024 and vendor contract actions planned for completion by the end of 2025. In January 2024, Victor Limongelli was appointed interim chief executive officer, replacing Matthew Moynahan. The company also completed a tender offer in December 2023, repurchasing 2,380,834 shares at $10.50 per share for approximately $25.0 million.
The quarter's GAAP profit is a clear improvement, but the full-year loss widened and operating cash flow remained negative. Risks include macroeconomic uncertainty in banking and financial services, longer sales cycles, greater price sensitivity, increasing competition in e-signature, limited brand awareness, and challenges with sales force productivity. Foreign exchange also matters. The company generates about 83% of revenue and incurs about 58% of operating expenses outside the United States. In 2023, approximately 53% of revenue was denominated in U.S. dollars, 43% in Euros, and 4% in other currencies. Changes in foreign exchange rates favorably impacted total revenue by approximately $2.3 million and unfavorably impacted operating expenses by approximately $0.9 million. The company's ability to execute its cost reduction plans, stabilize Digital Agreements, and improve cash generation will determine whether the fourth-quarter profit becomes a trend.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $62.9M | $58.8M | +7.0% | $56.6M | +11.1% |
| Gross profit | $43.5M | $40.7M | +6.9% | $38.0M | +14.5% |
| Gross margin | 69.1% | 69.1% | -0.1 pp | 67.0% | +2.0 pp |
| Research & development | $8.7M | $10.1M | -13.8% | $8.1M | +7.3% |
| Sales & marketing | $13.8M | $16.7M | -16.9% | $15.8M | -12.1% |
| General & administrative | $14.2M | $11.6M | +23.1% | $16.0M | -11.1% |
| Total operating expenses | $41.6M | $45.5M | -8.4% | $42.0M | -0.8% |
| Operating income (loss) | $1.8M | -$4.8M | +137.9% | -$4.0M | +145.3% |
| Operating margin | 2.9% | -8.2% | +11.0 pp | -7.1% | +10.0 pp |
| Net income (loss) | $441.0K | -$4.1M | +110.7% | -$3.1M | +114.2% |
| Net margin | 0.7% | -7.0% | +7.7 pp | -5.5% | +6.2 pp |
| Diluted EPS | $0.01 | -$0.10 | +$0.11 | -$0.08 | +$0.09 |
| Customers | 10 | — | — | 10 | ±0.0% |
| Net retention rate | 110.0% | 108.0% | +2.0 pp | 107.0% | +3.0 pp |
Risks
The company changed its 2022 strategic plan after determining it was unlikely to achieve Digital Agreements revenue growth targets, and the 2023 Actions include workforce reductions of approximately 270 positions plus expected restructuring charges of $11.0 million to $12.0 million for severance and $2.0 million to $3.0 million for vendor terminations. These actions may not achieve intended benefits and could disrupt operations or reduce employee morale.
The e-signature market is increasingly mature and competitive, with DocuSign and Adobe Systems as larger primary competitors, and competitors may better integrate generative AI into their products. The company also faces higher pricing aggressiveness and limited brand awareness among e-signature buyers.
The sales cycle in the financial services market is often nine to 18 months, and macroeconomic uncertainties in banking and financial services have resulted in longer sales cycles and greater price sensitivity. This made it harder to build the Digital Agreements sales pipeline and improve sales force productivity.
The company terminated approximately 270 employees in 2022 and 2023 and terminated its previous CEO in January 2024, appointing an interim CEO. These layoffs and leadership changes have created uncertainty and may make retaining key employees more difficult, time-consuming, and expensive.
Approximately 83% of 2023 revenue was generated outside the U.S., and a majority of revenue comes from banking and financial services customers. Consolidation, economic uncertainty, and geopolitical tensions in those markets could reduce demand, lengthen sales cycles, and increase price competition.
Operating cash flow was negative $10.7 million for FY2023, down 86.4% from negative $5.8 million for FY2022, and net cash balances decreased to $42.5 million at December 31, 2023 from $96.2 million at December 31, 2022. Working capital decreased 64% to $31.5 million, which may require additional capital.
The top 10 largest customers contributed 22% of total worldwide revenue in 2023, and the loss of substantial sales to any one of them could adversely affect revenues and profits.
The Digipass authenticator business depends on a limited number of suppliers and assembles devices in mainland China and Romania. Prior disruptions from China's Zero COVID policy and extreme weather affected contract manufacturers, and inventory forecasts could lead to substantial inventory-related losses.
The company has experienced several security incidents in the past, none material to date, but as a digital agreements and cybersecurity provider serving banks it may be an attractive target. A future material event could cause significant liability, reputational harm, and customer loss.
At December 31, 2023, goodwill and intangible assets had a net book value of $104.5 million. An adverse change in market conditions or critical assumptions could result in a significant impairment charge.
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 Q4 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.