OneSpan Inc. Q1 2026 Earnings Call Summary

1Key Financial Results and Metrics

Total Revenue: $65.9 million, up 4.1% year-over-year.

Adjusted EBITDA: $21 million, representing a margin of 31.9%.

Annual Recurring Revenue (ARR): $192.1 million, up 14.1% year-over-year.

Subscription Revenue: $52.7 million, accounting for 80% of total revenue, grew 8.2%.

GAAP Operating Income: $14.8 million, down from $17.2 million year-over-year.

GAAP Net Income per Share: $0.30, compared to $0.37 in Q1 2025.

Cash from Operations: $28.2 million.

Gross Margin: Approximately 74%, consistent with the prior year.

2Strategic Updates and Business Highlights

Acquisitions: Completed the acquisition of Build 38, enhancing mobile application security capabilities. Nok Nok Labs acquisition has increased ARR by 20% since its acquisition.

Product Development: Focus on integrating AI-driven capabilities in digital agreements and enhancing mobile application security.

Customer Retention: Gross revenue retention rates improved to 90% overall and 94% in digital agreements.

Capital Allocation: Returned over $10 million to shareholders through dividends and share repurchases.

3Forward Guidance and Outlook

Full Year 2026 Guidance:

Total revenue expected between $244 million to $249 million.

ARR guidance raised to $194 million to $198 million.

Adjusted EBITDA projected between $66 million to $68 million.

Growth Expectations: Anticipated growth in software and services revenue, particularly in digital agreements, with a slight headwind in cybersecurity due to two non-renewing contracts.

4Bad News, Challenges, or Points of Concern

Hardware Revenue Decline: Hardware revenue continues to decline, comprising only 16% of total revenue, with expectations for ongoing secular decline.

Non-Renewing Contracts: Anticipated $3 million headwind in ARR from two contracts not renewing, primarily affecting cybersecurity.

Increased Operating Costs: Operating income decreased due to higher costs related to acquisitions and investments in growth.

5Notable Q&A Insights

ARR Growth: Organic ARR growth was approximately 7-8%, excluding contributions from recent acquisitions.

Market Positioning: The acquisition of Nok Nok is expected to enhance customer retention and attract new clients as the market shifts towards passwordless authentication.

Geographic Revenue Mix: Noted a shift in revenue sources, with a decrease in EMEA contributions and a focus on growing in North America.

Future of Hardware: While hardware is in decline, there is potential for stabilization through FIDO2 security offerings. Overall, OneSpan Inc. reported a solid first quarter with strong profitability and growth in recurring revenue, while navigating challenges in hardware and certain customer contracts. The company remains optimistic about its strategic investments and future growth trajectory.