OneSpan (OSPN) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $56.2M, down 4% year-over-year, but subscription revenue grew 29% to $33.6M, now 60% of total revenue.

• Adjusted EBITDA reached $17M (30% margin), up from $6.3M last year; both business units were profitable, with Digital Agreements segment profitable for the first time.

• Net income was $8.3M ($0.21/share) vs. a net loss of $4.1M last year; gross margin improved to 74% from 69%.

• Annualized Recurring Revenue (ARR) rose 9% to $164M; Net Retention Rate was 106%.

• Strong cash generation: $14M from operations in Q3, $43M year-to-date, with $77M in cash and no long-term debt.

Financial highlights

• Trailing twelve-month revenue totaled $245M as of September 30, 2024.

• Adjusted EBITDA for the trailing twelve months was $64M, a sharp increase from prior years.

• Q3 2024 net income was $8.3M, compared to a net loss of $4.1M in Q3 2023.

• Cumulative annualized cost savings reached $76.5M by September 30, 2024.

• Gross margin improved to 74% in Q3 2024, up from 69% in Q3 2023.

Outlook and guidance

• 2024 revenue guidance narrowed to $238M–$242M due to lower hardware shipments, offset by stronger subscription revenue.

• ARR guidance affirmed at $166M–$170M; adjusted EBITDA guidance raised to $65M–$67M due to improved operating leverage.

• Expect continued double-digit subscription revenue growth and higher gross margins in the low 70s.

• Management expects to continue cost reduction and restructuring actions through 2025, targeting further improvements in Adjusted EBITDA.

• Hardware revenues expected to continue modest decline into 2025.