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 $34M, now 60% of total revenue; both business units were profitable, with Digital Agreements segment profitable on a fully burdened basis for the first time.

• Net income for Q3 2024 was $8.3M ($0.21/share), reversing a $4.1M loss last year; adjusted EBITDA reached $17M (30% margin), and ARR rose 9% to $164M with a 106% net retention rate.

• Gross margin improved to 74% from 69% last year, and operating expenses fell 33% due to restructuring and cost reductions.

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

• Multi-year cost reduction initiatives delivered $18M in annualized savings year-to-date and $76.5M since May 2022, exceeding targets.

Financial highlights

• Trailing twelve-month revenue totaled $245M as of September 30, 2024; Q3 2024 revenue was $56.2M.

• Adjusted EBITDA for Q3 2024 was $16.7M (29.7% margin), up from $6.3M last year; trailing twelve-month adjusted EBITDA was $64M.

• Q3 2024 net income was $8.3M, compared to a net loss of $4.1M in Q3 2023; GAAP EPS: $0.21, Non-GAAP EPS: $0.33.

• Gross profit for Q3 was $41.5M (74% margin), up from $40.7M (69%) last year.

• Cash and cash equivalents were $77.5M at quarter-end, up from $43M at year-end 2023.

Outlook and guidance

• 2024 revenue guidance narrowed to $238M–$242M (from $238M–$246M) due to lower hardware shipments, partially offset by stronger subscription revenue.

• Adjusted EBITDA guidance raised to $65M–$67M (from $55M–$59M) on improved operating leverage.

• ARR guidance affirmed at $166M–$170M for year-end.

• 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 and operational efficiency.