OneSpan (OSPN -2.79%), a digital identity and authentication company focused on banking security and e-signature solutions, reported its earnings for the second quarter of fiscal 2025 on August 5, 2025. The company delivered results that exceeded Wall Street expectations, with both GAAP revenue and non-GAAP EPS surpassing analyst estimates, with non-GAAP earnings per share of $0.34 and GAAP revenue of $59.8 million, Both non-GAAP EPS and GAAP revenue were above analyst forecasts. While Total GAAP revenue declined 2% year-over-year, profitability improved and recurring subscription-based revenue continued rising. The company’s bottom line benefited from higher gross margins and disciplined cost controls. Overall, the quarter showcased progress in shifting to a subscription-centric business with improving profitability but limited top-line growth.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.34 | $0.29 | $0.31 | 9.7% |
| Revenue (GAAP) | $59.8 million | $59.03 million | $60.9 million | (1.8%) |
| Operating Income | $10.5 million | $7.6 million | 38.2% | |
| Adjusted EBITDA | $17.6 million | $16.2 million | 8.6% | |
| Subscription Revenue | $36.2 million | $29.6 million | 22.3% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About OneSpan and Its Strategic Focus
OneSpan delivers software and hardware products that protect banks, financial institutions, and enterprises during digital transactions. Its primary offerings include authentication devices, identity verification, and Digital Agreements, which let customers sign forms and contracts online.
In recent years, the company has shifted its business model from selling hardware-based security devices to focusing on cloud-based software delivered as a subscription, also known as software-as-a-service (SaaS). Success in this transition depends on building recurring revenue, sustaining innovation in cybersecurity and e-signature software, and gaining brand recognition in a competitive market dominated by large names.
Quarterly Highlights: Financial and Operational Developments
Subscription revenue reached $36.2 million, a 22% increase in operating income compared to the prior year period. Subscription revenue was $36.2 million out of $59.8 million total revenue. The company’s gross margin (GAAP) expanded to 73%, up from 66% in Q2 2024.
Segment results offer more detail. In Security Solutions, GAAP revenue was $44.2 million, down 3% compared to the prior year, with continuing declines in hardware sales offset by growing demand for authentication software. Subscription revenue within the Security Solutions segment saw a substantial 39% jump, with segment-level gross margin at 74%. However, Overall Security Solutions revenue remains on a downward trend due to the industry's shift away from physical devices, as revenue decreased 3% year-over-year (GAAP) and decreased 1% in FY2024 (GAAP), primarily driven by lower hardware revenues. Meanwhile, Digital Agreements revenue was $15.6 million, up 1% year-over-year. This segment, which centers on software for legally binding digital signatures, delivered operating income versus a small loss last year.
Annual recurring revenue (ARR), a non-GAAP metric which measures contracted subscription revenue expected over the next twelve months, increased 8% year over year to $177.8 million. This figure includes $8.1 million from the recent acquisition of Nok Nok Labs, a company specializing in passwordless authentication software.
On the bottom line, Operating income improved by 38% to $10.5 million, while Adjusted EBITDA rose 9.1% year-over-year. The company continued returning capital to shareholders through its quarterly dividend and maintained a robust cash balance of $92.9 million. The board declared a recurring quarterly dividend of $0.12 per share.
Looking Ahead: Guidance and Key Areas to Watch
The company reaffirmed its full-year revenue outlook of $245 million to $251 million, explicitly including the impact from the Nok Nok Labs acquisition. Adjusted EBITDA guidance remained unchanged.
Investors following OneSpan should monitor the pace of organic recurring revenue growth, especially as most of the increase in ARR this quarter was due to the recent acquisition rather than expansion from the core business, as $8.1 million of the ARR increase was attributed to the acquisition of Nok Nok Labs Inc. Digital Agreements revenue was essentially flat year-over-year, increasing by only 1% to $15.6 million (GAAP), and the ongoing drop in hardware income highlight competition and changing market demand. Margin improvements and continued movement towards a software-driven business will remain important areas to watch in coming periods. OSPN does currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
