OneSpan's Q1 2025 Earnings Call: Key Contradictions in Hardware Demand, Macroeconomic Impact, and Capital Strategy

Hardware revenue and demand, macroeconomic conditions and customer buying behavior, ARR growth and revenue mix, macro environment and customer engagement, capital allocation and M&A strategy are the key contradictions discussed in OneSpan's latest 2025Q1 earnings call.



Strong Financial Performance:
- OneSpan reported record high adjusted EBITDA of $23 million, nearly 15% higher than last year's first quarter, reaching 36% of revenue.
- The growth was driven by optimizing the cost structure and a more favorable revenue mix compared to the previous year.

Subscription Revenue Growth:
- Q1 subscription revenue grew 9% year-over-year, driven by demand for software authentication, app shielding, and e-signature solutions.
- Growth was primarily offset by trends such as banks adopting mobile-first policies, transitioning from hardware to software solutions, and legacy product sunsetts.

Security and Digital Agreements Performance:
- Security subscription revenue increased by 7%, primarily driven by expansion contracts with existing customers, despite headwinds from sunsetted products.
- Digital agreements subscription revenue grew by 13%, driven by expansion contracts and new logos, leading to profitability at the segment level.

Cash Generation and Dividends:
- OneSpan generated $29 million in cash from operations and ended the quarter with $105 million in cash on hand.
- The company paid a $0.12 per share dividend, totaling approximately $4.6 million, as part of a recurring quarterly dividend program.

Tariff and Foreign Currency Impacts:
- OneSpan estimates potential up to $1 million of incremental tariff-related costs for the full year 2025, impacting a single-digit percentage of its hardware revenue.
- Significant changes in foreign currency rates could affect results, but the company maintains confidence in its core business and affirms its previous guidance.