OneSpan's Q4 2024: Navigating Contradictions in Hardware Decline, Ecosystem Growth, and Subscription Revenue

These are the key contradictions discussed in OneSpan's latest 2024Q4 earnings call, specifically including: Hardware Revenue Decline, Ecosystem and Partnership Expansion, New Logo Growth, and Subscription Revenue Growth:



Financial Performance and Cash Generation:
- OneSpan reported adjusted EBITDA of $20 million in Q4 2024, representing 32% of revenue, and full-year adjusted EBITDA of $73 million, accounting for 30% of revenue.
- The company generated $12 million in cash from operations in Q4 and $56 million for the year, significantly improving from the previous year's cash generation.
- This performance was driven by cost savings initiatives, improved software revenue mix, and increased gross margins.

Subscription Revenue Growth:
- Subscription revenue grew by 30% for both the Q4 and the full year 2024, accounting for 57% of total revenue, up 12 percentage points year-on-year.
- The growth was primarily due to demand for software, authentication, and e-signature solutions, and successful transition to higher-margin software revenue.

Security and Digital Agreements Business Units:
- Security segment's subscription revenue grew by 49% in Q4, driven by demand for software authentication solutions and multiyear agreements.
- Digital Agreements segment experienced a 12% ARR growth and an 8% revenue increase, attributed to expansion contracts and new logos.

Hardware Revenue Decline and Strategic Shift:
- Hardware revenue declined by 36% in Q4 and 23% for the full year, primarily due to banks adopting mobile-first policies in EMEA and APAC regions.
- The decline is part of a strategic shift towards software-based solutions, which contributed to increased profitability and gross margins.