10-K: OneSpan Inc. Reports Profitable 2024, Focuses on Subscription Growth

OneSpan Inc. announces profitable 2024 results, driven by subscription revenue growth in both Security Solutions and Digital Agreements segments.

Summary

• OneSpan Inc. reported profitable results for the full year 2024, with both the Security Solutions and Digital Agreements segments achieving profitability.
• The company's strategy is focused on driving profitable and efficient growth in both operating segments, with a particular emphasis on subscription revenue growth.
• Security Solutions and Digital Agreements subscription revenue grew 33% and 28% year-over-year in 2024, respectively.
• Security Solutions total revenue decreased 1% in 2024, primarily due to a reduction in hardware revenues as customers adopt a mobile-first approach.
• Digital Agreements total revenue increased 20% in 2024, with the segment substantially transitioned to a SaaS revenue model.
• The company is subject to complex and evolving global regulations in the various jurisdictions in which its products and services are used.
• OneSpan's voluntary turnover across its global employee base in 2024 was 12.4%, while total attrition was 24.3%, primarily due to cost reduction and restructuring efforts.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with profitable results and growth in key areas like subscription revenue. While there are challenges and risks, the overall tone is optimistic and indicates a company on a positive trajectory.

Positives

• Both Security Solutions and Digital Agreements segments were profitable for the full year 2024.
• Subscription revenue in both segments experienced significant growth.
• Digital Agreements segment substantially transitioned to a SaaS revenue model.
• The company is actively managing its inventory to minimize supply chain disruptions.
• OneSpan is promoting and supporting employee development through various training programs.

Negatives

• Security Solutions total revenue decreased 1% in 2024 due to reduced hardware revenues.
• The company incurred restructuring charges related to cost reduction actions.
• The company is subject to complex and evolving global regulations.
• Total attrition in 2024 was 24.3%, primarily due to cost reduction and restructuring efforts.

Risks

• The company may experience difficulties increasing or maintaining its rate of revenue growth.
• The markets OneSpan serves are highly competitive.
• The Digipass authenticator business has a complex global supply chain and is dependent on a limited number of suppliers for certain components.
• Security breaches or cyberattacks could expose OneSpan to significant liability.
• The company faces a number of risks associated with its international operations.
• Economic uncertainties or downturns could materially adversely affect OneSpan's business.

Future Outlook

The company expects revenue from Digipass authenticator tokens to decrease modestly on a year-over-year basis in 2025. OneSpan aims to continue to grow its revenue in both Security Solutions and Digital Agreements going forward.

Management Comments

• The company now seeks to drive profitable, efficient growth in both operating segments, with a particular emphasis on subscription revenue growth.
• As organizations embrace the convenience and accessibility of mobile technology, we expect to increase our focus on high-margin software solutions while continuing to invest in our hardware authentication solutions in order to meet diverse customer needs.

Industry Context

The market for digital solutions for security, authentication, identity, electronic signature, and digital workflow products is very competitive and subject to rapid change. The rise of generative AI in cyber threats has amplified the sophistication of phishing campaigns and social engineering attacks.

Comparison to Industry Standards

• OneSpan's primary competitors for electronic signature solutions are DocuSign and Adobe Systems, both of which are significantly larger.
• OneSpan's main competitors in its identity verification and authentication markets are Gemalto (a subsidiary of Thales Group), RSA Security and Yubico.

Management Changes

Corporate Governance

Legal Proceedings

• The company is subject to certain legal proceedings and claims incidental to the operations of its business.

Stakeholder Impact

• Shareholders may benefit from the initiation of a recurring quarterly dividend program and the stock repurchase program.
• Employees may be impacted by ongoing restructuring and cost reduction efforts.
• Customers may benefit from the company's focus on high-margin software solutions and continued investment in hardware authentication solutions.

Next Steps

• The company plans to incrementally take actions under the restructuring plan until December 31, 2025, when the plan terminates.
• OneSpan expects to be subject to the EU Corporate Social Responsibility Directive and the EU Taxonomy Regulation beginning for its fiscal year ending December 31, 2025.

Key Dates