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    OSPN
    Earnings call· Jun 2026(Q2 FY26)

    OneSpan Q2 FY26 earnings call OSPN

    Aug 4, 2026 Source

    Executive summary

    OneSpan Q2 FY26 — Strong Subscription Growth and DigiPASS One Launch

    OneSpan delivered a solid second quarter, marked by robust subscription revenue growth and the strategic launch of its unified DigiPASS One authentication platform. The company is focused on leveraging its expanded capabilities and existing customer base to drive future software growth, while also maintaining financial discipline and returning capital to shareholders. Management is optimistic about the potential for new offerings like DigiPASS One Verify to expand market opportunities.

    Highlights

    5

    • Subscription revenue grew 11% to $47 million, comprising 77% of total revenue.

    • Adjusted EBITDA margin was 27.9% ($16.9 million), reflecting solid profitability.

    • Digital Agreements revenue grew 25.2% to $19.5 million, driven by strong overage revenue.

    • Full-year 2026 revenue guidance was increased to $248M-$252M (from $244M-$249M).

    • Returned almost $8 million to shareholders through dividends and share repurchases in Q2.

    Concerns

    4

    • GAAP operating income decreased to $8.7 million from $10.5 million YoY, due to increased operating costs from acquisitions and organic investments.

    • Cybersecurity revenue decreased 7.5% to $40.9 million, impacted by lower multi-year term license revenue and less past-due renewal catch-up.

    • GAAP net income per share decreased to $0.18 from $0.21 YoY.

    • Non-GAAP net income per share decreased to $0.30 from $0.34 YoY.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year 2026 Total Revenue
    $248M-$252M
    high materiality
    High
    Full-year 2026 Software and Services Revenue
    $202M-$204M
    medium materiality
    High
    Full-year 2026 Hardware Revenue
    $46M-$48M
    medium materiality
    High
    Full-year 2026 ARR
    $194M-$198M
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $67M-$71M
    high materiality
    High
    Q3 2026 Hardware Revenue Recognition
    About one-third of second half hardware revenue
    low materiality
    High
    Q3 2026 Digital Agreements Overage Revenue
    Expected, but not to the same extent as in Q2
    low materiality
    Medium
    DigiPASS One Verify POCs
    Underway
    medium materiality
    High
    European Digital Identity Regulations
    Banks to accept wallets
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Cybersecurity
    ARR growth inclusive of $3M headwind and Build 38 acquisition. Revenue decreased due to lower multi-year term license revenue and less past-due renewal catch-up. Gross margin impacted by incremental third-party license costs and amortization from Build 38. Operating income impacted by acquired company expenses and organic investments.
    ARR: $123MARR Growth YoY: 7.4%Subscription Revenue: $27.2MSubscription Revenue Growth YoY: 2.5%Gross Margin: 73%Prior Year Gross Margin: 74%Prior Year Operating Income: $19.8M (45%)
    		$40.9M-7.5%—$13.8M (34%)
    Digital Agreements
    Driven by strong overage revenue, expansion of renewal contracts, and new customer additions. Strong overage revenue is a positive indicator of transaction volume growth. Gross margin improved due to higher revenue. Operating income improved due to revenue growth, higher gross margin, and modest decline in operating expenses (higher internal software capitalization).
    ARR: $66.7MARR Growth YoY: 5.3%Gross Margin: 74.7%Prior Year Gross Margin: 71.4%Prior Year Operating Income: $2.9M (18.4%)
    		$19.5M25.2%—$7M (35.7%)
    Americas
    Revenue mix increased, reflecting growth in digital agreements and cybersecurity software, consistent with investment strategy.
    Q2 FY25 Revenue Mix: 40%
    		46%———
    EMEA
    Revenue mix decreased, primarily due to lower cybersecurity hardware and software revenue, partially offset by growth in digital agreements.
    Q2 FY25 Revenue Mix: 39%
    		35%———
    Asia Pacific
    Revenue mix decreased, primarily due to lower hardware revenue, partially offset by an increase in cybersecurity software.
    Q2 FY25 Revenue Mix: 21%
    		19%———

    Operational metrics

    18
    Adjusted EBITDA
    $16.9Mvs $17.6M Q2 FY25
    Q2 FY26
    Adjusted EBITDA margin
    27.9%vs 29.5% Q2 FY25
    Q2 FY26
    Total Revenue
    $60.5Mup 1% YoY
    Q2 FY26
    Subscription Revenue
    $47Mup 11% YoY
    Q2 FY26
    Subscription Revenue as % of Total Revenue
    77%vs 70% Q2 FY25
    Q2 FY26
    Hardware and Perpetual Maintenance Revenue as % of Total Revenue
    23%vs 30% Q2 FY25
    Q2 FY26
    Gross Margin
    73.6%vs 73.5% Q2 FY25
    Q2 FY26
    GAAP Operating Income
    $8.7Mvs $10.5M Q2 FY25
    Q2 FY26
    GAAP Net Income per Share
    $0.18vs $0.21 Q2 FY25
    Q2 FY26
    Non-GAAP Net Income per Share
    $0.30vs $0.34 Q2 FY25
    Q2 FY26
    Cash and investments balance
    $43.3Mvs $49.8M Q1 FY26 end
    Q2 FY26 end
    Outstanding Debt (Credit Facility)
    $5Mvs $0M Q1 FY26 end
    Q2 FY26 end
    Dividends Paid
    $4.8M
    Q2 FY26
    Share Repurchases
    $2.9M
    Q2 FY26
    Capitalized Software Development Costs
    $3M
    Q2 FY26
    Total Return to Shareholders
    >$40M
    LTM Q2 FY26

    Aggregate basis over the last four quarters.

    Quarterly Dividend
    $0.13
    Current Quarter

    Approved by the Board.

    Digital Agreements Revenue (ex-overages)
    11.3%
    Q2 FY26

    Growth rate for Digital Agreements revenue, excluding the impact of overages.

    Industry KPIs

    5
    MetricValueDetails
    Revenue growth$60.5MUSD
    Arr net new arr$189.7MUSD
    Gross retention renewal rate93%%
    Operating FCF margin rule of 4027.9%%
    Net revenue net dollar retention103%%

    Product announcements

    5
    ProductTypeDetails
    DigiPASS Onelaunch
    DigiPASS One Authenticatelaunch
    DigiPASS One Verifylaunch
    DigiPASS One Protectlaunch
    DigiPASS One Insightslaunch

    Deals & partnerships

    2
    Knock Knock LabsAcquisition of authentication technology

    Innovations from Knock Knock Labs were unified into the DigiPASS One platform, strengthening OneSpan's authentication offering, particularly with passkey capability.

    Build 38Acquisition of mobile application shielding technology

    Innovations from Build 38 were unified into the DigiPASS One platform, providing mobile application shielding technology. The acquisition contributed to increased operating costs.

    Risks & headwinds

    3
    Increased operating costs from acquisitions and organic investmentsQ2 FY26

    GAAP operating income decreased to $8.7 million (from $10.5 million YoY); Cybersecurity operating income decreased to $13.8 million (from $19.8 million YoY).

    Mitigation: Implied continued investment for future growth, no explicit mitigation strategy stated.

    Cybersecurity revenue declineQ2 FY26

    Cybersecurity revenue decreased 7.5% to $40.9 million.

    Mitigation: Focus on customer expansion, new logos, and revenue from acquisitions (NUCNUC, Build 38). Improving on-time renewal performance to reduce past-due renewal catch-up revenue.

    Decline in hardware and perpetual maintenance revenueQ2 FY26

    Hardware and perpetual maintenance revenue declined, accounting for 23% of total revenue (vs 30% Q2 FY25).

    Mitigation: Expectation of stabilization and potential growth from FIDO2 security keys, particularly in corporate banking, to offset legacy hardware decline. Increased hardware bookings in H1 FY26 provide confidence for H2 deliveries.

    What to watch in Q3 FY26

    5

    Digital Agreements Overage Revenue

    Q3 FY26
    CurrentStrong in Q2 FY26, contributing to 25.2% revenue growth.
    TargetNot to the same extent as in Q2.

    Why it matters

    Overage revenue is a leading indicator for ARR and expansion contracts; its trajectory indicates underlying transaction volume and future growth potential.

    We expect additional overages in the third quarter of 2026, but not to the same extent as in Q2.

    Q&A highlights

    5

    What needs to happen for OneSpan to achieve sustainable mid-to-high single-digit organic revenue growth, especially as hardware becomes a smaller component?

    Victor Limongelli explained that solid software growth (subscription and ARR) is expected to continue, and stabilizing the hardware business will allow this growth to show up in overall numbers. New product offerings like DigiPASS One and new go-to-market leadership are key steps.

    “Over time, our software business has been growing, and we had an offset, a negative offset from the hardware business for quite some time. And we felt like if we could get the hardware business stable, maybe have some revenue coming from the newer security keys, as well as stabilization in the overall hardware business, that that growth would show up, overall growth would show up as a result of the software growth.”

    asked by Gray Powell · answered by Victor Limongelli

    2 min read5 chapters

    Detailed Narrative

    01

    DigiPASS One Platform Launch

    OneSpan launched its DigiPASS One authentication platform, integrating innovations from Knock Knock Labs and Build 38 acquisitions. This platform unifies authentication, verifiable credentials, mobile app shielding, and analytical insights, providing a comprehensive solution for secure login and transaction signing across various channels, including emerging agent-driven banking interactions. It aims to offer flexibility for banks to support diverse users, devices, and authentication preferences.

    02

    Strategic Growth Drivers

    The company views the shift to agentic-driven interactions as a significant opportunity to extend its offerings and strengthen customer value. DigiPASS One is positioned to help banks authenticate customers and protect transactions in both existing and future channels, leveraging OneSpan's broad authentication suite and mobile app shielding technology. Management anticipates cross-sell opportunities with DigiPASS One Protect and Verify to its existing customer base as a key driver for software growth.

    03

    Digital Agreements Business Performance

    OneSpan is investing in AI-enabled capabilities for its digital agreements business, aiming to improve efficiency, gain deeper insights from workflows, and enhance end-user experience. The strong overage revenue in Q2, contributing to 25.2% revenue growth for the segment, is seen as a positive indicator of transaction volume growth, potentially leading to expansion contracts and acting as a leading indicator for future ARR.

    04

    Capital Allocation Strategy

    The board is committed to a balanced capital allocation strategy, considering shareholder returns, organic investment, and targeted M&A. In Q2, the company returned nearly $8 million to shareholders through dividends and share repurchases, reducing approximately 230,000 shares. The board also approved a quarterly dividend of $0.13 per share and will continue to evaluate additional share repurchase opportunities.

    05

    Hardware Business Stabilization Efforts

    Management expressed optimism about stabilizing the hardware business, particularly with the FIDO2 security keys gaining traction in corporate banking. The goal is to transition it into a flattish or potentially growing business, which would positively impact overall company growth despite software being the overwhelming majority of revenue. Increased H1 bookings have led to higher full-year hardware revenue guidance.

    AI-generated summary of the company’s earnings call. Not investment advice.