Third Quarter Financial Results

• Third quarter revenue grew 3% year-over-year to $58.8 million

• Third quarter subscription revenue grew 18% year-over-year to $26.2 million

• Annual Recurring Revenue (ARR) grew 10% year-over-year to $149.8 million1

• Net Retention Rate (NRR) of 108%2

BOSTON: OneSpan Inc. (Nasdaq: OSPN), the digital agreements security company, today reported financial results for the third quarter ended September 30, 2023.

“I am pleased by the operational rigor we demonstrated in the third quarter as we executed on several actions related to our business model change, including the formal creation of two business units, and an increase in cost reduction initiatives which resulted in improved profitability,” stated OneSpan CEO, Matt Moynahan. “We plan to continue driving operational excellence while executing on additional cost reduction initiatives in Q4 and subsequent quarters. We also plan to announce in the next week a modified ‘Dutch auction’ tender offer to repurchase approximately $20 million of our common stock. I believe the operational changes we are making to right-size our cost structure and focus on efficient growth, combined with a return of capital to shareholders, will help enable OneSpan to achieve our commitment of creating and returning value to our shareholders.”

Key Financial Results

Third Quarter 2023 Financial Highlights

• Total revenue was $58.8 million, an increase of 3% compared to $57.1 million for the same quarter of 2022. Digital Agreements revenue was $13.0 million, an increase of 7% year-over-year. Security Solutions revenue was $45.8 million, an increase of 2% year-over-year.
• ARR increased 10% year-over-year to $149.8 million.
• Gross profit was $40.7 million, or 69% gross margin, compared to $38.4 million, or 67% in the same period last year.
• Operating loss was $4.8 million, compared to operating loss of $5.6 million in the same period last year.
• Net loss was $4.1 million, or $(0.10) per diluted share compared to net loss of $7.2 million, or $(0.18) per diluted share in the same period last year. Non-GAAP net income was $3.6 million, or $0.09 per diluted share, compared to net income of $1.3 million, or $0.03 per diluted share, in the same period last year.3
• Adjusted EBITDA was $6.3 million compared to $4.5 million in the same period last year.3
• Cash, cash equivalents and short-term investments were $68.5 million at September 30, 2023 compared to $98.5 million at December 31, 2022 and $93.6 million at September 30, 2022.

Dutch Auction Tender Offer

As previously noted, OneSpan intends to announce in the next week a modified “Dutch auction” tender offer for approximately $20 million of OneSpan common stock at a specified price range that is yet to be determined. The tender offer will be part of OneSpan’s share repurchase program announced in May 2022.

Financial Outlook

For the full year 2023, OneSpan expects:

• Revenue to be in the range of $228 million to $232 million, as compared to our previous guidance range of $226 million to $232 million
• ARR to be in the range of $148 million to $152 million.
• Adjusted EBITDA to be in the range of $2 million to $4 million, as compared to our previous guidance range of $0 million to $3 million3

For the Full Year 2024, OneSpan is targeting:

• Revenue growth in the low to mid-single digits
• Adjusted EBITDA margin to be in the range of 20% to 23%3

Conference Call Details

In conjunction with this announcement, OneSpan Inc. will host a conference call today, November 8, 2023, at 4:30 p.m. ET. During the conference call, Mr. Matthew Moynahan, CEO, and Mr. Jorge Martell, CFO, will discuss OneSpan’s results for the third quarter 2023.

For investors and analysts accessing the conference call by phone, please refer to the press release dated October 10, 2023, announcing the date of OneSpan’s third quarter 2023 earnings release. It can be found on the OneSpan investor relations website at investors.onespan.com.

The conference call is also available in listen-only mode at investors.onespan.com. Shortly after the conclusion of the call, a replay of the webcast will be available on the same website for approximately one year.

____________________________________________

About OneSpan

OneSpan helps organizations accelerate digital transformations by enabling secure, compliant, and refreshingly easy customer agreements and transaction experiences. Organizations requiring high assurance security, including the integrity of end-users and the fidelity of transaction records behind every agreement, choose OneSpan to simplify and secure business processes with their partners and customers. Trusted by global blue-chip enterprises, including more than 60% of the world’s largest 100 banks, OneSpan processes millions of digital agreements and billions of transactions in 100+ countries annually.

For more information, go to www.onespan.com. You can also follow @OneSpan on Twitter or visit us on LinkedIn and Facebook.

Forward-Looking Statements

This Press Release contains forward-looking statements within the meaning of applicable U.S. securities laws, including statements regarding our plan to continue driving operational excellence while executing on additional cost reduction initiatives in the fourth quarter of 2023 and subsequent quarters; our plan to announce and conduct a modified “Dutch auction” tender offer to repurchase approximately $20 million of our common stock; the outcomes we expect from the operational changes we are taking to right-size our cost structure, focus on efficient growth, and return capital to shareholders; the ability of these operational changes to enable us to accelerate adjusted EBITDA growth, allow us to return capital to stockholders, and create and return value to our shareholders over the long term; estimates concerning the timing and amount of savings, adjusted EBITDA margin and/or restructuring charges that may result from our cost reduction initiatives; our 2023 financial guidance and our financial expectations for 2024; and our general expectations regarding our operational or financial performance in the future. Forward-looking statements may be identified by words such as "seek", "believe", "plan", "estimate", "anticipate", “expect", "intend", "continue", "outlook", "may", "will", "should", "could", “confident”, or "might", and other similar expressions. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Important factors that could materially affect our business and financial results include, but are not limited to: our ability to execute our strategic transformation plan or our cost reduction initiatives in the expected timeframes and to achieve the outcomes we expect from them; unintended costs and consequences of our restructuring plan and our cost reduction actions, including higher than anticipated restructuring charges, disruption to our operations, litigation or regulatory actions, reduced employee morale, attrition of valued employees, adverse effects on our reputation as an employer, loss of institutional know-how, slower customer service response times, and reduced ability to complete or undertake new product development projects and other business, product, technical, compliance or risk mitigation initiatives; our ability to attract new customers and retain and expand sales to existing customers; our ability to effectively develop and expand our sales and marketing capabilities; our ability to hire, train, and retain sales and other employees necessary to implement our strategic transformation plan; our ability to successfully develop and market new product offerings and product enhancements; the loss of one or more large customers; difficulties enhancing and maintaining our brand recognition; competition; lengthy sales cycles; departures of senior management or other key employees; changes in customer requirements; interruptions or delays in the performance of our products and solutions; real or perceived malfunctions or errors in our products; the potential effects of technological changes; economic recession, inflation, and political instability; our ability to effectively manage third party partnerships, acquisitions, divestitures, alliances, or joint ventures; security breaches or cyber-attacks; claims that we have infringed the intellectual property rights of others; litigation or regulatory actions; price competitive bidding; changing laws, government regulations or policies; pressures on price levels; component shortages; delays and disruption in global transportation and supply chains; reliance on third parties for certain products and data center services; impairment of goodwill or amortizable intangible assets causing a significant charge to earnings; actions of activist stockholders; and exposure to increased economic and operational uncertainties from operating a global business, as well as other factors described in the “Risk Factors” section of our most recent Annual Report on Form 10-K, as updated by the “Risk Factors” section of our Quarterly Report on Form 10-Q for the quarters ended June 30 and September 30, 2023. Our filings with the Securities and Exchange Commission and other important information can be found in the Investor Relations section of our website at investors.onespan.com. We do not have any intent, and disclaim any obligation, to update the forward-looking information to reflect events that occur, circumstances that exist or changes in our expectations after the date of this press release, except as required by law.

Unless otherwise noted, references in this press release to “OneSpan”, “Company”, “we”, “our”, and “us” refer to OneSpan Inc. and its subsidiaries.

OneSpan Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenue
Product and license		$	31,732			$	31,280			$	95,461			$	89,496
Services and other			27,106				25,867				76,717				72,888
Total revenue			58,838				57,147				172,178				162,384
Cost of goods sold
Product and license			11,004				12,646				36,330				32,672
Services and other			7,165				6,070				21,599				19,097
Total cost of goods sold			18,169				18,716				57,929				51,769
Gross profit			40,669				38,431				114,249				110,615
Operating costs
Sales and marketing			16,664				15,265				56,388				45,193
Research and development			10,133				9,541				29,686				33,596
General and administrative			11,559				11,813				44,038				39,549
Restructuring and other related charges			6,524				6,481				13,076				11,828
Amortization of intangible assets			583				956				1,749				3,555
Total operating costs			45,463				44,056				144,937				133,721
Operating loss			(4,794	)			(5,625	)			(30,688	)			(23,106	)
Interest income, net			587				179				1,675				197
Other income (expense), net			353				(1,155	)			342				13,817
Loss before income taxes			(3,854	)			(6,601	)			(28,671	)			(9,092	)
Provision for income taxes			279				600				1,569				2,245
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