Q3 2026 OneSpan Inc Earnings Call

October 29, 2026

Speaker #1: This afternoon, after market close, OneSpan issued a press release announcing results for our third quarter of 2026. To access a copy of the press release and other investor information, please visit our website.

Joe Maxa: This afternoon, after market close, OneSpan issued a press release announcing results for our Q3 2026. To access a copy of the press release and other investor information, please visit our website. Following our prepared comments today, we will open the call for questions. Please note that statements made during this conference call that relate to future plans, events, or performance, including the outlook for full year 2026 and other long-term financial targets, are forward-looking statements. These statements involve risks and uncertainties and are based on current assumptions. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. I direct your attention to today's press release and the company's filings with the US Securities and Exchange Commission for discussion of such risks and uncertainties.

Speaker #1: Following our prepared comments today, we will open the call for questions. Please note that statements made during this conference call that relate to future plans, events, or performance—including the outlook for full year 2026 and other long-term financial targets—are forward-looking statements.

Speaker #1: These statements involve risks and uncertainties, and are based on current assumptions. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.

Speaker #1: I direct your attention to today's press release and the company's filings with the U.S. Securities and Exchange Commission for discussion of such risks and uncertainties.

Speaker #1: Also note that certain financial measures that may be discussed on this call are expressed on a non-GAAP basis, and have been adjusted from a related GAAP financial measure.

Joe Maxa: Also note that certain financial measures that may be discussed on this call are expressed on a non-GAAP basis and have been adjusted from a related GAAP financial measure. We have provided an explanation for and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the earnings press release and in the investor presentation available on our website. In addition, please note that all growth rates discussed on this call refer to a year-over-year basis unless otherwise indicated. The date of this conference call is 29 October 2026. Any forward-looking statements and related assumptions are made as of this date. Except as required by law, we undertake no obligation to update these statements as a result of new information or future events or for any other reason. I will now turn the call over to Victor.

Speaker #1: We have provided, and explanation for, and reconciliations of, these non-GAAP financial measures to the most directly comparable GAAP financial measures in the earnings press release and in the investor presentation available on our website.

Speaker #1: In addition, please note that all growth rates discussed on this call refer to a year-over-year basis unless otherwise indicated. The date of this conference call is October 29, 2026.

Speaker #1: Any forward-looking statements and related assumptions are made as of this date. Except as required by law, we undertake no obligation to update these statements as a result of new information or future events or for any other reason.

Speaker #1: I will now turn the call over to Victor.

Speaker #2: Thank you, Joe. Hello, everyone. Thank you for joining us today. Our goal for 2026 was to deliver solid performance while positioning the company for future growth.

Victor Limongelli: Thank you, Joe. Hello, everyone. Thank you for joining us today. Our goal for 2026 was to deliver solid performance while positioning the company for future growth. We are achieving those goals. We had an excellent Q3 with 12% revenue growth, including 16% subscription revenue growth, and a 12% increase in operating income. Before diving into the details, I want to take a moment to thank the entire OneSpan team for all of their efforts in delivering these results, and also to underscore the progress we have made as a business, achieving a rule of 42 performance level in Q3, whereas just a few years ago, in 2023, OneSpan performed at a rule of 12 level. Looking at Q3 specifically, I am happy to report that both business units grew at a double-digit rate, with digital agreements up 14% and cybersecurity up 11%.

Speaker #2: We are achieving those goals. We had an excellent third quarter with 12% revenue growth, including 16% subscription revenue growth, and a 12% increase in operating income.

Speaker #2: Before diving into the details, I want to take a moment to thank the entire OneSpan team for all of their efforts in delivering these results, and also to underscore the progress we have made as a business, achieving a "Rule of 42" performance level in Q3, whereas just a few years ago, in 2023, OneSpan performed at a "Rule of 12" level.

Speaker #2: Looking at Q3 specifically, I'm happy to report that both business units grew at a double-digit rate. With digital agreements up 14% and cybersecurity up 11%, our overall gross margin also improved, rising to 76.3% compared to 73.6% in the year-ago period.

Victor Limongelli: Our overall gross margin also improved, rising to 76.3% compared to 73.6% in the year-ago period. We achieved a company-wide GRR of 91% in Q3, evidence of our stronger customer engagement and our delivery of better customer experiences across both our cybersecurity and digital agreements business units. With respect to the other part of our goals, that is positioning the company for future growth, we made great progress in that area in Q3 as well. In July, we launched the DigipassONE platform in our cybersecurity business. DigipassONE brings together our suite of security solutions, including DigipassONE Authenticate, the industry's broadest customer authentication capabilities, spanning hardware, software, on-prem, in the cloud, OTP, and passkeys. DigipassONE Protect, our mobile application protection portfolio providing continuous in-app protection, active defense, and real-time threat visibility.

Speaker #2: And we achieved a company-wide GRR of 91% in Q3. Evidence of our stronger customer engagement and our delivery of better customer experiences across both our cybersecurity and digital agreements business units.

Speaker #2: With respect to the other part of our goals, that is positioning the company for future growth, we made great progress in that area in Q3 as well.

Speaker #2: In July, we launched the DigiPass One platform in our cybersecurity business. DigiPass One brings together our suite of security solutions, including DigiPass One Authenticate, the industry's broadest customer authentication capabilities, spanning hardware, software, on-prem, in-the-cloud, OTP, and passkeys.

Speaker #2: DigiPass One Protect, our mobile application protection portfolio, providing continuous in-app protection, active defense, and real-time threat visibility. DigiPass One Verify, a new offering that provides support for digital credentials and verification capabilities, across multiple wallet ecosystems.

Victor Limongelli: DigipassONE Verify, a new offering that provides support for digital credentials and verification capabilities across multiple wallet ecosystems, which will be a key requirement for banks in Europe. DigipassONE Insights, another new offering that will deliver cross-platform analytics and visibility that will provide enriched insights and actionable intelligence from telemetry spanning the entire platform, providing value not only to our customers' authentication teams, but to their broader security teams as well. You are all familiar with OneSpan as an authentication provider, but I want to take a moment to talk about DigipassONE Verify, which we plan to release early next year. As an important reminder, the European Digital Identity Regulation will require banks to support digital identity wallets for customer onboarding and authentication by December 2027.

Speaker #2: Which will be a key requirement for banks in Europe. And DigiPass One Insights, another new offering, will deliver cross-platform analytics and visibility that provide enriched insights and actionable intelligence from telemetry spanning the entire platform. This will provide value not only to our customers' authentication teams, but to their broader security teams as well.

Speaker #2: You are all familiar with OneSpan as an authentication provider, but I want to take a moment to talk about DigiPass One Verify, which we plan to release early next year.

Speaker #2: As an important reminder, the European Digital Identity Regulation will require banks to support digital identity wallets for customer onboarding and authentication by December 2027.

Speaker #2: We remain actively engaged with the ecosystem as verifiable credentials and digital wallets develop, and we plan to support the first country-specific wallets, which are slated to be released early next year.

Victor Limongelli: We remain actively engaged with the ecosystem as verifiable credentials and digital wallets develop, and we plan to support the first country-specific wallets slated to be released early next year. We are encouraged by the discussions that we have seen around DigipassONE Verify and expect this to be an important offering as these wallets become more broadly available. As you know, we have a broad customer base of European banks, and we expect this offering to be of particular interest in that market. We also continue to see encouraging interest in DigipassONE Protect and our expanded capabilities introduced with our acquisition of Build38. As more consumer banking actions move to mobile applications, there is increased recognition of the importance in protecting these applications and the users from attacks and fraudulent behavior.

Speaker #2: We are encouraged by the discussions that we have seen around DigiPass One Verify, and expect this to be an important offering as these wallets become more broadly available.

Speaker #2: As you know, we have a broad customer base of European banks, and we expect this offering to be of particular interest in that market.

Speaker #2: We also continue to see encouraging interest in DigiPass One Protect and our expanded capabilities introduced with our acquisition of Build 38. As more consumer banking actions move to mobile applications, there is increased recognition of the importance in protecting these applications and the users from attacks and fraudulent behavior.

Speaker #2: Our expanded portfolio now offers both a post-compilation or wrapping approach and an SDK approach to provide next-gen in-app protection capabilities. Turning to digital agreements, we also made meaningful progress during the quarter, earlier this month we announced exciting advancements in innovations that we are adding to OneSpan Sign, expanding the value it brings to e-signatures, and the workflows involved with high-value agreements.

Victor Limongelli: Our expanded portfolio now offers both a post-compilation or wrapping approach and an SDK approach to provide next-gen in-app protection capabilities. Turning to digital agreements, we also made meaningful progress during the quarter. Earlier this month, we announced exciting advancements and innovations that we are adding to OneSpan Sign, expanding the value it brings to e-signatures and the workflows involved with high-value agreements. We continue to focus on purpose-built features and functions that serve the broader financial services vertical, where security, compliance, and assurance are core requirements. Our recent e-signature innovations are focused on three key areas: making agreements easier and faster to complete, strengthening identity and document assurance without adding unnecessary friction, and better connecting completed agreements into the systems and processes that drive the next business action in our customers' workflows.

Speaker #2: We continue to focus on purpose-built features and functions that serve the broader financial services vertical, where security, compliance, and assurance are core requirements. Our recent e-signature innovations are focused on three key areas: making agreements easier and faster to complete, strengthening identity and document assurance without adding unnecessary friction, and better connecting completed agreements into the systems and processes that drive the next business action in our customers' workflows.

Speaker #2: This includes investments in a redesigned user experience, AI-assisted capabilities such as automatic document validation, as well as advanced identity verification and expanded integration capabilities.

Victor Limongelli: This includes investments in a redesigned user experience, AI-assisted capabilities such as automatic document validation, as well as advanced identity verification and expanded integration capabilities. We are encouraged by continued healthy gross retention metrics and customer activity we are seeing, including expansion and longer-term contract commitments from large customers. During Q3, a major banking customer of our digital agreements business meaningfully expanded its contract in both term and in size, moving from overages under the previous contract into a multi-year contract that will support their continued growth and utilization of OneSpan Sign. Stepping back, we are encouraged by the progress we are making as a company overall, both in Q3 and more broadly over the past few years. We believe we are investing in the right strategic areas and putting the pieces in place to enable growth over the longer term.

Speaker #2: We are encouraged by continued healthy gross retention metrics and customer activity we are seeing, including expansion and longer-term contract commitments from large customers. During the third quarter, a major banking customer of our digital agreements business meaningfully expanded its contract in both term and in size.

Speaker #2: Moving from overages under the previous contract into a multi-year contract that will support their continued growth and utilization of OneSpan Sign. Stepping back, we are encouraged by the progress we are making as a company overall, both in Q3 and more broadly over the past few years.

Speaker #2: We believe we are investing in the right strategic areas and putting the pieces in place to enable growth over the longer term. And we're proud that we are able to do so while also improving in the day-to-day execution of the business.

Victor Limongelli: We are proud that we are able to do so while also improving in the day-to-day execution of the business. Please note that the board has approved a quarterly dividend of $0.13 per share to be paid in the current quarter and will continue to evaluate additional share repurchase opportunities. Since the beginning of last year, we have returned $55 million, or just under $1.50 per share, to our shareholders through dividends and share repurchases. In summary, we had an excellent quarter and continue to strengthen the business and position OneSpan for durable long-term growth. With that, I will turn the call over to Jorge.

Speaker #2: Please note that the board has approved a quarterly dividend of $0.13 per share to be paid in the current quarter, and will continue to evaluate additional share repurchase opportunities.

Speaker #2: Since the beginning of last year, we have returned $0.55 million, or just under $1.50 per share, to our shareholders through dividends and share repurchases.

Speaker #2: In summary, we had an excellent quarter, and continue to strengthen the business and position OneSpan for durable long-term growth. With that, I'll turn the call over to Jorge.

Speaker #3: Thanks, Victor, and good afternoon, everybody. I'm pleased to report another strong quarter and continued progress in positioning OneSpan for long-term growth. Q3 revenue was $63.9 million, an increase of 12% compared to last year's third quarter.

Jorge Martell: Thanks, Victor, and good afternoon, everybody. I am pleased to report another strong quarter and continued progress in positioning OneSpan for long-term growth. Q3 revenue was $63.9 million, an increase of 12% compared to last year's third quarter. Subscription revenue grew 16% to $51.5 million, and hardware revenue grew 7%. This growth was partially offset by an expected decline in perpetual maintenance revenue as customers moved to term licenses. For the quarter, subscription revenue increased to 81% of total revenue, up from 78% in the prior year quarter, while hardware and perpetual maintenance revenues accounted for a combined 19% of total revenue as compared to 22% in last year's Q3. Annual recurring revenue, or ARR, also continued to grow, increasing 8.5% year over year to $195.5 million.

Speaker #3: Subscription revenue grew 16% to $51.5 million, and hardware revenue grew 7%. This growth was partially offset by an expected decline in perpetual maintenance revenue as customers moved to term licenses.

Speaker #3: For the quarter, subscription revenue increased to 81% of total revenue, up from 78% in the prior year quarter, while hardware and perpetual maintenance revenues accounted for a combined 19% of total revenue, compared to 22% in last year's Q3.

Speaker #3: Annual recurring revenue, or ARR, also continued to grow, increasing 8.5% year-over-year to $195.5 million. ARR growth was driven by expansion of existing customer contracts and new logos as well as Build 38, which contributed approximately $1.5 percentage points.

Jorge Martell: ARR growth was driven by expansion of existing customer contracts and new logos, as well as Build38, which contributed approximately 1.5 percentage points. ARR increased to $5.9 million sequentially, consistent with the expectation we shared last quarter of sequential quarterly growth in the second half of the year. Our net retention rate, or NRR, was 105%, up from 103% last quarter. Third quarter gross margin was 76.3% compared to 73.6% in Q3 of last year. GAAP operating income was $9.2 million compared to $8.2 million in Q3 2025. The year-over-year improvement reflects higher revenue and gross profit, partially offset by increased operating costs related to Build38, organic investments, including certain costs related to go-to-market leadership and higher share-based compensation expense and bonus accruals. GAAP net income per share was $0.20 compared to $0.17 in the third quarter of last year.

Speaker #3: ARR increased 5.9 million sequentially consistent with the expectation we shared last quarter of sequential quarterly growth in the second half of the year. Our net retention rate, or NRR, was 105% up from 103% last quarter.

Speaker #3: Third-quarter gross margin was 76.3% compared to 73.6% in Q3 of last year. Gap operating income was 9.2 million, compared to 8.2 million in Q3 2025.

Speaker #3: The year-over-year improvement reflects higher revenue and gross profit, partially offset by increased operating costs related to Build 38, organic investments—including starting costs related to go-to-market leadership—and higher share-based compensation expense and bonus accruals.

Speaker #3: GAAP net income per share was $0.20 compared to $0.17 in the third quarter of last year. Non-GAAP net income per share was $0.35 compared to $0.33 in last year's Q3.

Jorge Martell: Non-GAAP net income per share was $0.35 compared to $0.33 in last year's Q3. Adjusted EBITDA and adjusted EBITDA margin were $19.3 million and 30.1%, respectively. This is compared to $17.5 million and 30.7% in the same period last year. Next, I will discuss the third quarter financial results for our two business divisions, starting with Cybersecurity. Cybersecurity's revenue increased 11.3% to $44.9 million. Subscription revenue increased 17.4% to $32.5 million, primarily driven by customer expansion contracts, including an increase in multi-year term license revenue, new logos, M&A, new products, and an increase in pass-through renewal catch-up revenue as compared to last year's third quarter. As a reminder, multi-year term license and catch-up revenue can vary from quarter to quarter. Hardware revenue grew 7% to $10.5 million, largely due to certain customers requesting earlier than anticipated deliveries of Digipass tokens, which we had expected to ship in Q4.

Speaker #3: Adjusted EBITDA and adjusted EBITDA margin were $19.3 million and 30.1%, respectively. This compares to $17.5 million and 30.7% in the same period last year.

Speaker #3: Next, I will discuss the third-quarter financial results for two business divisions starting with cybersecurity. Cybersecurity's revenue increased 11.3% to $44.9 million. Subscription revenue increased 17.4% to $32.5 million, primarily driven by customer expansion contracts including an increase in multi-year term license revenue, new logos, M&A, new products, and an increase in past-due renewal catch-up revenue as compared to last year's third quarter.

Speaker #3: As a reminder, multi-year term license and catch-up revenue can vary from quarter to quarter. Hardware revenue grew 7% to 10.5 million largely due to certain customers requesting earlier-than-anticipated deliveries of DigiPass tokens which we had expected to ship in Q4.

Speaker #3: As discussed last quarter, Q3 is typically our seasonally low hardware quarter but deliveries were higher than we expected this year due to the timing of these shipments.

Jorge Martell: As discussed last quarter, Q3 is typically our seasonally low hardware quarter, but deliveries were higher than we expected this year due to the timing of these shipments. Our full year 2026 hardware outlook has not changed, which means we now expect a correspondingly lower hardware contribution in Q4 than previously forecast. Perpetual maintenance revenue in cybersecurity declined as expected. ARR for the cybersecurity division increased 10.1% year over year to $127.2 million. Gross margin was 77%, compared to 74% in the prior year quarter. The increase in gross margin primarily reflects increased subscription revenue and a more favorable mix of hardware devices shipped, partially offset by incremental amortization of acquired software related to Build38. Operating income was $18.5 million or 41% of revenue, compared to $16.7 million or 41% of revenue in last year's Q3.

Speaker #3: Our full-year 2026 hardware outlook has not changed, which means we now expect a correspondingly lower hardware contribution in Q4 than previously forecast. Perpetual maintenance revenue in cybersecurity declined as expected.

Speaker #3: ARR for the Cybersecurity division increased 10.1% year-over-year to $127.2 million. Gross margin was 77% compared to 74% in the prior-year quarter. The increase in gross margin primarily reflects increased subscription revenue and a more favorable mix of hardware devices shipped, partially offset by incremental amortization of acquired software related to Build 38.

Speaker #3: Operating income was $18.5 million, or 41% of revenue, compared to $16.7 million, or 41% of revenue, in last year's Q3. The year-over-year increase in revenue and gross margin was partially offset by higher operating expenses related to Build 38 and higher organic investments to help drive future growth.

Jorge Martell: The year-over-year increase in revenue and gross margin was partially offset by higher operating expenses related to Build38 and higher organic investments to help drive future growth. Now turning to digital agreements. Revenue grew 13.5% to $19 million, driven by overages, expansion of renewal contracts, and new customer additions. As we discussed previously, overage revenue can be a positive indicator of transactional volume growth that can lead to expansion with existing customers. As Victor mentioned earlier, a large customer generating overages renewed during the third quarter with a materially larger annual commitment. As a result, overage revenue from that customer has ended, and revenue from them is now ratable. This also led to a sequential decline in overage revenue in Q3, and we expect a further sequential decline in overage revenue in Q4 towards more typical levels. ARR grew 5.7% year over year to $68.4 million.

Speaker #3: Now turning to digital agreements, revenue grew 13.5% to 19 million. Driven by overages, expansion of renewal contracts, and new customer additions. As we discussed previously, overage revenue can be a positive indicator of transaction volume growth that can lead to expansion with existing customers.

Speaker #3: As Victor mentioned earlier, a large customer—generating overages—renewed during the third quarter with a materially larger annual commitment. As a result, overage revenue from that customer has ended, and revenue from them is now ratable.

Speaker #3: This also led to a sequential decline in overage revenue in Q3, and we expect a further sequential decline in overage revenue in Q4, towards more typical levels.

Speaker #3: ARR grew 5.7% year-over-year to $68.4 million. As a reminder, overages are not included in ARR or NRR. Gross margin improved to 74%, up from 72% in the prior year period, primarily reflecting higher revenue, including overage revenue, and greater efficiency in our cloud infrastructure costs.

Jorge Martell: As a reminder, overages are not included in ARR or NRR. Gross margin improved to 74%, up from 72% in the prior year period, primarily reflecting higher revenue, including overage revenue, and greater efficiency in our cloud infrastructure costs. Operating income was $6.9 million, or 37% of revenue, compared to $4.2 million or 25% of revenue in the same period last year. The strong improvement in operating income was primarily driven by revenue growth and higher gross margin. Turning to our balance sheet, we ended the third quarter with $51.4 million in cash and cash equivalents and $5 million outstanding under our credit facility, which was repaid subsequent to quarter end. This compares to $43.3 million in cash and cash equivalents and $5 million of outstanding debt at the end of the second quarter of 2026. During the quarter, we generated $16.5 million in operating cash flows.

Speaker #3: Operating income was 6.9 million or $37% of revenue compared to 4.2 million or $25% of revenue in the same period last year. The strong improvement in operating income was primarily driven by revenue growth and higher gross margin.

Speaker #3: Turning to our balance sheet, we ended the third quarter with $51.4 million in cash and cash equivalents and $5 million outstanding under a credit facility which was repayed subsequent to quarter end.

Speaker #3: This compares to $43.3 million in cash and cash equivalents, and $5 million outstanding debt at the end of the second quarter of 2026. During the quarter, we generated $16.5 million in operating cash flows.

Speaker #3: Primary uses of cash include $4.8 million for our quarterly dividend and $2.9 million for capitalized software development costs. By geographic region, revenue in the third quarter of 2026 was $43% from the Americas, $37% from EMEA, and 20% from Asia Pacific, compared to $46%, $38%, and 16% respectively, in the third quarter of 2025.

Jorge Martell: Primary uses of cash includes $4.8 million for our quarterly dividend and $2.9 million for capitalized software development costs. By geographic region, revenue in the third quarter of 2026 was 43% from the Americas, 37% from EMEA, and 20% from Asia Pacific, compared to 46%, 38%, and 16%, respectively, in the third quarter of 2025. Revenue increased year over year across all three regions, led by APAC, followed by EMEA and the Americas. Now turning to some modeling notes and our outlook. For the full year 2026, we are increasing our guidance to reflect our strong third quarter results and updated expectations for the remaining of the year. In Q4, we now expect software and services revenue to be higher than previously forecast, partially offset by lower hardware revenue due to the timing of shipments discussed earlier.

Speaker #3: Revenue increase year-over-year across all three regions led by APAC followed by EMEA and the Americas. Now turning to some modeling notes and our outlook, for the full year 2026, we are increasing our guidance to reflect our strong third-quarter results and updated expectations for the remaining of the year.

Speaker #3: In Q4, we now expect software and services revenue to be higher than previously forecast, partially offset by lower hardware revenue due to the timing of shipments discussed earlier.

Speaker #3: As a result of this shift in revenue mix, we now expect a higher Q4 gross margin with a full-year gross margin slightly above 74%.

Jorge Martell: As a result of this shift in revenue mix, we now expect a higher Q4 gross margin with our full-year gross margin slightly above 74%. More specifically, for the full year 2026, we expect total revenue to be in the range of $254 to $258 million, as compared to our previous guidance range of $248 to $252 million. We expect software and services revenue to be in the range of $208 to $210 million, as compared to our previous guidance range of $202 to $204 million. We expect hardware revenue to be in the range of $46 to $48 million, unchanged from our previous guidance. We expect ARR to be in the range of $197 to $201 million, as compared to our previous guidance range of $194 to $198 million.

Speaker #3: More specifically, for the full year 2026, we expect total revenue to be in the range of $254 million to $258 million, as compared to our previous guidance range of $248 million to $252 million.

Speaker #3: We expect software and services revenue to be in the range of $208 million to $210 million, as compared to our previous guidance range of $202 million to $204 million.

Speaker #3: We expect hardware revenue to be in the range of $46 to $48 million, unchanged from our previous guidance. We expect ARR to be in the range of $197 to $201 million, as compared to our previous guidance range of $194 to $198 million.

Speaker #3: And we expect adjusted EBITDA to be in the range of $72 million to $76 million, as compared to our previous guidance range of $67 million to $71 million.

Jorge Martell: We expect adjusted EBITDA to be in the range of $72 to $76 million, as compared to our previous guidance range of $67 to $71 million. That concludes my remarks. I will now turn the call back to Victor.

Speaker #3: That concludes my remarks. I will now turn the call back to Victor.

Speaker #1: Thanks, Jorge. To recap, we are pleased with our third quarter results and the progress we continue to make across the business. We are executing well while continuing to invest in the opportunities we believe can drive stronger growth over time.

Victor Limongelli: Thanks, Jorge. To recap, we are pleased with our Q3 results and the progress we continue to make across the business. We are executing well while continuing to invest in the opportunities we believe can drive stronger growth over time. At the same time, we continue to deliver solid profitability and return capital to shareholders. We remain focused on executing our strategy and creating long-term value. Jorge and I will now be happy to take your questions.

Speaker #1: At the same time, we continue to deliver solid profitability and return capital to shareholders. We remain focused on executing our strategy and creating long-term value.

Speaker #1: Jorge and I will now be happy to take your questions.

Speaker #2: We will now begin the question-and-answer session. If you would like to ask a question, please use the raise hand icon, which can be found in the black bar at the bottom of the webinar application screen.

Operator: We will now begin the question and answer session. If you would like to ask a question, please use the raise hand icon, which can be found in the black bar at the bottom of the webinar application screen. When you hear your name called, you will be prompted to unmute your line and ask your question. If you have joined using a telephone dial-in, you may join the queue by pressing star nine. When you hear your name, press star six to unmute and ask your question. We will now take a moment to allow the queue to form. Our first question comes from Erik Suppiger with B. Riley Securities. Please unmute your line and ask your question.

Speaker #2: When you hear your name called, you will be prompted to unmute your line and ask your question. If you have joined using a telephone dial-in, you may join the queue by pressing star 9.

Speaker #2: When you hear your name, please press *6 to unmute and ask your question. We will now take a moment to allow the queue to form.

Speaker #2: Our first question comes from Eric Sepiger with B. Riley Securities. Please unmute your line and ask your question.

Speaker #4: Yes, can you hear me okay?

Erik Suppiger: Yes. Can you hear me okay?

Speaker #3: Yep, we can hear you, Eric. How are you?

Jorge Martell: Yep, we can hear you, Erik. How are you?

Speaker #4: Great.

Speaker #1: Yeah, hi, Eric. We can hear you.

Victor Limongelli: Great. Hi, Erik. We can hear you.

Speaker #4: Congrats. And good to see the upgraded system here. On the hardware, can you comment how you're thinking about hardware going forward? I know you're not guiding for fiscal 27, but are you thinking at this point that hardware is at a sustainable level?

Erik Suppiger: Congrats, and good to see the upgraded system here. On the hardware, can you comment how you are thinking about hardware going forward? I know you are not guiding for fiscal 2027, but are you thinking at this point that hardware is at a sustainable level? Are the FIDO2 tokens enabling you to offset any of the legacy declines?

Speaker #4: Are the FIDO2 tokens enabling you to offset any of the legacy declines?

Speaker #1: Yeah, thank you. Thank you very much for the question. So, we used to talk about hardware, saying if we could just offset the decline and be flattish, it would really improve our business.

Victor Limongelli: Yeah. Thank you. Thank you very much for the question. We used to talk about hardware, saying if we could just offset the decline and be flattish, it would really improve our business. We are starting to see that. I think if you look at our guidance for the year, it implies being down just a few percent from last year. Of course, we are not giving 2027 guidance yet, but we do think that we have a much more sustainable hardware business at the level we are currently at, and some of that will come from the FIDO2 security keys, increasingly in 2027 and subsequent years.

Speaker #1: And we're starting to see that. I think if you look at our guidance for the year, it implies being down just a couple, just a few percent from last year.

Speaker #1: And of course, we're not giving 2027 guidance yet. But we do think that we have a much more sustainable hardware business at the level we're currently at.

Speaker #1: And some of that will come from the FIDO2 security keys increasingly in '27 and subsequent years.

Speaker #4: Can you give any updates specific to the FIDO2 tokens? How is that business performing?

Erik Suppiger: Can you give any updates specific to the FIDO2 tokens? How is that business performing?

Speaker #1: Eric, it is definitely picking up speed. And I expect that when we get to next quarter, we'll be able to give you a lot more details on that.

Victor Limongelli: Eric, it is definitely picking up speed, and I expect that when we get to next quarter, we will be able to give you a lot more details on that. To date, the business through the first three quarters, it is still overwhelmingly related to our older banking tokens.

Victor Limongelli: Erik, it is definitely picking up speed, and I expect that when we get to next quarter, we will be able to give you a lot more details on that. To date, the business through the first three quarters, it is still overwhelmingly related to our older banking tokens.

Speaker #1: To date, the business through the first three quarters, it is still overwhelmingly related to our older banking tokens.

Speaker #4: Good. Congratulations.

Erik Suppiger: Good. Congratulations.

Speaker #1: Thank you.

Victor Limongelli: Thank you.

Speaker #2: Our next question comes from Gray Powell with US Bank BTIG. Please unmute your line and ask your question.

Operator: Our next question comes from Gray Powell with BTIG. Please unmute your line and ask your question.

Speaker #5: Okay, great. Thanks for taking the question and, yeah, congratulations on the good set of numbers. It was really nice to see, particularly after some of the results we saw yesterday.

Gray Powell: Okay, great. Thanks for taking the question. Yeah, congratulations on the good set of numbers. It was really nice to see, particularly after some of the results we saw yesterday.

Speaker #1: Thank you, Gray. Thanks.

Speaker #5: Yeah, yeah, absolutely. Okay, so it was really good to see the improvement in net new ARR in the cybersecurity division. And look, I know that over the last 12 months, there have been some quasi one-time issues there. Just, where are we now?

Victor Limongelli: Thank you, Gray. Thanks.

Gray Powell: Yeah, absolutely. Okay, so it was really good to see the improvement in net new ARR in the cybersecurity division. I know that over the last 12 months, there have been some quasi one-time issues there. Just where are we now? Do you think that the business is in a good spot? Should the success you saw in Q3 be more indicative of your performance going forward?

Speaker #5: Do you think that the business is in a good spot? And should the success you saw in Q3 be more indicative of your performance going forward?

Speaker #4: Yeah, I can see.

Speaker #1: So Gray, yeah. So again, we're not going to give 2027 guidance, but we do feel better about the business than we did six months ago, 12 months ago.

Victor Limongelli: Yeah, I can take it. Yeah. So, great. Again, we are not going to give 2027 guidance, but we do feel better about the business than we did six months ago, 12 months ago. The launch of DigipassONE, I want to touch upon this a little bit. It certainly helps in our conversations with customers. You see things like our GRR going up as we are investing in solutions for them, and they feel more comfortable with the direction we are headed in. Bear in mind that two of the four components of DigipassONE are not out yet. We are expecting to release Verify in Q1, and then subsequently after that, we will release Insights. So we think there is an opportunity, as we said in the prepared remarks, to drive faster growth for the business overall.

Speaker #1: The launch of the last one—I want to touch upon this a little bit. It certainly helps in our conversations with customers. You see things like our GRR going up.

Speaker #1: As we are investing in solutions for them, and they feel more comfortable with the direction we're headed in. But bear in mind that two of the four components of DigitPass One are not out yet.

Speaker #1: We're expecting to release verify in Q1, and then subsequently after that, we'll release insights. So we think there is an opportunity as we said in the prepared remarks, to drive faster growth for the business overall.

Speaker #1: So the framework and the preparatory work, we feel like we've done a lot of that. And we're looking forward to continuing to improve the business.

Victor Limongelli: The framework and the preparatory work, we feel like we have done a lot of that, and we are looking forward to continuing to improve the business. By the way, I mentioned at the beginning, I am really proud of the team. We have improved OneSpan, both on the digital agreements and cybersecurity business, a lot over the last few years. So very proud of that.

Speaker #1: And by the way, I mentioned at the beginning, I'm really proud of the team. We've improved one span, both on the digital agreements and cybersecurity business a lot over the last few years.

Speaker #1: So very proud of that.

Speaker #5: Excellent, thank you very much. That's all I have.

Gray Powell: Excellent. Thank you very much. That is all I have.

Speaker #1: Thank you.

Speaker #5: Thanks, Gray.

Victor Limongelli: Thank you. Thanks, Gray.

Speaker #2: Our next question comes from Rudy Kessinger with DA Davidson. Please unmute your line and ask your question.

Operator: Our next question comes from Rudy Kessinger with D.A. Davidson. Please unmute your line and ask your question.

Speaker #1: Great. Thanks for taking my questions. I'll have my congrats to the quarter. Certainly, it looks like a strong quarter here. A few questions for me.

Rudy Kessinger: Great. Thanks for taking my questions. I'll have my introduction. The quarter certainly looks like a strong quarter here. Two questions for me. Firstly, just on the strong net new ARR in the quarter, any color you can share on just how broad-based that was or concentrated it was? What products really drove that? And just the mix between new logos and expansion activity that drove the net new ARR.

Speaker #1: Firstly, just on the strong net new ARR in the quarter, any color you can share—and just how broad-based that was, or whether it was concentrated?

Speaker #1: What products really drove that? And just the mix between new logos and expansion activity that drove the net new ARR? Yeah, go ahead. Go ahead.

Victor Limongelli: Yeah, thanks Rudy for the question. Yeah, go ahead, Jorge. Yeah. I can give you a little color. No, look, I think we are very proud of the metric, going back to 8.5% of ARR and net new ARR to your point, $5.8 million for this quarter. So, largely the product set is the existing products, kind of the legacy products that we normally sell licenses, on-prem, OCA, et cetera. We did have a little bit of a contribution from the new products with Build38 and ThreatFabric as well through the partnership. But that was not overwhelmingly what drove the number up. So I think we see progress there, which is how I would characterize it, progress on the new products. Hopefully we can continue to accelerate those.

Jorge Martell: Yeah, thanks Rudy for the question.

Speaker #4: Yeah, yeah. I can give you a little caller. So no, look, I think we're very proud of the metric going back to 8.5% of ARR and net new ARR, to your point, 5.8 million for this quarter.

Victor Limongelli: Yeah, go ahead, Jorge.

Jorge Martell: Yeah. I can give you a little color. No, look, I think we are very proud of the metric, going back to 8.5% of ARR and net new ARR to your point, $5.8 million for this quarter. So, largely the product set is the existing products, kind of the legacy products that we normally sell licenses, on-prem, OCA, et cetera. We did have a little bit of a contribution from the new products with Build38 and ThreatFabric as well through the partnership. But that was not overwhelmingly what drove the number up. So I think we see progress there, which is how I would characterize it, progress on the new products. Hopefully we can continue to accelerate those.

Speaker #4: So the largely the product set is the existing products kind of the legacy products that we normally sell licenses, on-prem, OCA, etc. We did have a little bit of a contribution from the new products for build 38 and thread fabric as well through the partnership.

Speaker #4: So that was not overwhelmingly what drove the number up. So I think we see progress there, which is how I would characterize it—progress on the new products. Hopefully, we can continue to accelerate those.

Speaker #4: But largely, it's the existing products and primarily, as you know, our net new ARR or ARR growth primarily comes from expansion of existing business on both digital agreements on transaction volumes and Victor alluded to the large expansion that we closed this quarter and we signaled in terms of the overages from last quarter and we say normally that is a leading indicator for expansion.

Jorge Martell: But largely it is the existing products and primarily, as you know, our net new ARR or ARR growth primarily comes from expansion of existing business on both digital agreements on transaction volumes. Victor alluded to the large expansion that we closed this quarter, and we signaled in terms of the overages from last quarter. We say normally that is a leading indicator for expansion. So that was the case for that large customer, which we are pleased with. On the security side, again, the expansion also came from existing customer base. It is good to see when customers are renewing, they renew with this expansion, not only in certain regions, it is for adding across all the regions that we normally see. So we are pretty pleased with that. Rudy, I was going to just add to what Jorge said.

Speaker #4: So that was the case for that large customer, which we're pleased with. And then, on the security side, again, the expansion also came from the existing customer base.

Speaker #4: And it's good to see when customers are renewing, they renew with this expansion, not only in certain regions, it's sporadic across all the regions that we normally see.

Speaker #4: So we're pretty pleased with that.

Speaker #1: Yeah, Rudy, I was going to just add to what Jorge said. This is not a revenue number, but on a bookings basis, we did very well across many geographies.

Victor Limongelli: Rudy, I was going to just add to what Jorge said. As I said, this is not a revenue number, but on a booking basis, we did very well across many geographies. It was not just one geography or one area, so it was great to see.

Victor Limongelli: As I said, this is not a revenue number, but on a booking basis, we did very well across many geographies. It was not just one geography or one area, so it was great to see.

Speaker #1: It wasn't just one geography or one area, so it was great to see.

Speaker #4: Got it. Okay, super helpful. Yeah, and I guess for me, it's similar maybe question to Gray. I believe who asked it. I think the question on a lot of investors' minds is, when can 5 million plus of net new ARR quarter become the average or just the base, if you will?

Rudy Kessinger: Got it. Okay, super helpful. I guess for me, it is similar, maybe question to Gray, I believe who asked it. I think the question on a lot of investors' minds is, "When can $5 million plus of net new ARR quarter become the average or just the base," if you will? It has certainly been lumpy over the last few years. You have some new products that you have launched. It is still some on the way. I guess, I hear your comments that you sound better than 6, 12 months ago. I guess, I do not know, does 2027 feel like the year where really we can kind of escape the growth ranges that we have been in and see some real acceleration? Or just how should we think about that at this stage?

Speaker #4: It's certainly been lumpy over the last few years. You have some new products that you've launched, and there are still some on the way, I guess.

Speaker #4: I hear your comments that you sound better than 6, 12 months ago. I guess, I don't know, is 2027 feel like the year where really we could kind of escape kind of the growth ranges that we've been in and see some real acceleration or just how should we think about that at this stage?

Speaker #1: Yeah, no, I understand the question, of course. And we haven't as a business completed finalized our 2027 planning. So it would be completely premature for us to be giving specific guidance for '27.

Victor Limongelli: Yeah, no, I understand the question, of course. We have not, as a business, completed, finalized our 2027 planning, so it would be completely premature for us to be giving specific guidance for 2027. However, we are introducing new products, right? You can see the strategy on the cybersecurity side. You can see the strategy of DigipassONE, where we want to provide more value to our customers and earn more revenue from them by providing more capabilities. So we will be doing that. Now, keep in mind, you know this, I am sure, dealing with many of the companies you cover. You introduce a new product in Q1. The sales cycles at large banks are not 60 days. They tend to be longer than that. So it will take a little while for that to have a revenue impact. But we do think it is going to help the business overall.

Speaker #1: However, we are introducing new products, right? And you can see the strategy on the cybersecurity side. You can see the strategy of DigitPass One, where we want to provide more value to our customers and earn more revenue from them by providing more capabilities.

Speaker #1: And so we'll be doing that. Now, keep in mind, you know this, I'm sure dealing with many of the companies you cover, you introduce a new product in Q1.

Speaker #1: The sales cycles at large banks are not 60 days. They tend to be longer than that. So it'll take a little while for that to have a revenue impact.

Speaker #1: But we do think it's going to help the business overall. It does, as I mentioned, it does help the renewal rates and the GRR and obviously, once you start lending those deals, it helps NRR as well.

Victor Limongelli: But we do think it is going to help the business overall. It does, as I mentioned, it does help the renewal rates and the GRR. Once you start landing those deals, it helps NRR as well. We feel like we are going in the right direction. Also, the Digital Agreements business has been introducing new products as well, new capabilities, I should say, on the platform. We think that is going to help that business as well. We feel good about the trajectory, I would say, without getting into the specifics of 2027 growth rates.

Victor Limongelli: It does, as I mentioned, it does help the renewal rates and the GRR. Once you start landing those deals, it helps NRR as well. We feel like we are going in the right direction. Also, the Digital Agreements business has been introducing new products as well, new capabilities, I should say, on the platform. We think that is going to help that business as well. We feel good about the trajectory, I would say, without getting into the specifics of 2027 growth rates.

Speaker #1: So we feel like we're going in the right direction. And also, the digital agreements business has been introducing new products as well. New capabilities, I should say, on the platform.

Speaker #1: And we think that's going to help that business as well. So we feel good about the trajectory, I would say, without getting into the specifics.

Speaker #1: Of 2027 growth rates.

Speaker #2: Our next question comes from Anya Söderström with Sudodi. Please unmute your line and ask the and answer the ask your question.

Operator: Our next question comes from Anja Soderstrom with Sidoti. Please unmute your line and ask your question.

Speaker #3: Thank you for taking my question. Congrats on the nice progress here. I'm just curious if ARR growth is long down a little bit in the fourth quarter.

Anja Soderstrom: Thank you for taking my question. Congrats on the nice progress here.

Victor Limongelli: Thank you.

Anja Soderstrom: I'm just curious, you say ARR growth is slowing down a little bit in Q4. Is there any seasonality there, or how should we think about that?

Speaker #3: Is there any seasonality there, or how should we think about that?

Speaker #4: Hey, Anya, thanks for the question. So when you look at the guy that we put in, so 199 at the midpoint, so that implies the 6.5 year-over-year growth.

Jorge Martell: Hey, Anja. Thanks for the question. When you look at the guide that we put in, so $199 million at the midpoint, that implies a 6.5% year-over-year growth. I think we obviously this is where we feel comfortable with. Hopefully, we can exceed it, Anja. But I think there's a lot of indications as well. We mentioned last quarter, a couple of the large churns that we had, some of those related to the passkeys before we acquired the business. So those are going to continue to be with us for the next couple of quarters still, Anja, so those are factored in. I would say we should expect to see a relatively consistent number where we saw this quarter. Hopefully, we can do a little better, but that's the midpoint of what we decided to guide towards, Anja.

Speaker #4: I think we obviously this is where we feel comfortable with. Hopefully, we can exceed it, Anya. But I think there's a lot of indications as well.

Speaker #4: We mentioned last quarter, a couple of the large churns that we had; some of those were related to the past, before we had acquired the business.

Speaker #4: So those are going to continue to be with us for the next couple of quarters still. Anya, so those are factored in. And so I would say we should expect to see a relatively consistent number where we saw this quarter.

Speaker #4: Hopefully, we can do a little better, but that's the midpoint of what we decided to guide towards.

Speaker #3: Okay, thank you. And then, can you just bucket your growth with existing customers versus adding new logos?

Anja Soderstrom: Okay. Thank you. Can you just bucket your growth with existing customers versus adding new logos?

Speaker #4: So largely, when we come as I mentioned before, largely the ARR at this point, I think maybe you should unpack it by the two business units.

Jorge Martell: Largely, as I mentioned before, largely the ARR at this point, I think maybe you should unpack it by the two business units. When it comes to security, it is largely an expansion driver when it comes to ARR. As I mentioned, a little bit of the contribution came from the new products. So our goal is to continue to expand that contribution for new products into the customer base. Of course, we like to have new logos, but just because of the market share that we have in some regions, new logos tend to be, particularly in security, a lower contribution to the mix. On the Digital Agreement side, the new logo contribution is slightly higher, maybe it's 20% to 30% when it comes to ARR growth. We want to continue to get that contribution because it is a land and expand, Anja.

Speaker #4: So, when it comes to security, it is largely an expansion driver when it comes to ARR. And as I mentioned, a little bit of the contribution came from the new products.

Speaker #4: And we so our goal is to continue to expand that contribution for new products into the customer base. Of course, we like to have new logos, but just because of the market share that we have in some regions, new logos tend to be particularly in security, a lower contribution to the mix.

Speaker #4: On the digital agreement side, the new low contribution is slightly higher, maybe it's 20, 20 to 30 percent when it comes to ARR growth.

Speaker #4: And we want to continue to get that contribution because it is a land and expand. As we mentioned before, DA is completely land and expand.

Victor Limongelli: As we mentioned before, DA is completely land and expand. You got to land it to then expand them. But at this point, it is still largely an expansion from ARR. We are running go-to-market initiatives to accelerate the new logo contribution and landing. That is all I can tell you at this point. I do not know, Victor, if you have any other thoughts. No, that is accurate. I alluded to this a few minutes ago. When you are talking about large banks, the sales cycles tend to be kind of lengthy, so new logos will be harder to come by. We have 60 of the 100 biggest banks in the world as customers, so we are already at the majority of the top 100. Of course, we are trying to get new logos, and we do.

Jorge Martell: As we mentioned before, DA is completely land and expand. You got to land it to then expand them. But at this point, it is still largely an expansion from ARR. We are running go-to-market initiatives to accelerate the new logo contribution and landing. That is all I can tell you at this point. I do not know, Victor, if you have any other thoughts.

Speaker #4: You got to land it and then expand them. But at this point, it's still largely an expansion from ARR. We are running go-to-market initiatives to accelerate the new logo contribution and landing.

Speaker #4: And so that's all I can tell you at this point. I don't know if you have any other thoughts.

Speaker #1: No, that's accurate. I alluded to this a few minutes ago when you're talking about large banks. The sales cycles tend to be kind of lengthy.

Victor Limongelli: No, that is accurate. I alluded to this a few minutes ago. When you are talking about large banks, the sales cycles tend to be kind of lengthy, so new logos will be harder to come by. We have 60 of the 100 biggest banks in the world as customers, so we are already at the majority of the top 100. Of course, we are trying to get new logos, and we do.

Speaker #1: So, new logos will be harder to come by. And we have 60 of the 100 biggest banks in the world as customers.

Speaker #1: So we're already out the majority of the top 100. Of course, we're trying to get new logos. And we do. We do add new logos.

Speaker #1: But most of our growth comes from existing customers, which is why our strategy is to add value, add products, and have more to sell them because that's the most straightforward way to drive higher growth in the business.

Victor Limongelli: We do add new logos, but most of our growth comes from existing customers, which is why our strategy is to add value, add products, and have more to sell them because that is the most straightforward way to drive higher growth in the business.

Speaker #2: Your final question comes from Catherine Trebnick with Rosenblatt Securities, Inc. Please unmute your line and ask your question.

Operator: Your final question comes from Catharine Trebnick with Rosenblatt Securities Inc. Please unmute your line and ask your question.

Speaker #5: Hi, good afternoon. A couple of product questions. For clarification, passkeys, does that cannibalize the DigitPass hardware or does a hybrid model protect that revenue?

Catharine Trebnick: Hi, good afternoon. A couple product questions. For clarification, passkeys, does that cannibalize the Digipass hardware, or does a hybrid model protect that revenue? I got a couple few others. Thanks.

Speaker #5: And then I got a couple few others. Thanks.

Speaker #1: Yeah, Catherine, great question. So there is a mix of use cases by our customers. Some people prefer hardware authentication. Passkeys are certainly a modern authentication method that are safe and convenient.

Victor Limongelli: Yeah, Catharine. Great question. There is a mix of use cases by our customers. Some people prefer hardware authentication. Passkeys are certainly a modern authentication method that are safe and convenient. There is going to be a mix. It kind of depends on the end market, the geography, and also the use case. Hardware authentication is not inconvenient if you are doing your banking in front of a big screen, multiple monitors with a desktop or a laptop computer. You keep your hardware token in a drawer, you pull it out, you authenticate, super safe, and not inconvenient. So you see that proportionally more in corporate than you do in retail banking, for example. It also varies greatly by geography. Hardware is much more prevalent in Europe and in APAC, and much less so in North America, for example.

Speaker #1: And so there's going to be a mix. It kind of depends on the end market, the geography, and also the use case. Hardware authentication is not inconvenient if you're doing your banking in front of a big screen, multiple monitors, with a desktop or laptop computer.

Speaker #1: You keep your hardware token in a drawer, you pull it out, you authenticate, super safe, and not inconvenient. So you see that proportionately more in corporate than you do in retail banking for example.

Speaker #1: And it also varies greatly by geography. Hardware is much more prevalent in Europe and in APAC. And much less so in North America. For example.

Speaker #5: Okay, and then digital agreements, just for my knowledge or everybody, are those AI features priced separately? Are they bundled when you sell that? And congratulations on that order.

Catharine Trebnick: Okay, and then Digital Agreements, just for my knowledge or everybody's, are those AI features priced separately, or are they bundled when you sell that? And congratulations on that order. That sounds really good.

Speaker #5: That sounded really good.

Speaker #1: We have, to date, bundled the capabilities to create differentiation in the marketplace. TBD on how we handle future enhancements, but that's what we've done to date.

Victor Limongelli: We have, to date, bundled the capabilities to create differentiation in the marketplace. TBD on how we handle future enhancements, but that is what we have done to date.

Speaker #5: All right, thank you very much.

Catharine Trebnick: All right. Thank you very much.

Speaker #1: Thank you.

Speaker #4: Thanks, Catherine.

Victor Limongelli: Thank you.

Speaker #2: There are no further questions at this time. I will now turn the call back to Joe Maxa for closing remarks.

Joe Maxa: Thanks, Catharine.

Operator: There are no further questions at this time. I will now turn the call back to Joe Maxa for closing remarks.

Speaker #6: Thank you, everyone. We look forward to updating you again next quarter. Have a great night.

Joe Maxa: Thank you, everyone. We look forward to updating you again next quarter. Have a great night.

Operator: The call has concluded. Thank you for joining. You may now disconnect.

More OSPN earnings call transcripts

Browse all earnings call transcripts

Q3 2026 OneSpan Inc Earnings Call

Request TrialDemo

Event Details

OneSpan

OSPN

Earnings

Q3 2026 OneSpan Inc Earnings Call

Thursday, October 29th, 2026 at 8:30 PM

Open Event Documents

Search Transcript

Enter a search term to find quotes

OneSpan

Earnings