OSPN 10-K & 10-Q changes, risk factors and insider trading
OneSpan Inc. · Nasdaq · Services-Computer Integrated Systems Design · CIK 1044777 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Acquisitions or other strategic transactions, such as our planned acquisition of Build38, may not achieve the intended benefits and could disrupt our operations.”
New heading “If we are unable to retain key employees and successfully hire and train qualified new employees, we may be unable to achieve our business objectives.”
New heading “We may be unable to maintain or increase our level of profitability.”
New heading “The credit agreement for our revolving credit facility contains financial covenants and various other restrictions and requirements that could limit our operational flexibility and adversely affect our financial condition and results of operations if we are unable to comply with them.”
New heading “U.S. trade policy or foreign policy developments could have a material adverse impact on our business.”
Removed heading “If we are unable to retain key employees and successfully hire and train qualified new employees, we may be unable to achieve our business objectives. In addition, we may experience negative effects from the significant workforce reductions we have completed over the past several years.”
Removed heading “We have operated at a loss for two of the past three fiscal years, and we may not be profitable in the future.”
Removed heading “Acquisitions or other strategic transactions may not achieve the intended benefits or may disrupt our current plans and operations.”
Largest changes
“The Credit Agreement contains customary events of default relating to, among other things, payment defaults, breach of covenants, cross defaults to material indebtedness, bankruptcy-related defaults, judgment defaults, and the occurrence of certain change of control events. If an event of default occurs and is not cured or waived, the lenders under the Credit Agreement will be entitled to take various actions, including the termination of commitments and the acceleration of amounts due under the Credit Agreement in addition to charging default interest. …”see in full comparison
“The California Privacy Rights Act of 2020 (“CPRA”) also created a new enforcement agency – the California Privacy Protection Agency – whose sole responsibility is to enforce the CPRA, which will further increase compliance risks. In addition, more than 18 other states already have passed comprehensive privacy laws. States are also passing laws regulating specific categories of information that may impact our business. …”see in full comparison
“In the United States, we are subject to a fragmented and expanding regulatory landscape at both the federal and state levels. Federal data privacy and security enforcement continues to evolve, and although the current federal regulatory environment is expected to shift toward more traditional and narrower enforcement priorities, our company remains exposed to potential actions by federal agencies such as the FTC under existing privacy laws, especially in the area of processing biometrics and other sensitive data. …”see in full comparison
“For example, in the European Economic Area (“EEA”), we are subject to Regulation (EU) 2016/679 (the General Data Protection Regulation or “GDPR”) and related national implementing laws. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to lawful basis for processing, transparency, data subject rights, security safeguards, breach notification, accountability, and the oversight of third-party processors. …”see in full comparison
“In the event that the supply of components or finished products for our Digipass authenticator business is interrupted or relations with any of our principal component vendors or contract manufacturers is terminated, there could be increased costs and considerable delay in finding suitable replacement sources for components or alternative manufacturers for our hardware products. Our Digipass authentication devices are currently assembled at several facilities located in mainland China and one facility in Romania. …”see in full comparison
“In the event that the supply of components or finished products for our Digipass authenticator business is interrupted or relations with any of our principal component vendors or contract manufacturers is terminated, there could be increased costs and considerable delay in finding suitable replacement sources for components or alternative manufacturers for our hardware products. Our Digipass authentication devices are currently assembled at several facilities located in mainland China and one facility in Romania. …”see in full comparison
Full comparison: every changed paragraph (114)
•We may experienceencounter difficultieschallenges increasingin or maintainingachieving our rate of revenue growth.growth objectives.
•Acquisitions or other strategic transactions, such as our planned acquisition of Build38, may not achieve the intended benefits and could disrupt our operations.
•If we are unable to retain key employees and successfully hire and train qualified new employees, we may be unable to achieve our business objectives. In addition, we may experience negative effects from the significant workforce reductions we have completed over the past several years.
•We may be unable to maintain or increase our level of profitability.
•The credit agreement for our revolving credit facility contains financial covenants and various other restrictions and requirements that could limit our operational flexibility and adversely affect our financial condition and results of operations if we are unable to comply with them.
•We have operated at a loss for two of the past three years, and we may not be profitable in the future.
•U.S. trade policy or foreign policy developments could have a material adverse impact on our business.
•Acquisitions or other strategic transactions may not achieve the intended benefits or may disrupt our current plans and operations.
We may experienceencounter difficultieschallenges increasingin or maintainingachieving our rate of revenue growth.growth objectives.
DuringOur 2024,total werevenue madefor significant2025 strideswas inapproximately improvingthe profitabilitysame acrossas our business,total including achieving profitability in our Digital Agreements segmentrevenue for the2024. first time. Our revenue also grew modestly during 2024, and weWe are aiming to continue to grow our revenue in both Security SolutionsCybersecurity and Digital Agreements going forward; however, this may be challenging. We expect revenue from our Digipass authenticator tokens to decrease modestly on a year-over-year basis in 2025,2026, consistent with trends over the past decade as our banking customers have generally moved toward “mobile-first” authentication (authentication solutions delivered through a software application on a mobile device), especially for consumer banking. We will therefore need to grow our revenue relatively more in the software component of our SecurityCybersecurity Solutions segmentdivision and in theour Digital Agreements segmentdivision to compensate for the anticipated decline in hardwarehardware. asWe wellare as,enhancing our software solutions through strategic acquisitions, including our acquisition of Nok Nok Labs in June 2025 and our entry into a definitive agreement to aacquire lesser extent, the impact of the sunsetting of certain of our productsBuild38 in 2022,December 20232025, and 2024 and the decrease in maintenance and support revenue as we continue to transition legacy perpetual maintenance contracts to term licenses. Although we are makingtargeted additional investments in software product development; and in channel partnerships to enhance our software solutions,however, these efforts may not yield the additional software revenue we seek for various reasons, such as competition, delays and challenges in integrating acquisitions or developing products that meet our customers’ needs, long sales cycles, lack of brand awareness, general economic conditions, and other risks described in these Risk Factors. If we are unable to grow our revenue as planned, we may also be unable to continuemaintain to graduallyor increase our profitability, since we have already implemented significant restructuring activities over the past several years.profitability.
Acquisitions or other strategic transactions, such as our planned acquisition of Build38, may not achieve the intended benefits and could disrupt our operations.
To remain competitive, we have in the past and may in the future acquire additional businesses, products or technologies or make investments in, or enter into joint ventures or similar transactions with, third parties. In 2025, we acquired Nok Nok Labs, a provider of FIDO passwordless software authentication solutions, and made a strategic investment in ThreatFabric Holding B.V., a provider of fraud detection, mobile threat intelligence, and malware defense solutions. In December 2025, we signed a definitive agreement to acquire Build38, a provider of mobile application protection software. The proposed Build38 acquisition is subject to customary closing conditions and is currently expected to close in March 2026. Acquisitions and other strategic transactions such as these involve numerous risks, including the following:
•Delays in completing acquisitions, or failure to complete planned acquisitions, due to longer than anticipated regulatory clearance processes or other unexpected challenges;
•Delays or reductions in customer purchases for OneSpan and/or the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company;
•Difficulties in supporting and, where applicable, migrating acquired customers to our platforms, which could cause customer churn, unanticipated costs, and damage to our reputation;
•Constraints on our liquidity in the event that we use cash or incur debt to fund a significant acquisition, or dilution to existing stockholders in the event we issue equity securities as part of the consideration for such an acquisition;
•Potential loss of partners of OneSpan or an acquired business due to the actual or perceived impact of the acquisition;
Any of these risks could result in acquisitions or other strategic transactions failing to achieve their intended objectives and/or disrupting our business.
Technological changes occur rapidly in our industry and development of new products and features is critical to maintain and grow our revenue. Our ability to attract and retain customers will depend in part upon our ability to enhance our current products and develop innovative new solutions to distinguish us from the competition and to meet customers’ changing needs. For instance, we believe that our bank and financial institution customers, who account for a majority of our revenue, may increasingly move away from multi-factor authentication methods and toward passkeys that use the FIDO2 passwordless authentication standard. If we are unable to provide our customers with high quality and innovative passkey solutions, or if we otherwise do not anticipate or adapt to changing technology, industry standards or customer requirements on a timely basis, our competitive position and financial results will be negatively impacted.
Product developments and technology innovations by others may adversely affect our competitive position. The introduction by our competitors of products embodying new technologies or the emergence of new industry standards could render our existing products obsolete and unmarketable. For example, if our competitors are able to more quickly and effectively integrate new technologies such as generative artificial intelligence into their products, our competitive position may suffer. In addition, AI may reduce barriers to entry in our markets by allowing new entrants to rapidly and cost-effectively create competitive and potentially disruptive software solutions.
We spend substantial amounts of time and money to research and develop new offerings and enhanced versions of our existing offerings in order to meet our customers’ rapidly evolving needs. When we develop a new offering or an enhanced version of an existing offering, we typically incur expenses and expend resources upfront to market, promote and sell the new offering. Therefore, when we develop or acquire new or enhanced offerings, their introduction must achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to market. In somethe cases,past, we determinehave determined that certain product initiatives we initially believed were promising dodid not warrant further investment. For example, in 2023, we decided to discontinue investments in our Digipass CX product in order to rationalize and focus our product portfolio,investment, and incurred non-cash impairment charges as a result. If other recent or future new product offeringsinitiatives do not garner widespread customer adoption and implementation, we may incur future non-cash charges and our business may be adversely affected.
The marketmarkets for digital solutions for security, authentication, identity, electronic signature,cybersecurity and digital workflowagreements solutions isare very competitive and, like most technology-driven markets, isare subject to rapid change and constantly evolving solutions and services. Competition in these markets may intensify further as advances in AI enable rapid, low-cost development of software applications.
Our identity verification andThe authentication products in our Cybersecurity division are designed to allow authorized users access to digital business processes and properties,processes, in some cases using patented technology, as a replacement for or supplement to a static password.technology. Our main competitors in our identity verification and authentication marketsmarket are Gemalto, a subsidiary of Thales Group, Yubico and RSA Security. There are also many other companies in adjacent areas, such as mobile device management ("MDM"),MDM, threat protection, and identity and access management ("IAM"),IAM, that offer competing servicesservices. In addition to these companies, we face competition from many small authentication solution providers, many of whom offer new technologies and niche solutions such as biometric or risk and behavioral analysis. We believe that competition in this market is likelymay to intensify as a result of increasing demand for security products.
Our primary competitors for electronic signature solutions in our Digital Agreements division are DocuSign and Adobe Systems. Both companies are significantly larger than us. In addition to these companies, there are numerous smaller and regional or niche providers of electronic signing solutions.
Some of our present and potential competitors have significantly greater brand awareness and financial, technical, marketing, purchasing, and other resources than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, devote greater resources to the development, promotion and sale of products, or deliver competitive products at a lower end-user price than we do. These factors have made it more difficult for us to compete successfully and may continue to do so, which wouldcould negatively affect our business.
In the event that the supply of components or finished products for our Digipass authenticator business is interrupted or relations with any of our principal component vendors or contract manufacturers is terminated, there could be increased costs and considerable delay in finding suitable replacement sources for components or alternative manufacturers for our hardware products. Our Digipass authentication devices are currently assembled at several facilities located in mainland China and one facility in Romania. The importation of these products from China and Romania exposes us to the possibility of product supply disruption and increased costs in the event of changes in the policies of the Chinese, Romanian or EU governments, political unrest, natural disasters, extreme weather or unstable economic conditions in China, Romania or the EU, or developments in China, Romania, the U.S. or the EU that are adverse to trade, including enactment of tariffs or other protectionist legislation. We experienced supply chain disruption in 2022 as a result of China’s implementation and subsequent reversal of its “Zero COVID” policy and extreme heatwaves and drought affecting southern China, both of which affected our China-based contract manufacturers. We may experience similar disruptions again due to numerous factors, including tariffs and trade disputes, geopolitical tensions, armed conflict, impacts as a result of pandemics or other public health threats, and natural disasters and extreme weather, which may occur more frequently due to climate change. These factors have in the past, and may in the future, cause delays in our fulfillment of customer orders, which may in turn delay our recognition of revenue from such orders or cause customers not to place orders or to seek alternative suppliers.
A typical sales cycle in the financial services market is often nine to 18 months long. We often need to spend significant time and resources to better educate and familiarize these potential customers with the value proposition of our products and solutions. Purchasing decisions for our products and services may be subject to delays due to a number of factors, many of which are outside of our control, such as:
Our corporate infrastructure stores and processes our sensitive, proprietary and other confidential information (including information related to finance, technology, employees, marketing, sales, etc.) which is used daily in our operations. In addition, our solutions involve the transmission and processing of our customers' confidential, proprietary, personal and sensitive information. We have legal and contractual obligations to protect the confidentiality and appropriate use of customer data. Because we are a digital agreements and cybersecurity company, and because the majority of our customers are banks and other financial institutions, which are frequent targets of cyberattacks, we may be an attractive target for cyber attackers or other data thieves.
High-profile cyberattacks and security breaches have increased in recent years, with the potential for such acts heightened because of the numberwidespread adoption of employeesremote working remotely since the COVID-19 pandemic and the increase in sophisticated cyberattack methods, such asincluding the use of artificial intelligence to launch automated, accelerated and enhanced cyberattacks. Because techniques used to obtain unauthorized access or to sabotage systems are constantly evolving, change frequently and often are not recognized until launched against a specific target, we may be unable to anticipate these techniques or to implement adequate preventative measures. As we seek to increase our client base and expand awareness of our brand, we may become a greater target for third parties seeking to compromise our security systems and we anticipate that hacking attempts and cyberattacks will increase in the future.
Artificial intelligence technologies introduce evolving industry‑wide risks, including model manipulation, data poisoning, deceptive AI‑generated content, and rapidly expanding regulatory requirements. For OneSpan, the use of AI within security operations and product‑related processes may create vulnerabilities if systems are improperly designed, supervised, or governed, potentially resulting in unauthorized access, incorrect automated actions, exposure of confidential information, or operational failures. Despite policies governing AI usage, lifecycle risk management, and oversight, failures in design, monitoring, or compliance—as well as errors or misuse of AI‑enabled capabilities—could impair our security posture, reduce threat‑detection effectiveness, harm customer trust, or expose OneSpan to legal, regulatory, and reputational consequences.
We have experienced several security incidents in the past, none of which have been material to date. However, it is possible that we may experience a material event in the future. While we have established teams, processes and strategies to protect our assets, we may not always succeed in preventing or repelling unauthorized access to our systems. We also may face delays in detecting or otherwise responding to cybersecurity incidents or other breaches.
Additionally, we use third-party service providers for certain services involving data storage or transmission, such as SaaS, cloud computing, and internet infrastructure and bandwidth. These providers face various cybersecurity threats and may experience cybersecurity incidents or other security breaches. For example, the recent Salesloft, Inc. Drift data breach impacted hundreds of Salesforce.com customers worldwide. Although OneSpan was among the affected customers, the incident did not compromise our products and had minimal impact on our business, but it is possible that future third-party incidents may be more harmful to us.
Despite our security measures, our IT systems and infrastructure may be vulnerable to attacks. Threats to IT security can take a variety of forms. Individuals and groups of malicious actors and sophisticated organizations, including state-sponsored organizations or nation-states, continuously attempt to compromise systems using tactics, techniques, and procedures such as phishing attacks, malicious software, exploiting hardware or software vulnerabilities, social engineering, and coordinated attacks like distributed denial of service or other coordinated attacks. If account security controls are not effectively implemented or maintained, unauthorized access to confidential or sensitive information could occur.
We have experienced several security incidents in the past. None have been material to date, but it is possible that we will experience a material event in the future. Even though we have established teams, processes and strategies to protect our assets, we may not always be successful in preventing or repelling unauthorized access to our systems. We also may face delays in our ability to identify or otherwise respond to a cybersecurity incident or other breach. Additionally, we use third-party service providers to provide some services to us that involve the storage or transmission of data, such as SaaS, cloud computing, and internet infrastructure and bandwidth, and they face various cybersecurity threats and may suffer cybersecurity incidents or other security breaches. Despite our security measures, our IT and infrastructure may be vulnerable to attacks. Threats to IT security can take a variety of forms. Individuals and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our own IT. These actors may use a wide variety of methods, which may include utilizing our products to launch phishing attacks, developing and deploying malicious software or exploiting vulnerabilities in hardware, software, or other infrastructure in order to attack our products and services or gain access to our networks, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ or customers’ data, or acting in a coordinated manner to launch distributed denial of service or other coordinated attacks. Inadequate account security practices may also result in unauthorized access to confidential and/or sensitive data.
Security incidents may have a number of negative consequences to us, including the following: requiring us to expend significant capital and other resources to alleviate the incidents and to improve our security technologies; impairing our ability to provide services to our customers and protect the privacy of their data delaying product development efforts; compromising confidential or technical business information or personal data; harming our reputation or competitive position; resulting in theft or misuse of our intellectual property or other assets; and exposing us to substantial litigation expenses and damages, indemnity and other contractual obligations, government fines and penalties, mitigation expenses, costs for remediation and incentives offered to affected parties, including customers, other business partners and employees, in an effort to maintain business relationships after an incident. We arecontinually continuouslyinvest workingin strengthening our information technology systems and implementing robust security measures to improve our IT systems, together with creating security boundaries around ourprotect critical and sensitive assets. WeOur providecybersecurity program includes regular security awareness training to ourfor employees and our key contractorscontractors, thatemphasizing focusesbest onpractices variousand aspectsemerging threats. These efforts are designed to reduce the likelihood of cybersecurity. All these steps are taken to mitigate the risk ofan attack and to ensure our readinesspreparedness to responsiblyrespond manageeffectively ato any security violation or attack. However, we may nevertheless be unable to anticipate attacks or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures and our products could be harmed, we could lose potential sales and existing customers, our ability to operate our business could be impaired, we may incur significant liabilities, we could suffer harm to our reputation and competitive position, and our business and financial condition could be negatively impacted.breach.
Despite these measures, we may not be able to anticipate or prevent all attacks. In the event of an actual or perceived security breach, confidence in our security practices and products could be diminished, resulting in loss of customers and sales, impairment of our operations, significant liabilities, reputational harm, and a negative impact on our business and financial condition.
If we are unable to retain key employees and successfully hire and train qualified new employees, we may be unable to achieve our business objectives. In addition, we may experience negative effects from the significant workforce reductions we have completed over the past several years.
Our ability to successfully attain our business objectives will depend significantly on our ability to retain and motivate key employees and attract qualified new hires. In 2022, 2023 and 2024, we terminated the employment of approximately 330 employees as part of our cost reduction and restructuring efforts. These reductions may make it more difficult, more time-consuming and more expensive for us to retain key employees and attract new hires, both because our reputation in the hiring market may have been negatively affected by the reductions and because the remaining employees have had to assume additional work. We face intense competition for these employees from numerous technology, software and other companies, many of whom have greater resources than we do, and our employees are generally employed on an at-will basis, which means that they could terminate their employment with us at any time. The temporary or permanent loss of the services of our CEO, other members of senior management or other key employees for any reason could significantly delay or prevent the achievement of our objectives and harm our business, financial condition and results of operations. Further, the loss of key employees, particularly those in senior management roles, could be negatively perceived in the capital markets, which could reduce the market value of our securities.
In addition, while we believe the significant workforce reductions we completed in the past three years were necessary in order to position the company for profitable growth, it is possible that we could experience various negative effects from these reductions, including 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.
•Other events or factors, including those resulting from pandemics, war, natural disasters, incidents of terrorism or responses to these events.
We have operated at a loss for two of the past three fiscal years, and we may not be profitable in the future.
Over our approximately 30-year operating history, we have operated at a loss for many of those years, including for the years ended December 31, 2023 and 2022, for which we reported a net loss of $29.8 million and $14.4 million, respectively. Although we were profitable in 2024, we may not be able to maintain or increase our level of profitability. We intend to continue to incur significant expenses to maintain, develop and enhance our products and solutions, improve our infrastructure and technology, and grow our customer base. These efforts may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and experience unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and common stock may significantly decrease.
We expect that our SaaS offerings will constitute an increasingly important part of our business. As a result, we will need to continue to evolve our processes to meet a number of regulatory, intellectual property, contractual, service, and security compliance challenges. These challenges include: compliance with licenses for open-source and third-party software embedded in our SaaS offerings; maintaining compliance with global export control, privacy, data security, and resiliency regulations (including the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the EU General Data Protection Regulation ("GDPR"), and the EU Digital Operational Resilience Act ("DORA")); supporting contractual requirements that our customers impose on us due to their own legal obligations, such as compliance with DORA; protecting our products from external threats; maintaining continuous service levels and data security practices expected by our customers; and preventing inappropriate use of our products. In addition to using our internal resources, we also utilize third-party resources to deliver SaaS offerings, such as third-party data hosting vendors. The failure of a third-party provider to prevent service disruptions, data losses or security breaches may require us to issue credits or refunds or to indemnify or otherwise be liable to customers or third parties for damages that may occur. Additionally, if these third-party providers fail to deliver on their obligations, our reputation could be damaged, and our customers could lose confidence in us and our ability to maintain and expand our SaaS offerings. Finally, our SaaS offerings must be designed to operate at significant transaction volumes. When combined with third-party software and hosting infrastructure, our SaaS offerings may not perform as designed, which could lead to service disruptions and associated damages.
Our business relies on our customers’ satisfaction with the technical and customer support and professional services we provide to support our products. If we fail to provide customer and technical support services that are high-quality, responsive, and able to promptly resolve issues that our customers encounter with our products and services, then they may elect not to purchase or renew subscription licenses or may otherwise reduce or discontinue their business relationship with us. Maintaining high-quality customer support can be costly, and it is possible that we will need to rely more heavily on online self-help tools or AI technology in order to meet our profitability objectives. These types of changes could result in difficulties maintaining the service levels our customers expect. This could result in loss of revenue and damage to our reputation, which could have an adverse effect on our business.
The exchange rate between the U.S. dollar and foreign currencies has fluctuated in recent years and may fluctuate substantially in the future. For example, the U.S. dollar’s strength against foreign currencies, particularly the Euro, during 2022 had a significant impact on our 2022 financial results. Although foreign exchange impact was not significant to our 2023 and 2024 results, it could adversely affect our results for 2025 and beyond. We do not currently use forward contracts or other hedging strategies such as options or foreign exchange swaps to mitigate our exposure to foreign currency fluctuations.
In 2024,2025, 2024 and 2023, we generated approximately 79%, 83% and 83% of our revenue and incurred approximately 54%, 59% of our operating expenses were generated/incurred outside of the U.S. In 2023, approximately 83% of our revenue and approximately 58% of our operating expenses were generated/incurred outside of the U.S.U.S., In 2022, approximately 83% of our revenue and approximately 66% of our operating expenses were generated/incurred outside of the U.S.respectively. A severe economic decline in any of our major foreign markets could adversely affect our results of operations and financial condition.
•geopolitical conflicts and related economic or political instability, including tensions or conflicts between the U.S. and other countries or regions, particularly China and the European Union, over territorial and sovereignty matters (including those related to Taiwan, Hong Kong, and Greenland), tariffs and trade, or U.S. foreign policy;
•adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash; and
•increased exposure to climate change, natural disasters, armed conflict, terrorism, epidemics, or pandemics and other health crises; andcrises.
•economic or political instability in foreign markets, including instability related to the impact of geopolitical tensions between China and the U.S. over Taiwan, Hong Kong, and tariffs and trade, particularly if the current U.S. presidential administration continues or expands tariffs on Chinese or other imports into the U.S.
In the event that the supply of components or finished products for our Digipass authenticator business is interrupted or relations with any of our principal component vendors or contract manufacturers is terminated, there could be increased costs and considerable delay in finding suitable replacement sources for components or alternative manufacturers for our hardware products. Our Digipass authentication devices are currently assembled at several facilities located in mainland China and one facility in Romania. The importation of these products from China and Romania exposes us to the possibility of product supply disruption and increased costs in the event of changes in the policies of the Chinese, Romanian or EU governments, political unrest, natural disasters, extreme weather or unstable economic conditions in China, Romania or the EU, or developments in China, Romania, the U.S. or the EU that are adverse to trade, including threatened or actual military conflict or enactment of tariffs or other protectionist legislation. We have experienced supply chain disruption in the past as a result of China’s COVID-related policies and extreme heatwaves and drought affecting southern China, both of which affected our China-based contract manufacturers. We may experience similar disruptions again due to numerous factors, including tariffs and trade disputes, geopolitical tensions, armed conflict, pandemics or other public health threats, and natural disasters and extreme weather, which may occur more frequently due to climate change. These factors have in the past, and may in the future, cause delays in our fulfillment of customer orders, which may in turn delay our recognition of revenue from such orders or cause customers not to place orders or to seek alternative suppliers.
A typical sales cycle in the financial services market is often 9 to 18 months long. We often need to spend significant time and resources to better educate and familiarize these potential customers with the value proposition of our products and solutions. Purchasing decisions for our products and services may be subject to delays due to a number of factors, many of which are outside of our control, such as:
If we are unable to retain key employees and successfully hire and train qualified new employees, we may be unable to achieve our business objectives.
Our ability to successfully attain our business objectives will depend significantly on our ability to retain and motivate key employees and attract qualified new hires. We face intense competition for these employees from numerous technology, software and other companies, many of whom have greater resources than we do, and our employees are generally employed on an at-will basis, which means that they could terminate their employment with us at any time. The temporary or permanent loss of the services of our CEO, other members of senior management or other key employees for any reason could significantly delay or prevent the achievement of our objectives and harm our business, financial condition and results of operations. Further, the loss of key employees, particularly those in senior management roles, could be negatively perceived in the capital markets, which could reduce the market value of our securities.
•Other events or factors, including those resulting from pandemics, war and other geopolitical conflicts, natural disasters, incidents of terrorism or responses to these events.
We may be unable to maintain or increase our level of profitability.
Over our approximately 30-year operating history, we have operated at a loss for many of those years, including for the year ended December 31, 2023, for which we reported a net loss of $29.8 million. Although we were profitable in 2024 and 2025, we may not be able to maintain or increase our level of profitability. We intend to continue to incur significant expenses to maintain, develop and enhance our products and solutions, improve our infrastructure and technology, and grow our customer base. These efforts may be costlier than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and experience unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and common stock may significantly decrease.
The credit agreement for our revolving credit facility contains financial covenants and various other restrictions and requirements that could limit our operational flexibility and adversely affect our financial condition and results of operations if we are unable to comply with them.
On June 23, 2025, we entered into the Credit Agreement with MUFG, as administrative agent, swingline lender and letter of credit issuer, and other lenders party thereto. The Credit Agreement provides for a $100.0 million revolving credit facility with a $10.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit. It also provides that we may, with the agreement of the lenders and/or new lenders and subject to certain conditions and limitations, add one or more incremental revolving facilities to increase commitments under the credit facility in an aggregate amount not to exceed the greater of (x) $100.0 million and (y) 100% of Consolidated EBITDA (as defined in the Credit Agreement) for the four consecutive fiscal quarters most recently ended for which financial statements have been delivered pursuant to the terms of the Credit Agreement.
The proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. We may borrow, repay and reborrow funds under the revolving credit facility until its maturity on June 23, 2030. As of December 31, 2025, we had outstanding letters of credit of $0.4 million and no borrowings outstanding under the Credit Agreement. Refer to Note 12, Debt in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for further details on the Credit Agreement.
Management's Discussion & Analysis (MD&A)
Removed heading “Business Segments”
Removed heading “Business Developments”
Largest changes
“•Restructuring and other related charges. Restructuring and other related charges consists of employee costs which include severance, retention pay, and related benefits incurred in connection with headcount reductions as part of our restructuring plan, including the 2023 Actions; real estate rationalization costs incurred to optimize our real estate footprint, which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs incurred to advance our operating model …”see in full comparison
“•Restructuring and other related charges. Restructuring and other related charges consists of employee costs which include severance, retention pay, and related benefits incurred in connection with headcount reductions as part of our restructuring plan, including the 2023 Actions; real estate rationalization costs incurred to optimize our real estate footprint which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs incurred to advance our operating model, which …”see in full comparison
“•Impairment of intangible assets. Impairment of intangible assets are incurred when we determine that the carrying value of an asset exceeds its fair value. We test annually, or when triggering events arise. During the year ended December 31, 2022, we performed an impairment review of the customer relationships intangible assets obtained in our 2018 acquisition of Dealflo Limited (“Dealflo”). The impairment review was triggered by our July 2022 notification to customers regarding our intent to gradually sunset our Dealflo solution in the months leading up to December 31, 2023. …”see in full comparison
We define Adjusted EBITDA as net income before interest, taxes, depreciation, amortization, long-term incentive compensation and related payroll tax expense, restructuring and other related charges, and certain non-recurring items, including acquisition related costs, rebranding costs, and non-routine shareholder matters. Adjusted EBITDA is a non-GAAP financial metric. We use Adjusted EBITDA as a simplified measure of performance for use in communicating our performance to investors and analysts and for comparisons to other companies within our industry. As a performance measure, we believe that Adjusted EBITDA presents a view of our operating results that is most closely related to serving our customers. By excluding interest, taxes, depreciation, amortization, long-term incentivesee in full comparisoncompensation,compensation and related payroll tax expense, restructuring costs and other related costs, and certain other non-recurring items, we are able to evaluate performance without considering decisions that, in most cases, are not directly related to meeting our customers’ requirements and were either made in prior periods (e.g., depreciation, amortization, long-term incentivecompensation,compensation and related payroll tax expense, non-routine shareholder matters), deal with the structure or financing of the business (e.g., interest, one-time strategic action costs, restructuring costs, impairment charges) or reflect the application of regulations that are outside of the control of our management team (e.g., taxes). In addition, removing the impact of these items helps us compare our core business performance with that of our competitors.
“We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization, long-term incentive compensation, restructuring and other related charges, and certain non-recurring items, including acquisition related costs, rebranding costs, and non-routine shareholder matters. We use Adjusted EBITDA as a simplified measure of performance for use in communicating our performance to investors and analysts and for comparisons to other companies within our industry.”see in full comparison
“We plan to incrementally take actions under the restructuring plan until December 31, 2025, when the plan terminates. We completed substantially all of the workforce reductions planned as part of the 2023 Actions in 2023 and 2024. The vendor contract component of the 2023 Actions is planned for completion by the end of 2025.”see in full comparison
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OneSpan delivershelps cutting-edgeorganizations solutionsbuild insecure, seamless, and trusted digital experiences through two keysolution areasportfolios: advanced secure authenticationCybersecurity and digitalDigital agreements.Agreements. Our secure authenticationcybersecurity solutions protect devices,identities, secure mobile apps, and safeguard access through advanced high-assurance authentication, threat intelligence, fraud prevention, and mobile app protection, defending users, devices, and applications withagainst robustsophisticated multi-factor and passwordless authentication and other fraud prevention technologies.attacks. Our digital agreementsagreement solutions combinestreamline agreement workflows with secure e-signatures, identity verification, electronicand signatures,smart digital forms, built to enable speed, compliance and digitalexceptional workflowscustomer to streamline agreements, enhance compliance, and accelerate business processes. We empower organizations to automate and secure both customer-facing and revenue-generating processes, supporting a wide range of use cases—from simple transactions to complex workflows requiring elevated security.experiences. Trusted by leading global blue-chip enterprises, including more than 60% of the world’s 100 largest banks, OneSpan processes millionsover ofa hundred million digital agreements and billions of secure authentication transactions inacross more than 100120 countries annually.each year.
Business Segments
We report our financial results under the following two linesbusiness of business,divisions, which are our reportable operating segments: Security SolutionsCybersecurity and Digital Agreements.
•SecurityCybersecurity. Solutions.Cybersecurity, formerly Security SolutionsSolutions, consists of our broad portfolio of software products, software development kits ("SDKs"), and Digipass authenticator devices that are used to build applications designed to defend against attacks on digital transactions across online environments, devices, and applications. The software products and SDKs included in the Security SolutionsCybersecurity segment are delivered through on-premises and,and tocloud-based adeployment lesser extent, cloud software products,models and include multi-factorstandards-based authentication technologies such as Fast Identity Online ("FIDO") authentication and passkeys, multi-factor authentication, transaction signing solutions,solutions such asand mobile application security and mobile software tokens.security.
•Digital Agreements. Digital Agreements consists of solutions that enable our clients to secure and automate business processes associated with their digital agreement and customer transaction lifecycles that require consent, non-repudiation and compliance. These solutions, which are largely cloud-based, include OneSpan Sign e-signature, OneSpan Notary, and OneSpan Identity Verification.
Beginning in mid-2023 and through the third quarter of 2024, our focus was on adjusting our cost structure to enable both business divisions to operate profitably. These cost optimization efforts were a major factor in the overall business returning to operating profitability in the fourth quarter of 2023. The subsequent increase in profitability, combined with high levels of cash generation, enabled us to return approximately $31.6 million to shareholders in 2025 in the form of quarterly dividends and share repurchases. Beginning in the fourth quarter of 2024 and continuing through 2025, we continued to operate profitably while taking a number of important steps to generate future revenue growth:
•In December 2024, we hired a new Chief Technology Officer, Ashish Jain, to lead our research and development efforts.
•In June 2025, we acquired Nok Nok Labs, a provider of passwordless software authentication solutions, which brought S3, a leading FIDO software product, to our product portfolio. This acquisition provides OneSpan's customers with a wider range of flexible, adaptable authentication options. See Note 6, Business Acquisitions, for additional information.
•In June 2025, we entered into the Credit Agreement with MUFG and other lenders party thereto. The Credit Agreement provides for a $100.0 million revolving credit facility with a $10.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit. The proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. We may borrow, repay and reborrow funds under the revolving credit facility until its maturity on June 23, 2030. See Note 12, Debt, for additional information.
•In October 2025, we announced a strategic investment in, and partnership with, ThreatFabric Holding B.V., a Dutch company that provides mobile threat intelligence, malware risk detection, and behavioral analytics, to further enhance the value we offer by providing fraud detection solutions to our customers. See Note 2, Summary of Significant Accounting Policies, for additional information.
•In December 2025, we hired a new Chief Revenue Officer, Shaun Bierweiler, to lead our go-to-market efforts, and to drive growth and customer success.
•Later in December 2025, we entered into a definitive agreement to acquire Build38, a leader in next-generation mobile application protection solutions, to extend our investment in advanced mobile security technologies. See Note 6, Business Acquisitions, for additional information.
Our efforts to broaden and strengthen our product offerings are driven in part by a secular shift away from physical authentication devices such as our Digipass tokens. Because consumers increasingly interact with their banks through their mobile devices rather than desktop computers, they are more likely to prefer authentication methods that enable secure, convenient access to mobile banking apps without the need for a physical device. In response to this trend, our bank and financial institution customers have increasingly adopted a “mobile first” approach to consumer authentication that prioritizes the mobile user experience over traditional desktop experiences. This approach has resulted in a reduction of Digipass hardware authenticator sales and an increase in sales of software authentication licenses delivered through software applications on mobile devices. Due largely to the mobile first trend, our revenue from Digipass devices declined from 78% of our revenue in 2015 to 20% of our revenue in 2025. Although we plan to continue to invest in our Digipass authenticators, including our newer FIDO2 Digipass devices, as an important component of our broad authentication solution portfolio, we are focused on driving revenue growth in higher–margin software solutions, both through further expansion of our Cybersecurity software solutions and through continued growth in our Digital Agreements division.
Business Developments
During 2022 and the first half of 2023, OneSpan was operating under a three-year strategic plan that focused on driving revenue growth in Digital Agreements. However, in mid-2023, we determined that we were unlikely to achieve the revenue growth levels set forth in that strategic plan within the contemplated three-year timeframe due to a number of factors, including increasing maturity and competitiveness in the market for e-signature solutions, limited awareness of our brand among buyers of e-signature tools, and higher pricing aggressiveness from competitors.
In response to these challenges, we modified our strategy to focus more heavily on improving profitability across the business. To this end, in August 2023, our Board approved the 2023 Actions (discussed below) to achieve higher levels of profitability while maintaining the Company's long-term growth potential. .
We now seek to drive profitable, efficient growth in both operating segments, with a particular emphasis on subscription revenue growth. Digital Agreements became profitable for the first time in the third quarter of 2024 and both operating segments were profitable for the full year 2024. 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, largely due to a reduction in hardware revenues driven by certain customers adopting a “mobile-first” approach, which prioritizes the mobile user experience over traditional desktop and hardware experiences, particularly for consumer banking. This approach has resulted in a reduction of Digipass hardware authenticator sales and an increase in sales of software authentication licenses delivered through software applications on mobile devices. 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.
Digital Agreements total revenue increased 20% in 2024 and we substantially completed transitioning the segment to a SaaS revenue model.
In 2021 and 2022, our board of directors approved cost reduction actions designed to advance our operating model, streamline our business, improve efficiency, and enhance our capital resources.
In December 2021, our Board approved a restructuring plan designed to advance our operating model, streamline our business, improve efficiency, and enhance our capital resources. The first phase of this restructuring plan began and was substantially completed during the three months ended March 31, 2022. In May 2022, our Board approved additional actions related to the restructuring plan through the year ending December 31, 2025. The additional actions consisted primarily of headcount-related reductions designed to continue to advance the same objectives as the first phase of the plan.
In August 3, 2023, our Boardboard of Directorsdirectors approved further cost reduction actions (the "2023 Actions"). In connection with the 2023 Actions, we have incurred and expect to continue to incur restructuring charges, most of which relate to employee transition and severance payments and employee benefits, with a significantly smaller amount of charges relating to vendor contract termination and rationalization actions. We currentlyterminated expectour thatrestructuring plan as of December 31, 2025, as we willsubstantially incurcompleted restructuring chargesall of approximatelythe $0.5workforce millionreductions toand $1.0vendor millioncontract relatedtermination toand rationalization actions planned as part of the 2023 Actions infrom periods2023 afterthrough 2024, substantially all of which relate to employee transition and severance payments.2025.
We plan to incrementally take actions under the restructuring plan until December 31, 2025, when the plan terminates. We completed substantially all of the workforce reductions planned as part of the 2023 Actions in 2023 and 2024. The vendor contract component of the 2023 Actions is planned for completion by the end of 2025.
On DecemberFebruary 16,26, 2024,2026, theour Boardboard of Directorsdirectors declared a quarterly cash dividend as part of the initiation of aour recurring quarterly dividend program.program Theannounced initialin quarterlyDecember 2024. A cash dividend of $0.12$0.13 per shareshare, waswhich represents a year-over-year increase of 8.3%, will be paid on FebruaryMarch 14,27, 20252026 to shareholders of record as of the close of business on JanuaryMarch 31,13, 2025.2026. The declaration and payment of future dividends is subject to the sole discretion of the Board of Directors.board.
Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates in 20242025 compared to 20232024 resulted in aan decreaseincrease in operating expenses of less than $0.1$1.3 million in 2024.2025.
The comparison of operating expenses can also be impacted significantly by costs related to our share-based and long-term incentive plans. In 2025, 2024, 2023, and 2022,2023, operating expenses included $9.2$11.3 million, $14.6$9.2 million, and $8.8$14.6 million, respectively, of expenses related to share-based and long-term incentive plans. For the year ended December 31, 2024, stock-based compensation declined as compared to the year ended December 31, 2023, which was largely due to the departure of our former CEO and forfeitures recorded upon his termination, timing of annual grants, and a lower level of employee equity awards granted in 2024 compared to 2023. However, this decline was partially offset by the awards granted to our current CEO when he accepted his permanent role of President and CEO in 2024. Long-term incentive plan compensation expense consists of share-based incentives and an immaterial amount of cash-based incentives.
•Research and development. Research and development expenses consist primarily of personnel costs (net of capitalized software costs), bonuses, and long-term incentive compensation. Our research and development expenses may fluctuate as a percentage of total revenue.
•General and administrative. General and administrative expenses consist primarily of personnel costs, bonuses, legal, consulting and other professional fees, transaction related expenses, and long-term incentive compensation. Our general and administrative expenses may fluctuate as a percentage of total revenue.
•Restructuring and other related charges. Restructuring and other related charges consists of employee costs which include severance, retention pay, and related benefits incurred in connection with headcount reductions as part of our restructuring plan, including the 2023 Actions; real estate rationalization costs incurred to optimize our real estate footprint which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs incurred to advance our operating model, which include write-offs of capitalized software assets no longer in use; write-offs of acquired blockchain technology and related capitalized software due to the discontinuation of incremental development investments in this technology and related commercial efforts; and vendor rationalization costs for contractually committed services that we are no longer utilizing. We plan to incrementally incur additional restructuring costs through December 31, 2025, when the restructuring plan terminates and the 2023 Actions are completed.
•Impairment of intangible assets. Impairment of intangible assets are incurred when we determine that the carrying value of an asset exceeds its fair value. We test annually, or when triggering events arise. During the year ended December 31, 2022, we performed an impairment review of the customer relationships intangible assets obtained in our 2018 acquisition of Dealflo Limited (“Dealflo”). The impairment review was triggered by our July 2022 notification to customers regarding our intent to gradually sunset our Dealflo solution in the months leading up to December 31, 2023. The results of the impairment review indicated that the carrying value of the Dealflo customer relationships exceeded the fair value, and we recorded a $3.8 million impairment charge on the entire remaining value of the asset during the year ended December 31, 2022. This was recorded in "restructuring and other related charges" on the consolidated statements of operations.
•Restructuring and other related charges. Restructuring and other related charges consists of employee costs which include severance, retention pay, and related benefits incurred in connection with headcount reductions as part of our restructuring plan, including the 2023 Actions; real estate rationalization costs incurred to optimize our real estate footprint, which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs incurred to advance our operating model, which include write-offs of capitalized software assets no longer in use; write-offs of acquired blockchain technology and related capitalized software due to the discontinuation of incremental development investments in this technology and related commercial efforts; and vendor rationalization costs for contractually committed services that we are no longer utilizing. We terminated our restructuring plan as of December 31, 2025, as we substantially completed all of the workforce reductions and vendor contract termination and rationalization actions planned as part of the 2023 Actions in 2023 through 2025.
Interest income, net, consists of income earned on our cash equivalentsequivalents, and short-term investments. Our cash equivalents and short-term investmentswhich are invested in short-term instruments at current market rates. Interest expense is primarily related to the amortization of debt issuance costs associated with our credit facilities.
Other Income (Expense),Expense, Net
Other income (expense),expense, net, primarily includes exchange gains (losses) on transactions that are denominated in currencies other than our subsidiaries’ functional currencies, subsidies received from foreign governments in support of our research and development in those countries, and other miscellaneous non-operational expenses.
Our effective tax rate reflects our global structure related to the ownership of our intellectual property (“IP”). Our IP in our SecurityCybersecurity Solutions businessdivision is owned by aour U.S. operating subsidiary.subsidiaries. The e-signature IP in our Digital Agreements businessdivision is owned by a subsidiary in Canada. These subsidiaries have entered into agreements with most of the other OneSpan entities under which those other entities provide services to the IP owners on a cost plus basis. In addition, many of our OneSpan entities operate as distributors for all of our OneSpan products. Under this structure, the earnings of our service provider and distributor subsidiaries are relatively constant. These subsidiaries tend to be in jurisdictions with higher effective tax rates. Fluctuations in earnings flow to the IP owners.
We record changes in valuation allowance against deferred tax assets that, based on management’s assessment, are considered not to be more likely than not to be realized. The decrease in the valuation allowance in 2025 and 2024 reflects a change in management's assessment of theour ability to use existing deferred tax assets, including NOLs,NOLs and credits and other carryforwards, due to an increase in the operating profit and the intra-entity asset transfer of certain intellectual property ("IP Transfer") discussed in Note 13,14, Income Taxes. The increase in the valuation allowance in 2023 reflects Net Operating Losses (“NOLs”), other deduction carryforwards, and credits for which the realization is not more likely than not. The change in valuation allowance in 2024 also reflects other factors including, but not limited to, changes in management’s assessment of the ability to use existing deferred tax assets, including NOLs and other deduction carryforwards.
As of December 31, 2025, we adopted ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures. See Note 14, Income Taxes, for additional information.
In 20242025 and 2023,2024, we generated approximately 83%79% and 83%, of our revenue for both years and incurred approximately 59%54% and 58%59% of our operating expenses outside of the U.S., respectively. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian dollar exchange rate, can have a significant impact on our revenue and operating expenses.
In general, to minimize the net impact of currency fluctuations on operating income, we attempt to denominate an amount of billings in a currency such that it would provide a natural hedge against the operating expenses being incurred in that currency. We expect that changes in currency rates may impact our future results if we are unable to match amounts of revenue with our operating expenses in the same currency. If the amount of our revenue in Europe denominated in Euros continues as it is now or declines, we may not be able to fully balance fully the exposures of currency exchange rates on revenue and operating expenses.
Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations in other incomeexpense, (expense).net. Foreign exchange transaction losses aggregated $0.9$1.6 million and $1.1$0.9 million for the years ended December 31, 20242025 and 2023,2024, respectively.
(2) Security SolutionsCybersecurity other segment items includes general and administrative expense, restructuring and other related charges, and amortization of intangibles for the years ended December 31, 20242025 and 2023.2024.
(3) Security SolutionsCybersecurity operating income includes $0.9$1.3 million and $0$0.9 million of total amortization and depreciation expense for the years ended December 31, 20242025 and 2023,2024, respectively.
Security SolutionsCybersecurity operating income includes $2.0$0.3 million and $5.5$2.0 million of restructuring and other related charges for the years ended December 31, 20242025 and 2023,2024, respectively.
(1) Professional services and other includes perpetual software licenses revenue, which was immaterial for the year ended December 31, 2024 and approximately 1% of total revenue for the year ended December 31, 2023.
For the year ended December 31, 2024,2025, total revenue increasedwas by $8.1 million, or 3%,flat compared to the year ended December 31, 2023.2024. Changes in foreign exchange rates as compared to the same period in 20232024 negativelyfavorably impacted total revenue by approximately $0.1$3.7 million.
•Security SolutionsCybersecurity revenue decreased $2.0$4.5 million, or approximately 1%,2%, during the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. This decrease was driven primarily byattributable to lower volumes of hardware devices sold,sold due to the mobile-first trend, and to a lesser extent, lower perpetual software license and perpetual-based maintenance and professional services revenues as we focus on transitioningdue to on-premisesour transition to term licenses and cloud subscription license models,models and the sunsetting of our Dealflo solution. The decrease was largelypartially offset by higher on-premisesterm license subscription revenues, primarily from existing customers, increased cloud subscription revenue, and revenue from existingcustomers customer expansion, including an increaseacquired in multi-yearour contracts, for which we recognize mostacquisition of theNok revenueNok early in the contract term.Labs. Changes in foreign exchange rates compared to the same period in 20232024 negativelyfavorably impacted Security SolutionsCybersecurity revenue by $0.1$3.5 million.
•Digital Agreements revenue increased $10.1$4.5 million, or approximately 20%,7%, during the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The increase in Digital Agreements revenue was drivenprimarily byattributable to higher cloud subscription revenue from existing customer expansionexpansions andand, to a lesser extent, customers new customersto OneSpan (which we sometimes refer to as "new logos"), and overages, partially offset by lower term-based maintenance revenue relateddue to the sunsetting of our on-premisestransition e-signatureto product.cloud subscription licenses. Changes in foreign exchange rates as compared to the same period in 20232024 favorably impacted Digital Agreements revenue by less than $0.1$0.2 million.
Revenue by Geographic Regions: We classify our sales by customer location in three geographic regions: 1) EMEA, which includes Europe, Middle East and Africa; 2) the Americas, which includes sales in North, Central, and South America; and 3) Asia Pacific (APAC), which also includes Australia,Australia and New Zealand, and India.Zealand. The breakdown of revenue in each of our major geographic areas was as follows:
For the year ended December 31, 2024,2025, revenue generated in EMEA was $3.0$6.0 millionmillion, or 3%5%, lower than the same period in 2023,2024, primarily driven by a decrease in hardware revenue due to lower hardware volumes soldattributed to the mobile-first trend and theend-of-life impactproducts, of sunsetting our Dealflo solution, largelypartially offset by an increase in software authentication revenue from customermobile expansions.application security products.
For the year ended December 31, 2024, revenue generated in the Americas was $6.7 million or 8% higher than the same period in 2023, primarily driven by an increase in e-signature revenue from customer expansion and new logos and an increase in software authentication revenue from customer expansion, partially offset by a decrease in hardware revenue due to lower volumes sold.
For the year ended December 31, 2024,2025, revenue generated in APACthe Americas was $4.3$8.9 millionmillion, or 10%10%, higher than the same period in 2023,2024, primarily drivendue byto an increase in revenue from software authentication revenueproducts fromand customerDigital expansions,Agreements partially offset by a decrease in hardware revenue due to lower volumes sold.revenue.
For the year ended December 31, 2025, revenue generated in APAC was $3.0 million, or 6%, lower than the same period in 2024, primarily attributable to lower hardware volumes and a decrease in revenue from software authentication products, partially offset by an increase in revenue from mobile application security products.
The cost of product and license revenue decreased $11.9$4.6 million or 25%13% for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The decrease in cost of product and license revenue was primarily driven by lower hardware revenues.revenue and hardware costs, partially offset by higher third-party license costs.
The cost of services and other revenue increaseddecreased $3.2$0.2 million or 11%1% for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. This increase was largely due to higherthe cloudimpact platformof costsour related to higher volume usage and the2024 write-off of acquired technology and capitalized internally developed software costs dueassociated towith our decision to discontinue our investment in blockchain technology (see Note 8, Intangible Assets - net) (the "2024 write-off") and lower cloud platform costs in 2024.2025.
Gross profit increased $16.9$4.8 million, or 11%3% for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. Total gross margin was 74% for the year ended December 31, 2025, compared to 72% for the year ended December 31, 2024, compared to 67% for the year ended December 31, 2023.2024. The change was primarily driven by an increase in total gross profit was driven by higher software versusrevenue and decrease in hardware revenue mixrevenue, and the changesprior inyear costimpact of revenuethe discussed2024 above.write-off.
The majority of our inventory purchases are denominated in U.S. dollars. Our sales are denominated in various currencies, including the Euro. The impact of changes in currency rates are estimated to have had a unfavorable impact on overall cost of goods sold of approximatelyless $0.8than $0.1 million for the year ended December 31, 2024.2025. Had currency rates in 20242025 been equal to rates in the comparable period of 2023,2024, the gross profit margin would have been less than 1 percentage point higherlower for the year ended December 31, 2024.2025.
•Security SolutionsCybersecurity gross profit increaseddecreased $12.9$0.6 million, or approximately 11%,million for the year ended December 31, 20242025 compared to the prior year. The increase in gross profit was primarily driven by an increase in subscription revenue. Security SolutionsCybersecurity gross margin was 73%74% and 65%73% for the years ended December 31, 20242025 and 2023,2024, respectively. The increase in the gross margin is primarily the result of increased1% subscriptionwas revenuedue whichto isan a higher margin product, combined with a declineincrease in higher-margin hardware revenue, which hasdespite lower margins.overall hardware revenue, due to favorable hardware product and customer mix partially offset by slightly lower margins in software revenue, despite higher overall software revenue, primarily due to incremental third party costs.
•Digital Agreements gross profit increased $4.0$5.3 million, or approximately 11%,13%, for the year ended December 31, 20242025 compared to the prior year. The increase in gross profit was driven by higher overall revenue, partially offset by higher cloud platform costs and higher depreciation of capitalized software costs. Digital Agreements gross margin for the years ended December 31, 20242025 and 20232024 was 68%72% and 74%,68%, respectively. The decreaseincrease in gross profit and gross margin iswas primarilydriven theby resulthigher ofcloud ansubscription increaserevenue, inlower depreciationcloud ofplatform capitalized software costscosts, and the write-offprior inyear 2024impact of the previously2024 capitalized software costs discussed above.write-off.
For the year ended December 31, 2024,2025, operating expenses decreasedincreased by $56.8$1.1 million, or 30%,1%, compared to the year ended December 31, 2023.2024. Changes in foreign exchange rates favorablyunfavorably impacted operating expenses by approximately less than $0.1$1.3 million as compared to the year ended December 31, 2023.2024.
Sales and marketing expenses decreasedincreased $25.7$2.4 million, or 37%,5%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The decreaseincrease was driven primarily driven by lowerhigher employee compensation costscosts, which included decreasesincreases in commissions,salaries, salaries,benefits and benefitscommission as a result of headcount reductions,additions, including the acquisition of Nok Nok Labs. This increase was partially offset by decreased consultingsoftware licensing costs and marketinglead costs,generation andcosts lowerdue travelto andrationalization entertainment expenses.efforts.
What changed in the latest 10-Q
Risk Factors
There have been no material changes in or additions to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 26, 2026.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Largest changes
“As of June 30, 2026, we had $5.0 million of borrowings outstanding under our $100.0 million revolving credit facility entered into on June 23, 2025. The borrowing will be used for general corporate purposes and reflects our ability to access liquidity under the Credit Agreement, as needed, to support our operating and capital requirements. As of June 30, 2026, we had $0.4 million letters of credit outstanding. …”see in full comparison
•Digital Agreements operating income for the three and six months endedsee in full comparisonMarchJune31,30, 2026 was$5.3$7.0 million and $12.3 million, respectively, compared toanoperating income of$3.4$2.9 million and $6.2 million, for the three and six months endedMarchJune31,30,2025.2025, respectively. TheimprovementincreaseinforoperatingbothincomeperiodswasendeddrivenJuneby30, 2026 is largely due to highergrossrevenue,profitincluding overages fees, andlower operating expenses, includinglower research and developmentexpensesexpenses, andrestructuringsalesexpenses.and marketing expenses compared to the prior year periods.
“Includes restructuring and other related charges of less than $0.1 million and $0.1 million for the three and six months ended June 30, 2025, respectively. These charges are recorded in "Services and other cost of goods sold" on the condensed consolidated statements of operations.”see in full comparison
Cybersecurity operating income does not include any restructuring and other related charges for the three and six months ended June 30, 2026. Cybersecurity operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months endedsee in full comparisonMarchJune31,30,2025.2025, respectively.
“Digital Agreements operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months ended June 30, 2025, respectively.”see in full comparison
(3)see in full comparisonIncludes restructuring and other related charges of less than $0.1 million for the three months ended March 31, 2025. These chargesCosts are recorded in "Services and other cost of goods sold" and "Restructuring and other related charges," respectively, on the condensed consolidated statements of operations.
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This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of OneSpan for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025 as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”).
We seek to drive profitable, efficient growth in both operating segments, with a particular emphasis on subscription revenue growth. Both operating segments were profitable for the three and six months ended MarchJune 31,30, 2026, and Cybersecurity and Digital Agreements subscription revenue grew 7%2% and 11%,25%, respectively, as compared to the three months ended MarchJune 31,30, 2025.2025, respectively, and 5% and 18% as compared to the six months ended June 30, 2025, respectively.
As discussed in greater detail below in "Results of Operations", the following factors had a significant impact on our financial results for the three and six months ended MarchJune 31,30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025.
Foreign exchange rate impact for the threesix months ended MarchJune 31,30, 2026. Changes in foreign exchange rates, in particular the weakening of the U.S. Dollar relative to the Euro, favorably impacted both total revenue and Cybersecurity revenue by approximately $2.7$3.3 million and $2.5$3.0 million, respectively, for the threesix months ended MarchJune 31,30, 2026 as compared to the equivalentsame period in 2025. The impact of changes in foreign exchange rates on the Digital Agreements segment for this period was approximately $0.2$0.3 million as compared to the equivalentsame period in 2025.
Recent acquisitions. In June 2025, we acquired Nok Nok Labs, Inc. ("Nok Nok Labs"), a leading provider of passwordless software authentication solutions, and in February 2026, we acquired Build38 GmbH ("Build38"), a leader in next-generation mobile application protection solutions. See Note 6, Business Acquisitions, for additional information about these two transactions (the "Acquisitions").transactions.
Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates during the three months ended MarchJune 31,30, 2026 compared to the comparable prior year period resulted in an increase in operating expenses of $1.0$1.2 million.
The comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans. Long-term incentive plan compensation expense includes both stock-based incentives and an immaterial amount of cash-based incentives. During the three months ended MarchJune 31,30, 2026 and 2025, operating expenses included $1.9$3.5 million and $2.8$3.5 million, respectively, of expenses related to stock-based and long-term incentive plans. During the six months ended June 30, 2026 and 2025, operating expenses included $5.3 million and $6.3 million, respectively, of expenses related to stock-based and long-term incentive plans.
•Restructuring and related charges. Restructuring and other related charges consists of employee costs incurred in connection with headcount reductions, which include severance, retention pay, and related benefits, real estate rationalization costs, which include lease contract termination costs, asset impairment charges, and lease right-of-use asset and lease liability write-off gains or losses; product and services optimization costs, which include write-offs of capitalized software assets no longer in use; write-offs of acquired technology and capitalized software; and vendor rationalization costs for contractually committed services that we are no longer utilizing. Prior to 2026, these costs were incurred in connection with restructuring plans previously approved by the Company's Board of Directors. There were no costs recorded for restructuring and related charges during the six months ended June 30, 2026.
Other Expense,Income (Expense), Net
Other expense,income (expense), net, primarily includes exchange gains (losses) on transactions that are denominated in currencies other than our subsidiaries’ functional currencies, subsidies received from foreign governments in support of our research and development in those countries and other miscellaneous non-operational expenses.
Changes in the effective tax rate reflect changes in the geographic mix of earnings and the tax rates in each of the countries in which it is earned. The statutory tax rate for the primary foreign tax jurisdictions ranges from 17% to 30%.33%.
During the three months ended MarchJune 31,30, 2026 and 2025, we generated approximately 79%76% and 84%78% of our revenuesrevenues, respectively, and incurred approximately 57% and 58%54% of our operating expenses, respectively, outside of the U.S. During the six months ended June 30, 2026 and 2025, we generated approximately 78% and 81% of our revenues, respectively, and incurred approximately 57% and 56% of our operating expenses, respectively, outside of the U.S. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian Dollar exchange rate, can have a significant impact on our revenue and operating expenses.
While the majority of our revenue is generated outside of the U.S., a significant amount of our revenue earned during the threesix months ended MarchJune 31,30, 2026 was denominated in U.S. Dollars. For the threesix months ended MarchJune 31,30, 2026, approximately 59%60% of our revenue was denominated in U.S. Dollars, 38%37% was denominated in Euros and 3% was denominated in other currencies. For the threesix months ended MarchJune 31,30, 2025, approximately 55%56% of our revenue was denominated in U.S. Dollars, 43%41% was denominated in Euros and 2%3% was denominated in other currencies.
Translation adjustments arising from differences in exchange rates generated a comprehensive loss of $1.9$0.4 million and $2.3 million during the three and six months ended MarchJune 31,30, 2026.2026, respectively. For the three and six months ended MarchJune 31,30, 2025, translation adjustments arising from differences in exchange rates generated a comprehensive gain of $2.7$5.5 million.million and $8.2 million, respectively.
Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other expense,income (expense), net. Foreign exchange transaction losses aggregated $0.5$0.2 million and $0.2$0.7 million for the three and six months ended MarchJune 31,30, 20262026, respectively. For the three and six months ended June 30, 2025, losses resulting from foreign currency transactions were $1.0 million and $1.1 million, respectively.
(1) Cybersecurity other segment items includes general and administrative expense, write-off of assetsexpense and amortization of intangibles for the three months ended MarchJune 31,30, 2026, and general and administrative expense, write-off of assets, and amortization of intangibles for the six months ended June 30, 2026. Cybersecurity other segment items includes general and administrative expense,expense and restructuring and other related charges for the three and six months ended MarchJune 31,30, 2025.
(2) Cybersecurity operating income includes $0.7$1.0 million and $0.2$1.7 million of total amortization and depreciation expense for the three and six months ended MarchJune 31,30, 2026 and 2025,2026, respectively. Cybersecurity operating income also includes $0.3$0.2 million relatedand to$0.4 write-offmillion of assetstotal amortization and depreciation expense for the three monthsand ended March 31, 2026. There were no write-off of assets for the threesix months ended MarchJune 31,30, 2025.2025, respectively.
Cybersecurity operating income does not include any restructuring and other related charges for the three and six months ended June 30, 2026. Cybersecurity operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months ended MarchJune 31,30, 2025.2025, respectively.
(3) Digital Agreements other segment items includes general and administrative expense and amortization of intangibles for the three and six months ended MarchJune 31,30, 2026. Digital Agreements other segment items includes general and administrative expense,expense and restructuring and other related charges, and amortization of intangiblescharges for the three and six months ended MarchJune 31,30, 2025.
(4) Digital Agreements operating income includes $2.2 million and $1.7$4.3 million of total amortization and depreciation expense for the three and six months ended MarchJune 31,30, 20262026, respectively. Digital Agreements operating income includes $1.8 million and $3.5 million of total amortization and depreciation expense for the three and six months ended June 30, 2025, respectively.
Digital Agreements operating income includesdoes $0.2not millioninclude ofany restructuring and other related charges for the three and six months ended MarchJune 31,30, 2025.2026.
Digital Agreements operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months ended June 30, 2025, respectively.
Revenue by products and services allocated to the segments for the three and six months ended MarchJune 31,30, 2026, and 2025 is as follows:
(1) Cybersecurity and Digital Agreements Subscription revenue during the three months ended MarchJune 31,30, 2025 includes $5.1$5.9 million and less than $0.1 million, respectively, of term maintenance that has been reclassified from maintenance and services to align with the revised presentation of revenue. Cybersecurity and Digital Agreements Subscription revenue during the six months ended June 30, 2025 includes $11.0 million and less than $0.1 million, respectively, of term maintenance that has been reclassified from maintenance and services to align with the revised presentation of revenue. See Note 4, Revenue from Contracts with Customers, for additional information.
Total revenue increased by $2.6$0.6 million, or 4%,1%, during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. Changes in foreign exchange rates as compared to the same period in 2025 favorably impacted revenue by approximately $2.7$0.6 million. Total revenue increased by $3.2 million, or 3%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Changes in foreign exchange rates as compared to the same period in 2025 favorably impacted revenue by approximately $3.3 million.
•Cybersecurity revenue increaseddecreased $0.8$3.3 million, or approximately 2%,7%, during the three months ended MarchJune 31,30, 20262026, compared to the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, Cybersecurity revenue decreased $2.5 million, or approximately 3%, compared to the six months ended June 30, 2025. The decrease in Cybersecurity revenue for both periods was primarily due to lower hardware revenue, partially offset by an increase in software revenue. The decrease in hardware revenue was due to lower volume of hardware devices sold, partially offset by favorable customer mix. The increase in Cybersecuritysoftware revenue was primarily attributabledue to increasedan increase in subscription revenue fromprimarily due to the Acquisitions,two recent acquisitions and existing customer expansions, and higher revenue from past due renewals, partially offset by lower multi-year term license revenuerevenue, due tothe timing of customer renewals, and lower hardwareperpetual maintenance revenue due to customercontract andtransitions productto mix.term-based arrangements. Changes in foreign exchange rates for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025 favorably impacted Cybersecurity revenue by $2.5$0.5 million. Changes in foreign exchange rates for the six months ended June 30, 2026 compared to the same period in 2025 favorably impacted Cybersecurity revenue by $3.1 million.
•Digital Agreements revenue increased $1.7$3.9 million, or 11%,25%, during the three months ended MarchJune 31,30, 20262026, compared to the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, Digital Agreements revenue increased $5.7 million, or 18%, during the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase infor Digitalboth Agreements revenueperiods was primarily attributable to higheran increase in subscription revenue from existing customer expansions and overages.overage usage fees. Changes in foreign exchange rates for the three months ended June 30, 2026, compared to the same period in 20252025, favorably impacted Digital Agreements revenue by less$0.1 thanmillion. $0.2Changes millionin foreign exchange rates for the threesix months ended MarchJune 31,30, 2026.2026, compared to the same period in 2025, favorably impacted Digital Agreements revenue by $0.3 million.
Revenue by Geographic Regions: We classify our sales by customer location in three geographic regions: 1) the Americas, which includes North, Central, and South America; 2) EMEA, which includes Europe, Middle East and Africa; 2) the Americas, which includes sales in North, Central, and South America; and 3) Asia Pacific (APAC), which includes Australia and New Zealand. The breakdown of revenue in each of our major geographic areas was as follows:
For the three months ended March 31, 2026, revenue generated in EMEA was $2.5 million, or 8%, lower than the same period in 2025. The decrease in revenue stems largely from lower hardware revenue due to customer and product mix, and lower multi-year renewal term revenue for our authentication products.
For the three months ended MarchJune 31,30, 2026, revenue generated in the Americas was $4.1$3.9 million, or 19%,16%, higher than the three months ended MarchJune 31,30, 2025,2025. primarilyFor the six months ended June 30, 2026, revenue generated in the Americas was $7.9 million, or 18%, higher than the same period in 2025. The increase in revenue for both periods was largely due to increasedan subscription revenue from customer expansionincrease in bothDigital businessAgreements segmentsrevenue, and revenueto contributiona fromlesser theextent, Acquisitions.Cybersecurity software revenue.
For the three months ended MarchJune 31,30, 2026, revenue generated in APACEMEA was $1.0$2.5 million, or 10%, lower than the same period in 2025. For the six months ended June 30, 2026, revenue generated in EMEA was $4.9 million, or 9%, higherlower than the threesame monthsperiod ended March 31,in 2025. The increasedecrease for both periods was primarily attributabledue to highera decrease in Cybersecurity hardware and software revenues, partially offset by an increase in Digital Agreements revenue.
For the three months ended June 30, 2026, revenue generated in APAC was $0.8 million, or 6%, lower than the three months ended June 30, 2025, primarily due to lower Cybersecurity hardware revenue, offset partially by Cybersecurity software revenue. For the six months ended June 30, 2026, revenue generated in APAC was $0.2 million, or 1%, higher than the same period in 2025 due to an increase in Cybersecurity software revenue, offset partially by a decrease in Cybersecurity hardware revenue.
The following table presents cost of goods sold for our products and services for the three and six months ended MarchJune 31,30, 2026 and 2025:
The cost of product and license revenue increaseddecreased by less than $0.1$1.7 million, or 0.5%,20%, and $1.6 million, or 10% during the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the three and six months ended MarchJune 31,30, 2025. The decrease in the cost of product and license revenue for both the three and six months ended June 30, 2026 was driven primarily by lower hardware revenues and more favorable customer mix.
The cost of services and other revenue increased by $1.1$1.8 million, or 15%,23%, and $2.9 million, or 19% during the three and six months ended MarchJune 31,30, 20262026, compared to the three and six months ended MarchJune 31,30, 2025. The increase wasin attributableboth periods is largely attributed to additional hosting server costs and third-party license costs driven by increased cloud subscription revenue from existing customer expansionscustomers and, to a lesser extent, new customers, as well as higheramortization third-partyof licenseintangible costs.assets related to our acquisitions.
Gross profit increased by $1.4$0.5 million, or 3%,1%, during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. Gross margin was 74% for the three months ended MarchJune 31,30, 2026, flat as compared to 74%73% for the three months ended MarchJune 31,30, 2025. Gross profit increased by $1.9 million, or 2%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Gross margin was 74% for both the six months ended June 30, 2026 and 2025.
The majority of our inventory purchases are denominated in U.S. Dollars. Our sales are denominated in various currencies, including the Euro. The impact of changes in currency rates are estimated to have had an unfavorable impact on overall cost of goods sold of $0.7$0.1 million for three months ended MarchJune 31,30, 2026 and $0.6 million for the six months ended June 30, 2026. Had currency rates during the three months ended MarchJune 31,30, 2026 been equal to rates in the comparable period of 2025, the gross margin would have been less than 1 percentage point lower,higher, driven by the favorable currency rate impact to revenue. Had currency rates during the six months ended June 30, 2026 been equal to rates in the comparable period of 2025, the gross margin would have 3 percentage points higher.
•Cybersecurity gross profit decreased by $0.2 million, or 0.5%, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to higher third-party license costs and cloud vendor costs. Cybersecurity gross margin was 74% during the three months ended March 31, 2026, compared to 76% for the three months ended March 31, 2025.
•Digital AgreementsCybersecurity gross profit increaseddecreased $1.6by $2.9 million, or 15%,9%, during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. Digital AgreementsCybersecurity gross margin was 73% during the three months ended June 30, 2026, compared to 74% for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, Cybersecurity gross profit decreased $3.1 million, or 5%, compared to the same period in 2025. Cybersecurity gross margin for the six months ended June 30, 2026 was 72%,74%, compared to 70%75% for the threesix months ended MarchJune 31,30, 2025. The increasedecrease in gross profit for both periods is primarily due to lower hardware revenues and grosshigher marginthird-party wascosts drivenand cloud infrastructure costs, partially offset by higherimproved cloudhardware subscriptioncustomer revenue.mix.
•Digital Agreements gross profit increased $3.4 million, or 31%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Digital Agreements gross margin for the three months ended June 30, 2026 was 75%, compared to 71% for the three months ended June 30, 2025. For the six months ended June 30, 2026, Digital Agreements gross profit increased $5.0 million, or 23%, compared to the same period in June 30, 2025. Digital Agreements gross margin for the six months ended June 30, 2026 was 74%, compared to 71% for the six months ended June 30, 2025. The increase in gross profit and gross margin for both periods was driven by higher subscription revenue from existing customer expansions and overage fees, as well as lower cloud infrastructure costs.
Operating expenses increased by $3.8$2.3 million, or 13%,7%, during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. For the three months ended MarchJune 31,30, 2026, changes in foreign exchange rates increased operating expenses by approximately $1.0$0.2 million as compared to the same period in 2025. Operating expenses increased by $6.1 million, or 10%, during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. For the six months ended June 30, 2026, changes in foreign exchange rates increased operating expenses by approximately $1.2 million as compared to the same period in 2025.
The following table presents the breakout of operating expenses by category for the three and six months ended MarchJune 31,30, 2026 and 2025:
Sales and marketing expenses for the three months ended MarchJune 31,30, 2026 increased by $1.2$1.6 million, or 11%,14%, compared to the three months ended MarchJune 31,30, 2025. Sales and marketing expenses for the six months ended June 30, 2026 increased by $2.8 million, or 12%, compared to the six months ended June 30, 2025. The increase in expense for both periods was driven primarily by higher employee compensation costs, which included higher headcount from organic hires and from the two recent Acquisitions,acquisitions, increases in salaries, benefits, bonus, and commissions, as well as higher lead generation costs.commissions.
Average full-time sales, marketing, support, and operating employee headcount for the three and six months ended MarchJune 31,30, 2026 was 169176 and 173, respectively, compared to 158163 and 160 for the three and six months ended MarchJune 31,30, 2025.2025, respectively. Average headcount was 7%8% higher for both the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the same periodperiods in 2025.
Research and development expenses for the three months ended MarchJune 31,30, 2026 increased by $1.2$0.5 million, or 15%,5%, compared to the three months ended MarchJune 31,30, 2025, which was largely driven by higher employee compensation costs from the two recent acquisitions, offset partially by higher internal software capitalization costs. Research and development expenses for the six months ended June 30, 2026 increased by $1.6 million, or 9%, compared to the six months ended June 30, 2025. The increase in expense for the period was primarily driven by higher employee compensation costs, largely due to higher headcount from the two recent Acquisitions,acquisitions, and higher contractor costs, offset partially offset by higher internal software capitalization costs.
Average full-time research and development employee headcount for the three and six months ended MarchJune 31,30, 2026 was 245254 and 250, respectively, compared to 222228 and 225 for the three and six months ended MarchJune 31,30, 2025.2025, respectively. Average headcount was 10%11% higher for both the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods in 2025.
General and administrative expenses for the three months ended MarchJune 31,30, 2026 increased by $1.4$0.2 million, or 15%,1%, compared to the three months ended MarchJune 31,30, 2025, which was primarily due to higher employee compensation costs, offset partially by lower consulting expenses compared to the prior year period. General and administrative expenses for the six months ended June 30, 2026 increased by $1.6 million, or 7%, compared to the six months ended June 30, 2025. The increase in expense for the period was largely driven by higher employee compensation costs,costs and higher non-recurring acquisition-related advisor costscosts, offset partially by lower consulting expenses compared to the prior year period.
Average full-time general and administrative employee headcount for both the three and six months ended MarchJune 31,30, 2026 was 9192, compared to 8586 for both the three and six months ended MarchJune 31,30, 2025. Average headcount was 7% higher for both the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods in 2025.
Amortization of intangible assets expense for the three months ended MarchJune 31,30, 2026 increased by less than $0.1 million, or 26%,13%, compared to the three months ended MarchJune 31,30, 2025. Amortization of intangible assets expense for the six months ended June 30, 2026 increased by $0.2 million, or 19%, compared to the six months ended June 30, 2025. The increase in amortization expense for both periods was driven by an increase in acquired intangible assets due to the two recent Acquisitions.acquisitions.
•Cybersecurity operating income for the three months ended MarchJune 31,30, 2026 was $20.8$13.8 million, which was a year-over-year decrease of $3.4$6.0 million, or 14%,30%, from the three months ended MarchJune 31,30, 2025. Operating income for the six months ended June 30, 2026 was $34.6 million, which was a year-over-year decrease of $9.4 million, or 21%, from the six months ended June 30, 2025. The decrease for both periods was largely due to higherlower salesrevenue and marketinghigher operating expenses and research and development expenses, as a result of organic investments and the incremental headcount from the recent Acquisitions.acquisitions, respectively.
•Digital Agreements operating income for the three and six months ended MarchJune 31,30, 2026 was $5.3$7.0 million and $12.3 million, respectively, compared to an operating income of $3.4$2.9 million and $6.2 million, for the three and six months ended MarchJune 31,30, 2025.2025, respectively. The improvementincrease infor operatingboth incomeperiods wasended drivenJune by30, 2026 is largely due to higher grossrevenue, profitincluding overages fees, and lower operating expenses, including lower research and development expensesexpenses, and restructuringsales expenses.and marketing expenses compared to the prior year periods.
Interest (expense) income, net, was less than $(0.10.2) million and $0.7 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Interest (expense) income, net, was $(0.2) million and $1.4 million for the six months ended June 30, 2026 and 2025, respectively. The decrease wasfor dueboth periods relates to higher average excess cash invested in the prior year period compared to the current year period, as well as interest expense incurred in the current year related to the Credit Agreement. The decrease in invested cash is largely the result of the Company using cash to fund the Acquisitions.acquisitions.
Other expense,income (expense), net
Other expense,income (expense), net, primarily includes subsidies received from foreign governments in support of our research and development in those countries, exchange gains (losses) on transactions that are denominated in currencies other than our subsidiaries’ functional currencies, and other miscellaneous non-operational, non-recurring expenses.
Other expense,income (expense), net, for the three months ended MarchJune 31,30, 2026 and 2025 was $0.4income million andof less than $0.1 million and expense of $0.7 million, respectively. Other income (expense), net, for the six months ended June 30, 2026 and 2025 was expense of $0.3 million and $0.7 million, respectively. The year-over-year change for both periods was largely driven by increasedlower foreign exchange transaction losses in 2026 compared to foreign exchange transaction losses in 2025 primarily2025, due to the U.S. Dollar weakening against the Euro.Euro, as well as decreased subsidies received from foreign governments.
We recorded income tax expense of $2.8$1.9 million and $3.4$2.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, $4.7 million and $5.6 million for the six months ended June 30, 2026 and 2025, respectively. Lower income tax expense for theboth three months and six months ended MarchJune 31,30, 2026 was primarily attributable to lower pre-tax income.
At MarchJune 31,30, 2026, we had cash and cash equivalent balances of $49.8$43.3 million. Our cash and cash equivalents balance includes money market funds.
We are party to lease agreements that require letters of credit to secure the obligations, which totaled $0.2 million as of December 31, 2025.
As of MarchJune 31,30, 2026, we held $43.0$25.6 million of cash and cash equivalents in subsidiaries outside of the United States. Of that amount, $41.6$24.4 million is not subject to repatriation restrictions, but may be subject to taxes upon repatriation.
As of June 30, 2026, we had $5.0 million of borrowings outstanding under our $100.0 million revolving credit facility entered into on June 23, 2025. The borrowing will be used for general corporate purposes and reflects our ability to access liquidity under the Credit Agreement, as needed, to support our operating and capital requirements. As of June 30, 2026, we had $0.4 million letters of credit outstanding. Subject to the terms of the Credit Agreement, we may borrow, repay, and reborrow amounts under the revolving credit facility until its maturity on June 23, 2030, and may prepay revolving loans without penalty or premium, subject to notice and customary breakage costs. Borrowings under the Credit Agreement bear interest at variable rates based on our election and consolidated net leverage ratio, and we are also required to pay a commitment fee on the unused portion of the facility. We believe that the revolving credit facility, including the remaining availability thereunder, provides us with additional financial flexibility to fund general corporate purposes and support our liquidity needs.
OSPN insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 20,000 shares, about $289.0K). Net open-market shares: -20,000 (purchases minus sales); net value about -$289.0K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-06 | Martell Jorge Garcia |
Option exercise | 3,055 | — | — |
| 2026-09-06 | Martell Jorge Garcia |
Shares withheld for tax | 897 | $16.70 | $15.0K |
| 2026-09-04 | Martell Jorge Garcia |
Option exercise | 1,763 | — | — |
| 2026-09-04 | Martell Jorge Garcia |
Shares withheld for tax | 518 | $16.70 | $8.7K |
| 2026-09-04 | Mataac Lara |
Option exercise | 1,197 | — | — |
| 2026-09-04 | Mataac Lara |
Shares withheld for tax | 352 | $16.70 | $5.9K |
| 2026-09-04 | Limongelli Victor |
Shares withheld for tax | 3,199 | $16.70 | $53.4K |
| 2026-09-04 | Limongelli Victor |
Option exercise | 6,299 | — | — |
| 2026-06-16 | Martell Jorge Garcia |
Open-market sale | 20,000 | $14.45 | $289.0K |
| 2026-06-16 | Jain Ashish |
Option exercise | 4,731 | — | — |
| 2026-06-16 | Jain Ashish |
Shares withheld for tax | 1,693 | $14.26 | $24.1K |
| 2026-05-14 | Martell Jorge Garcia |
Option exercise | 1,133 | — | — |
| 2026-05-14 | Martell Jorge Garcia |
Shares withheld for tax | 333 | $12.18 | $4.1K |
| 2026-05-14 | Mataac Lara |
Option exercise | 1,133 | — | — |
| 2026-05-14 | Mataac Lara |
Shares withheld for tax | 333 | $12.18 | $4.1K |
Well-known investors holding OSPN (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 1,188,680 | $17.1M | 0.01% | Added 101% |
| Millennium Management (Israel Englander) | 2026-06-30 | 301,609 | $4.3M | 0.0% | Reduced 70% |
| Two Sigma Investments | 2026-06-30 | 122,854 | $1.8M | 0.0% | Reduced 54% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 94,937 | $1.4M | 0.0% | Added 287% |
| Renaissance Technologies | 2026-06-30 | 33,829 | $356.2K | — | Sold out |