Onespan’s Earnings Call: Strong EBITDA Amid Challenges

Onespan ((OSPN)) has held its Q4 earnings call. Read on for the main highlights of the call.

The latest earnings call from Onespan painted a picture of robust profitability and cash generation, underscored by record high adjusted EBITDA and significant growth in subscription revenues. Despite facing challenges such as declining hardware revenue and the impact of sunsetting products, the company expressed optimism about its strategic pivot towards higher-margin software and subscription revenue. The introduction of dividends further suggests a positive outlook for the future.

Record High Adjusted EBITDA

Onespan achieved a record high adjusted EBITDA in the fourth quarter of 2024, reaching $20 million, which represents 32% of the revenue. For the full year, the adjusted EBITDA was $73 million, or 30% of revenue. This milestone underscores the company’s strong operational performance and its ability to generate substantial earnings.

Subscription Revenue Growth

The company reported impressive growth in subscription revenue, which increased by over 30% for both the quarter and the year. Subscription revenue now accounts for 57% of total revenue, marking a 12 percentage point increase year-over-year. This shift highlights Onespan’s successful transition towards a more sustainable and profitable business model.

Cash Generation Improvement

In 2024, Onespan generated $56 million in cash from operations, a significant turnaround from the prior year’s cash usage of $11 million. This improvement in cash flow is a testament to the company’s enhanced financial management and operational efficiency.

Security Subscription Revenue Surge

Security subscription revenue saw a remarkable increase, surging 49% in the fourth quarter and 33% for the full year 2024. This growth indicates a strong demand for Onespan’s security solutions and reinforces the company’s strategic focus on this high-growth area.

Dividend Introduction

In a historic move, Onespan paid its first quarterly cash dividend, signaling confidence in its financial stability and future prospects. The company plans to continue quarterly dividend payments, providing an additional incentive for investors.

Total Revenue Decline in Q4

Despite the positive developments, Onespan’s total revenue declined by 3% in the fourth quarter, primarily due to anticipated declines in hardware revenue. This decline highlights the ongoing challenges in the hardware segment.

Continued Decline in Hardware Revenue

Hardware revenues fell by 36% in Q4 and 23% for the full year 2024, with expectations of continued decline into 2025. This trend reflects the broader industry shift away from hardware towards software and services.

Impact of End-of-Life Products

The growth in annual recurring revenue (ARR) was negatively impacted by churn related to end-of-life products, resulting in a $3 million revenue impact in Digital Agreements for the full year 2024. This challenge underscores the need for Onespan to manage product transitions effectively.

Forward-Looking Guidance

Looking ahead, Onespan provided guidance for 2025, projecting revenue between $245 million to $251 million and ARR from $180 million to $186 million. The company expects adjusted EBITDA to range from $72 million to $76 million, with double-digit subscription revenue growth anticipated. These forecasts reflect Onespan’s confidence in its strategic direction and growth potential.

In conclusion, Onespan’s earnings call highlighted a strong financial performance, driven by record high adjusted EBITDA and substantial subscription revenue growth. While challenges remain, particularly in the hardware segment, the company’s strategic focus on software and subscription services, along with the introduction of dividends, suggests a promising future. Investors and market watchers will be keen to see how Onespan navigates these dynamics in the coming year.