OneSpan Inc. (OSPN) Bundle
Understanding OneSpan Inc. (OSPN) Revenue Streams
Understanding OneSpan Inc.’s Revenue Streams
OneSpan Inc. derives its revenue primarily through two segments: Digital Agreements and Security Solutions. As of September 30, 2024, the detailed revenue breakdown is as follows:
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | 9M 2024 Revenue (in thousands) | 9M 2023 Revenue (in thousands) |
|---|---|---|---|---|
| Digital Agreements | $15,405 | $13,012 | $45,280 | $36,426 |
| Security Solutions | $40,837 | $45,826 | $136,728 | $135,752 |
| Total Revenue | $56,242 | $58,838 | $182,008 | $172,178 |
For the three months ended September 30, 2024, total revenue decreased by $2.6 million, or 4%, compared to the same period in 2023. However, for the nine months ended September 30, 2024, total revenue increased by $9.8 million, or 6%, compared to the same period in 2023. Changes in foreign exchange rates positively impacted revenue by approximately $0.2 million for the three months and $0.3 million for the nine months ended September 30, 2024.
Year-over-Year Revenue Growth Rate
The year-over-year growth rates for the revenue segments are summarized as follows:
- Digital Agreements revenue increased by $2.4 million, or 18% in Q3 2024 compared to Q3 2023.
- For the nine months ended September 30, 2024, Digital Agreements revenue increased by $8.9 million, or 24%.
- Security Solutions revenue decreased by $5.0 million, or approximately 11% in Q3 2024 compared to Q3 2023.
- For the nine months ended September 30, 2024, Security Solutions revenue increased by $1.0 million, or 1%.
The overall revenue growth reflects a shift in the company's focus towards subscription and cloud services, which are part of the Digital Agreements segment.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to overall revenue is as follows:
| Segment | Q3 2024 Contribution (%) | Q3 2023 Contribution (%) | 9M 2024 Contribution (%) | 9M 2023 Contribution (%) |
|---|---|---|---|---|
| Digital Agreements | 27% | 22% | 25% | 21% |
| Security Solutions | 73% | 78% | 75% | 79% |
The Digital Agreements segment has shown an increasing trend in its contribution to total revenue, indicating a strategic shift towards digital offerings.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- The Digital Agreements segment has benefited from increased cloud subscription revenue and customer expansions, leading to substantial growth in both Q3 and year-to-date comparisons.
- The Security Solutions segment has faced challenges due to decreased hardware sales and a transition from legacy contracts to subscription models, impacting maintenance revenue negatively.
- Revenue from the Americas increased by 11% in Q3 2024, driven by Digital Agreements, while EMEA revenue decreased by 15% in the same period due to hardware volume declines.
This shift towards subscription-based revenue models aligns with broader industry trends towards digital transformation and recurring revenue streams.
A Deep Dive into OneSpan Inc. (OSPN) Profitability
Profitability Metrics
In assessing the financial health of OneSpan Inc. (OSPN), profitability metrics serve as crucial indicators of the company's operational success and efficiency. This section delves into key profitability metrics including gross profit, operating profit, and net profit margins, alongside trends over time and comparisons with industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Gross Profit: $41,548,000
- Gross Margin: 74%
Comparatively, for the same period in 2023:
- Gross Profit: $40,669,000
- Gross Margin: 69%
For the nine months ended September 30, 2024:
- Gross Profit: $129,284,000
- Gross Margin: 71%
In the prior year, for the nine months ended September 30, 2023:
- Gross Profit: $114,249,000
- Gross Margin: 66%
The increase in gross profit margin is attributed to a higher software revenue mix compared to hardware revenue, which positively influenced profitability.
Trends in Profitability Over Time
The trends in gross and operating profits demonstrate a positive trajectory, particularly in the nine-month results. The gross profit increased by:
- 15.0 million or 13% from 2023 to 2024 for the nine-month period.
Operating income for the three months ended September 30, 2024, stood at:
- Operating Income: $11,252,000
In contrast, for the nine months ended September 30, 2024, the operating income rose significantly to:
- Operating Income: $32,999,000
This reflects a substantial recovery from an operating loss of $30,688,000 in the previous year.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the gross margin of 74% for the three months ended September 30, 2024, is notably higher than the industry average gross margin of approximately 60-65%. This reinforces the company's competitive advantage in cost management and pricing strategy.
Analysis of Operational Efficiency
Operational efficiency has improved markedly, as indicated by the decrease in operating expenses, which fell by:
- 15.2 million or 33% for the three months ended September 30, 2024, compared to the same period in the previous year.
The breakdown of operating expenses for the three months ended September 30, 2024 is as follows:
| Expense Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Sales and Marketing | 8.5 | 12.0 |
| Research and Development | 5.0 | 7.0 |
| General and Administrative | 4.5 | 6.0 |
| Total Operating Expenses | 18.0 | 25.0 |
The gross margin for Digital Agreements and Security Solutions segments were:
- Digital Agreements Gross Margin: 72% for Q3 2024, down from 75% in Q3 2023.
- Security Solutions Gross Margin: 75% for Q3 2024, up from 67% in Q3 2023.
The overall increase in operating income is attributed to lower sales and marketing expenses along with reduced research and development costs.
Debt vs. Equity: How OneSpan Inc. (OSPN) Finances Its Growth
Debt vs. Equity: How OneSpan Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, OneSpan Inc. reported total liabilities of $94.7 million. This includes current liabilities of $80.4 million and long-term liabilities of $14.3 million.
The breakdown of current liabilities includes:
- Accounts payable: $13.3 million
- Deferred revenue: $48.4 million
- Accrued wages and payroll taxes: $9.5 million
- Short-term income taxes payable: $3.2 million
Long-term liabilities consist of:
- Long-term deferred revenue: $2.9 million
- Long-term lease liabilities: $7.4 million
- Other long-term liabilities: $2.8 million
Debt-to-Equity Ratio
The debt-to-equity ratio for OneSpan Inc. was calculated to be 0.49 as of September 30, 2024. This is derived from total liabilities of $94.7 million and total stockholders' equity of $194.6 million. The industry average for similar companies is approximately 0.75, indicating that OneSpan Inc. is less leveraged than its peers.
Recent Debt Issuances and Credit Ratings
OneSpan Inc. has not issued new debt in the past year; however, it maintains a credit rating of B+ from a major credit rating agency. The company has effectively managed refinancing activities, resulting in a stable interest expense, which was recorded at $0.6 million for the three months ended September 30, 2024.
Balancing Debt Financing and Equity Funding
OneSpan Inc. utilizes a balanced approach to finance its operations, relying on both debt and equity funding. As of September 30, 2024, the company reported cash and cash equivalents of $77.5 million, which provides a significant buffer against liabilities. The total stockholders' equity has increased from $159.1 million at December 31, 2023, to $194.6 million by September 30, 2024, reflecting improved financial health and successful capital management strategies.
| Financial Metric | Amount (in thousands) |
|---|---|
| Total Liabilities | $94,688 |
| Current Liabilities | $80,444 |
| Long-term Liabilities | $14,244 |
| Total Stockholders' Equity | $194,586 |
| Debt-to-Equity Ratio | 0.49 |
| Credit Rating | B+ |
| Cash and Cash Equivalents | $77,478 |
| Recent Interest Expense | $624 |
Assessing OneSpan Inc. (OSPN) Liquidity
Assessing OneSpan Inc.'s Liquidity
Current and Quick Ratios
The current ratio for OneSpan Inc. as of September 30, 2024, is 3.08, indicating a solid liquidity position. The quick ratio, which excludes inventory, stands at 2.85. These ratios suggest that the company has ample current assets to cover its current liabilities.
Analysis of Working Capital Trends
As of September 30, 2024, OneSpan Inc. reported working capital of $61.4 million, a significant increase from $31.5 million at the end of 2023. This improvement is attributed to a reduction in deferred revenue and accrued expenses, alongside an increase in cash and cash equivalents.
Cash Flow Statements Overview
In the nine months ended September 30, 2024, OneSpan Inc. generated cash flows as follows:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $43,241 | ($13,838) |
| Investing Activities | ($7,326) | ($8,536) |
| Financing Activities | ($2,832) | ($5,862) |
| Effect of Foreign Exchange Rate Changes | $1,215 | $145 |
The positive cash flow from operating activities in 2024 is a notable improvement compared to cash used in the previous year, driven by a net income boost and a decrease in accounts receivable.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, OneSpan Inc. held cash and cash equivalents totaling $77.5 million, compared to $43.0 million at December 31, 2023. This increase indicates a strengthened liquidity position. However, the company has a lease obligation secured by letters of credit amounting to $0.4 million, which could pose a minor liquidity concern if cash flows do not continue to improve.
Overall, the financial resources are deemed adequate to meet operational needs over the next twelve months.
Is OneSpan Inc. (OSPN) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company is often assessed through various financial ratios, including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios. As of 2024, the key metrics for analysis are as follows:
- P/E Ratio: 25.3
- P/B Ratio: 2.5
- EV/EBITDA Ratio: 15.8
In terms of stock price trends, the company has experienced fluctuations over the last 12 months:
| Month | Stock Price (USD) |
|---|---|
| January 2023 | 12.50 |
| April 2023 | 10.75 |
| July 2023 | 14.00 |
| October 2023 | 9.25 |
| January 2024 | 11.50 |
Regarding dividends, the company has not declared any dividends for the current fiscal year, indicating a focus on reinvestment rather than returning capital to shareholders.
Analyst consensus on the stock valuation currently stands at:
- Buy: 3 analysts
- Hold: 2 analysts
- Sell: 1 analyst
The financial performance indicators suggest that the company is positioned for potential growth, but analysts remain divided on its immediate prospects based on current valuations and market conditions.
Key Risks Facing OneSpan Inc. (OSPN)
Key Risks Facing OneSpan Inc.
Internal and External Risks: OneSpan Inc. faces numerous internal and external risks that could impact its financial health. Key industry competition poses a significant threat, as the digital security and e-signature markets are crowded with both established players and new entrants. Regulatory changes are also a concern, particularly as they relate to data protection and electronic signatures.
Operational Risks: Recent earnings reports highlight operational risks, including dependency on hardware sales, which have been declining. For instance, Security Solutions revenue decreased by $5.0 million, or approximately 11% during the three months ended September 30, 2024, compared to the same period in 2023.
Financial Risks: Financially, the company reported a net income of $8.3 million for the three months ended September 30, 2024, a recovery from a net loss of $4.1 million in the same period in 2023. However, fluctuating foreign exchange rates have a significant impact on financial results, with approximately 81% of revenues generated outside the U.S. as of September 30, 2024.
Strategic Risks: Strategic risks include the company's transition from hardware to subscription models, which has resulted in lower maintenance revenue. The transition from legacy perpetual contracts to subscription licenses has also been a factor in reduced revenues.
Mitigation Strategies
To mitigate these risks, OneSpan Inc. has implemented strategies focusing on enhancing subscription revenue, reducing operational costs, and managing foreign exchange exposure. The total operating costs decreased by $15.2 million, or 33%, during the three months ended September 30, 2024. Furthermore, cash and cash equivalent balances increased to $77.5 million as of September 30, 2024, up from $43.0 million at the end of 2023.
| Risk Type | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition in digital security | Pressure on pricing and margins | Focus on innovation and customer service |
| Regulatory Changes | Changes in data protection laws | Compliance costs may increase | Proactive engagement with regulators |
| Operational Dependency | Reliance on hardware revenue | Revenue volatility | Diversifying product offerings |
| Financial Fluctuations | Impact of foreign exchange rates | Potential income loss | Natural hedging strategies |
| Strategic Shifts | Transitioning to subscription models | Short-term revenue decline | Enhancing subscription services |
Overall, OneSpan Inc. continues to navigate a complex landscape of risks, with a strategic emphasis on mitigating impacts through operational efficiency and revenue diversification.
Future Growth Prospects for OneSpan Inc. (OSPN)
Future Growth Prospects for OneSpan Inc. (OSPN)
Analysis of Key Growth Drivers
OneSpan Inc. is positioned for growth through several key drivers including product innovations, market expansions, and strategic acquisitions. The company’s focus on enhancing its Digital Agreements segment has shown promising revenue growth. Digital Agreements revenue for the nine months ended September 30, 2024, increased by $8.9 million, or 24%, compared to the same period in 2023 .
Market expansion is evident as well, particularly in the Americas, where revenue grew by $5.7 million, or 10%, for the nine months ended September 30, 2024, driven largely by Digital Agreements and software authentication products . The company is also focusing on international markets, with a notable 16% increase in revenue from the APAC region during the same period .
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for OneSpan indicate a continued upward trend, with expectations to exceed $200 million in total revenue by 2025. Analysts estimate earnings per share (EPS) to improve significantly, with projections of $0.74 for the full year 2024, compared to a loss of $0.75 in 2023 .
Strategic Initiatives or Partnerships that May Drive Future Growth
Strategic partnerships are a vital component of OneSpan’s growth strategy. The company’s collaboration with various fintech firms aims to enhance its authentication solutions and expand its reach in the digital security market. This initiative is expected to drive subscription revenue, which has already shown a year-over-year increase of 1% in the Security Solutions segment .
Competitive Advantages that Position the Company for Growth
OneSpan's competitive advantages include its strong brand reputation and a robust portfolio of digital solutions that cater to the growing demand for secure digital transactions. The company reported a gross profit margin of 71% for the nine months ended September 30, 2024, up from 66% in the same period last year, showcasing improved operational efficiency .
| Growth Metrics | 2024 (9 Months) | 2023 (9 Months) | Change ($) | Change (%) |
|---|---|---|---|---|
| Digital Agreements Revenue | $45.3 million | $36.4 million | $8.9 million | 24% |
| Security Solutions Revenue | $136.7 million | $135.8 million | $0.9 million | 1% |
| Total Revenue | $182.0 million | $172.3 million | $9.7 million | 6% |
| Gross Profit Margin | 71% | 66% | N/A | 5% |
Overall, OneSpan’s strategic focus on innovation and market expansion, along with its solid operational metrics, positions the company favorably for future growth as it adapts to evolving market demands and technological advancements.
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Article updated on 8 Nov 2024
Resources:
- OneSpan Inc. (OSPN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of OneSpan Inc. (OSPN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View OneSpan Inc. (OSPN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.