OneSpan NASDAQ: OSPN reported first-quarter fiscal 2026 results that management described as a “good first quarter” marked by solid revenue growth, strong profitability, rising retention metrics, and continued capital returns to shareholders. The company also highlighted progress integrating recent acquisitions and reiterated its full-year outlook for revenue and adjusted EBITDA while raising its ARR guidance.
Q1 results: subscription growth and strong margins
Chief Executive Officer Victor Limongelli said subscription revenue grew 8% year-over-year, while adjusted EBITDA margin reached 32%. He also pointed to improving customer retention, noting that gross revenue retention rose again in the quarter to 90% company-wide and 94% for the Digital Agreements business.
Chief Financial Officer Jorge Martell reported total revenue of $65.9 million, up 4.1% from the prior-year quarter, driven by 5.8% growth in software and services revenue, partially offset by a 4.3% decline in hardware revenue. Subscription revenue grew 8.2% to $52.7 million and represented 80% of total revenue, while gross margin was approximately 74%, consistent with the year-ago period.
Profitability metrics declined year-over-year as OneSpan absorbed costs tied to acquisitions and investments. GAAP operating income was $14.8 million compared with $17.2 million a year ago. Martell said the decrease primarily reflected higher operating costs related to the acquisitions of Nok Nok Labs and Build38, including headcount and non-recurring consulting costs, as well as some costs tied to organic investments, partially offset by lower share-based compensation.
GAAP earnings were $0.30 per share, down from $0.37 a year earlier. On a non-GAAP basis, earnings were $0.39 per share versus $0.45 last year. Adjusted EBITDA was $21.0 million (31.9% margin), compared with $23.0 million (36.4% margin) in the prior-year quarter.
ARR growth, retention, and updated revenue presentation
OneSpan ended the quarter with annual recurring revenue (ARR) of $192.1 million, up 14.1% year-over-year, inclusive of acquisition contributions. Martell said net retention was 105%, “benefiting from customer expansion contracts,” with ARR also supported by new customer additions and M&A.
Martell also noted a presentation change in segment revenue reporting: term maintenance revenue is now included within subscription revenue. He said the change is presentation-only and does not affect total revenue, operating income, or cash flows, and that prior periods were updated for comparability.
Segment performance: Digital Agreements outpaced cybersecurity revenue growth
In cybersecurity, ARR rose 16.5% year-over-year to $124.6 million, inclusive of acquisitions. Revenue increased 1.7% to $48.5 million. Subscription revenue grew 6.6% to $35.3 million, which Martell attributed to customer expansions, new logos, and M&A, partially offset by lower multi-year term license revenue. The division’s gross margin was 74% versus 76% a year ago, which Martell said reflected incremental third-party license costs as well as subscription and professional services costs.
Cybersecurity operating income was $20.8 million, or 43% of revenue, compared with $24.2 million, or 51% of revenue, last year. Martell said the decline was driven by increased operating expenses from acquisitions, incremental cost of revenues, higher non-recurring acquisition-related consulting costs, and increased investments.
Digital Agreements posted ARR of $67.5 million, up 9.9% year-over-year, with revenue rising 11.2% to $17.4 million. Martell said growth was driven by expansion of renewal contracts, new customer additions, and overage fees. Gross margin improved to 72.5% from 70.3% a year ago due to higher revenues and greater efficiency in cloud infrastructure costs. Operating income in Digital Agreements rose to $5.3 million (30.4% of revenue) from $3.4 million (21.5% of revenue), which Martell tied to revenue growth, higher gross margins, and a modest decline in operating expenses.
Acquisitions: Build38 and Nok Nok updates
Management emphasized that recent acquisitions are intended to broaden OneSpan’s security and authentication portfolio. Limongelli said OneSpan completed the acquisition of Build38 in the quarter, adding mobile threat and mobile application protection capabilities, including telemetry to help customers understand attacks targeting mobile applications. Martell noted Build38 was acquired on February 27 and contributed just over one month of financial results in the quarter.
Limongelli contrasted Build38’s capabilities with OneSpan’s prior approach, which relied on a partner and “wrapping” after an application is compiled. He said Build38 offers an SDK-based approach that builds protection into apps and enables telemetry “back from the applications,” providing more information about devices and attacks.
Limongelli also provided an update on Nok Nok Labs, which OneSpan acquired last year. He said the business has grown materially since the closing, with ARR increasing about 20% in less than 10 months. In response to an analyst question, Martell said Nok Nok’s ARR was $9.7 million at quarter-end, up from $8.1 million at acquisition, while Build38’s acquired ARR was $2.8 million. Martell said the combined contribution suggested “organic” ARR growth of roughly 7% to 8%.
On go-to-market momentum for passwordless authentication, Limongelli said Nok Nok’s capabilities support both retention and new customer opportunities as passwordless adoption increases. He said early strength has been “stronger in North America with strength in Japan as well,” with expectations to expand over time into Europe and Latin America. On cross-selling hardware tokens alongside Nok Nok’s software, Limongelli said “to date, not too many” customers buy both, characterizing it as an opportunity rather than a material contributor currently.
Cash flow, capital returns, and outlook
OneSpan generated $28.2 million in operating cash flow and ended the quarter with $49.8 million in cash and equivalents, down from $70.5 million at the end of 2025. Martell said uses of cash included $5.0 million for the quarterly dividend, $5.4 million to repurchase approximately 510,000 shares, $34.6 million related to the Build38 acquisition, and $2.6 million in capitalized software development costs. The company ended the quarter with no long-term debt.
Limongelli said OneSpan has returned capital through share repurchases totaling about 1.5 million shares for more than $18 million over the past three quarters, and through an increased quarterly dividend. He added that the board approved a quarterly dividend of $0.13 per share to be paid in the current quarter and would continue to evaluate additional buyback opportunities.
On guidance, Martell said OneSpan is affirming full-year 2026 guidance for revenue and adjusted EBITDA but raising ARR guidance. The company expects full-year results as follows:
- Total revenue: $244 million to $249 million
- Software and services revenue: $201 million to $204 million
- Hardware revenue: $43 million to $45 million
- ARR: $194 million to $198 million (raised from $192 million to $196 million)
- Adjusted EBITDA: $64 million to $68 million
Martell also flagged an expected second-quarter ARR headwind of approximately $3 million from two contracts not expected to renew, noting both customers are not banks or financial institutions. He said the majority of the headwind relates to a customer moving to passwordless authentication following a decision made a year ago, before OneSpan acquired Nok Nok Labs. Martell said the company expects ARR growth to resume in the second half, with “most of that growth occurring in the fourth quarter.”
Hardware remained a point of investor focus. Martell said hardware was 16% of revenue in the quarter, continuing a long-term decline. Limongelli said OneSpan expects consumer banking tokens to continue to decline but does not believe hardware will go to zero, pointing to continued use cases in parts of Europe and Asia and certain banking workflows. He added that growth in FIDO2 security keys could help offset declines.
Geographically, OneSpan reported Q1 revenue mix of 43% EMEA, 38% Americas, and 19% Asia Pacific. Martell said year-over-year changes reflected growth in Digital Agreements and cybersecurity software revenue in the Americas, lower cybersecurity hardware and software revenue in EMEA, and increased hardware revenue in Asia Pacific. Addressing geopolitical concerns, Limongelli said the Gulf region represents about 4% of revenue and that the company was “cautiously watching” the situation, while also noting OneSpan expects to grow faster in North America than in the past.
Limongelli said management is encouraged by progress in positioning the company for long-term growth, while cautioning that “one good quarter does not make an excellent year.”
About Onespan NASDAQ: OSPN
OneSpan, formerly known as Vasco Data Security International, is a Chicago-based cybersecurity software company specializing in digital identity and anti-fraud solutions. Founded in 1991, the company provides a suite of authentication and transaction security products designed to help organizations protect critical applications and high-value transactions across online, mobile and in-branch channels.
The core OneSpan portfolio includes multi-factor authentication, risk-based authentication and transaction signing solutions.
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