OneSpan Inc. (OSPN) combats identity fraud, primarily within the banking industry, where 60 of the top 100 global banks are using its products. The company is transforming from a hardware and perpetual licence software-based business model to cloud-delivered software services. But therein lies the problem for the most recent quarter. The pandemic is causing an acceleration of the business transformation which is blurring the financial picture for the company.
Q2 2020 Performance
On the surface, the performance appears to be pretty mediocre, with revenue decreasing by 2% YoY for Q2 2020. This is primarily the result of a faster-than-expected drop in hardware and perpetual license sales due to the pandemic. Of course, some of the lost product sales have migrated over to term license software or services. During the transition to Software-as-a-Service (SAAS), lower revenue is expected, along with margin compression, thus blurring the company’s performance.