ospn-20231231

This Annual Report on Form 10-K contains forward-looking statements within the meaning of applicable U.S. securities laws, including statements regarding the outcomes we expect from our updated strategic transformation plan and cost reduction and restructuring actions approved in August 2023 and in prior periods, including the ability of those actions to allow us to accelerate Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) growth and drive value creation by growing revenue efficiently and profitably; estimates concerning the timing and amount of savings, Adjusted EBITDA improvements, and/or restructuring charges that may result from our cost reduction and restructuring actions; our plans for managing our Digital Agreements and Security Solutions segments; expectations about trends in our cost of goods sold, gross margin, and sales and marketing, research and development, and general and administrative expenses; the impact of foreign currency rate fluctuations; expectations regarding sources and uses of cash; and our general expectations regarding our operational or financial performance in the future. Forward-looking statements may be identified by words such as "seek", "believe", "plan", "estimate", "anticipate", “expect", "intend", "continue", "outlook", "may", "will", "should", "could", or "might", and other similar expressions. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could materially affect our business and financial results include, but are not limited to: our ability to execute our updated strategic transformation plan and cost reduction and restructuring actions in the expected timeframe and to achieve the outcomes we expect from them; unintended costs and consequences of our cost reduction and restructuring actions, including higher than anticipated restructuring charges, disruption to our operations, litigation or regulatory actions, reduced employee morale, attrition of valued employees, adverse effects on our reputation as an employer, loss of institutional know-how, 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; our ability to attract new customers and retain and expand sales to existing customers; our ability to successfully develop and market new product offerings and product enhancements; changes in customer requirements; the potential effects of technological changes; the loss of one or more large customers; difficulties enhancing and maintaining our brand recognition; competition; lengthy sales cycles; challenges retaining key employees and successfully hiring and training qualified new employees; security breaches or cyber-attacks; real or perceived malfunctions or errors in our products; interruptions or delays in the performance of our products and solutions; reliance on third parties for certain products and data center services; our ability to effectively manage third party partnerships, acquisitions, divestitures, alliances, or joint ventures; economic recession, inflation, and political instability; claims that we have infringed the intellectual property rights of others; price competitive bidding; changing laws, government regulations or policies; pressures on price levels; component shortages; delays and disruption in global transportation and supply chains; impairment of goodwill or amortizable intangible assets causing a significant charge to earnings; actions of activist stockholders; and exposure to increased economic and operational uncertainties from operating a global business, as well as other factors described in the “Risk Factors” section of this Annual Report on Form 10-K. Our filings with the Securities and Exchange Commission (the “SEC”) and other important information can be found in the Investor Relations section of our website at investors.onespan.com. We do not have any intent, and disclaim any obligation, to update the forward-looking information to reflect events that occur, circumstances that exist or changes in our expectations after the date of this Form 10-K, except as required by law.

We are currently in the midst of a business transformation. In December 2021, our board of directors (“Board” or “Board of Directors”) approved a restructuring plan (the “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 and we announced a three-year strategic transformation plan that began on January 1, 2023 (the "2022 strategic plan"). In conjunction with the 2022 strategic plan and to enable a more efficient capital deployment model, effective with the quarter ended June 30, 2022, we began reporting under the following two lines of business, which are our reportable operating segments: Digital Agreements and Security Solutions.

During the quarter ended June 30, 2023, we determined that we were unlikely to achieve the revenue growth levels set forth in our 2022 strategic plan within the contemplated three-year timeframe. A number of factors contributed to the challenges achieving the originally planned growth levels, particularly in Digital Agreements, on the timeframes set forth in the 2022 strategic plan, including: macroeconomic uncertainties in the banking and financial services segments, which have resulted in longer sales cycles and greater price sensitivity on the part of customers; 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. These and other factors made it more difficult than we originally anticipated to build our Digital Agreements sales pipeline, generate demand for our Digital Agreements solutions through marketing efforts, and improve our sales force productivity levels.

During 2022, the supply chain for our Digipass devices was impacted by global issues related to the effects of the COVID-19 pandemic, the Russia-Ukraine conflict and the inflationary cost environment, particularly with respect to materials in the semiconductor market, including part shortages, increased freight costs, diminished transportation capacity and labor constraints. This resulted in disruptions in our supply chain during 2022, as well as difficulties and delays in procuring certain microprocessors. In addition, since late 2021, our costs have increased due to elevated lead times and increased material costs, in particular the need to purchase microprocessors from alternative sources. Although the supply chain issues we saw in 2022 stabilized during 2023, global supply chains for semiconductors and electronic components remain vulnerable to disruption from range of risks, including natural disasters and extreme weather, regional or global conflicts, and scarcity of certain minerals and components.

We believe that the principal competitive factors affecting the market for digital solutions for identity, security, and electronic signatures include the strength and effectiveness of the solution, technical features, ease of use, quality and reliability, customer service and support, brand recognition, customer base, distribution channels, and the total cost of ownership of the solution. With the exception of brand recognition, we believe that our products are currently competitive with respect to these factors; nevertheless, we may not be able to maintain our competitive position against current and potential competitors. Some of our present and potential competitors have significantly greater financial, technical, marketing, purchasing, and other resources. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, to devote greater resources to the development, promotion and sale of products, to establish and maintain greater brand recognition, or to deliver competitive products at a lower end-user price. Please see Item IA, Risk Factors.

We monitor the gender diversity of our workforce regularly. We measure gender diversity overall, by job level, and by job family. As of December 31, 2023, approximately 31% of our employees identified as female, unchanged from the end of 2022 but up from 27% at the end of 2021. The percentage of women by job level (executive, vice president, director, manager, supervisor and individual) improved for the vice president, manager, and supervisor job levels, remained unchanged for the individual job level, and decreased slightly in the director and executive job levels. For job families (consisting of general and administrative, research and development, sales and marketing, and Digipass), the percentage of women by job family improved slightly for sales and marketing, remained unchanged for research and development, and declined slightly in general and administrative and Digipass. Although our gender diversity metrics may fluctuate from period to period, over the longer term, we hope and expect to see continued improvement in the representation of women across the company.

We maintain an Internet website at www.onespan.com. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be a part of this Annual Report on Form 10-K. Our website address is included in this Annual Report on Form 10-K as inactive textual reference only. Our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to those reports, are accessible through our website, free of charge, as soon as reasonably practicable after these reports are filed electronically with, or otherwise furnished to, the Securities and Exchange Commission, or the SEC. We also make available on our website the charters of our audit committee, compensation committee and nominating and corporate governance committee, as well as our corporate governance guidelines and our code of business conduct and ethics.

VICTOR LIMONGELLI — Mr. Limongelli has served as OneSpan’s Interim Chief Executive Officer since January 2024. Mr. Limongelli is a seasoned software executive who most recently served as Chief Executive Officer at BQE Software, a private SaaS company providing billing, accounting, and similar functionality to professional services firms, from September 2021 to April 2023. From April 2018 to August 2021, he served as Chief Executive Officer of MobileCause, Inc., a private equity-backed SaaS company focused on fundraising and donor engagement for nonprofits, and from November 2015 to April 2018, he was initially Chairman of the Board and then Chief Executive Officer of AccessData Group, a privately held security software company. From May 2003 through November 2014, Mr. Limongelli held a number of executive positions with Guidance Software, Inc., a publicly traded security software company, including over 9 years as President and 7 years as its Chief Executive Officer. Mr. Limongelli received an A.B. from Dartmouth College and a J.D. from Columbia University. Mr. Limongelli is 57 years old.

JORGE MARTELL — Mr. Martell has served as OneSpan’s Chief Financial Officer since September 2022 and as its principal accounting officer since December 2023. From July 2016 to September 2022, he served as Chief Financial Officer and Treasurer and from April 2015 to July 2016 as Vice President of Finance, Corporate Controller, at Extreme Reach Inc., a private-equity owned omnichannel creative logistics company for brand advertising, where he played an integral role in optimizing the company’s balance sheet and in executing the company’s growth strategy through global M&A, prior to its acquisition by another private equity firm. From September 2012 to March 2015, Mr. Martell was Treasurer and Assistant Corporate Controller at Sapient Corporation, a technology company, where he led its global revenue organization, execution of its M&A financial strategy, and global treasury organization prior to its acquisition by Publicis Groupe. Earlier in his career, Mr. Martell held leadership roles at ABM Industries, Inc., a provider of facilities management solutions, and at KPMG LLP, a public accounting firm. Mr. Martell is 45 years old.

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this Risk Factors Summary. These summary risks provide an overview of many of the risks we are exposed to in the normal course of our business, some of which have manifested and any of which may occur in the future. As a result, the following summary risks do not contain all of the information that may be important to you, and you should read them together with the more detailed discussion of risks set forth following this section under the heading “Risk Factors,” and with the other information in this Annual Report on Form 10-K. Additional risks beyond those summary risks discussed below, in “Risk Factors” or elsewhere in this Annual Report on Form 10-K, could have an adverse effect on our business, results of operations, financial condition or prospects, and could cause the trading price of our common stock to decline. Our business, results of operations, financial condition or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. Consistent with the foregoing, we are exposed to a variety of risks, including the following significant risks:

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 in connection with the restructuring plan and we announced our 2022 strategic plan, a three-year plan which began on January 1, 2023. During the quarter ended June 30, 2023, we determined that we were unlikely to achieve the revenue growth levels set forth in the 2022 strategic plan within the contemplated three-year timeframe. A number of factors contributed to the challenges achieving the originally planned growth levels, particularly in Digital Agreements, on the timeframes set forth in the 2022 strategic plan, including: macroeconomic uncertainties in the banking and financial services segments, which have resulted in longer sales cycles and greater price sensitivity on the part of customers; 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. These and other factors made it more difficult than we originally anticipated to build our Digital Agreements sales pipeline, generate demand for our Digital Agreements solutions through marketing efforts, and improve our sales force productivity levels.

In response to these challenges in growing our Digital Agreements revenue, we modified our strategy to focus more heavily on improving Adjusted EBITDA margin across the business. To this end, in August 2023, our Board approved the 2023 Actions described in Item 1, Business to seek to drive higher levels of Adjusted EBITDA while maintaining our long-term growth potential. The 2023 Actions consisted primarily of workforce related reductions, with a significantly smaller contribution from vendor contract termination and rationalization actions. Further information about the 2023 Actions, including associated expected restructuring charges, can be found in Item 7, Management’s Discussion and Analysis. The 2023 Actions and other cost reduction actions implemented under our restructuring plan originally adopted in December 2021 may yield unintended consequences and costs, such as: higher than anticipated restructuring charges; disruption to our operations; litigation and regulatory actions; reduced employee morale, attrition of valued employees, and adverse effects on our reputation as an employer; loss of institutional know-how; 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. In addition, our ability to complete the 2023 Actions and achieve the anticipated benefits from the 2023 Actions within the expected time frame or at all is subject to estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control, such that we may not succeed in achieving all or part of the intended benefits of the 2023 Actions.

The achievement of our business objectives also depends on our ability to retain and expand sales to existing customers. While this factor is important in both of our reporting segments, it is especially significant for our Security Solutions segment, which has been focused in recent years mostly on expanding sales to existing customers rather than seeking new customers. Our renewal and expansion rates in either segment may be below our expectations, decline or fluctuate as a result of a number of factors, including customer budgets, decreases in the number of users at our customers, changes in the type and size of our customers, pricing, competitive conditions, the competitiveness of our solutions, customer attrition and general economic and global market conditions. If our efforts to expand sales to our existing customers are not successful or if our customers do not renew their subscriptions at the rates we expect, our business will be negatively impacted.

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. Product developments and technology innovations by others may adversely affect our competitive position and we may not successfully anticipate or adapt to changing technology, industry standards or customer requirements on a timely basis. 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 better able to effectively integrate new technologies such as generative artificial intelligence ("AI") into their products, our competitive position may suffer.

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 some cases, we determine that product initiatives we initially believed were promising do 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, and incurred non-cash charges as a result. If other recent or future new product offerings do not garner widespread customer adoption and implementation, we may incur future non-cash charges and our business may be adversely affected.

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 assembled at facilities located in mainland China and 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 unrests, 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 protectionist legislation. We experienced supply chain disruption in 2022 as a result of the 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 trade disputes, geopolitical tensions, armed conflict, impacts as a result of the COVID-19 pandemic, future pandemics or other public health threats, and natural disasters and extreme weather, which are likely to 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.

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 and 2023, we terminated the employment of approximately 270 employees as part of our cost reduction and restructuring efforts, and in early January 2024, we terminated the employment of our previous CEO and hired an interim CEO. These layoffs and the changes in our leadership have created uncertainty among our employees, and we expect it may make it more difficult, more time-consuming and more expensive for us to retain key employees and attract 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 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.

High-profile cyberattacks and security breaches have increased in recent years, with the potential for such acts heightened because of the number of employees working remotely due to the COVID-19 pandemic. Security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting information technology, or IT, products and enterprise infrastructure. 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 more of a target for third parties seeking to compromise our security systems and we anticipate that hacking attempts and cyberattacks will increase in the future.

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 software as a service (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. Individual 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 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; 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 are continuously working to improve our IT systems, together with creating security boundaries around our critical and sensitive assets. We provide security awareness training to our employees and contractors that focuses on various aspects of cybersecurity. All these steps are taken to mitigate the risk of attack and to ensure our readiness to responsibly manage a 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.

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, 2022 and 2021, for which we reported a net loss of $29.8 million, $14.4 million, and $30.6 million, respectively. We will need to generate and sustain increased revenue levels and manage our expenses in future periods to become profitable and, even if we do, 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 outsource portions of our cloud infrastructure to third-party hosting providers, principally Amazon Web Services, or AWS. We also outsource components of our services to third-party technology vendors who host their products in the cloud. Customers of our products need to be able to access our platform at any time, without interruption or degradation of performance. AWS and other third-party hosting providers run their own platforms that we access, and we are therefore vulnerable to service interruptions on these third-party platforms, as well as to service interruptions affecting our own infrastructure and our third-party technology vendors. We have experienced interruptions, delays and outages in service and availability from time to time due to a variety of factors impacting our third-party hosting providers, our own infrastructure or other vendors, and we expect to experience these types of incidents in the future.

If our products or platform are unavailable or our users are otherwise unable to use our products within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected. In some instances, we may not be able to identify the cause or causes of these performance problems within a period of time acceptable to our customers. It may become increasingly difficult to maintain and improve our platform performance, especially during peak usage times, as our products become more complex and the usage of our products increases. We have in the past and may in the future experience capacity constraints that affect our product performance and cause us to miss our service level agreements with our customers. These capacity constraints can be due to a number of causes, including technical failures, natural disasters, fraud or security attacks. To the extent that we do not effectively address capacity constraints, either through our own infrastructure, our current third-party providers or alternative providers of cloud infrastructure, our business, results of operations and financial condition may be adversely affected. In addition, any changes in service levels from our third-party hosting providers or other cloud-based technology vendors may adversely affect our ability to meet our customers' requirements.

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 export control and privacy regulations (including the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and the General Data Protection Regulation ("GDPR")), protecting our products from external threats, maintaining continuous service levels and data security practices expected by our customers, preventing inappropriate use of our products, and incurring significant up-front costs where desired higher margins are dependent on achieving significant sales volume and adapting our go-to-market efforts. 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 need to 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.

Because a significant number of our principal customers are located outside the United States, we expect that international sales will continue to generate a significant portion of our total revenue. We are subject to foreign exchange fluctuations and risks because the majority of our product costs are denominated in U.S. dollars, whereas a significant portion of the sales and expenses of our foreign operating subsidiaries are denominated in various foreign currencies. A decrease in the value of any of these foreign currencies relative to the U.S. dollar could adversely affect our revenue and profitability in U.S. dollars of our products sold in these markets. Furthermore, a strengthening of the U.S. dollar could increase the cost in local currency of our products and services to customers outside the United States, which could adversely affect our business, results of operations, financial condition and cash flows.

Mergers, acquisitions, and personnel changes at key banks and financial services organizations have the potential to adversely affect our business, financial condition, cash flows, and results of operations. A majority of our revenue is derived from customers in the banking and financial services industry, making us susceptible to consolidation in, or contraction of, the number of participating institutions within that industry. In addition, other factors affecting the banking and financial services industry, such as economic and credit conditions, may create uncertainty or financial pressures that cause our customers or potential customers to adopt cost reduction measures or reduce capital spending, resulting in longer sales cycles, deferrals or delays in purchases of our products, delays in paying our accounts receivable, and increased price competition, any of which could negatively impact our revenue. Furthermore, if customers respond to a negative or unpredictable economic climate by consolidating with other banks or financial institutions, it could reduce the number of our current and/or potential customers.

Approximately 45% of our total revenue for the year ended December 31, 2023 was attributable to subscription license contracts. We recognize subscription revenue over the term of each of our subscription contracts, which are typically one year in length but may be up to three years or longer. As a result, much of our revenue is generated from the recognition of contract liabilities from contracts entered into during previous periods. Consequently, a shortfall in demand for our products or a decline in new or renewed contracts in any one quarter may not significantly reduce our revenue for that quarter but could negatively affect our revenue in future quarters. Our revenue recognition model also makes it difficult for us to rapidly increase our revenue through additional sales contracts in any period, as revenue from new customers is recognized over the applicable term of their contracts.

We are subject to U.S. federal, state, local and sales taxes in the United States and foreign income taxes, withholding taxes and transaction taxes in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain and the relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations by recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by changes to our operating structure (including a currently in-process revenue of our intellectual property structure), by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes, sales taxes and value-added taxes against us. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our operating results or cash flows in the period for which a determination is made.

In addition, under the provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, substantial changes in our ownership may limit the amount of pre-change NOLs that can be utilized annually in the future to offset taxable income. Section 382 of the Internal Revenue Code imposes limitations on a company’s ability to use its NOLs if one or more stockholders or groups of stockholders that own at least 5% of the company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Based upon an analysis as of December 31, 2021, we determined that we do not expect these limitations to materially impair our ability to use our NOLs prior to expiration. However, if changes in our ownership occurred after such date, or occur in the future, our ability to use our NOLs may be further limited. Subsequent statutory or regulatory changes in respect of the utilization of NOLs for federal or state purposes, such as suspensions on the use of NOLs or limitations on the deductibility of NOLs carried forward, or other unforeseen reasons, may result in our existing NOLs expiring or otherwise being unavailable to offset future income tax liabilities. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we achieve profitability.

Our success is dependent, in part, upon protecting our proprietary technology. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws and contractual provisions in an effort to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. While we have been issued patents in the U.S. and other countries and have additional patent applications pending, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Any of our patents, trademarks or other intellectual property rights may be challenged or circumvented by others or invalidated through administrative process or litigation. There can be no guarantee that others will not independently develop similar products, duplicate any of our products or design around our patents. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and solutions that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our products may be unenforceable under the laws of jurisdictions outside the U.S. To the extent we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information may increase.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect and enforce these rights, including through litigation. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products and solutions, impair the functionality of our products and solutions, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our products and solutions or injure our reputation. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Moreover, policing unauthorized use of our technologies, trade secrets and intellectual property may be difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the U.S. and where mechanisms for enforcement of intellectual property rights may be weak. If we fail to adequately protect our intellectual property and proprietary rights, our business, operating results and financial condition could be adversely affected.

From time to time, we are involved as a party or an indemnitor in disputes or regulatory inquiries. These may include alleged claims, lawsuits and proceedings regarding intellectual property disputes, labor and employment issues, commercial disagreements, securities law violations and other matters. In particular, companies in the software industry are often required to defend against litigation or claims based on allegations of infringement or other violations of intellectual property rights. In certain instances, we have received claims that we have infringed the intellectual property rights of others, including claims regarding patents, copyrights, and trademarks. Because of constant technological change in the markets in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow. Such claims sometimes involve patent holding companies or other adverse patent owners that have no relevant product revenue and against which our own patents may therefore provide little or no deterrence. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us the confidential or proprietary information of these former employers. If we are not successful in defending such claims, we could be required to stop selling our products, delay shipments, redesign our products, pay monetary amounts as damages, enter into royalty or licensing arrangements (which may not be available to us on commercially reasonable terms), or satisfy indemnification obligations to our customers, any of which could have a material adverse effect on our business.

We use open-source software in our products and solutions. Any use of open-source software may expose us to greater risks than the use of commercial software because open-source licensors generally do not provide warranties or controls on the functionality or origin of the software. Any use of open-source software may involve security risks, making it easier for hackers and other third parties to determine how to compromise our platform. From time to time, there have been claims challenging the ownership of open-source software against companies that incorporate open-source software into their products. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open-source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our products. In addition, if we were to combine our proprietary software products with open-source software in a certain manner, we could, under certain of the open-source licenses, be required to release the source code of our proprietary software products. If we inappropriately use or incorporate open-source software subject to certain types of open-source licenses that challenge the proprietary nature of our software products, we may be required to re-engineer our products, discontinue the sale of our products and solutions or take other remedial actions.

Our international sales and operations are subject to risks such as the imposition of government controls, new or changed export license requirements, restrictions on the export of critical technology, trade restrictions and changes in tariffs. If we are unable to obtain regulatory approvals on a timely basis, our business may be impacted. Certain of our products are subject to export controls under U.S. law including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions administered by the U.S. Treasury Department’s Office of Foreign Assets Control. The list of products and countries for which export approval is required, and the regulatory policies with respect thereto, may be revised from time to time and our inability to obtain required approvals under these regulations could materially and adversely affect our ability to make international sales. Additionally, we may be negatively affected if our third-party technology partners fail to obtain proper licenses and permits for the import and export of their products. We maintain trade control compliance requirements for our partners; however, we cannot guarantee that our partners will comply with these requirements. Violations of export control and international trade laws could result in penalties, fines,

We collect, transmit, store, and otherwise process (on our systems and on our third-party partners’ systems) our customers’ and our employees’ data that includes personal data subject to international and domestic privacy and data protection laws and regulations. For example, in Europe, we are subject to the European Union's General Data Protection Regulation, (EU) 2016/679 (“GDPR”) and laws implemented by EU member states. These laws and regulations impose restrictions on the collection and use of personal data that are generally more stringent, and impose more significant burdens on subject businesses, than current privacy standards in the United States. They establish several obligations that organizations must follow with respect to use of personal data, including consent requirements, data subject rights, and a prohibition on the transfer of personal data from the EU to other countries whose laws do not protect personal data to an adequate level of privacy or security. We continue to adapt our compliance with GDPR using standard contractual clauses and other methods; however, it is difficult to be certain that compliance has been achieved. We have expended significant resources to comply, but those methods may be subject to scrutiny by data protection authorities in EU member states. In addition, other jurisdictions such as Brazil, Canada, and the United Kingdom have enacted privacy and data protection laws and regulations that impose similar restrictions and obligations on products and services we sell.

In the United States, the federal and state governments have also enacted privacy and data protection laws and regulations that impact us, our customers, and partners. For example, in June 2018, California enacted the California Consumer Privacy Act (“CCPA”), which took effect January 1, 2020, and imposed many requirements on businesses that process the personal information of California residents. Many of the CCPA’s requirements are similar to those found in the GDPR, including requiring businesses to provide notice to data subjects regarding the information collected about them and how such information is used and shared, and providing data subjects the right to request access to such personal information and, in certain cases, request the erasure of such personal information. The CCPA also affords California residents the right to opt-out of “sales” of their personal information. The CCPA contains significant penalties for companies that violate its requirements. In January 2023, the California Privacy Rights Act of 2020 (“CPRA”) went into effect, and significantly expanded the CCPA to incorporate additional GDPR-like provisions including requiring that the use, retention, and sharing of personal information of California residents be reasonably necessary and proportionate to the purposes of collection or processing, granting additional protections for sensitive personal information, and requiring greater disclosures related to notice to residents regarding retention of information. The 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. The provisions in the CPRA may apply to some of our business activities. In addition, several other states have passed state privacy and data protection laws, and the U.S. Congress has been debating passing a federal privacy law.

Our activities as a SaaS solution provider mainly involve the processing of personal data on behalf of our customers. Our operations as a processor of our customers’ data relate to collecting, transmitting, storing, and processing a wide array of data, including personal data and biometric information of individuals worldwide. This data is handled both on our systems and those of our third-party partners, making us subject to a complex web of regulations across various jurisdictions. Adapting to these requirements may entail significant operational changes, including revising data processing and storage practices, enhancing data security measures, ensuring transparent communication with data subjects about their rights and our data handling practices, and it may impact our business activities, including our relationships with business partners and the marketing and distribution of our products.

We work to comply with all applicable international and domestic privacy and data protection laws and regulations; however, these laws and regulations vary greatly from jurisdiction to jurisdiction, change rapidly, and are subject to interpretation, all of which leads to uncertainty in their applicability. The costs of compliance with these laws and regulations that apply to us, and other burdens imposed by them, may limit our use of personal data and could have a material adverse impact on our results of operations. Compliance may require that we implement new processes and policies or change our existing processes and policies or features of our systems, which may require substantial financial and other resources, and which otherwise may be difficult to undertake. Any failure or perceived failure by us (or our third-party partners) to comply with these privacy and data protection laws and regulations, our processes and policies, contractual provisions, or an actual, perceived or suspected data privacy or information security incident could result in serious consequences for us. These consequences may include enforcement actions, audits, investigations, prosecutions, fines, penalties, debarment, litigation, claims for damages by customers and other affected individuals, reputational loss, and financial and business losses. .

We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act, and other similar laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business. We have operations, deal with and make sales to governmental or quasi-governmental customers in countries known to experience corruption, particularly certain countries in the Middle East, Africa, East Asia and South and Central America, and further expansion of our international selling efforts may involve additional regions. Our activities in these countries create the risk of unauthorized payments or offers of payments by one of our employees, consultants, sales agents or channel partners that could be in violation of various laws, including the FCPA and the U.K. Bribery Act, even though these parties are not always subject to our control. While we have implemented policies and training that mandate compliance with these anti-corruption laws, we cannot guarantee that these policies and procedures will prevent reckless or criminal acts committed by our employees, consultants, sales agents or channel partners. Violations of these laws may result in materially significant diversion of management’s resources as well as significant investigation and outside counsel expense. Violations of these laws may also result in severe criminal or civil sanctions, including suspension or debarment from government contracting, and we may be subject to other liabilities which could disrupt our business and result in a materially adverse effect on our reputation, business, results of operations, and financial condition.

Efforts to manage and mitigate climate change, pollution, biodiversity loss and other environmental impacts have produced significant regulatory and legislative efforts on a global basis, a trend we expect to continue. We expect that new laws and regulations in this area will result in added compliance requirements and increased costs for us and our suppliers, which could result in a significant negative impact on our ability to operate profitably. In particular, we expect to be subject to the EU Corporate Social Responsibility Directive and related EU laws beginning for our fiscal year ending December 31, 2025, and believe we will need to incur significant costs to comply with these requirements. In addition, many of our customers are also subject to significant new environmental and climate-related regulations or stakeholder pressure, which may affect their purchasing decisions in ways unfavorable to us. For instance, customers who purchase our Digipass authenticator devices sometimes inquire about the environmental impact of the devices, and customers who are especially focused on carbon footprint or waste minimization may choose software-based authentication methods rather than physical authentication devices. Finally, disclosures we may be required to make with respect to climate change, pollution or other environmental impacts may damage our reputation and have an adverse impact on our business.

We sell products and services to U.S. federal, state and local governments as well as foreign government entities. Risks associated with selling our products and services to government entities include compliance with complex procurement regulations and government-specific contractual requirements that may vary from our standard terms and conditions, longer sales cycles that are not easy to predict, and varying government funding and budgeting processes. Selling to these entities is expensive and time-consuming and often requires significant up-front resource effort and expense. We have processes in place to aid in compliance with applicable government contracting requirements; however, it is difficult to be certain that compliance has been achieved. Non-compliance with government entity requirements may result in significant material risk to the Company including debarment, reputational loss, and financial and business losses.

New laws and regulations and changes to current laws and regulations are always possible and, in some cases they may be introduced with little or no time to bring related products into compliance. Furthermore, our products are used by customers to assist with achieving compliance with laws and regulations that apply to their industry. Our failure to comply with laws and regulations and to adapt to our customers’ needs may prevent us from selling our products in a certain country or to a particular customer. In addition, these laws, regulations, and requirements may increase our cost of supplying the products by forcing us to redesign existing products, change manufacturing practices, or to use more expensive designs or components. In these cases, we may experience unexpected disruptions in our ability to supply customers with products, or we may incur unexpected costs or operational complexities to bring products into compliance, and we may experience lowered customer demand. This could have an adverse effect on our revenues, gross profit margins and results of operations and increase the volatility of our financial results.

We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. Our estimate as to how long we expect our cash and cash equivalents to be able to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. We intend to continue to make investments to support our business objectives and may require additional funds to achieve our objectives and respond to business challenges, including the need to develop new features or enhance our products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

General economic conditions both inside and outside the U.S., as well as the COVID-19 pandemic and geopolitical events, have resulted in significant volatility in global financial markets in recent years. If this volatility persists or becomes more pronounced, we could experience an inability to access additional capital, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. In addition, market volatility, high levels of inflation and interest rate fluctuations may increase our cost of financing or restrict our access to potential sources of future liquidity. Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business objectives and to respond to business challenges could be significantly impaired, and our business may be adversely affected.

In recent years, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies due to, among other factors, the actions of market participants or other actions outside of our control, including general market volatility caused by geopolitical events, developments in the COVID-19 pandemic, and general economic developments. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We have been the target of this type of litigation in the past, and may be targeted again the future, which could result in substantial costs and divert our management’s attention.

Although we strive to maintain constructive, ongoing communications with all of our stockholders, and welcome their views and opinions with the goal of enhancing value for all of our stockholders, our stockholders have in the past, and may from time to time in the future, engage in proxy solicitations, advance stockholder proposals or otherwise attempt to effect changes or acquire control of the Company. Campaigns by stockholders to effect changes at publicly traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming and could divert the attention of our Board of Directors and senior management from the management of our operations and the pursuit of our business strategy. We cannot predict whether additional proxy contests or related matters will occur in the future and the time and cost associated with such matters.

Risk Assessment and Safeguards. We conduct regular assessments of risks and vulnerabilities to the confidentiality, integrity, and availability of data in our systems, and we implement safeguards to reduce these risks and vulnerabilities to a reasonable and appropriate level. For internal information systems and assets, we conduct regular internal reviews, employ continuous security monitoring, and conduct periodic independent reviews of the key components of our security program. For customer-facing products and services, in addition to internal reviews and testing, we undergo external reviews and penetration testing using an independent third party provider. Our cloud platforms for SaaS solutions are audited annually by external independent auditors who review our platforms against the Service Organization Controls (“SOC”) 2 and ISO 27001, 27017 and 27018 standards, and some of our Digital Agreement products are available on a FedRAMP compliant platform. Some of our products are certified under specific technical standards or industry guidelines, such as FIPS 140-2 and FIDO. Our Digipass authentication fulfillment services are also audited annually by external independent auditors against the SOC 2 standard. We conduct self-assessment activities for those standards or regulations that are not covered by the external auditors, such as the General Data Protection Regulation in Europe. Additionally, we periodically engage third party consultants to assist with identifying, assessing, and/or managing cybersecurity threats.

Our Board is primarily responsible for overseeing the assessment and management of our risk exposure, including the balance between risk and opportunity and the totality of risk exposure across the organization. The Audit Committee oversees the company’s cybersecurity risks and exposures. We operate our security program under a global Information Security Charter approved by the Audit Committee, and the Audit Committee receives security updates and information about cybersecurity risks from the Chief Information Officer ("CIO") and Chief Information Security Officer ("CISO") at least quarterly. Our Board generally reviews the company’s overall risk management program at least annually, including the corporate insurance program which includes our cybersecurity insurance policy. We maintain an Information Security Steering Committee which is composed of key senior leaders who oversee the corporate information security program and our cybersecurity posture. Cybersecurity threats with the possibility of heightened criticality are escalated to a management team comprised of C-level executives and legal department representatives.

The CIO leads our global information technology organization and has nearly 30 years of information technology leadership experience, including acting as CIO at two cloud-based technology providers. The Senior Vice President of Research and Development has more than 25 years of information technology experience, including at another publicly traded technology company. Our CISO reports to the CIO and is responsible for leading our information security organization and overseeing our information security program. The CISO has over 20 years experience in information technology and security, including serving as Chief Information Security Officer at another cloud-based technology provider. Team members who support our cybersecurity risk management program have relevant education and experience in the fields of cybersecurity, risk management, security architecture, data protection, application security, audit, compliance, incident response, identity governance and governance of enterprise information technology.

We are currently in the midst of a business transformation. In December 2021, our Board approved a restructuring plan (the “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 and we announced a three-year strategic transformation plan that began on January 1, 2023 (the "2022 strategic plan"). In conjunction with the 2022 strategic plan and to enable a more efficient capital deployment model, effective with the quarter ended June 30, 2022, we began reporting under the following two lines of business, which are our reportable operating segments: Digital Agreements and Security Solutions.

•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.

Our effective tax rate reflects our global structure related to the ownership of our intellectual property (“IP”). The majority of our IP in our Security Solutions business is owned by two subsidiaries, one in the U.S. and one in Switzerland. The e-signature IP in our Digital Agreements business 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 either a percentage of revenue or on a cost plus basis, or both. 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 subsidiaries are relatively constant. These service provider companies tend to be in jurisdictions with higher effective tax rates. Fluctuations in earnings flow to the IP owners.

Management assesses the need for a valuation allowance on a regular basis, weighing all positive and negative evidence to determine whether a deferred tax asset will be fully or partially realized. In evaluating the realizability of deferred tax assets, significant pieces of negative evidence such as 3-year cumulative losses are considered. Management also reviewed reversal patterns of temporary differences to determine if the Company would have sufficient taxable income due to the reversal of temporary differences to support the realization of deferred tax assets. Management continues to maintain a valuation allowance against certain deferred tax assets in jurisdictions where assets are not more likely than not to be realized. For all other remaining deferred tax assets, management believes it is still more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

In our quarterly earnings press releases and conference calls, we discuss the below key metrics and financial measures that are not calculated according to generally accepted accounting principles (“GAAP”). These metrics and non-GAAP financial measures help us monitor and evaluate the effectiveness of our operations and evaluate period-to-period comparisons. Management believes that these metrics and non-GAAP financial measures help illustrate underlying trends in our business. We use these metrics and non-GAAP financial measures to establish budgets and operational goals (communicated internally and externally), manage our business and evaluate our performance. We also believe that both management and investors benefit from referring to these metrics and non-GAAP financial measures as supplemental information in assessing our performance and when planning, forecasting, and analyzing future periods. We believe these metrics and non-GAAP financial measures are useful to investors both because they allow for greater transparency with respect to financial measures used by management in their financial and operational decision-making and also because they are used by investors and the analyst community to help evaluate the health of our business.

We use annual recurring revenue, or ARR, as an approximate measure to monitor the revenue growth of our recurring business. ARR represents the annualized value of the active portion of SaaS, term-based license, and maintenance and support contracts at the end of the reporting period. For term-based license arrangements, the amount included in ARR is consistent with the amount that we invoice the customer annually for the term-based license transaction. A customer with a one-year term-based license contract will be invoiced for the total value of the contract at the beginning of the contractual term, while a customer with a multi-year term-based license contract will be invoiced for each annual period at the beginning of each year of the contract. For contracts that include annual values that increase over time because there are additional deliverables in subsequent periods, we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation. We do not include the future committed increases in the contract value as of the date of the ARR calculation.

Revenue from the sale of on-premises subscription revenue is recorded upon delivery which is the latter of when the customer receives the ability to access the software or when they are legally allowed to use the software. No significant obligations or contingencies exist with regard to delivery, customer acceptance or rights of return at the time revenue is recognized. We offer term licenses for on-premises subscription revenue ranging from one to five years in length. For term licenses, payments are either on installment or in advance. In limited circumstances, we integrate third-party software solutions into our software products. We have determined that, consistent with our conclusion under prior revenue recognition rules, generally we act as the principal with respect to the satisfaction of the related performance obligation and record the corresponding revenue on a gross basis from these transactions. For transactions in which we do not act as the principal, we recognize revenue on a net basis. The fees owed to the third parties are recognized as a component of cost of goods sold when the revenue is recognized.

Professional Services and other revenue: Professional services revenues are primarily comprised of implementing, automating and extending business processes, technology infrastructure, and software applications. Professional services revenues are recognized over time as services are rendered, usually over a period of time that is generally less than a few months. Most projects are performed on a time and materials basis while a portion of revenues is derived from projects performed on a fixed fee. For time and material contracts, revenues are generally recognized and invoiced by multiplying the number of hours expended in the performance of the contract by the contractual hourly rates. For fixed fee contracts, revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours to complete the services. Customer payments normally correspond with delivery. Professional services and other revenue includes perpetual licenses revenue, which was approximately 1% of total revenue for the year ended December 31, 2023 and approximately 2% of total revenue for the year ended December 31, 2022. Perpetual licenses grant the customer unlimited access to the software.

We enter into contracts to deliver a combination of hardware devices, software licenses, subscriptions, maintenance and support and, in some situations, professional services. The Company evaluates the nature of the goods or services promised in these arrangements to identify the distinct performance obligations. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment depending on the terms and conditions of the respective customer arrangement. When a hardware client device and licenses to server software are sold in a contract, they are treated as a single performance obligation because the software license is deemed to be a component of the hardware that is integral to the functionality of the hardware that is used by our customers for identity authentication. When a software client device is sold in a contract server software, the licenses are considered a single performance obligation to deliver the authentication solution to the customer. In either of these types of arrangements, maintenance and support and professional services are typically distinct separate performance obligations from the hardware or software solutions. Our contracts to deliver subscription services typically do not include multiple performance obligations; however, in certain limited cases customers may purchase professional services that are distinct performance obligations.

Foreign Currency Exchange Risk – In 2023, approximately 83% of our business was conducted outside the United States, primarily in Europe, Latin America and Asia Pacific. A significant portion of our business operations is transacted in foreign currencies. As a result, we have exposure to foreign exchange fluctuations. We are affected by both foreign currency translation and transaction adjustments. Translation adjustments result from the conversion of the foreign subsidiaries’ balance sheets and income statements to U.S. dollars at year-end exchange rates and weighted average exchange rates, respectively. Translation adjustments resulting from this process are recorded directly into stockholders’ equity. Transaction adjustments result from currency exchange movements when one of our companies transacts business in a currency that differs from its local currency. These adjustments are recorded as gains or losses in our consolidated statements of operations. Our business transactions are spread across numerous countries and currencies. As noted in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations above, we attempt to minimize the net impact of currency on operating earnings by denominating 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 do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our operating results.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audits of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

As discussed in Notes 2 and 4 to the consolidated financial statements, the Company enters into contracts to deliver a combination of hardware devices, software licenses, subscriptions, maintenance and support and, in some situations, professional services. The Company evaluates the nature of the goods and services promised in these arrangements to identify the distinct performance obligations. The Company recognized total revenue of $235 million, a portion of which related to contracts containing software licenses, for the year ended December 31, 2023. We identified the evaluation of the Company’s identification of performance obligations in contracts containing software licenses with unique terms and conditions as a critical audit matter. Specifically, complex auditor judgment was required to evaluate the Company's identification of performance obligations in such contracts, including for contracts with new customers or contracts that were amended with existing customers.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s revenue recognition process. This included controls related to the identification of performance obligations and evaluation of unique terms and conditions present in individual contracts. We tested a selection of contracts, including contracts with new customers and contracts that were amended with existing customers, by obtaining and reading the underlying contract and accounting analysis to evaluate the Company’s identification of performance obligations. Specifically, we evaluated the completeness and accuracy of the Company’s identification of terms and conditions that were unique to the selected contracts and the Company’s determination of the impact of those terms and conditions on revenue recognition.


	December 31,
	2023		2022
ASSETS
Current assets
Cash and cash equivalents	$	42,493	$	96,167
Restricted cash	1,037		1,208
Short-term investments	—		2,328
Accounts receivable, net of allowances of $1,536 in 2023 and $1,600 in 2022	64,387		65,132
Inventories, net	15,553		12,054
Prepaid expenses	6,575		6,222
Contract assets	5,139		4,520
Other current assets	11,159		10,757
Total current assets	146,343		198,387
Property and equipment, net	18,722		12,681
Operating lease right-of-use assets	6,171		8,022
Goodwill	93,684		90,514
Intangible assets, net of accumulated amortization	10,832		12,482
Deferred income taxes	1,721		1,901
Other assets	11,718		11,095
Total assets	$	289,191	$	335,082
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	17,452	$	17,357
Deferred revenue	69,331		64,637
Accrued wages and payroll taxes	14,335		18,345
Short-term income taxes payable	2,646		2,438
Other accrued expenses	10,684		7,664
Deferred compensation	382		373
Total current liabilities	114,830		110,814
Long-term deferred revenue	4,152		6,269
Long-term lease liabilities	6,824		8,442
Long-term income taxes payable	—		2,565
Deferred income taxes	1,067		1,197
Other long-term liabilities	3,177		2,484
Total liabilities	130,050		131,771
Stockholders' equity
Preferred stock: 500 shares authorized, none issued and outstanding at December 31, 2023 and 2022	—		—
Common stock: $0.001 par value per share, 75,000 shares authorized; 41,243 and 40,764 shares issued; 37,519 and 39,726 shares outstanding at December 31, 2023 and 2022	38		40
Additional paid-in capital	118,620		107,305
Treasury stock, at cost, 3,724 and 1,038 shares outstanding at December 31, 2023 and 2022, respectively	(47,377)		(18,222)
Retained earnings	98,939		128,738
Accumulated other comprehensive loss	(11,079)		(14,550)
Total stockholders' equity	159,141		203,311
Total liabilities and stockholders' equity	$	289,191	$	335,082


	Years Ended December 31,
	2023		2022		2021
Revenue
Product and license	$	130,848	$	121,426	$	120,358
Services and other	104,258		97,580		94,123
Total revenue	235,106		219,006		214,481

Cost of goods sold
Product and license	48,676		45,106		46,196
Services and other	28,715		25,330		25,350
Total cost of goods sold	77,391		70,436		71,546

Gross profit	157,715		148,570		142,935

Operating costs
Sales and marketing	70,235		60,949		62,730
Research and development	38,420		41,735		47,414
General and administrative	58,267		55,552		53,031

Restructuring and other related charges	17,311		13,310		—
Amortization of intangible assets	2,353		4,139		5,888
Total operating costs	186,586		175,685		169,063

Operating loss	(28,871)		(27,115)		(26,128)

Interest income (expense), net	2,090		595		(1)
Other income (expense), net	(532)		14,827		(14)

Loss before income taxes	(27,313)		(11,693)		(26,143)
Provision for income taxes	2,486		2,741		4,441

Net loss	$	(29,799)	$	(14,434)	$	(30,584)

Net loss per share
Basic	$	(0.74)	$	(0.36)	$	(0.77)
Diluted	$	(0.74)	$	(0.36)	$	(0.77)

Weighted average common shares outstanding
Basic	40,193		40,143		39,614
Diluted	40,193		40,143		39,614


	Common Stock			Treasury - Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders Equity
Description	Shares	Amount		Shares	Amount
Balance at December 31, 2020	40,103	$	40	250	$	(5,030)	$	98,819	$	173,731	$	(10,220)	$	257,340
Net loss	—	—		—	—		—		(30,584)		—		(30,584)
Foreign currency translation adjustment, net of tax	—	—		—	—		—		26		(2,997)		(2,971)
Share-based compensation	—	—		—	—		4,354		—		—		4,354
Vesting of restricted stock awards	385	—		—	—		—		—		—		—
Tax payments for stock issuances	(145)	—		—	—		(2,923)		—		—		(2,923)
Unrealized gain (loss) on available-for-sale securities	—	—		—	—		—		—		(21)		(21)
Share repurchases	(342)	—		342	(7,471)		—		—		—		(7,471)
Pension adjustment, net of tax	—	—		—	—		—		—		2,056		2,056
Balance at December 31, 2021	40,001	$	40	592	$	(12,501)	$	100,250	$	143,173	$	(11,182)	$	219,780
Net loss	—	—		—	—		—		(14,434)		—		(14,434)
Foreign currency translation adjustment, net of tax	—	—		—	—		—		(1)		(7,245)		(7,246)
Share-based compensation	—	—		—	—		8,642		—		—		8,642
Vesting of restricted stock awards	263	—		—	—		—		—		—		—
Tax payments for stock issuances	(92)	—		—	—		(1,587)		—		—		(1,587)
Unrealized gain (loss) on available-for-sale securities	—	—		—	—		—		—		18		18
Share repurchases	(446)	—		446	(5,721)		—		—		—		(5,721)
Pension adjustment, net of tax	—	—		—	—		—		—		3,859		3,859
Balance at December 31, 2022	39,726	$	40	1,038	$	(18,222)	$	107,305	$	128,738	$	(14,550)	$	203,311
Net loss	—	—		—	—		—		(29,799)		—		(29,799)
Foreign currency translation adjustment, net of tax	—	—		—	—		—		—		3,689		3,689
Share-based compensation	—	—		—	—		14,252		—		—		14,252
Vesting of restricted stock awards	741	—		—	—		—		—		—		—
Tax payments for stock issuances	(262)	—		—	—		(2,939)		—		—		(2,939)
Unrealized gain (loss) on available-for-sale securities	—	—		—	—		—		—		4		4
Share repurchases	(2,686)	(2)		2,686	(29,155)		2		—		—		(29,155)
Pension adjustment, net of tax	—	—		—	—		—		—		(222)		(222)
Balance at December 31, 2023	37,519	$	38	3,724	$	(47,377)	$	118,620	$	98,939	$	(11,079)	$	159,141


	Years Ended December 31,
	2023		2022		2021
Cash flows from operating activities:
Net loss from operations	$	(29,799)	$	(14,434)	$	(30,584)
Adjustments to reconcile net loss from operations to net cash used in operations:
Depreciation and amortization of intangible assets	6,479		7,066		8,926
Loss on disposal of asset	455		—		—

Write-off of property and equipment, net	2,728		3,828		—
Impairment of inventories, net	143		—		—
Gain on sale of equity-method investment	—		(14,810)		—
Deferred tax benefit	118		1,637		2,823
Stock-based compensation	14,252		8,642		4,354
Allowance for doubtful accounts	(65)		184		(2,705)
Changes in operating assets and liabilities:
Accounts receivable	1,571		(9,705)		2,047
Inventories, net	(3,275)		(2,168)		2,209
Contract assets	(574)		52		3,787
Accounts payable	(253)		9,261		2,716
Income taxes payable	(2,367)		(1,140)		(2,525)
Accrued expenses	(1,531)		2,197		3,089
Deferred compensation	9		(504)		(725)
Deferred revenue	2,015		8,173		9,713
Other assets and liabilities	(641)		(4,038)		(5,870)
Net cash used in operating activities	(10,735)		(5,759)		(2,745)

Cash flows from investing activities:
Purchase of short-term investments	—		(15,812)		(59,925)
Maturities of short-term investments	2,330		48,550		51,149
Additions to property and equipment	(12,484)		(4,996)		(2,169)
Additions to intangible assets	(59)		(29)		(35)
Cash paid for acquisition of business	(1,800)		—		—
Sale of equity-method investment	—		18,874		—
Net cash provided by (used in) investing activities	(12,013)		46,587		(10,980)

Cash flows from financing activities:
Repurchase of common stock	(29,155)		(5,721)		(7,471)
Tax payments for restricted stock issuances	(2,939)		(1,587)		(2,923)
Net cash used in financing activities	(32,094)		(7,308)		(10,394)

Effect of exchange rate changes on cash	997		(372)		(895)

Net (decrease) increase in cash	(53,845)		33,148		(25,014)
Cash, cash equivalents, and restricted cash, beginning of period	97,375		64,227		89,241
Cash, cash equivalents, and restricted cash, end of period	$	43,530	$	97,375	$	64,227

Supplemental cash flow disclosures:
Cash paid for income taxes	$	4,989	$	2,025	$	7,700
Cash paid for interest	$	—	$	—	$	—

Each of the undersigned, in his or her capacity as an officer or director, or both, as the case may be, of OneSpan Inc. does hereby appoint Victor Limongelli and Jorge Martell, and each of them severally, his or her true and lawful attorneys or attorney to execute in his or her name, place and stead, in his or her capacity as director or officer, or both, as the case may be, this Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and any and all amendments thereto and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission. Each of said attorneys shall have power to act hereunder with or without the other attorney and shall have full power and authority to do and perform in the name and on behalf of each of said directors or officers, or both, as the case may be, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as to which each of said officers or directors, or both, as the case may be, might or could do in person, hereby ratifying and confirming all that said attorneys or attorney may lawfully do or cause to be done by virtue hereof.


Delaware			36-4169320
(State or Other Jurisdiction of Incorporation or Organization)			(IRS Employer Identification No.)


		PAGE
Cautionary Note Regarding Forward-Looking Statements

PART I

Item 1.	Business	1

Item 1A.	Risk Factors	10

Item 1B.	Unresolved Staff Comments	30

I tem 1C.	Cybersecurity	30

Item 2.	Properties	31

Item 3.	Legal Proceedings	31

Item 4.	Mine Safety Disclosures	31

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32

Item 6.	[Reserved]	33

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 8.	Financial Statements and Supplementary Data	52

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	52

Item 9A.	Controls and Procedures	52

Item 9B.	Other Information	53

Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspection	53

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	53

Item 11.	Executive Compensation	53

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53

Item 13.	Certain Relationships and Related Transactions, and Director Independence	53

Item 14.	Principal Accounting Fees and Services	54

PART IV

Item 15.	Exhibits, Financial Statement Schedules	54

CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE		F-1


2023	High		Low
Fourth quarter	$	11.77	$	7.71
Third quarter	$	14.96	$	10.67
Second quarter	$	18.48	$	12.94
First quarter	$	18.81	$	11.55


2022	High		Low
Fourth quarter	$	14.12	$	8.36
Third quarter	$	12.40	$	8.58
Second quarter	$	15.87	$	11.01
First quarter	$	17.42	$	12.34


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
October 1, 2023 through October 31, 2023	—	$	—	—	40,761,555
November 1, 2023 through November 30, 2023	—	$	—	—	40,761,555
December 1, 2023 through December 31, 2023	2,380,834	$	10.50	2,380,834	15,762,798


Auditor Name: KPMG LLP			Auditor Location: Chicago, IL			Auditor Firm ID: 185


	12/31/2018		12/31/2019		12/31/2020		12/31/2021		12/31/2022		12/31/2023
OneSpan Inc.	$	100.00	$	132.20	$	159.69	$	130.73	$	86.40	$	82.76
NASDAQ Computer Index	$	100.00	$	150.34	$	225.48	$	310.84	$	199.64	$	332.34
Russell 2000 Index	$	100.00	$	125.52	$	150.58	$	172.90	$	137.56	$	160.85
3577 - Computer Peripheral Equipment, NEC	$	100.00	$	140.82	$	202.54	$	321.38	$	227.51	$	371.40


	Years Ended December 31,
(In thousands, except percentages)	2023			2022
Digital Agreements
Revenue	$	50,925		$	48,401
Gross profit	$	37,742		$	37,488
Gross margin	74		%	77		%
Operating (loss) income	$	(18,525)		$	5,348

Security Solutions
Revenue	$	184,181		$	170,605
Gross profit	$	119,974		$	111,082
Gross margin	65		%	65		%
Operating income	$	60,190		$	32,051

Total Company:
Revenue	$	235,106		$	219,006
Gross profit	$	157,715		$	148,570
Gross margin	67		%	68		%

Statements of operations reconciliation:
Segment operating income	$	41,665		$	37,399
Corporate operating expenses not allocated at the segment level	70,536			64,514
Operating loss	$	(28,871)		$	(27,115)
Interest income, net	2,090			595
Other income (expense), net	(532)			14,827
Loss before income taxes	$	(27,313)		$	(11,693)


	Years Ended December 31,
(In thousands)	2023		2022
Net loss	$	(29,799)	$	(14,434)
Interest income, net	(2,090)		(595)
Provision for income taxes	2,486		2,741
Depreciation and amortization of intangible assets (1)	6,479		7,066
Long-term incentive compensation (2)	14,562		8,813



Restructuring and other related charges	17,311		13,310
Other non-recurring items (3)	3,048		(10,505)
Adjusted EBITDA	$	11,997	$	6,396


Exhibit Number						Description

3.1						Certificate of Incorporation of the Registrant, as amended (Incorporated by Reference to the Registrant’s Form 10-Q filed August 4, 2022)

3.2						Amended and Restated Bylaws of Registrant, effective as of January 30, 2023. (Incorporated by Reference to the Registrant’s Form 8-K filed on February 1, 2023)


Exhibit Number						Description
4.1						Specimen of Registrant’s Common Stock Certificate. (Incorporated by Reference to the Registrant’s Registration Statement on Form S-4, as amended (Registration No. 333-35563), originally filed on September 12, 1997.)

4.2						Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934

10.1*						Interim CEO Employment Agreement dated January 4, 2024 between the Registrant and Victor Limongelli (Incorporated by Reference to the Registrant’s Form 8-K filed January 5, 2024)

10.2*						Employment Agreement between the Registrant and Jorge Martell (Incorporated by Reference to the Registrant’s Form 10-Q filed November 1, 2022)

10.3*						Employment Agreement between the Registrant and Lara Mataac (Incorporated by Reference to the Registrant’s Form 10-K filed February 28, 2023)

10.4*						2023 Management Incentive Plan

10.5*						OneSpan Inc. 2019 Omnibus Incentive Plan (Incorporated by Reference to Attachment A to the Registrant’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 26, 2019)

10.6*						Form of Director and Officer Indemnification Agreement (Incorporated by Reference to the Registrant’s Form 10-K filed February 28, 2023)

10.7*						Form of 2023 Performance-Based RSU Agreement under the Registrant’s 2019 Omnibus Incentive Plan (Incorporated by Reference to the Registrant’s Form 10-Q filed May 4, 2023)

10.8*						Form of 2023 Time-Based RSU Agreement (Executive) under the Registrant’s 2019 Omnibus Incentive Plan

10.9*						Form of 2023 Time-Based RSU Agreement (General) under the Registrant’s 2019 Omnibus Incentive Plan (Incorporated by Reference to the Registrant’s Form 10-Q filed May 4, 2023)

10.10*						Form of 2022 Performance-Based RSU Agreement under the Registrant’s 2019 Omnibus Incentive Plan (Incorporated by Reference to the Registrant's Form 10-Q filed November 1, 2022)

10.11*						Form of 2022 Time-Based RSU Agreement (Executive) under the Registrant’s 2019 Omnibus Incentive Plan (Incorporated by Reference to the Registrant's Form 10-Q filed November 1, 2022)

10.12*						Form of 2022 Time-Based RSU Agreement (General) under the Registrant’s 2019 Omnibus Incentive Plan (Incorporated by Reference to the Registrant's Form 10-Q filed November 1, 2022)

10.13*						Form of Time-Based Deferred RSU Agreement for Non-Employee Directors of the Registrant (Incorporated by Reference to the Registrant’s Form 10-K filed March 16, 2020)

10.14						Cooperation Agreement dated May 28, 2021, by and among the Registrant, Legion Partners, Christopher S. Kiper and Raymond T. White (Incorporated by Reference to the Registrant's Form 8-K filed May 28, 2021)


Exhibit Number						Description
10.15*						Amended and Restated Employment Agreement between the Registrant and Matthew Moynahan (Incorporated by Reference to the Registrant’s Form 8-K filed January 5, 2024)

10.16*						Special PSU Agreement dated March 11, 2023 between the Registrant and Matthew Moynahan (Incorporated by Reference to the Registrant’s Form 10-Q filed May 4, 2023)

10.17*						Time-Based RSU Agreement dated February 17, 2022 between the Registrant and Matthew Moynahan (Incorporated by Reference to the Registrant's Form 10-Q filed November 1, 2022)

10.18*						Amended and Restated PSU Agreement dated February 26, 2023 between the Registrant and Matthew Moynahan

10.19*						One-Time Special Grant Award Agreement dated November 29, 2021 for Time-Based Restricted Stock Units between the Registrant and Matthew Moynahan under the Registrant’s 2019 Omnibus Incentive Plan (Incorporated by Reference to the Registrant’s Form 10-K filed February 28, 2023)

10.20*						One-Time Special Grant Award Agreement dated November 29, 2021 for Performance-Based Restricted Stock Units between the Registrant and Matthew Moynahan under the Registrant’s 2019 Omnibus Incentive Plan (Incorporated by Reference to the Registrant’s Form 10-K filed February 28, 2023)

10.21*						Separation Agreement dated February 7 , 2024 between the Registrant and Matthew Moynahan

10.22*						Separation Agreement dated December 1, 2023 between the Registrant and John Bosshart

21						Subsidiaries of Registrant

23						Consent of KPMG LLP

31.1						Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated March 6, 2024

31.2						Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated March 6, 2024

32.1						Section 1350 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated March 6, 2024

32.2						Section 1350 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated March 6, 2024

97						Dodd-Frank Compensation Recovery Policy

101.INS						XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document


Exhibit Number						Description

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

104						Cover page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibit 101)


Financial Statements

Report of Independent Registered Public Accounting Firm			F-2

Consolidated Balance Sheets as of December 31, 2023 and 2022			F-4

Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021			F-5

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2022 and 2021			F-6

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021			F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021			F-8

Notes to Consolidated Financial Statements			F-9

Financial Statement Schedule

The following consolidated financial statement schedule is included herein:

Schedule II – Valuation and Qualifying Accounts			F-40


(In thousands)	2024		2025		2026		Beyond 2026		Total
Future revenue related to current unsatisfied performance obligations	$	49,644	$	23,894	$	14,138	$	4,761	$	92,437


	Years Ended December 31,
(In thousands, except percentages)	2023			2022			$ Change		% Change
Revenue
EMEA	$	111,568		$	100,298		$	11,270	11	%
Americas	80,057			77,740			2,317		3	%
APAC	43,481			40,968			2,513		6	%
Total revenue	$	235,106		$	219,006		$	16,100	7	%

% of Total Revenue
EMEA	47		%	46		%
Americas	34		%	35		%
APAC	19		%	19		%


(In thousands)	As of Date of Opening Balance Sheet
Net assets acquired:
Acquired technology	$	1,447
Accrued wages and payroll taxes	(47)
Goodwill	600
Total net assets acquired	$	2,000

Consideration	$	2,000


2024	$	2,839
2025	2,806
2026	2,398
2027	2,124
2028	50
Thereafter	217
Subject to amortization	10,434
Trademarks	398
Total intangible assets	$	10,832


		December 31,
(In thousands)	Useful Life (in years)	2023		2022
Office equipment and software	3-5	$	8,574	$	14,451
Leasehold improvements	10	7,459		9,927
Furniture and fixtures	5	3,658		4,260
Capitalized software	3	12,560		4,007
Total		32,251		32,645
Accumulated depreciation		(13,529)		(19,964)
Property and equipment, net		$	18,722	$	12,681


			Fair Value Measurement at Reporting Date Using
(In thousands)	December 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:



Money Market Funds	$	8,496	$	8,496	$	—	$	—


			Fair Value Measurement at Reporting Date Using
(In thousands)	December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:

Corporate Notes / Bonds	$	2,328	$	—	$	2,328	$	—
Commercial Paper	$	6,743	$	—	$	6,743	$	—
Money Market Funds	$	48,623	$	48,623	$	—	$	—


(In thousands)
Balance at December 31, 2021	$	1,419
Provision	517
Write-offs	(334)
Net foreign currency translation	(2)
Balance at December 31, 2022	1,600
Provision	286
Write-offs	(350)
Net foreign currency translation	—
Balance at December 31, 2023	$	1,536



(In thousands)
2024	$	2,378
2025	1,608
2026	1,515
2027	1,327
2028	1,218
Later years	1,369
Less imputed interest	(1,278)
Accrued lease termination fees	714
Total lease liabilities	$	8,851


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2023
Total revenues	$	57,607	$	55,733	$	58,838	$	62,928
Gross profit	$	39,286	$	34,294	$	40,669	$	43,466
Operating costs	$	47,416	$	52,058	$	45,463	$	41,649
Operating income (loss)	$	(8,130)	$	(17,764)	$	(4,794)	$	1,817
Provision (benefit) for income taxes	$	689	$	601	$	279	$	917
Net income (loss)	$	(8,356)	$	(17,751)	$	(4,133)	$	441
Net income/(loss) per share:
Basic	$	(0.21)	$	(0.44)	$	(0.10)	$	0.01
Diluted	$	(0.21)	$	(0.44)	$	(0.10)	$	0.01

2022
Total revenues	$	52,447	$	52,790	$	57,147	$	56,622
Gross profit	$	36,678	$	35,506	$	38,431	$	37,955
Operating costs	$	45,921	$	43,744	$	44,056	$	41,964
Operating income (loss)	$	(9,243)	$	(8,238)	$	(5,625)	$	(4,009)
Provision (benefit) for income taxes	$	1,173	$	472	$	600	$	496
Net income (loss)	$	5,214	$	(9,350)	$	(7,201)	$	(3,097)
Net income/(loss) per share:
Basic	$	0.13	$	(0.23)	$	(0.18)	$	(0.08)
Diluted	$	0.13	$	(0.23)	$	(0.18)	$	(0.08)


(In thousands)	Carryforward		Expiration
NOL Carryforward
Canada	$	44,461	2032-2043
United States	27,512		None
United Kingdom	10,543		None
Switzerland	20,127		2028-2029
Other foreign	5,779		None
Canada province	43,352		2032-2043
U.S. states	30,526		2025-2043
	$	182,300
Other Carryforwards
United States credit	$	1,277	2031-2033
Canada	44,357		None
Canada province	58,488		None
Capital loss	382		None
Canada credits	8,819		2033-2043
Canada province credits	3,677		2036-2043
	$	117,000

	$	299,300


Australia			2015
Austria			2017
Belgium			2019
Canada			2019
Netherlands			2018
Singapore			2018
Switzerland			2019
United Kingdom			2021
United States			2017


(Sharecounts in thousands)	Shares	Weighted- average remaining term (years)	Weighted- average grant date fair value
Unearned, January 1, 2023	1,733	2.41	$	13.08
Shares vested	(641)		13.49
Shares awarded	1,097		13.14
Shares forfeited	(376)		13.04
Unearned, December 31, 2023	1,813	1.85	$	12.98


(Sharecounts in thousands)	Total Unvested Shares	Weighted- average remaining term (years)	Weighted- average grant date fair value
Unearned, January 1, 2023	316	1.38	$	12.96
Shares vested	(95)		13.09
Shares awarded	1,003		14.25
Shares forfeited	(258)		14.09
Unearned, December 31, 2023	966	0.84	$	13.99


	Years Ended December 31,
(In thousands, except per share data)	2023		2022		2021
Net loss	$	(29,799)	$	(14,434)	$	(30,584)
Weighted average common shares outstanding:
Basic	40,193		40,143		39,614
Incremental shares with dilutive effect:
Restricted stock awards	—		—		—
Diluted	40,193		40,143		39,614

Net loss per share:
Basic	$	(0.74)	$	(0.36)	$	(0.77)
Diluted	$	(0.74)	$	(0.36)	$	(0.77)


(In thousands)
	Europe, Middle East, Africa (EMEA)		Americas		Asia Pacific		Total
2023
Revenue	$	111,568	$	80,057	$	43,481	$	235,106
Gross profit	$	74,843	$	53,704	$	29,168	$	157,715
Long-lived assets	$	5,783	$	18,795	$	315	$	24,893

2022
Revenue	$	100,298	$	77,740	$	40,968	$	219,006
Gross profit	$	68,040	$	52,738	$	27,792	$	148,570
Long-lived assets	$	4,856	$	15,270	$	577	$	20,703

2021
Revenue	$	104,878	$	68,646	$	40,957	$	214,481
Gross profit	$	69,893	$	45,747	$	27,295	$	142,935
Long-lived assets	$	5,978	$	13,634	$	342	$	19,954


(In thousands)	Employee Costs		Real Estate Rationalization		Total
Balance as of December 31, 2021	$	—	$	—	$	—
Additions	9,482		—		9,482
Payments	(5,886)		—		(5,886)
Balance as of December 31, 2022	3,596		—		3,596
Additions	11,703		1,885		13,588
Payments	(12,169)		—		(12,169)
Balance as of December 31, 2023	$	3,130	$	1,885	$	5,015


Years Ended December 31,	Beginning Balance		Provision for Bad Debts	Chargeoffs	Foreign Currency Translation	Ending Balance
2023	$	1,600	286	(350)	—	$	1,536
2022	$	1,419	517	(334)	(2)	$	1,600
2021	$	4,135	(16)	(2,689)	(11)	$	1,419


			OneSpan Inc.

			/s/ Victor Limongelli
			Victor Limongelli
			Interim Chief Executive Officer
			(Principal Executive Officer)


	Achievement Level against Target	Payout Level	Weight	Weighted Factor (Payout Level*Weight)
Company Performance Factors
Revenue	97.9%	50%	70%	35%
Adjusted EBITDA	100%	100%	20%	20%
Individual Performance Factor	100%	100%	10%	10%
Combined Performance Factor (sum of the three weighted factors)				65%


Grantee	# of RSUs	Vesting Start Date	Vesting Schedule
		Feb 23, 2023	•33.32% of the Restricted Stock Units will vest on the first annual anniversary date of the Vesting Start Date; •An additional 16.67% of the Restricted Stock Units will vest on the eighteen month anniversary date of the Vesting Start Date; •An additional 16.67% of the Restricted Stock Units will vest on the second annual anniversary date of the Vesting Start Date; •An additional 16.67% of the Restricted Stock Units will vest on the thirty month anniversary date of the Vesting Start Date; and •The final 16.67% of the Restricted Stock Units will vest on the third annual anniversary date of the Vesting Start Date.


Metric	Weighting	Awarded RSUs
2022 Average of Subscription plus Term License Revenue	75%	75,243
2022 Adjusted EBITDA	25%	25,079
Total	100%	100,322