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Summary of Significant Accounting Policies (Policies) | 9 Months Ended
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Sep. 30, 2022
Summary of Significant Accounting Policies |
Description of the Company | Description of the Company OneSpan Inc. designs, develops, and markets solutions that enable secure, compliant, and easy digital customer agreements and transaction experiences. The Company is a global leader in providing high-assurance identity and authentication security as well as simplified e-signature workflows. The Company’s solutions enable trust that ensures the integrity of the people and artifacts associated with digital agreements and transactions across banking, financial services, healthcare, and professional services. The Company’s solution portfolio includes a broad set of offerings across several categories, including identity verification, authentication, transaction signing, mobile security, electronic signature, and secure video collaboration for virtual interactions and transactions. OneSpan has operations in Austria, Australia, Belgium, Canada, China, France, Japan, The Netherlands, Singapore, Switzerland, the United Arab Emirates, the United Kingdom (U.K), and the United States (U.S.). Transformation Plan In May 2022, the Company announced a three-year strategic transformation plan that will enable it to build on its strong solution portfolio and market position, enhance its enterprise go-to-market strategy, accelerate revenue growth, and drive efficiencies to support margin expansion and increased profitability. In conjunction with the strategic transformation plan and to enable a more efficient capital deployment model, effective with the quarter ended June 30, 2022, the Company began reporting under the following two lines of business, which are its reportable operating segments: Digital Agreements and Security Solutions. The Company plans to manage Digital Agreements for accelerated growth and market share gains and Security Solutions for cash flow given its more modest growth profile. For further information regarding the Company’s reportable segments, see Note 16 – Segment Information. While the Company’s consolidated results will not be impacted, the Company has recast its segment information during 2022 for comparable presentation.
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of OneSpan and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the results of the interim periods presented. All intercompany accounts and transactions have been eliminated. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Estimates and Assumptions | Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The financial position and results of the operations of the majority of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. Accordingly, assets and liabilities are translated into U.S. Dollars using current exchange rates as of the balance sheet date. Revenue and expenses are translated at average exchange rates prevailing during the year. Translation adjustments arising from differences in exchange rates are charged or credited to other comprehensive income (loss). Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other income (expense), net. Foreign exchange transaction losses aggregated $1.3 and $2.6 million for the three and nine months ended September 30, 2022, respectively. Foreign exchange transaction losses aggregated less than $0.1 million and $0.2 million for the three and nine months ended September 30, 2021, respectively. The financial position and results of operations in Singapore, Switzerland, and Canada are measured in U.S. Dollars. For these subsidiaries, gains and losses that result from foreign currency transactions are included in the consolidated statements of operations in “Other expense (income), net”.
Revision of Previously Issued Financial Statements | Revision of Previously Issued Financial Statements As disclosed previously in the Company’s Form 10-K for the year ended December 31, 2021, the Company revised amounts reported in previously issued financial statements to correct prior period immaterial errors. The errors relate to certain costs directly related to the production and distribution of hardware products. The costs were not properly categorized in prior periods, which led to an understatement of product and license cost of goods sold and an overstatement of sales and marketing expense. There was no impact to previously reported revenue or net income. The Company evaluated the aggregate effects of the errors on its previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in its Annual Reports on Form 10-K for the years ended December 31, 2021 and 2020, or for any quarterly periods included therein or through its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021. The following table presents the effects of the aforementioned revision on the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021. Revised Condensed Consolidated Statements of Operations Amounts: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30, 2021 | ​ | Nine Months Ended September 30, 2021
(In thousands) |  | As Previously Reported |  | Adjustments | ​ | As Revised |  | As Previously Reported |  | Adjustments | ​ | As Revised
Cost of goods sold | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Product and license | ​ | $ | 8,477 | ​ | $ | 1,025 | ​ | $ | 9,502 | ​ | $ | 27,607 | ​ | $ | 3,212 | ​ | $ | 30,819
Total cost of goods sold | ​ | $ | 14,856 | ​ | $ | 1,025 | ​ | $ | 15,881 | ​ | $ | 46,648 | ​ | $ | 3,212 | ​ | $ | 49,860
​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​
Gross profit | ​ | $ | 37,420 | ​ | $ | (1,025) | ​ | $ | 36,395 | ​ | $ | 108,680 | ​ | $ | (3,212) | ​ | $ | 105,468
​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​
Operating costs | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sales and marketing | ​ | $ | 15,474 | ​ | $ | (1,025) | ​ | $ | 14,449 | ​ | $ | 49,850 | ​ | $ | (3,212) | ​ | $ | 46,638
Total operating costs | ​ | $ | 39,436 | ​ | $ | (1,025) | ​ | $ | 38,411 | ​ | $ | 128,849 | ​ | $ | (3,212) | ​ | $ | 125,637
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

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