XML 24 R10.htm IDEA: XBRL DOCUMENT v3.23.1
Segment Information
 3 Months Ended
Mar. 31, 2023
Segment Reporting [Abstract]  
Segment Information Segment Information
Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker (CODM), in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.
•Digital Agreements. Digital Agreements consists of solutions that enable our clients to secure and automate business processes associated with their digital agreement and customer transaction lifecycles that require consent, non-repudiation and compliance. These solutions, which are largely cloud-based, include our OneSpan Sign e-signature solution and our OneSpan Notary and Virtual Room solutions. As our transformation plan progresses, we expect to include other cloud-based security modules associated with the secure transaction lifecycle of identity verification, authentication, virtual interactions and transactions, and secure digital storage in the Digital Agreements segment. This segment also includes costs attributable to our transaction cloud platform.
•Security Solutions. Security Solutions consists of our broad portfolio of software products and/or software development kits (SDKs) that are used to build applications designed to defend against attacks on digital transactions across online environments, devices and applications. These solutions, which are largely on-premises software products, include identity verification, multi-factor authentication and transaction signing,
such as mobile application security, mobile software tokens, and Digipass authenticators that are not cloud-connected devices.
Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue, sales and marketing, research and development expenses, amortization expense, and restructuring and other related charges that are incurred directly by a segment. The Company recorded $0.6 million of amortization expense in Digital Agreements operating income during the three months ended March 31, 2023 and 2022. The Company recorded $0 and $0.8 million of amortization expense in Security Solutions operating income during the three months ended March 31, 2023 and 2022, respectively. Unallocated corporate costs include costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment.

    Prior to 2023, the company allocated certain cost of goods sold and operating expenses to its two reportable segments using a direct cost allocation and an allocation based on revenue split between the segments. Beginning in the first quarter of 2023, and as a result of the ongoing strategic transformation, the Company refined its allocation methodology to better align internal and external costs more directly to where the employee efforts are being spent on each segment moving forward. As a result of this change, there was an increase in cost of goods sold and operating expenses being allocated to the Digital Agreements segment, which better aligns with the investments the Company is making to grow that segment as compared to its Security Solutions segment.
The tables below set forth information about the Company’s reportable operating segments for the three months ended March 31, 2023 and 2022, along with the items necessary to reconcile the segment information to the totals reported in the accompanying condensed consolidated financial statements.
Three Months Ended
March 31,
(In thousands, except percentages)20232022
Digital Agreements
Revenue$11,552 $13,301 
Gross profit$8,448 $10,286 
Gross margin73 %77 %
Operating income (loss)$(6,033)$1,125 
Security Solutions
Revenue$46,055 $39,146 
Gross profit$30,838 $26,392 
Gross margin67 %67 %
Operating income $15,631 $7,689 
Total Company:
Revenue$57,607 $52,447 
Gross profit$39,286 $36,678 
Gross margin68 %70 %
Statements of Operations reconciliation:
Segment operating income$9,598 $8,814 
Corporate operating expenses not allocated at the segment level(17,728)(18,057)
Operating loss$(8,130)$(9,243)
Interest income (expense), net503 (17)
Other (expense) income, net(40)15,647 
Income (loss) before income taxes$(7,667)$6,387 
The following tables illustrate the disaggregation of revenues by category and services, including a reconciliation of the disaggregated revenues to revenues from the Company’s two reportable operating segments for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022
Digital AgreementsSecurity SolutionsDigital AgreementsSecurity Solutions
(In thousands)
Subscription $10,348 $19,608 $11,671 $11,598 
Maintenance and support996 10,165 1,352 10,594 
Professional services and other (1)208 1,416 278 1,603 
Hardware products— 14,866 — 15,351 
Total Revenue$11,552 $46,055 $13,301 $39,146 
(1) Professional services and other includes perpetual software licenses revenue, which was less than 2% of total
revenue for the three months ended March 31, 2023 and 2022.
The Company allocates goodwill by reporting unit, in accordance with Accounting Standards Codification (ASC) 350 – Goodwill and Other. Asset information by segment is not reported to or reviewed by the CODM to allocate resources, and therefore, the Company has not disclosed asset information for the segments.