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Segment Information | 9 Months Ended
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Sep. 30, 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 OneSpan Sign e-signature and OneSpan Notary. This segment also includes costs attributable to our transaction cloud platform. •Security Solutions. Security Solutions consists of our broad portfolio of software products, software development kits (SDKs) and Digipass authenticator devices that are used to build applications designed to defend against attacks on digital transactions across online environments, devices, and applications. The software products and SDKs included in the Security Solutions segment are largely on-premises software products and include identity verification, multi-factor authentication and transaction signing solutions, such as mobile application security and mobile software tokens. 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. 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 operating segments using a direct cost allocation and an allocation based on revenue split between the segments. During the three months ended March 31, 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. Effective with the three months ended September 30, 2022, the Company began allocating amortization of intangible assets expense to operating income (loss) for each of its reportable operating segments in order to better align the expense with the operations of each segment. The Company has updated segment operating income (loss) for the three and nine months ended September 30, 2022 to reflect the change in presentation. The allocation change had no impact on the Company's condensed consolidated financial statements. The tables below set forth information about the Company’s reportable operating segments for the three and nine months ended September 30, 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 September 30, |  | Nine Months Ended September 30,
(In thousands, except percentages) | 2023 |  | 2022 |  | 2023 |  | 2022
Digital Agreements |  |  |  |  |  |  |
Revenue | $ | 13,012 |  |  | $ | 12,200 |  |  | $ | 36,426 |  |  | $ | 35,955 |
Gross profit | $ | 9,808 |  |  | $ | 9,736 |  |  | $ | 26,839 |  |  | $ | 27,669 |
Gross margin | 75 | % |  | 80 | % |  | 74 | % |  | 77 | %
Operating income (loss) (1) | $ | (4,666) |  |  | $ | 2,160 |  |  | $ | (17,820) |  |  | $ | 2,823 |
Security Solutions |  |  |  |  |  |  |
Revenue | $ | 45,826 |  |  | $ | 44,947 |  |  | $ | 135,752 |  |  | $ | 126,429 |
Gross profit | $ | 30,861 |  |  | $ | 28,695 |  |  | $ | 87,410 |  |  | $ | 82,946 |
Gross margin | 67 | % |  | 64 | % |  | 64 | % |  | 66 | %
Operating income (2) | $ | 15,673 |  |  | $ | 5,711 |  |  | $ | 39,827 |  |  | $ | 21,399 |
Total Company: |  |  |  |  |  |  |
Revenue | $ | 58,838 |  |  | $ | 57,147 |  |  | $ | 172,178 |  |  | $ | 162,384 |
Gross profit | $ | 40,669 |  |  | $ | 38,431 |  |  | $ | 114,249 |  |  | $ | 110,615 |
Gross margin | 69 | % |  | 67 | % |  | 66 | % |  | 68 | %
Statements of Operations reconciliation: |  |  |  |  |  |  |
Segment operating income | $ | 11,007 |  |  | $ | 7,871 |  |  | $ | 22,007 |  |  | $ | 24,222 |
Corporate operating expenses not allocated at the segment level | 15,801 |  |  | 13,496 |  |  | 52,695 |  |  | 47,328 |
Operating loss | $ | (4,794) |  |  | $ | (5,625) |  |  | $ | (30,688) |  |  | $ | (23,106) |
Interest income, net | 587 |  |  | 179 |  |  | 1,675 |  |  | 197 |
Other income (expense), net | 353 |  |  | (1,155) |  |  | 342 |  |  | 13,817 |
Loss before income taxes | $ | (3,854) |  |  | $ | (6,601) |  |  | $ | (28,671) |  |  | $ | (9,092) |
(1) Digital Agreements operating income includ es $0.6 million of amortization of intangible assets expense for the three months ended both September 30, 2023 and 2022 and $1.7 million of amortization of intangible assets expense for the nine months ended both September 30, 2023 and 2022. (2) Security Solutions operating income includes $0 and $0.4 million of amortization of intangible assets expense for the three months ended September 30, 2023 and 2022, respectively, and $0 and $1.8 million of amortization of intangible assets expense for the nine months ended September 30, 2023 and 2022, respectively. 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 and nine months ended September 30, 2023 and 2022:
| Three Months Ended September 30,
| 2023 |  | 2022
| Digital Agreements |  | Security Solutions |  | Digital Agreements |  | Security Solutions
(In thousands) |  |  |  |  |  |  |
Subscription | $ | 11,807 |  |  | $ | 14,378 |  |  | $ | 10,321 |  |  | $ | 11,941 |
Maintenance and support | 995 |  |  | 11,276 |  |  | 1,693 |  |  | 11,158 |
Professional services and other (1) | 210 |  |  | 1,333 |  |  | 186 |  |  | 2,034 |
Hardware products | — |  |  | 18,839 |  |  | — |  |  | 19,814 |
Total Revenue | $ | 13,012 |  |  | $ | 45,826 |  |  | $ | 12,200 |  |  | $ | 44,947 |
| Nine Months Ended September 30,
| 2023 |  | 2022
| Digital Agreements |  | Security Solutions |  | Digital Agreements |  | Security Solutions
(In thousands) |  |  |  |  |  |  |
Subscription | $ | 32,641 |  |  | $ | 46,485 |  |  | $ | 30,728 |  |  | $ | 34,632 |
Maintenance and support | 3,121 |  |  | 31,914 |  |  | 4,453 |  |  | 32,522 |
Professional services and other (1) | 664 |  |  | 4,002 |  |  | 774 |  |  | 5,327 |
Hardware products | — |  |  | 53,351 |  |  | — |  |  | 53,948 |
Total Revenue | $ | 36,426 |  |  | $ | 135,752 |  |  | $ | 35,955 |  |  | $ | 126,429 |
(1) Professional services and other includes perpetual software licenses revenue, which was less than 2% of total revenue for the three and nine months ended September 30, 2023, respectively, and less than 3% of total revenue for the three and nine months ended September 30, 2022, respectively. 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.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 22 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-22 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-15 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 31 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-31 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 42 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-42 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 40 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-40 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//280/tableOfContent Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 26 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-26 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 34 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-34 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 41 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-41 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 + Details
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