OneSpan Inc.

Previous wording

This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of OneSpan for the three- and six-month periods ended June 30, 2025 and 2024 as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”).

Current wording

This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of OneSpan for the three- and nine-month periods ended September 30, 2025 and 2024 as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “Form 10-K”).

Previous wording

We seek to drive profitable, efficient growth in both operating segments, with a particular emphasis on subscription revenue growth. Both operating segments were profitable for the three and six months ended June 30, 2025, and Security Solutions and Digital Agreements subscription revenue grew 39% and 5% as compared to the three months ended June 30, 2024, respectively, and 19% and 9% as compared to the six months ended June 30, 2024, respectively.

Current wording

We seek to drive profitable, efficient growth in both operating segments, with a particular emphasis on subscription revenue growth. Both operating segments were profitable for the three and nine months ended September 30, 2025, and Security Solutions and Digital Agreements subscription revenue grew 13% and 11% as compared to the three months ended September 30, 2024, respectively, and 17% and 10% as compared to the nine months ended September 30, 2024, respectively.

Previous wording

As discussed in greater detail below in "Results of Operations", the following factors and trends had a significant impact on our financial results for the three and six months ended June 30, 2025:

Current wording

As discussed in greater detail below in "Results of Operations", the following factors and trends had a significant impact on our financial results for the three and nine months ended September 30, 2025:

Previous wording

"Mobile-first" trend. Security Solutions total revenue decreased by 3% and 4% during the three and six months ended June 30, 2025, respectively, as compared to the equivalent periods in 2024. A key factor contributing to this decrease was a reduction in hardware revenues driven by certain customers adopting a “mobile first” approach, which prioritizes using mobile authentication solutions to enhance user experience over traditional hardware authentication devices, particularly for consumer banking. This trend has generally resulted in a reduction of sales volumes of our Digipass hardware authenticator devices, as banks adopt a higher mix of software authentication licenses delivered through software applications on mobile devices.

Current wording

"Mobile-first" trend. Security Solutions total revenue decreased by 1% and 3% during the three and nine months ended September 30, 2025, respectively, as compared to the equivalent periods in 2024. A key factor contributing to this decrease was a reduction in hardware revenues driven by certain customers adopting a “mobile first” approach, which prioritizes using mobile authentication solutions to enhance user experience over traditional hardware authentication devices, particularly for consumer banking. This trend has generally resulted in a reduction of sales volumes of our Digipass hardware authenticator devices, as banks adopt a higher mix of software authentication licenses delivered through software applications on mobile devices.

Previous wording

Increase in multi-year on-premises term subscription contracts. Revenue for the Security Solutions segment for the three and six months ended June 30, 2025 was positively impacted by a shift of certain customers from single-year to multi-year on-premises term subscription contracts. Although on-premises term subscription contracts may have a term of up to five years, we generally recognize the license revenue upfront after the contract becomes effective. This can result in a positive year-over-year revenue impact as customers shift from single-year to multi-year contracts.

Current wording

Increase in multi-year on-premise term subscription contracts. Revenue for the Security Solutions segment for the three and nine months ended September 30, 2025 was positively impacted by a shift of certain customers from single-year to multi-year on-premises term subscription contracts. Although on-premises term subscription contracts may have a term of up to five years, we generally recognize the license revenue upfront after the contract becomes effective. This can result in a positive year-over-year revenue impact as customers shift from single-year to multi-year contracts.

Previous wording

Foreign exchange rate impact for three months ended June 30, 2025. Changes in foreign exchange rates favorably impacted both total revenue and Security Solutions revenue by approximately $1.2 million for the three months ended June 30, 2025 as compared to the equivalent period in 2024. The impact of changes in foreign exchange rates for the six months ended June 30, 2025, as well as the impact of these changes on the Digital Agreements segment, were immaterial.

Current wording

Foreign exchange rate impact for the three months ended September 30, 2025. Changes in foreign exchange rates favorably impacted both total revenue and Security Solutions revenue by approximately $1.3 million for the three months ended September 30, 2025 as compared to the equivalent period in 2024. The impact of changes in foreign exchange rates for the nine months ended September 30, 2025, as well as the impact of these changes on the Digital Agreements segment, were immaterial.

Previous wording

2024 write-off. In the three and six months ended June 30, 2024, we wrote off costs associated with acquired technology and capitalized internally-developed software costs due to our decision to discontinue investment in blockchain technology. This write-off significantly impacted various year-over-year comparisons, as discussed below.

Current wording

2024 write-off. In the three and nine months ended September 30, 2024, we wrote off costs associated with acquired technology and capitalized internally-developed software costs due to our decision to discontinue investment in blockchain technology. This write-off significantly impacted various year-over-year comparisons, as discussed below. The write-offs for 2024 materially impacted operations compared to the immaterial write-off recorded in 2025.

Previous wording

On August 3, 2023, our Board of Directors approved further cost reduction actions (the "2023 Actions"). In connection with the 2023 Actions, we have incurred and expect to continue to incur restructuring charges, most of which relate to employee transition and severance payments and employee benefits, with a significantly smaller amount of charges related to vendor contract termination and rationalization actions. We currently expect that we will incur restructuring charges of approximately $0 to $0.5 million related to the 2023 Actions for the remainder of 2025, substantially all of which relate to employee transition and severance payments.

Current wording

On August 3, 2023, our Board of Directors approved further cost reduction actions (the "2023 Actions"). In connection with the 2023 Actions, we have incurred and expect to continue to incur restructuring charges, most of which relate to employee transition and severance payments and employee benefits, with a significantly smaller amount of charges related to vendor contract termination and rationalization actions. We currently expect that we will incur restructuring charges of approximately less than $0.1 million to $0.2 million related to the 2023 Actions for the remainder of 2025, substantially all of which relate to employee transition and severance payments.

Previous wording

As part of the restructuring plan (including the 2023 Actions), we reduced headcount by eliminating approximately 336 positions. We incurred severance and related benefits costs, recorded in “Restructuring and other related charges” in the consolidated statements of operations.

Current wording

As part of the restructuring plan (including the 2023 Actions), we reduced headcount by eliminating approximately 341 positions. We incurred severance and related benefits costs, recorded in “Restructuring and other related charges” in the consolidated statements of operations.

Previous wording

On June 23, 2025, OneSpan Inc. and certain of its subsidiaries entered into a $100.0 million credit agreement (the “Credit Agreement) with MUFG Bank, Ltd ("MUFG") and other lenders party thereto. The Credit Agreement provides for a $100.0 million revolving credit facility with a $10.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit. The proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. We may borrow, repay and reborrow funds under the revolving credit facility until its maturity on June 23, 2030. As of June 30, 2025, the Company had outstanding letters of credit of $0.2 million and no borrowings outstanding under the Credit Agreement. See Note 12, Debt, for additional information.

Current wording

On June 23, 2025, OneSpan Inc. and certain of its subsidiaries entered into a $100.0 million credit agreement (the “Credit Agreement) with MUFG Bank, Ltd ("MUFG") and other lenders party thereto. The Credit Agreement provides for a $100.0 million revolving credit facility with a $10.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit. The proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. We may borrow, repay and reborrow funds under the revolving credit facility until its maturity on June 23, 2030. As of September 30, 2025, the Company had outstanding letters of credit of $0.4 million and no borrowings outstanding under the Credit Agreement. Any outstanding letters of credit reduce the availability of funds to borrow. As of September 30,2025, the Company was in compliance with all covenants under the Credit Agreement. See Note 12, Debt, for additional information.

Previous wording

Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates during the three months ended June 30, 2025 compared to the comparable prior year period resulted in an increase in operating expenses of less than $0.4 million. We estimate the change in currency rates during the six months ended June 30, 2025 compared to the comparable prior year period resulted in an increase in operating expenses of $0.2 million.

Current wording

Historically, operating expenses have been impacted by changes in foreign exchange rates. We estimate the change in currency rates during the three months ended September 30, 2025 compared to the comparable prior year period resulted in an increase in operating expenses of less than $0.5 million. We estimate the change in currency rates during the nine months ended September 30, 2025 compared to the comparable prior year period resulted in an increase in operating expenses of $0.6 million.

Previous wording

The comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans. Long-term incentive plan compensation expense includes both stock-based incentives and an immaterial amount of cash-based incentives. During the three months ended June 30, 2025 and 2024, operating expenses included $3.5 million and $2.0 million, respectively, of expenses related to stock-based and long-term incentive plans. During the six months ended June 30, 2025 and 2024, operating expenses included $6.3 million and $3.6 million, respectively, of expenses related to stock-based and long-term incentive plans.

Current wording

The comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans. Long-term incentive plan compensation expense includes both stock-based incentives and an immaterial amount of cash-based incentives. During the three months ended September 30, 2025 and 2024, operating expenses included $3.4 million and $2.7 million, respectively, of expenses related to stock-based and long-term incentive plans. During the nine months ended September 30, 2025 and 2024, operating expenses included $9.6 million and $6.4 million, respectively, of expenses related to stock-based and long-term incentive plans.

Previous wording

During the three months ended June 30, 2025 and 2024, we generated approximately 78% and 85% of our revenues and incurred approximately 54% and 60% of our operating expenses, respectively, outside of the U.S. During the six months ended June 30, 2025 and 2024, we generated approximately 81% and 84% of our revenues and incurred approximately 56% and 61% of our operating expenses, respectively, outside of the U.S. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian Dollar exchange rate, can have a significant impact on our revenue and operating expenses.

Current wording

During the three months ended September 30, 2025 and 2024, we generated approximately 75% and 81% of our revenues and incurred approximately 53% and 58% of our operating expenses, respectively, outside of the U.S. During the nine months ended September 30, 2025 and 2024, we generated approximately 79% and 83% of our revenues and incurred approximately 55% and 60% of our operating expenses, respectively, outside of the U.S. As a result, changes in currency exchange rates, especially the Euro exchange rate and the Canadian Dollar exchange rate, can have a significant impact on our revenue and operating expenses.

Previous wording

While the majority of our revenue is generated outside of the U.S., a significant amount of our revenue earned during the six months ended June 30, 2025 was denominated in U.S. Dollars. For the six months ended June 30, 2025, approximately 56% of our revenue was denominated in U.S. Dollars, 41% was denominated in Euros and 3% was denominated in other currencies. For the six months ended June 30, 2024, approximately 54% of our revenue was denominated in U.S. Dollars, 42% was denominated in Euros and 4% was denominated in other currencies.

Current wording

While the majority of our revenue is generated outside of the U.S., a significant amount of our revenue earned during the nine months ended September 30, 2025 was denominated in U.S. Dollars. For the nine months ended September 30, 2025, approximately 57% of our revenue was denominated in U.S. Dollars, 40% was denominated in Euros and 3% was denominated in other currencies. For the nine months ended September 30, 2024, approximately 55% of our revenue was denominated in U.S. Dollars, 41% was denominated in Euros and 4% was denominated in other currencies.

Previous wording

Translation adjustments arising from differences in exchange rates generated a comprehensive gain of $5.5 million and $8.2 million during the three and six months ended June 30, 2025, respectively. For the three and six months ended June 30, 2024, translation adjustments arising from differences in exchange rates generated a comprehensive loss of $0.5 million and $2.1 million, respectively.

Current wording

Translation adjustments arising from differences in exchange rates generated a comprehensive loss of$0.9 million andgain of$7.3 million during the three and nine months ended September 30, 2025, respectively. For the three and nine months ended September 30, 2024, translation adjustments arising from differences in exchange rates generated a comprehensive gain of $5.9 million and $3.8 million, respectively.

Previous wording

Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other (expense) income, net. Foreign exchange transaction losses aggregated $1.0 million and $1.1 million for the three and six months ended June 30, 2025, respectively. For the three and six months ended June 30, 2024, gains resulting from foreign currency transactions were $0.1 million and $0.2 million, respectively.

Current wording

Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other (expense) income, net. Foreign exchange transaction losses aggregated $0.2 million and $1.3 million for the three and nine months ended September 30, 2025, respectively. For the three and nine months ended September 30, 2024, losses resulting from foreign currency transactions were $2.0 million and $1.8 million, respectively.

Previous wording

(1) Security Solutions other segment items includes general and administrative expense and restructuring and other related charges for thethree and six months ended June 30, 2025 and 2024.

Current wording

(1) Security Solutions other segment items includes general and administrative expense, restructuring and other related charges for thethree and nine months ended and September 30, 2025 and 2024.

Previous wording

(2) Security Solutions operating income includes $0.2 million and $0.4 million of total amortization and depreciation expense for both three and six months ended June 30, 2025 and 2024, respectively.

Current wording

(2) Security Solutions operating income includes $0.4 million and $0.7 million of total amortization and depreciation expense for three and nine months ended September 30, 2025 and $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

Security Solutions operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months ended June 30, 2025, respectively. Security Solutions operating income includes $0.3 million and $1.4 million of restructuring and other related charges for the three and six months ended June 30, 2024, respectively.

Current wording

Security Solutions operating income includes less than $0.1 million and $0.3 million of restructuring and other related charges for the three and nine months ended September 30, 2025, respectively. Security Solutions operating income includes $0.2 million and $1.6 million of restructuring and other related charges for the three and nine months ended September 30, 2024, respectively.

Previous wording

(3) Digital Agreements other segment items includes general and administrative expense, restructuring and other related charges, and amortization of intangibles for the three and six months ended June 30, 2025 and 2024.

Current wording

(3) Digital Agreements other segment items includes general and administrative expense, restructuring and other related charges, and amortization of intangibles for the three and nine months ended September 30, 2025 and 2024.

Previous wording

(4) Digital Agreements operating income includes $1.8 million and $3.5 million of total amortization and depreciation expense for three and six months ended June 30, 2025, respectively. Digital Agreements operating loss includes $1.6 million and $3.2 million of total amortization and depreciation expense for three and six months ended June 30, 2024, respectively.

Current wording

(4) Digital Agreements operating income includes $1.9 million and $5.5 million of total amortization and depreciation expense for the three and nine months ended September 30, 2025, respectively. Digital Agreements operating income includes $1.5 million and $4.6 million of total amortization and depreciation expense for the three and nine months ended September 30, 2024, respectively.

Previous wording

Digital Agreements operating income includes $0.1 million and $0.2 million of restructuring and other related charges for the three and six months ended June 30, 2025, respectively. Digital Agreements operating loss includes $1.2 million and $1.3 million of restructuring and other related charges for the three and six months ended June 30, 2024, respectively.

Current wording

Digital Agreements operating income includes $0.0 million and $0.2 million of restructuring and other related charges for the three and nine months ended September 30, 2025, respectively. Digital Agreements operating income includes $0.4 million and $1.4 million of restructuring and other related charges for the three and nine months ended September 30, 2024, respectively.

Previous wording

Revenue by products and services allocated to the segments for the three and six months ended June 30, 2025, and 2024 is as follows:

Current wording

Revenue by products and services allocated to the segments for the three and nine months ended September 30, 2025, and 2024 is as follows:

Previous wording

(1) Professional services and other includes perpetual software licenses revenue, which was immaterial for the three and six months ended June 30, 2025 and approximately 1% of total revenue for the three and six months ended June 30, 2024.

Current wording

(1) Professional services and other includes perpetual software licenses revenue, which was immaterial for the three and nine months ended September 30, 2025 and 2024.

Previous wording

Total revenue decreased by $1.1 million, or 2%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Changes in foreign exchange rates as compared to the same period in 2024 favorably impacted revenue by approximately $1.2 million. For the six months ended June 30, 2025, revenue decreased by $2.6 million, or 2%, compared to the six months ended June 30, 2024. Changes in foreign exchange rates as compared to the same period in 2024 favorably impacted revenue by approximately $0.1 million.

Current wording

Total revenue increased by $0.8 million, or 1%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Changes in foreign exchange rates as compared to the same period in 2024 favorably impacted revenue by approximately $1.3 million. For the nine months ended September 30, 2025, revenue decreased by $1.7 million, or 1%, compared to the nine months ended September 30, 2024. Changes in foreign exchange rates as compared to the same period in 2024 favorably impacted revenue by approximately $1.5 million.

Previous wording

•Security Solutions revenue decreased $1.2 million, or approximately 3%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The decrease in Security Solutions revenue was primarily attributable to lower volumes of hardware devices sold due largely to the mobile-first trend discussed in the "Overview" section above, and to a lesser extent, lower perpetual-based maintenance due to our transition to term licenses and cloud subscription license models. The decrease was partially offset by higher on-premises license and maintenance revenues, primarily from existing customers, and revenue from customers acquired in our acquisition of Nok Nok Labs. Timing of customer renewals and the transition of certain customers from single-year to multi-year term license contracts positively impacted on-premises revenue in the quarter. Changes in foreign exchange rates for the three months ended June 30, 2025 compared to the same period in 2024 favorably impacted Security Solutions revenue by $1.2 million.

Current wording

•Security Solutions revenue decreased $0.5 million, or approximately 1%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease in Security Solutions revenue was primarily attributable to lower volumes of hardware devices sold due largely to the mobile-first trend discussed in the "Overview" section above, and to a lesser extent, lower perpetual-based maintenance due to our transition to term licenses and cloud subscription license models, offset by higher term licenses, primarily from existing customers, and revenue from customers acquired in our acquisition of Nok Nok Labs. Timing of customer renewals and the transition of certain customers from single-year to multi-year term license contracts positively impacted on-premises revenue in the quarter. Changes in foreign exchange rates for the three months ended September 30, 2025 compared to the same period in 2024 favorably impacted Security Solutions revenue by $1.3 million.

Previous wording

•For the six months ended June 30, 2025, Security Solutions revenue decreased $3.9 million, or approximately 4%, which was primarily attributable to lower volumes of hardware devices sold due to the mobile-first trend, and to a lesser extent, lower perpetual-based maintenance and professional services revenues due to our transition to term licenses and cloud subscription license models. The decrease was partially offset by higher on-premises license and maintenance revenues, primarily from existing customers, increased cloud subscription revenue, and revenue from customers acquired in our acquisition of Nok Nok Labs. Timing of customer renewals and the transition of certain customers from single-year to multi-year term license contracts positively impacted on-premises revenue in the period. Changes in foreign exchange rates for the six months ended June 30, 2025 compared to the same period in 2024 favorably impacted Security Solutions revenue by $0.1 million.

Current wording

•For the nine months ended September 30, 2025, Security Solutions revenue decreased $4.5 million, or approximately 3%, which was primarily attributable to lower volumes of hardware devices sold due to the mobile-first trend, and to a lesser extent, lower perpetual-based maintenance and professional services revenues due to our transition to term licenses and cloud subscription license models. The decrease was partially offset by higher term license and maintenance revenues, primarily from existing customers, increased cloud subscription revenue, and revenue from customers acquired in our acquisition of Nok Nok Labs. Timing of customer renewals and the transition of certain customers from single-year to multi-year term license contracts positively impacted on-premises revenue in the period. Changes in foreign exchange rates for the nine months ended September 30, 2025 compared to the same period in 2024 favorably impacted Security Solutions revenue by $1.4 million.

Previous wording

•Digital Agreements revenue increased $0.1 million, or 1%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. For the six months ended June 30, 2025, Digital Agreements revenue increased $1.4 million, or 5%. The increase in Digital Agreements revenue for both periods was primarily attributable to higher cloud subscription revenue from existing customer expansions and, to a lesser extent, new logos and overages, partially offset by lower term-based maintenance revenue due to our transition to cloud subscription licenses. Changes in foreign exchange rates compared to the same period in 2024 favorably impacted Digital Agreements revenue by less than $0.1 million for the three months ended June 30, 2025. Changes in foreign exchange rates compared to the same period in 2024 negatively impacted Digital Agreements revenue by less than $0.1 million for the six months ended June 30, 2025.

Current wording

•Digital Agreements revenue increased $1.3 million, or 9%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, Digital Agreements revenue increased $2.7 million, or 6%. The increase in Digital Agreements revenue for both periods was primarily attributable to higher cloud subscription revenue from existing customer expansions and, to a lesser extent, new logos and overages, partially offset by lower term-based maintenance revenue due to our transition to cloud subscription licenses. Changes in foreign exchange rates compared to the same period in 2024 favorably impacted Digital Agreements revenue by less than $0.1 million for the three months ended September 30, 2025. Changes in foreign exchange rates compared to the same period in 2024 favorably impacted Digital Agreements revenue by less than $0.1 million for the nine months ended September 30, 2025.

Previous wording

For the three months ended June 30, 2025, revenue generated in EMEA was $1.8 million, or 7%, lower than the same period in 2024. For the six months ended June 30, 2025, revenue generated in EMEA was $2.6 million, or 5%, lower than the same period in 2024. The decrease for both periods was primarily due to lower hardware volumes attributed to the mobile-first trend and end-of-life products, partially offset by an increase in revenue from software authentication and mobile application security products.

Current wording

For the three months ended September 30, 2025, revenue generated in EMEA was $0.9 million, or 4%, lower than the same period in 2024. The increase in revenue from software authentication and mobile application security products were offset by lower hardware volumes attributed to the mobile-first trend and end-of-life products. For the nine months ended September 30, 2025, revenue generated in EMEA was $3.5 million, or 4%, lower than the same period in 2024. The decrease for this period was primarily due to lower hardware volumes attributed to the mobile-first trend and end-of-life products, partially offset by an increase in revenue from software authentication and mobile application security products.

Previous wording

For the three months ended June 30, 2025, revenue generated in the Americas was $2.8 million, or 13%, higher than the three months ended June 30, 2024, primarily due to an increase in revenue from software authentication products, and to a lesser extent, Digital Agreements revenue. For the six months ended June 30, 2025, revenue generated in the Americas was $2.5 million, or 6%, higher than the same period in 2024, primarily due to an increase in revenue from software authentication products and Digital Agreements revenue, partially offset by lower hardware revenue.

Current wording

For the three months ended September 30, 2025, revenue generated in the Americas was $4.0 million, or 18%, higher than the three months ended September 30, 2024, primarily due to an increase in revenue from software authentication products, and to a lesser extent, Digital Agreements revenue. For the nine months ended September 30, 2025, revenue generated in the Americas was $6.5 million, or 10%, higher than the same period in 2024, primarily due to an increase in revenue from software authentication products and Digital Agreements revenue, partially offset by lower hardware revenue.

Previous wording

For the three months ended June 30, 2025, revenue generated in APAC was $2.1 million, or 14%, lower than the three months ended June 30, 2024. For the six months ended June 30, 2025, revenue generated in APAC was $2.5 million, or 9%, lower than the same period in 2024. The decrease for both periods was primarily attributable to lower hardware volumes and a decrease in revenue from software authentication products, partially offset by an increase in revenue from mobile application security products.

Current wording

For the three months ended September 30, 2025, revenue generated in APAC was $2.3 million, or 19%, lower than the three months ended September 30, 2024. For the nine months ended September 30, 2025, revenue generated in APAC was $4.7 million, or 12%, lower than the same period in 2024. The decrease for both periods was primarily attributable to lower hardware volumes and a decrease in revenue from software authentication products, partially offset by an increase in revenue from mobile application security products.

Previous wording

The following table presents cost of goods sold for our products and services for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table presents cost of goods sold for our products and services for the three and nine months ended September 30, 2025 and 2024:

Previous wording

The cost of product and license revenue decreased by $3.0 million, or 26%, and $3.9 million, or 19% during the three and six months ended June 30, 2025, respectively, compared to the three and six months ended June 30, 2024. The decrease in cost of product and license revenue for both the three and six months ended June 30, 2025 was driven primarily by lower hardware revenue and hardware costs, partially offset by higher third-party license costs.

Current wording

The cost of product and license revenue decreased by $0.4 million, or 5%, and $4.3 million, or 15% during the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024. The decrease in cost of product and license revenue for both the three and nine months ended September 30, 2025 was driven primarily by lower hardware revenue and hardware costs, partially offset by higher third-party license costs.

Previous wording

The cost of services and other revenue decreased by $1.8 million, or 19%, and $1.9 million, or 11% during the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024. The decrease was largely due to the prior year impact of the 2024 write-off discussed in the "Overview" above. Lower cloud platform costs for the three and six months ended June 30, 2025 were also a factor in the year-over-year decrease.

Current wording

The cost of services and other revenue increased by $0.7 million, or 10%, and decreased $1.2 million, or 5% during the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024. The increase as compared to the three months ended September 30, 2024 was attributable to our increase in cloud subscription revenue from existing customer expansions and, to a lesser extent, new customers and overages. The decrease as compared to the nine months ended September 30, 2024 was largely due to the prior year impact of the 2024 write-off discussed in the "Overview" above. Lower cloud platform costs for the three and nine months ended September 30, 2025 were also a factor in the year-over-year decrease.

Previous wording

Gross profit increased by $3.6 million, or 9%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Gross margin was 73% for the three months ended June 30, 2025, compared to 66% for the three months ended June 30, 2024. Gross profit increased $3.3 million, or 4% during the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Gross profit margin was 74% for the six months ended June 30, 2025, compared to 70% for the six months ended June 30, 2024. The increase in profit margin in both periods was primarily driven by an increase in software revenue and a decrease in hardware revenue, along with an increase in hardware margin due to favorable hardware customer mix and the prior year impact of the 2024 write-off.

Current wording

Gross profit increased by $0.5 million, or 1%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Gross margin was 74% for the three months ended September 30, 2025, compared to 74% for the three months ended September 30, 2024. Gross profit increased $3.8 million, or 3% during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Gross profit margin was 74% for the nine months ended September 30, 2025, compared to 71% for the nine months ended September 30, 2024. The profit margin for three months ended September 30, 2025 was flat while the profit margin increase for the nine months ended September 30, 2025 was primarily driven by an increase in software revenue and higher-margin hardware revenue, despite lower overall hardware revenue, due to favorable hardware customer mix and the prior year impact of the 2024 write-off.

Previous wording

The majority of our inventory purchases are denominated in U.S. Dollars. Our sales are denominated in various currencies, including the Euro. The impact of changes in currency rates are estimated to have had an unfavorable impact on overall cost of goods sold of $0.2 million for three months ended June 30, 2025 and $0.1 million for six months ended June 30, 2025. Had currency rates during the three months ended June 30, 2025 been equal to rates in the comparable period of 2024, the gross margin would have been less than 1 percentage point higher, driven by the favorable currency rate impact to revenue. Had currency rates during the six months ended June 30, 2025 been equal to rates in the comparable period of 2024, the gross margin would have been less than 1 percentage point higher.

Current wording

September 30, 2025. Had currency rates during the three months ended September 30, 2025 been equal to rates in the comparable period of 2024, the gross margin would have been less than 1 percentage point lower, driven by the favorable currency rate impact to revenue. Had currency rates during the nine months ended September 30, 2025 been equal to rates in the comparable period of 2024, the gross margin would have been less than 1 percentage point higher.

Previous wording

•Security Solutions gross profit increased $2.2 million, or 7%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Security Solutions gross margin for the three months ended June 30, 2025 was 74%, compared to 67% for the three months ended June 30, 2024. The increase in gross margin was primarily due to an increase in software revenue and a decrease in hardware revenue, along with an increase in hardware margin due to favorable hardware customer mix. For the six months ended June 30, 2025, Security Solutions gross profit increased $0.8 million, or 1%, compared to the same period in 2024. Security Solutions gross margin for the six months ended June 30, 2025 was 75%, compared to 71% for the six months ended June 30, 2024. The increase in the gross margin was due to the same reasons set forth above.

Current wording

•Security Solutions gross profit decreased $0.5 million, or 2%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Security Solutions gross margin was 74% during the three months ended September 30, 2025, compared to 75% for the three months ended September 30, 2024. The gross margin declined slightly period over period, but included an increase in lower-margin software revenue, offset by higher-margin hardware revenue, despite lower overall hardware revenue, due to favorable hardware customer mix and the prior year impact of the 2024 write-off. For the nine months ended September 30, 2025, Security Solutions gross profit increased $0.3 million, or less than 1%, compared to the same period in 2024. Security Solutions gross margin for the nine months ended September 30, 2025 was 75%, compared to 72% for the nine months ended September 30, 2024. The increase in the gross margin was due to an increase in gross profit from software revenue at flat margins and higher-margin hardware revenue, despite lower overall hardware revenue, due to favorable hardware customer mix and the prior year impact of the 2024 write-off.

Previous wording

•Digital Agreements gross profit increased $1.4 million, or 14%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Digital Agreements gross margin for the three months ended June 30, 2025 was 71%, compared to 63% for the three months ended June 30, 2024. The increase is primarily attributed to the prior year impact of the 2024 write-off discussed above. For the six months ended June 30, 2025, Digital Agreements gross profit increased $2.5 million, or 13%, compared to the same period in June 30, 2024. Digital Agreements gross margin for the six months ended June 30, 2025 was 71%, compared to 66% for the six months ended June 30, 2024. The increase in gross profit and gross margin was driven by higher cloud subscription revenue and the 2024 write-off, partially offset by lower term-based maintenance revenue.

Current wording

•Digital Agreements gross profit increased $1.0 million, or 9%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Digital Agreements gross margin for the three months ended September 30, 2025 was 72%, compared to 72% for the three months ended September 30, 2024. For the nine months ended September 30, 2025, Digital Agreements gross profit increased $3.5 million, or 11%, compared to the same period in September 30, 2024. Digital Agreements gross margin for the nine months ended September 30, 2025 was 71%, compared to 68% for the nine months ended September 30, 2024. The increase in gross profit and gross margin was driven by higher cloud subscription revenue and the 2024 write-off, partially offset by lower term-based maintenance revenue.

Previous wording

Operating expenses increased by $0.8 million, or 2%, during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. For the three months ended June 30, 2025, changes in foreign exchange rates negatively impacted operating expenses by approximately $0.4 million as compared to the same period in 2024. Operating expenses decreased by $2.6 million, or 4%, during the six months ended June 30, 2025 compared to the six months ended June 30, 2024. For the six months ended June 30, 2025, changes in foreign exchange rates negatively impacted operating expenses by approximately $0.2 million as compared to the same period in 2024.

Current wording

Operating expenses increased by $3.5 million, or 11%, during the three months ended September 30, 2025 compared to the three months ended September 30, 2024. For the three months ended September 30, 2025, changes in foreign exchange rates negatively impacted operating expenses by approximately $0.5 million as compared to the same period in 2024. Operating expenses increased by $0.9 million, or 1%, during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. For the nine months ended September 30, 2025, changes in foreign exchange rates negatively impacted operating expenses by approximately $0.6 million as compared to the same period in 2024.

Previous wording

The following table presents the breakout of operating expenses by category for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table presents the breakout of operating expenses by category for the three and nine months ended September 30, 2025 and 2024: