OSPN as two revenue steams - a hardware side that is dying (-16% revenue yoy) and a cybersecurity software side (+11% ARR). The hardware side currently accounts for \~16% of revenue and is expected to continue to deteriorate. The software side services 60/100 of the world’s largest banks and is extremely sticky due to the high friction of integrating a different security solution for high value transactions (DYOR).
Using a DCF model assuming the hardware side vanishes tomorrow and an immediate decay to 2% terminal growth (10% discount rate), intrinsic value is $15.67 while current share price is $11.81.
I believe this discrepancy is caused by the shrinking hardware drag depressing headline numbers making growth look underwhelming at a glance.
Free optionality includes the hardware side which is in fact still generating revenue (for a time), nok nok and Build38 acquisitions which have strong synergies with their current locked in clientele (DYOR) as well as the true ARR of 11% rather than the 2% I modeled.
I won’t get into my personal base case modeling as those assumptions are at your own discretion. At a PE of 8 and zero debt, this is an information arbitrage fat pitch for me.
PS: Also has a dividend yield of 3%, but that shouldn’t matter if you got that OWNER mindset 🤓