OneSpan Inc.

Good afternoon. Thank you for attending the first quarter 2023 One-Span Earning Conference call. My name is Alyssa and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to your host, Joe Maxa, Vice President of Investor Relations. Joe, you may proceed.

Thank you, Operator. Hello, everyone, and thank you for joining the OneSpan First Quarter 2023 Earnings Conference Call. This call is being webcast and can be accessed on the Investor Relations section of OneSpan's website at investors.onespan.com. Joining me on the call today is Matt Moynihan, our Chief Executive Officer, and Jorge Martel, our Chief Financial Officer. This afternoon, after market close, OneSpan issued a press release announcing results for our first quarter 2023. To access a copy of the press release and other investor information, please visit our website. Following our prepared comments today, we will open the call for questions. Please note that statements made during this conference call that relate to future plans, events, or performance including the outlook for full year 2023 and our long-term financial targets, are forward-looking statements. These statements involve risks and uncertainties and are based on current assumptions. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. I direct your attention to today's press release and the company's filings with the U.S. Securities and Exchange Commission for discussion of such risks and uncertainties. Also note that certain financial measures that may be discussed on this call are expressed on a non-GAAP basis and have been adjusted from a related GAAP financial measure. We have provided an explanation for and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the earnings press release. In addition, please note that the date of this conference call is May 4th, 2023, and any forward-looking statements and related assumptions are made as of this date. except as required by law, we undertake no obligation to update these statements as a result of new information or future events or for any other reason. I will now turn the call over to Matt.

Thank you, Joe. Hello, everyone, and thank you for joining us on the call today. I'm pleased by the 10% revenue growth we reported in the first quarter of our three-year transformation plan. ARR grew 10% and adjusted EBITDA was negative 1.6 million, consistent with our plan to front-load investments in 2023, to drive ARR growth in the second half of the year and through 2024. Topline growth was primarily driven by our security segment, as several customers increased their number of licenses and extended their contract lengths, resulting in strong subscription renewals. We also saw growth, to a lesser extent, in new customer logos. Our marquee security client base continues to leverage our enterprise class security solutions to mitigate fraud and hacking attacks, protect their infrastructure, safeguard their reputation, and optimize costs by consolidating vendors to achieve the best return on their investment during this uncertain macroeconomic time. We experienced 25% growth in digital agreements SaaS revenue driven by customer expansion. Consistent with our decision to sunset our on-premises signature offering last year and move to a cloud-first model, we experienced a decline in total digital agreements revenue in the quarter as a result of certain on-premise deals that had upfront revenue recognition in the first quarter of 2022, not repeating in this quarter this year. This model change is consistent with our plan to increase R&D efficiencies and grow revenue more predictably over time. As we initially communicated in May of last year, investing in digital agreements is a key component of our growth plan. I'm happy to share that we reached our goal of doubling our quota-carrying sales force ahead of our 2023 year-end target. I am pleased by the level of experience, talent, and professionalism of the people we've been able to hire, all of whom are universally excited about our market positioning and growth strategy. I also feel good about the progress we've made to enable our Salesforce and onboard new talent to execute our unified go-to-market strategy. It is important to note that we are still in the initial phase of our three-year plan. We continue to work hard to align our increased sales capacity with a maturing demand generation engine. to execute against our new logo strategy in the second half of the year. Equally important to our new logo strategy is driving upsell and cross-sell opportunities within our existing customer base. To this end, we are committed to getting new products into the hands of our sales team to help deliver against our goals. In Q1, we launched the first version of One Spend Notary to test the market. And later this quarter, we'll be launching One Spend Notary more broadly to sell into additional states where we've been certified. We also plan to launch DigiPath CX, our cloud-connected device, later this quarter, initially targeting certain use cases in the banking and healthcare sectors. And we are also working to bring secure key vaulting for documents and artifacts to markets this year based on blockchain technology, which was acquired in the first quarter of this year with proven DB acquisition. Lastly, we are pleased with the positive customer feedback we have received regarding our new pricing model, which allows us to offer advanced technology and services at the most favorable price per value in the market. We believe this pricing model will be a key differentiator in generating new logo opportunities over the balance of the year. Next, I'd like to highlight a few customer wins during the quarter. A long-term on-premise e-signature customer in North America significantly expanded its business with us by signing an upper six-figure annual SAS contract. This customer evaluated competing solutions and found One Span Sign to be the most secure and flexible option for its needs. The largest private bank in India, the current corporate banking customer, purchased authentication and mobile security solutions for their retail banking unit in the mid six-figure ACV range. It was a competitive win against multiple firms and highlighted the flexibility of our mobile security solution. This bank has potential to become a much larger customer in the coming years. And an auto finance customer in Europe expanded their six-figure ACV contract and migrated to our identity verification and one-span sign solution. from the legacy deal flow platform sunsetted last year. In a competitive bidding situation, the customer valued our expertise in helping them execute their complex workflows in our out-of-the-box identity verification service. Now turning to the macroeconomic environment, we are seeing longer sales cycles and more scrutiny over investments by our clients in certain regions, similar to prior quarters. Specifically, we are seeing more caution around budget spend, which may put pressure on our expansion and new logo activities, particularly in the digital agreement market. That said, we're also seeing an increase in our sales pipeline, and we are monitoring on a regular basis our lead generation activities, conversion rates, and Salesforce productivity. We are still early in our 2023 investment cycle and continue to make adjustments as necessary to drive sales performance while also meeting our 2023 profitability targets. Regarding our exposure to recent bank failures, I want to point out that we have minimal exposure to the banks impacted thus far, and we will continue to closely monitor developments across the entire banker sector over months to come. Now I'd like to provide a few comments on generative AI in deepfake technology. I'm sure you've all seen or heard about several recent deepfakes. For example, Pope Francis wearing a white puffer jacket, a German newspaper using AI to generate an interview with former Formula One driver Michael Schumacher, and various other documents or content being created by AI algorithms. The technology has progressed to a point despite its early days, where you literally cannot tell whether what you are seeing or reading is real or fake. If I'm in a virtual meeting with someone I haven't met before, how do I know it is them? If I'm signing a digital document, can I trust its authenticity? This is where we come in. The industry is coming in our direction. Our five pillar solution strategy was designed to enable us to secure an entire digital transaction lifecycle by seamlessly weaving together identity verification, authentication, high assurance virtual collaboration, e-signature, and secure transaction e-vaulting for our customers. I believe in this world of generative AI and deep fakes, solutions like ours will increasingly be needed to deliver secure virtual user interactions, digital transaction integrity, and secure and trusted digital documents, such as videos and other artifacts embedded in blockchain technology. With that, I'll turn the call over to Jorge to review our financials. Jorge?