OneSpan Inc.

Today, thank you for standing by. Welcome to OneSpan's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Joe Maxa, Vice President of Best Relations. Please go ahead.

Thank you, Operator. Hello, everyone, and thank you for joining the OneSpan first quarter 2024 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 Victor Lamongeli, our interim 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 2024. 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 2024 and other 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 a 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 and in the investor presentation available on our website. In addition, please note that the date of this conference call is May 2, 2024. 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 Victor.

Thank you, Joe. And good afternoon, everyone. Thank you for joining us today. I want to start out by congratulating the entire OneSpan team for delivering another solid quarter, which exceeded our internal revenue and adjusted EBITDA expectations. Revenue grew 13% year-over-year to $65 million, and adjusted EBITDA was $20 million, with 31% of revenue. ARR growth also exceeded our internal expectations. It grew 9% year-over-year to $155 million and offset the headwinds we discussed on our last earnings call related to expired contracts of sunsetted products. Q1 was my first full quarter leading one span, and I continue to be impressed with the team's work ethic and dedication to operational rigor. For example, one of the major factors in the Q1 outperformance was that our renewals team did a great job closing several delayed renewals earlier than expected, which increased Q1 revenue by a few million dollars. And our APAC team did growth in more than three years. In addition to the impact from delayed renewals closing in Q1, our first quarter top-line outperformance was largely driven by expansion contracts from existing security customers who continue to place high value on our industry-leading anti-fraud solutions designed to mitigate potential hacking attacks. Profitability outperformance was driven by strong revenue, favorable product mix, and increased operating leverage, resulting from the right sizing of our cost structure over the last several quarters. We also generated $27 million in cash from operations and ended the quarter with $64 million in cash. Our two business units, Security Solutions Both had strong quarters with solid year-over-year revenue growth and significantly improved profitability. Revenue growth and security was primarily driven by strong increases in software licenses, including approximately $3 million from the past two renewals just discussed that we had originally expected to close in Q2. We also saw several annual contracts renew with multi-year term lines. resulting in about $2 million of additional revenue as compared to our forecast. And we had solid double-digit ACV growth in security, driven in part by increased demand for our cloud-based authentication solution, OCA, including a new seven-figure ACV contract and the expansion of a two-year contract to the mid-seven figures with new ACV of nearly $1 million. DigiPass hardware revenue declined, as expected. Last quarter, we discussed a few orders that had shipped in Q4 to the tune of approximately $2 million that were originally scheduled to ship in the first quarter of 2024. Revenue growth in digital agreements was primarily driven by expansion of cloud subscriptions from existing customers. Our profitability and cash flow generation improved significantly in the first quarter as compared to the prior year period. For the balance of the year, seasonal software and hardware revenue patterns suggest more modest revenue growth and profit margins in Q2 and in the second half. We will continue to focus on operational excellence in our driving efficient revenue growth to help ensure we achieve our profitability and cash flow commitments. With that, I will turn the call over to Jorge. Jorge?