OneSpan Inc.

Good day and thank you for standing by. Welcome to the Q1 2025 One Span 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Joe Maxa, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Hello, everyone, and thank you for joining the OneSpan first quarter 2025 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 Chief Executive Officer, and Jorge Martel, our Chief Financial Officer. This afternoon, after market closed, OneSpend issued a press release announcing results for our first quarter 2025. 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 2025 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 filing with the U.S. 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 all growth rates discussed on this call refer to a year over year basis unless otherwise indicated. The date of this conference call is May 1st, 2025. 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 thank you everyone for joining us today for our first quarter earnings call. I'm very pleased that we reported another strong quarter, driven by the great work and discipline of the team in continuing to optimize our cost structure, as well as a more favorable revenue mix as compared to last year. We achieved record high adjusted EBITDA of $23 million, which was nearly 15 percent higher than last year's first quarter record of $20 million. And our adjusted EBITDA reached a record high 36 percent of revenue. First quarter 2025 ARR grew 9 percent, in line with the growth rate implied by the midpoint of our full year 2025 guidance. Q1 subscription revenue also grew 9 percent, and was driven by demand for our software authentication, app shielding, and e-signature solutions. As expected, total revenue declined slightly in the first quarter. The growth in subscription revenue was primarily offset by the following three trends that we've discussed on prior calls. First, banks in EMEA, and to a lesser extent in APAC, over the past few years have been adopting mobile-first policies with respect to consumer banking authentication. This has resulted in lower hardware revenues in recent quarters. When a customer transitions to our software solutions from hardware, all else equal, we see lower revenue in the short run, although the gross margin profile of our software offerings is obviously better than is the case with hardware. In 2024, we transitioned certain legacy perpetual maintenance contracts to term-based subscriptions, which had the effect of lowering maintenance revenue in Q1 2025 compared to the prior year period. And third, headwinds related to sunsetted products was $1.4 million in the quarter. We expect a similar headwind in the second quarter, and a total of approximately $1 million spread over the second half of 2025, and then minimal headwinds in 2026. I'll now provide additional commentary specific to each business unit. In security, subscription revenue grew 7% and included headwinds from sunsetted products of approximately 3 percentage points. In general, growth in security subscription revenue is primarily driven by expansion contracts with our existing global security customers, including many of the world's largest banks. Regarding our on-time renewal rate, it slipped by a few percentage points in the first quarter, primarily due to two seven-figure renewal contracts that were expected to close at the end of March. One of the contracts actually expanded to three years from one year and has closed in early Q2. The other contract is also expected to close this quarter. More broadly, in our security business, our customers and their clients utilize our industry-leading anti-fraud solutions that are designed to mitigate even the most advanced account takeover and other hacking attempts. Given our strong customer base and leading position in the authentication market, Combined with the increasing sophistication of account takeover attacks, we believe we have a unique opportunity to continue innovating to deliver additional value-added solutions. In other words, we believe that we can further help our customers solve their emerging authentication and security challenges. In digital agreements, Q1 subscription revenue grew 13%, Growth and subscription revenue was primarily driven by expansion contracts and to a lesser extent new logos. Both business units were again nicely profitable at the segment level with security continuing to be very profitable. And we believe we are well positioned to achieve our stated goals for both business units to deliver growth and strong profitability. As we focus on the future, we will remain committed to operational excellence and on driving efficient revenue growth to help ensure we achieve our profitability commitments. Before turning the call over to Jorge, I want to briefly highlight our robust cash generation and the dividend we paid during the quarter. We generated $29 million in cash from operations and ended the quarter with $105 million in cash on hand. During the quarter, we paid a 12 cents per share dividend totaling approximately $4.6 million. It was the first quarterly dividend paid as part of the company's recurring quarterly dividend program. The board approved our second 12 cents per share dividend to be paid in the current quarter and plans to continue operating with a balanced capital allocation strategy, weighing potential increases in the capital returned to shareholders as well as organic investments in the business and targeted M&A. With that, I will turn the call over to Jorge.