OneSpan Inc.

Good day and thank you for standing by. Welcome to the OneSpan third quarter 2025 earnings conference. All participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone You'll then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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 third 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 Lamangeli, our chief executive officer, and Jorge Martel, our chief financial officer. This afternoon, after market closed, OneSpan issued a press release announcing results for our third quarter 2025. To access a copy of the press release and other investor information, please visit our website. Following our prepared comments today, we'll 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 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 all growth rates discussed on this call refer to a year-over-year basis unless otherwise indicated. The date of this conference call is October 30th, 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. Hello, everyone, and thank you for joining us today. Before turning to our results, I'd like to recap our progress in the transformation of OneSpan. 2024 was about fixing the cost structure of the business, ensuring that we could operate both business units in a profitable manner. The OneSpan team did a great job working through those challenges, and we entered this year in a much improved operating position. In fact, that improved operating position will enable us to return about $25 million to shareholders between dividends and buybacks by the end of this year. And in addition, we also completed an acquisition and made a strategic investment. all funded by cash generated by the business. In 2025, as we have discussed previously, has been about putting the pieces in place while continuing to operate with strong profitability to enable growth. It has been a remarkable year in that respect. Indeed, today we announced that our software business, now over 80% of the overall business, delivered double-digit subscription revenue growth and ARR growth. Turning to the specific components that we've been putting in place to drive growth. First, right before the year started, we hired a new CTO, Ashish Jain, to lead our R&D efforts and improve our internal development efforts. Second, in June, we acquired Knock Knock, bringing the best FIDO2 software product called S3 to our portfolio. I'm happy to report that in the first four months since the acquisition, we've already closed two new logos for S3, both in the low six-figure range, and we have built additional pipeline for Q4. We believe that there is a large opportunity in the coming years for S3 as FIDO2 becomes more widely adopted. Initially, we see the U.S. and Japan as the leading markets for FIDO2, but over the coming years, we expect Passkeys to become the standard around the world. Third, in October, we announced a strategic investment in and partnership with Threat Fabric to further enhance our value proposition to customers by offering mobile threat intelligence and fraud risk insights. We are in the midst of sales enablement so that our team can effectively sell the Threat Fabric products and are optimistic that those products will add to growth in 2026. Finally, you should not in any way consider OneSpan to be finished in our efforts to improve the value that we provide to customers and hence our growth prospects as a business. we are working on additional initiatives. While there might not be announcements each and every quarter, we will never be done improving our value proposition to customers, whether through internal development, through acquisitions, or through strategic partnerships. And we expect these efforts to drive growth, particularly in our software business, as we continue to work towards achieving a Rule of 40 performance level. Turning to our results, I'm pleased with the team's efficiency, which drove another strong quarter of profitability and cash generation, including $17.5 million of adjusted EBITDA or 31% of revenue and $11 million in cash from operations. I'm especially proud that over the first nine months of the year, we generated record adjusted EBITDA of $58 million, representing 32% of revenue and $47 million in cash from operations. We ended the quarter with annual recurring revenue of $180 million, up 10% year over year. In regards to revenue, we have seen strong bookings in certain regions, including our security business in North America, our Latin America business, and the southern portion of our EMEA region. I'm also heartened by the progress in APAC, and our DA business grew subscription revenue by double digits. And as I mentioned a few minutes ago, we're encouraged by the progress we've seen with our new S3 product acquired as part of the Knock Knock deal. With respect to hardware, As we've discussed many times, there has been a long-term secular shift away from consumer banking tokens to the point that in the first nine months of the year, hardware was less than 20% of our overall business. That trend is part of what drives us to broaden and strengthen our product offerings. In the quarter, total revenue grew 1% to $57 million, driven by double-digit organic subscription revenue growth. This growth was primarily offset by a reduction in security hardware revenue due to the shift described earlier in consumer banking strategies in EMEA and APAC, where banks continue adopting mobile-first authentication approaches. Subscription revenue grew 12%, led by 13% growth in security and 11% growth in digital agreements. The increase in security subscription revenue was driven by both cloud and on-prem authentication software, along with mobile app shielding software. Both business units remained solidly profitable at the segment level. with digital agreements delivering record high segment operating income. Security absorbed a modest cost impact from the knock-knock business in Q3, although we expect it to be accretive to securities operating income in Q4. As I mentioned earlier, we continue to generate significant cash from operations, $47 million in the first nine months of the year, and we ended the third quarter with $86 million in cash on hand. In Q3, we used $6 million to repurchase shares of our common stock, and combined with our quarterly dividend payments, we returned more than $20 million to shareholders in the first nine months of 2025. We also used cash to make the strategic acquisition of Knock Knock, and after the third quarter ended, to obtain a 15% equity stake in Threat Fabric. Our investment in Threat Fabric, as well as our acquisition of Knock Knock and Q2, and our internal development efforts are designed to enhance our product portfolio and move faster to deliver great products that provide additional value to our customers. To that end, we will continue investing in internal R&D and pursuing targeted technology-driven investments with proven market fit to enhance our product portfolio. Our board remains committed to a balanced capital allocation strategy weighing shareholder returns, organic investments, and targeted M&A. Accordingly, the board will consider additional share repurchases and has approved another $0.12 per share dividend to be paid in the current quarter. In summary, we're making solid progress in building the foundation for growth in our journey towards achieving Rule of 40 performance. At the same time, we remain committed to driving efficient revenue growth while maintaining strong profitability and cash generation and returning capital to shareholders. With that, I'll turn the call over to Jorge.