Thank you, operator. Hello, everyone.

Thank you for joining the OneSpan third quarter 2026 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 Limongelli, our Chief Executive Officer, and Jorge Martell, our Chief Financial Officer. This afternoon, after market close, OneSpan issued a press release announcing results for our third quarter of 2026.

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 2026 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 US 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 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 29th, 2026.

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.

Thank you for joining us today. Our goal for 2026 was to deliver solid performance while positioning the company for future growth.

We are achieving those goals. We had an excellent third quarter with 12% revenue growth, including 16% subscription revenue growth, and a 12% increase in operating income.

Before diving into the details, I want to take a moment to thank the entire OneSpan team for all of their efforts in delivering these results, and also to underscore the progress we have made as a business, achieving a Rule of 42 performance level in Q3, whereas just a few years ago in 2023, OneSpan performed at a Rule of 12 level. Looking at Q3 specifically, I'm happy to report that both business units grew at a double-digit rate, with Digital Agreements up 14% and Cybersecurity up 11%.

Our overall gross margin also improved, rising to 76.3% compared to 73.6% in the year-ago period, and we achieved a company-wide GRR of 91% in Q3, evidence of our stronger customer engagement and our delivery of better customer experiences across both our Cybersecurity and Digital Agreements business units. With respect to the other part of our goals, that is, positioning the company for future growth, we made great progress in that area in Q3 as well.

In July, we launched the DIGIPASS ONE platform in our Cybersecurity business. DIGIPASS ONE brings together our suite of security solutions, including DIGIPASS ONE Authenticate, the industry's broadest customer authentication capabilities spanning hardware, software, on-prem, in the cloud, OTP, and passkeys; DIGIPASS ONE Protect, our mobile application protection portfolio providing continuous in-app protection, active defense, and real-time threat visibility; DIGIPASS ONE Verify, a new offering that provides support for digital credentials and verification capabilities across multiple wallet ecosystems, which will be a key requirement for banks in Europe; and DIGIPASS ONE Insights, another new offering that will deliver cross-platform analytics and visibility that will provide enriched insights and actionable intelligence from telemetry spanning the entire platform, providing value not only to our customers' authentication teams, but to their broader security teams as well.

You are all familiar with OneSpan as an authentication provider, but I want to take a moment to talk about DIGIPASS ONE Verify, which we plan to release early next year. As an important reminder, the European Digital Identity regulation will require banks to support digital identity wallets for customer onboarding and authentication by December 2027.

We remain actively engaged with the ecosystem as verifiable credentials and digital wallets develop, and we plan to support the first country-specific wallets slated to be released early next year. We are encouraged by the discussions that we have seen around DIGIPASS ONE Verify, and expect this to be an important offering as these wallets become more broadly available.

As we have a broad customer base of European banks, and we expect this offering to be of particular interest in that market. We also continue to see encouraging interest in DIGIPASS ONE Protect and our expanded capabilities introduced with our acquisition of Build38.

As more consumer banking actions move to mobile applications, there is increased recognition of the importance in protecting these applications and the users from attacks and fraudulent behavior. Our expanded portfolio now offers both a post-compilation or wrapping approach and an SDK approach to provide next-gen in-app protection capabilities.

Turning to Digital Agreements, we also made meaningful progress during the quarter. Earlier this month, we announced exciting advancements and innovations that we are adding to OneSpan Sign, expanding the value it brings to e-signatures and the workflows involved with high-value agreements.

We continue to focus on purpose-built features and functions that serve the broader financial services vertical, where security, compliance, and assurance are core requirements. Our recent e-signature innovations are focused on three key areas: making agreements easier and faster to complete, strengthening identity and document assurance without adding unnecessary friction, and better connecting completed agreements into the systems and processes that drive the next business action in our customers' workflows.

This includes investments in a redesigned user experience, AI-assisted capabilities such as automatic document validation, as well as advanced identity verification and expanded integration capabilities. We are encouraged by continued healthy gross retention metrics and customer activity we are seeing, including expansion and longer-term contract commitments from large customers.

During the third quarter, a major banking customer of our Digital Agreements business meaningfully expanded its contract in both term and in size, moving from overages under the previous contract into a multi-year contract that will support their continued growth and utilization of OneSpan Sign. Stepping back, we are encouraged by the progress we are making as a company overall, both in Q3 and more broadly over the past few years.

We believe we are investing in the right strategic areas and putting the pieces in place to enable growth over the longer term, and we're proud that we are able to do so while also improving in the day-to-day execution of the business. Please note that the board has approved a quarterly dividend of 13 cents per share to be paid in the current quarter, and will continue to evaluate additional share repurchase opportunities.

Since the beginning of last year, we have returned $55 million, or just under $1.50 per share, to our shareholders through dividends and share repurchases. In summary, we had an excellent quarter, and continue to strengthen the business and position OneSpan for durable long-term growth.

With that, I'll turn the call over to Jorge.

Thanks, Victor, and good afternoon, everybody. I'm pleased to report another strong quarter and continued progress in positioning OneSpan for long-term growth.

Q3 revenue was $63.9 million, an increase of 12% compared to last year's third quarter. Subscription revenue grew 16% to $51.5 million, and hardware revenue grew 7%.

This growth was partially offset by an expected decline in perpetual maintenance revenue as customers move to term licenses. For the quarter, subscription revenue increased to 81% of total revenue, up from 78% in the prior-year quarter, while hardware and perpetual maintenance revenues accounted for a combined 19% of total revenue, as compared to 22% in last year's Q3.

Annual recurring revenue, or ARR, also continued to grow, increasing 8.5% year-over-year to $195.5 million. ARR growth was driven by expansion of existing customer contracts and new logos, as well as Build38, which contributed approximately 1.5 percentage points.

ARR increased $5.9 million sequentially, consistent with the expectation we shared last quarter of sequential quarterly growth in the second half of the year. Our net retention rate, or NRR, was 105%, up from 103% last quarter.

Third quarter gross margin was 76.3%, compared to 73.6% in Q3 of last year. GAAP operating income was $9.2 million, compared to $8.2 million in Q3 2025.

The year-over-year improvement reflects higher revenue and gross profit, partially offset by increased operating costs related to Build38, organic investments including certain costs related to go-to-market leadership, and higher share-based compensation expense and bonus accruals. GAAP net income per share was 20 cents, compared to 17 cents in the third quarter of last year.

Non-GAAP net income per share was 35 cents, compared to 33 cents in last year's Q3. Adjusted EBITDA and adjusted EBITDA margin were $19.3 million and 30.1%, respectively.

This is compared to $17.5 million and 30.7% in the same period last year. Next, I will discuss the third quarter financial results for two business divisions, starting with Cybersecurity.

Cybersecurity's revenue increased 11.3% to $44.9 million. Subscription revenue increased 17.4% to $32.5 million, primarily driven by customer expansion contracts, including an increase in multi-year term license revenue, new logos, M&A, new products, and an increase in past-due renewal catch-up revenue, as compared to last year's third quarter.

As a reminder, multi-year term license and catch-up revenue can vary from quarter to quarter. Hardware revenue grew 7% to $10.5 million, largely due to certain customers requesting earlier-than-anticipated deliveries of DIGIPASS tokens, which we had expected to ship in Q4.

As discussed last quarter, Q3 is typically our seasonally low hardware quarter, but deliveries were higher than we expected this year due to the timing of these shipments. Our full year 2026 hardware outlook has not changed, which means we now expect a correspondingly lower hardware contribution in Q4 than previously forecast.

Perpetual maintenance revenue in Cybersecurity declined, as expected. ARR for the Cybersecurity division increased 10.1% year-over-year to $127.2 million.

Gross margin was 77%, compared to 74% in the prior-year quarter. The increase in gross margin primarily reflects increased subscription revenue and a more favorable mix of hardware devices shipped, partially offset by incremental amortization of acquired software related to Build38.

Operating income was $18.5 million, or 41% of revenue, compared to $16.7 million, or 41% of revenue in last year's Q3. The year-over-year increase in revenue and gross margin was partially offset by higher operating expenses related to Build38 and higher organic investments to help drive future growth.

Now turning to Digital Agreements, revenue grew 13.5% to $19 million, driven by overages, expansion of renewal contracts, and new customer additions. As we discussed previously, overage revenue can be a positive indicator of transactional volume growth that can lead to expansion with existing customers.

As Victor mentioned earlier, a large customer generating overages renewed during the third quarter with a materially larger annual commitment. As a result, overage revenue from that customer has ended, and revenue from them is now ratable.

This also led to a sequential decline in overage revenue in Q3, and we expect a further sequential decline in overage revenue in Q4 towards more typical levels. ARR grew 5.7% year-over-year to $68.4 million.

As a reminder, overages are not included in ARR or NRR. Gross margin improved to 74%, up from 72% in the prior-year period, primarily reflecting higher revenue, including overage revenue, and greater efficiency in our cloud infrastructure costs.

Operating income was $6.9 million, or 37% of revenue, compared to $4.2 million, or 25% of revenue in the same period last year. The strong improvement in operating income was primarily driven by revenue growth and higher gross margin.

Turning to our balance sheet, we ended the third quarter with $51.4 million in cash and cash equivalents, and $5 million outstanding under our credit facility, which was repaid subsequent to quarter end. This compares to $43.3 million in cash and cash equivalents and $5 million of outstanding debt at the end of the second quarter of 2026.

During the quarter, we generated $16.5 million in operating cash flows. Primary uses of cash includes $4.8 million for our quarterly dividend and $2.9 million for capitalized software development costs.

By geographic region, revenue in the third quarter of 2026 was 43% from the Americas, 37% from EMEA, and 20% from Asia Pacific, compared to 46%, 38%, and 16%, respectively, in the third quarter of 2025. Revenue increased year-over-year across all three regions, led by APAC, followed by EMEA and the Americas.

Now turning to some modeling notes and our outlook, for the full year 2026, we are increasing our guidance to reflect our strong third quarter results and updated expectations for the remainder of the year. In Q4, we now expect software and services revenue to be higher than previously forecast, partially offset by lower hardware revenue due to the timing of shipments discussed earlier.

As a result of this shift in revenue mix, we now expect a higher Q4 gross margin, with our full year gross margin slightly above 74%. More specifically, for the full year 2026, we expect total revenue to be in the range of $254 to $258 million, as compared to our previous guidance range of $248 to $252 million.

We expect software and services revenue to be in the range of $208 to $210 million, as compared to our previous guidance range of $202 to $204 million. We expect hardware revenue to be in the range of $46 to $48 million, unchanged from our previous guidance.

We expect ARR to be in the range of $197 to $201 million, as compared to our previous guidance range of $194 to $198 million. We expect adjusted EBITDA to be in the range of $72 to $76 million, as compared to our previous guidance range of $67 to $71 million.

That concludes our remarks. I will now turn the call back to Victor.

Thanks, Jorge. To recap, we are pleased with our third quarter results and the progress we continue to make across the business.

We are executing well while continuing to invest in the opportunities we believe can drive stronger growth over time. At the same time, we continue to deliver solid profitability and return capital to shareholders.

We remain focused on executing our strategy and creating long-term value. Jorge and I will now be happy to take your questions.

Yes, can you hear me okay?

We can hear you, Erik. How are you?

Hi Erik, we can hear you. Great.

Congrats, and good to see the upgraded system here. On the hardware, can you comment how you're thinking about hardware going forward?

I know you're not guiding for fiscal '27, but are you thinking at this point that hardware is at a sustainable level? Are the FIDO2 tokens enabling you to offset any of the legacy declines?

Thank you very much for the question. We used to talk about hardware saying if we could just offset the decline and be flattish, it would really improve our business, and we're starting to see that.

I think if you look at our guidance for the year, it implies being down just a couple, just a few percent from last year. Of course, we're not giving 2027 guidance yet, but we do think that we have a much more sustainable hardware business at the level we're currently at, and some of that will come from the FIDO2 security keys increasingly in '27 and subsequent years.

Can you give any update specific to the FIDO2 tokens, how's that business performing?

Eric, it is definitely picking up speed, and I expect that when we get to next quarter, we'll be able to give you a lot more details on that. To date, the business through the first three quarters, it is still overwhelmingly related to our older banking tokens.

Good. Congratulations.

Thank you.

Great. Thanks for taking the question and yeah, congratulations on the good set of numbers.

It was really nice to see, particularly after some of the results we saw yesterday.

Thank you, Gray. Thanks.

Absolutely. It was really good to see the improvement in net new ARR in the cybersecurity division.

Look, I know that over the last 12 months, there've been some quasi-one-time issues there. Just where are we now?

Do you think that the business is in a good spot? Should the success you saw in Q3 be more indicative of your performance going forward?

Gray, yeah. Again, we're not going to give 2027 guidance, but we do feel better about the business than we did six months to 12 months ago.

The launch of DIGIPASS ONE, I want to touch upon this a little bit. It certainly helps in our conversations with customers.

You see things like our GRR going up, as we are investing in solutions for them and they feel more comfortable with the direction we're headed in. Bear in mind that two of the four components of DIGIPASS ONE are not out yet.

We're expecting to release Verify in Q1 and then subsequently after that, we'll release Insights. We think there is an opportunity as we said in the prepared remarks, to drive faster growth for the business overall.

The framework and the preparatory work, we feel like we've done a lot of that and we're looking forward to continuing to improve the business. By the way, I mentioned at the beginning, I'm really proud of the team.

We've improved OneSpan both on the digital agreements and cybersecurity business a lot over the last few years, very proud of that.

Excellent. Thank you very much.

That's all I have.

Thank you.

Thanks, Gray.

Great, thanks for taking my questions. A lot of momentum, guys.

The quarter certainly looks like a strong quarter here. Few questions for me.

Firstly, just understanding net new ARR in the quarter, any color you can share on just how broad-based that was or concentrated it was, what products really drove that, and just the mix between new logos and expansion activity that drove the net new ARR?

Thanks, Rudy, for the question.

Go ahead, Jorge.

I can give you a little color. No, look, and I think we're very proud of the metric going back to 8.5% of ARR, and net new ARR to your point, $5.8 million for this quarter.

Largely, the product set is the existing products and kind of the legacy products that we normally sell licenses on-prem, OCA, etc. We did have a little bit of a contribution from the new products with Build38 and ProvenDB as well through the partnership, but that wasn't overwhelmingly what drove the number up.

I think we see progress there, which is how would I characterize it, progress in the new products. Hopefully, we can continue to accelerate those.

Largely is the existing products, and primarily as our net new ARR or ARR growth primarily comes from expansion of existing business on both digital agreements on transactional volumes, and Victor alluded to the large expansion that we closed this quarter. We signaled in terms of the overages from last quarter, and we said normally that is a leading indicator for expansion.

That was the case for that large customer, which we're pleased with. Then on the security side, and expansion also came from existing customer base.

It's good to see when customers are renewing, they renew with this expansion and not only in certain regions. It's sporadic across all the regions that we normally see, we're pretty pleased with that.

Rudy, I was going to just add to what Jorge said. This is not a revenue number, but on a bookings basis, we did fairly well across many geographies.

It wasn't just one geography or one area, it was great to see.

Got it. Super helpful.

I guess for me, it similar maybe question to Gray. I believe asked it.

I think the question on a lot of investors' minds is when can $5 million-plus of net new ARR a quarter become the average or just the base, if you will? It's certainly been lumpy over the last few years.

You have some new products that you've launched and still some on the way, I guess. I hear your comments that you found better than 6, 12 months ago.

I guess, I don't know, is 2027 feel like the year where really we could kind of escape kind of the growth ranges that we've been in and see some real acceleration, or just how should we think about that at this stage?

No, I understand the question, of course, and we haven't as a business finalized our 2027 planning, it would be completely premature for us to be giving specific guidance for '27. However, we are introducing new products, right?

On the cybersecurity side, you can see the strategy of DIGIPASS ONE where we want to provide more value to our customers and earn more revenue from them by providing more capabilities, and so we'll be doing that. Now keep in mind you know this, I'm sure, dealing with many of the companies you cover, you introduce a new product in Q1, the sales cycles at large banks are not 60 days.

They tend to be longer than that, it'll take a little while for that to have a revenue impact, but we do think it's going to help the business overall. As I mentioned, it does help the renewal rates and the GRR, and obviously once you start landing those deals, it helps NRR as well.

We feel like we're going in the right direction. Also, the digital agreements business has been introducing new capabilities on the platform, and we think that's going to help that business as well.

We feel good about the trajectory, I would say, without getting into the specifics of 2027 growth rates.

Thank you for taking my question, and congrats on nice progress here. I'm just curious, the ARR growth is slowing down a little bit in the fourth quarter.

Is there any seasonality there, or how should we think about that? Hi,

Anja, thanks for the question. When you look at the guide that we put in, $199 million at the midpoint, that implies a 6.5% year-over-year growth.

I think, obviously, this is where we feel comfortable with. Hopefully, we can exceed it, Anja.

I think there's a lot of indications as well we mentioned last quarter. A couple of the large churns that we had, some of those related to the passkeys before we acquired the business.

Those are going to continue to be with us for the next couple of quarters still, Anja, those are factored in. I would say we should expect to see a relatively consistent number where we saw this quarter.

Hopefully, we can do a little better, but that's the midpoint of what we decided to guide towards, Anja.

Thank you. Then, could you just bucket your growth with existing customers versus adding new logos?

I think maybe we should unpack it by the two business units. When it comes to the security, it is largely an expansion driver when it comes to ARR.

As I mentioned, a little bit of the contribution came from the new products, and so our goal is to continue to expand that contribution from new products into the customer base. Of course, we like to have new logos, but just because of the market share that we have in some regions, new logos tend to be, particularly on security, a lower contribution to the mix.

On the digital agreements side, the new logo contribution is slightly higher, maybe it's 20, 20% to 30% when it comes to ARR growth, and we want to continue to get that contribution because it is a land-and-expand, Anja, as we mentioned before. DA is completely land-and-expand.

You've got to land and then expand them. At this point, it's still largely an expansion from ARR.

We are running go-to-market initiatives to accelerate the new logo contribution and landing, and so that's all I can tell you at this point. I don't know if you have any other thoughts.

That's accurate. I alluded to this a few minutes ago.

When you're talking about large banks, the sales cycles tend to be kind of lengthy, new logos will be harder to come by. We have 60 of the 100 biggest banks in the world as customers, we already have the majority of the top 100.

Of course, we're trying to get new logos, and we do. We do add new logos, but most of our growth comes from existing customers, which is why our strategy is to add value, add products, and have more to sell them, because that's the most straightforward way to drive higher growth in the business.

Hi, good afternoon. Couple product questions.

For clarification, passkeys, does that cannibalize the DIGIPASS hardware, or does a hybrid model protect that revenue? Then I got a couple few others.

Thanks.

Catharine, great question. There is a mix of use cases by our customers.

Some people prefer hardware authentication. Passkeys are certainly a modern authentication method that are safe and convenient, and so there's going to be a mix.

It kind of depends on the end market, the geography, and also the use case. Hardware authentication is not inconvenient if you're doing your banking in front of a big screen, multiple monitors, with a desktop or a laptop computer.

You keep your hardware token in a drawer, you pull it out, you authenticate, super safe, and not inconvenient. You see that proportionally more in corporate than you do in retail banking, for example.

It also varies greatly by geography. Hardware is much more prevalent in Europe and in APAC, and much less so in North America, for example.

):

Then digital agreements, just for my knowledge or everybody's, are those AI features priced separately, or are they bundled when you sell that? Congratulations on that quarter.

That sounds really good.

We have to date bundled the capability to create differentiation in the marketplace, and TBD on how we handle future enhancements, but that's what we've done to date. ):

All right, thank you very much.

Thank you.

Thanks, Catharine.