Q1 2025 OneSpan Inc Earnings Call
Yeah.
Operator: Good day and thank you for standing by.
Good day and thank you for standing by welcome to the Q1 2025, one span earnings conference call at.
Operator: Welcome to the Q1 2025 OneSpan 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. To withdraw your question, please press star 1 1 again. please be advised that today's conference is being recorded.
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 one on your telephone you will then hear an automated message advising your hand is raised.
To withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
Joe Maxa: 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.
I would now like to hand, the conference over to your first speaker today, Joe Maxa, Vice President of Investor Relations.
Please go ahead.
Speaker Change: Thank you operator, Hello, everyone and thank you for joining the <unk> first quarter 2025 earnings Conference call. This call is being webcast and can be accessed on the Investor Relations section of <unk> website at investors <unk> com.
Joe Maxa: 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.
Joe Maxa: Joining me on the call today is Victor Limongelli, our Chief Executive Officer. and Jorge Martell, our Chief Financial Officer.
Speaker Change: Joining me on the call today is victor or a module.
Speaker Change: Chief Executive Officer.
Speaker Change: And Jorge Mark Hill, our Chief Financial Officer.
Joe Maxa: This afternoon, after market close, OneSpan 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.
Speaker Change: This afternoon after market close once been 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.
Speaker Change: Following our prepared comments today, we will open the call for questions.
Joe Maxa: 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. Securities and Exchange Commission for a discussion of such risks and uncertainties.
Speaker Change: Please note that statements made during this conference call back awake and future plans.
Speaker Change: Our performance.
Speaker Change: Including the outlook for full year 2025, and other long term financial targets are forward looking statements.
Speaker Change: These statements involve risks and uncertainties and are based on current assumptions.
Speaker Change: Consequently, actual results could differ materially from the expectations expressed in these forward looking statements.
Speaker Change: I direct your attention to today's press release and the call.
Speaker Change: These filings with the U S Securities and Exchange Commission for a discussion of such risks and uncertainties.
Joe Maxa: 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 in-depth 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.
Speaker Change: 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.
Speaker Change: We have provided an explanation for and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.
Speaker Change: Earnings press release and in the Investor presentation.
Speaker Change: Presentation available on our website.
Speaker Change: In addition, please note that all growth rates discussed on this call refer to are year over year basis, unless otherwise indicated.
Joe Maxa: 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.
Speaker Change: The date of this conference call is May <unk> 2025.
Speaker Change: Any forward looking statements and related assumptions are made as of this date.
Speaker Change: 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.
Victor Limongelli: 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. 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% higher than last year's first quarter record of $20 million. and our adjusted EBITDA reached a record high 36% of revenue. First quarter 2025, ARR grew 9%.
Victor: I will now turn the call over to Victor.
Victor: Thank you Joe.
Victor: And thank you everyone for joining us today for our first quarter earnings call.
Victor: I am very pleased that we reported another strong quarter driven by the great work and discipline of the team and continuing to optimize our cost structure.
Victor: As well as a more favorable revenue mix as compared to last year we.
Victor: We achieved record high adjusted EBITDA of $23 million, which was nearly 15% higher than last year's first quarter record of $20 million.
Victor: And our adjusted EBITDA reached a record high 36% of revenue.
Victor: First quarter 2025, <unk> grew 9%.
Victor Limongelli: in line with the growth rate implied by the midpoint of our full year 2025 guidance. Q1 subscription revenue also grew 9% and was driven by demand for our software authentication, app shielding, and e-signature solution. 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 call. 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 years.
Victor: In line with the growth rate implied by the midpoint of our full year 2025 guidance.
Victor: Q1 subscription revenue also grew 9% and was driven by demand for our software authentication App shielding and esignature solutions.
Victor: As expected total revenue declined slightly in the first quarter.
Victor: The growth in subscription revenue was primarily offset by the following three trends that we've discussed on prior calls.
Victor: First banks in EMEA too.
Victor: Sure extent in APAC over the past few years have been adopting mobile first policies with respect to consumer banking authentication.
Victor: This has resulted in lower hardware revenues in recent quarters.
Victor Limongelli: When a customer transitions to our software solutions from hardware. All else equal, we see lower revenue in the short Although the gross margin profile of our software offerings is obviously better than is the case with hardware. Second, in 2024, we transitioned certain legacy perpetual maintenance contracts to term-based subscription. 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 dollars spread over the second half of 2025 and then minimal headwinds in 2026.
Victor: When a customer transitions to our software solutions from hardware.
Victor: All else equal we seen lower revenue in the short run.
Victor: Although the gross margin profile of our software offerings is obviously better than is the case with hardware.
Victor: Second in 2024, we transitioned certain legacy perpetual maintenance contracts to term based subscriptions.
Victor: Which had the effect of lowering maintenance revenue in Q1 2025.
Victor: <unk> to the prior year period.
Victor: And third headwinds related to sunset. It 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.
Victor Limongelli: I'll now provide additional commentary specific to each business. In security, subscription revenue grew 7% and included headwinds from sunsetted products of approximately 3%. In general, growth and security subscription revenue is primarily driven by expansion contracts with our existing global security customers, including many of the world's largest Regarding our on-time renewal rate, it slipped by a few percentage points in the first quarter, primarily due to two seven-figure renewal that were expected to close at the end of March.
Victor: I'll now provide additional commentary specific to each business unit.
Victor: In security subscription revenue grew 7% and included headwinds from sunsetting products of approximately three percentage points.
Victor: 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.
Victor: Regarding our on time renewal rate it slipped by a few percentage points in the first quarter.
Victor: Primarily due to two seven figure renewal contracts that were expected to close at the end of March.
Victor Limongelli: 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 antifrost solutions that are designed to mitigate even the most advanced account takeover and other hacking attacks. 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.
Victor: One of the contracts actually expanded to three years from one year and has closed in early Q2 the.
Victor: The other contract is also expected to close this quarter.
Victor: 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 attacks.
Victor: Given our strong customer base and leading position in the authentication market.
Victor: 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.
Victor: In other words, we believe that we can further help our customers solve their emerging authentication and security challenges.
Victor Limongelli: In digital agreements, Q1 subscription revenue grew 13%. Growth in 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 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 commitment.
Victor: In digital agreements Q1 subscription revenue grew 13%.
Victor: And subscription revenue was primarily driven by expansion contracts.
Victor: Lesser extent new logos.
Victor: Both business units, where again nicely profitable at the segment level with security continuing to be very profitable.
Victor: And we believe we are well positioned to achieve our stated goals for both business units to deliver growth and strong profitability.
Victor: 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.
Victor Limongelli: 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 $0.12 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.
Victor: Before turning the call over to Jorge I want to briefly highlight our robust cash generation and the dividend we paid during the quarter.
Victor: We generated $29 million in cash from operations and ended the quarter with $105 million in cash on hand.
Victor: During the quarter, we paid a <unk> 12 per share dividend.
Victor: Totally approximately $4 6 million.
Victor: It was the first quarterly dividend paid as part of the company's recurring quarterly dividend program.
Victor: The board approved our second <unk> <unk> per share dividend to be paid in the current quarter and plans to continue operating with a balanced capital allocation strategy waiting potential increases in the capital returned to shareholders as well as organic investments in the business and targeted M&A.
Jorge Martell: With that, I will turn the call over to Jorge. Thank you, Victor, and good afternoon, everyone. I am pleased that we reported another strong quarter. However, I am particularly pleased with our strong cash generation and record adjusted EBITDA. We generated more than $29 million in cash from operations and adjusted EBITDA was $23 million. ARR grew 9% to $168.4 million, and our net retention rate, or NRR, was 107%. ARR and NRR primarily benefited from customer expansion contracts, and ARR, to a lesser extent, also benefited from new customers.
Jorge: With that I will turn the call over to Jorge.
Jorge: Thank you Victor and good afternoon, everyone.
Jorge: I am pleased that we reported another strong quarter, however, I am, particularly pleased with our strong cash generation and a record adjusted EBITDA.
Jorge: We generated more than $29 million in cash from operations and adjusted EBITDA was $23 million.
Jorge: <unk> grew 9% to $158 4 million and our net retention rate or <unk> was 107%.
Jorge: And in Iraq, primarily benefited from customer expansion contracts.
To a lesser extent also benefited from new customers.
Jorge Martell: First quarter 2025 revenue was $63.4 million or 2% less than last year's Q1. Digital agreements revenue grew 9% and security solutions revenue declined 5% in line with expectations. We continue to focus on driving subscription revenue growth, which grew 9% in the quarter, led by 13% growth in digital agreements and 7% growth in security. First quarter growth margin was 74% compared to 73% in the prior year quarter. The slight increase in gross margin was primarily driven by favorable product mix and improved operational efficiencies in both business units as compared to last year. first quarter GAAP operating income was $17.2 million compared to $14.1 million in the first quarter of last year.
Jorge: First quarter of 'twenty, and 'twenty fire revenue was $63 4 million or 2% less than last year's Q1.
Jorge: Tangible agreements revenue grew 9% and security solutions revenue declined 5% inline with expectations.
Jorge: We continue to focus on driving subscription revenue growth, which grew 9% in the quarter led by 13% growth in data agreement and 7% growth in security.
Jorge: First quarter gross margin was 74% compared to 73% in the prior year quarter.
Jorge: The slight increase in gross margin was primarily driven by favorable product mix and improved operational efficiencies in both business units as compared to last year.
Jorge: First quarter GAAP operating income was $17 2 million compared to $14 1 million in the first quarter of last year.
Jorge Martell: The increase in operating income is primarily attributed to a higher gross margin, lower operating expenses due to the cost savings initiatives we executed in 2024, and lower restructuring costs. Gap net income per share was $0.37 in the first quarter of 2025, compared to $0.35 in the same period last year.
Jorge: The increase in operating income is primarily attributed to a higher gross margin lower operating expenses due to the cost savings initiatives executed in 2024 and lower restructuring costs.
Jorge: GAAP net income per share was 37% in the first quarter of 2025 compared to 35 cents in the same period last year.
Jorge Martell: For non-GAAP reporting purposes, I'd like to call your attention to changes we made this quarter. Given the significant growth in our profitability in 2024 and to provide better consistency across interim reporting periods in 2025 and beyond, we have used a forecasted long-term projected non-gap tax rate of 20% for the purpose of determining our non-gap net income and non-gap net income per share. We're also now including employer payroll taxes related to employee stock-based awards with our long-term incentive compensation expense in our non-gap reconciliation tables and have adjusted prior period amounts to reflect both of these changes.
Jorge: For non-GAAP reporting purposes, I'd like to call your attention to changes we made this quarter.
Jorge: Given the significant growth in our profitability in 2024 and to provide better consistency across interim reporting periods in 2025 and beyond we have used our forecasted long term projected non-GAAP tax rate of 20% for the purpose of determining our non-GAAP net income.
Jorge: And non-GAAP net income per share.
Jorge: We're also now including employer payroll taxes related to employee stock based awards with our long term incentive compensation expense in our non-GAAP reconciliation tables and have adjusted prior period amounts to reflect both of these changes.
Jorge Martell: Please refer to our Q1 earnings release and the investor presentation that can be found on our investor relations website for additional details regarding this change. Non-GAAP earnings per share, which excludes long-term incentive compensation and related payroll taxes, amortization, restructuring charges, and other non-recurring items, and the impact of tax adjustments, was $0.45 in the first quarter of 2025 compared to $0.39 in the first quarter of 2020. First quarter adjusted EBITDA and adjusted EBITDA margin was 23 million and 36.4%, all of which were new records for us. compared to 20.2 million and 31.2% in the same period of last year, respectively.
Jorge: Please refer to our Q1 earnings release and the Investor presentation that can be found on our Investor Relations website for additional details regarding these changes.
Jorge: non-GAAP earnings per share, which excludes long term incentive compensation and related payroll taxes amortization restructuring charges and other nonrecurring items and the impact of tax adjustments, but 45 in.
In the first quarter of 2025% compared to 39 in the first quarter of 2024.
Jorge: First quarter, adjusted EBITDA, and adjusted EBITDA margin was $23 million and 36, 4% both of which were new records for us.
<unk> to $22 million and 31, 2% in the same period of last year, respectively.
Jorge Martell: turning to our Security Solutions Business Unit. ARR grew 7% year-over-year in the first quarter to $107 million. First quarter security revenue declined 5% to $47.7 million.
Jorge: Turning to our secure solutions business unit.
Jorge: <unk> grew 7% year over year in the first quarter to $107 million.
Jorge: First quarter security revenue declined 5% to $47 7 million.
Jorge Martell: Growth in subscription revenue was offset by headwinds from sunsetted products, the expected decline in hardware, and the expected decline in maintenance and support, and professional services as we transitioned to SaaS and turned software licenses over time. security subscription revenue increased 7% to $28.1 million. Growth in subscription revenue was primarily driven by expansion of licenses from existing customers for our software-based authentication and app shielding products, partially offset by the sunsetting of our legacy deal flow solution. Q1 2025 gross margin was 76% as compared to 74% in the first quarter of 2024. The increase in margin is primarily attributable to favorable products and customers.
Jorge: Growth in subscription revenue was offset by headwinds from sunset products. The expected decline in hardware and the expected decline in maintenance and support and professional services as we transition to SaaS and term software licenses overtime.
Jorge: Security subscription revenue increased 7% to $28 1 million.
Jorge: Growth in subscription revenue was primarily driven by expansion of licenses from existing customers for our software based authentication and that's shielding products, partially offset by the sunsetting of our legacy deal flow solution.
Jorge: Q1, 2025 gross margin was 76% as compared to 74% in the first quarter of 2024.
Jorge: The increase in margin is primarily attributable to favorable product and customer mix.
Jorge Martell: Security segment operating income was $24.2 million compared to $25.9 million in last year's first quarter, primarily due to lower revenue and gross profit. security segment operating margin was 61% in both periods.
Jorge: Securities segment operating income was $24 2 million compared to $25 9 million in last year's first quarter, primarily due to lower revenue and gross profit.
Jorge: Securities segment operating margin was 51% in both periods.
Jorge Martell: Now turning to digital agreement. ARR grew 12% to $61 million. Revenue grew 9% to $15.7 million. The increase in revenue was primarily driven by new contracts and expansion of renewal contracts. partially upset by a reduction in maintenance revenue related to the sunsetting of our on-premise extinguisher project. Headwinds related to sunsetted products impacted revenue growth by about 4%. Subscription revenue grew 13% to $15.5 million. Maintenance and support revenue was negligible in the quarter as compared to half a million in Q1 of last year.
Jorge: Now turning to digital agreements.
<unk> grew 12% to $61 million.
Jorge: Revenue grew 9% to $15 7 million.
Jorge: The increase in revenue was primarily driven by new contracts and expansion of renewal contracts, partially offset by a reduction in maintenance revenue related to the sunsetting of our on premise E signature product.
Jorge: Headwinds related to sunset of products impacted revenue growth by about.
Jorge: <unk> four percentage points.
Jorge: Subscription revenue grew 13% to $15 5 million.
Jorge: Maintenance and support revenue was negligible in the quarter as compared to half a million dollars in Q1 of last year.
Jorge Martell: The year-over-year decline is attributed to the sunsetting of our on-premise e-signature First quarter gross margin was 70% as compared to 69% in the prior year quarter. The increase in margin was primarily driven by higher SAS revenue and improved operating leverage, partially offset by lower maintenance revenue due to the transition to SAS Lite. segment operating income was $3.4 million or 22% of revenue. as compared to an operating loss of $0.3 million or negative 2% of revenue in the first quarter of last year.
Jorge: Year over year decline is attributed to the sunsetting of our on premise esignature solution.
Jorge: First quarter gross margin was 70% as compared to 69% in the prior year quarter.
Jorge: The increase in margin was primarily driven by higher SaaS revenue and improved operating leverage partially offset by lower maintenance revenue due to the transition to SaaS licenses.
Jorge: Segment operating income was $3 4 million or 22% of revenue.
Jorge: As compared to an operating loss of zero point $3 million or negative <unk>, 2% of revenue in the first quarter of last year.
Jorge Martell: The year-over-year improvement in performance was driven by increased revenue and gross profit and a decrease in operating expenses due to lower head Now turning to our balance sheet.
Jorge: The year over year improvement in performance was driven by increased revenue and gross profit.
Jorge: A decrease in operating expenses due to lower head count.
Jorge: Now turning to our balance sheet.
Jorge Martell: We ended the first quarter of 2025 with $105.2 million in cash and cash equivalents compared to $83.2 million at the end of 2024. Doing part to the seasonality of our collections with the first quarter being typically the strongest of the year, we generated $29.4 million in cash from operations during the quarter as compared to $27 million in the first quarter of last year.
Jorge: We ended the first quarter of 2025 with $105 2 million in cash and cash equivalents compared to $83 2 million at the end of 2024.
Julian: Julian part to the seasonality of our collections with the first quarter of being typically the strongest of the year, we generated $29 $4 million in cash from operations during the quarter as compared to $27 million in the first quarter of last year.
Jorge Martell: We have no long-term. Geographically, our revenue mixed by region in the first quarter of 2025 was consistent with the first quarter of last year. EMEA accounted for 49%, the Americas accounted for 33%, and Asia-Pacific accounted for 18% of revenue, respectively, in each period.
Jorge: We have no long term debt.
Jorge: Geographically our revenue mix by region in the first quarter of 2025, what's consistent with the first quarter of last year.
Jorge: Counted FERC, 49% the Americas accounted for 33% at.
Jorge: In Asia Pacific accounted for 18% of revenue respectively in each period.
Jorge Martell: Moving to our financial outlook and modeling notes. Though we are, of course, pleased with our Q1 performance and continue to expect double-digit subscription revenue growth for the full year of 2025, we are monitoring the potential impact of tariffs and foreign currency. A single-digit percentage of our hardware revenue has potential tariff exposure, and thus, based on the tariffs currently announced, we estimate that we could see up to $1 million of incremental tariff-related costs for the full year 2025. The timing of customer orders could also be impacted by this tariff. In addition, significant changes in foreign currency rates could affect our results.
Jorge: Moving to our financial outlook and modeling belts.
Jorge: But we are of course pleased where Q1 performance and continue to expect double digit subscription revenue growth for the full year of 2025, we are monitoring the potential impact of tariffs and foreign currency.
Jorge: A single digit percentage of our hardware revenue has potential tariff exposure and das.
Jorge: On the tariffs currently announced we estimate that we could see up to $1 million of incremental tariff related costs for the full year of 2025.
Jorge: The timing of customer orders could also be impacted by the tariffs.
Jorge: In addition, significant changes in foreign currency rates could affect our results.
Jorge Martell: That said, given the confidence we have in our core business, at this time we are affirming our previously issued guidance. More specifically, we expect revenue to be in the range of $245 to $251 million. ARR to end the year in the range of $180 to $186 million. and adjusted EBITDA to be in the range of $72 to $76 million.
Jorge: Third given the confidence we have in our core business at this time, we are affirming our previously issued guidance more specifically, we expect revenue to be in the range of $245 million to $251 million.
Jorge: <unk> <unk> a year in the range of $180 million to $186 million.
Jorge: And adjusted EBITDA to be in the range of $72 million to $76 million.
Jorge Martell: For additional modeling points, I'd like to remind you that due to the secular industry shift from hardware to mobile authentication, we expect Q2 2025 hardware revenue to be in a similar range as compared to the prior three quarters. For the full year 2025, we believe a strong focus on operational excellence will enable us to achieve another year of strong profitability and cash generation, and enable us to continue returning capital to shareholders via quarterly cash dividends, and potentially other methods as part of a balanced capital allocation strategy.
Jorge: But additional modeling poised I'd like to remind you that due to the secular industry shift from hardware to mobile authentication. We expect Q2 of 2025 hardware revenue to be in a similar range as compared to the prior three quarters.
Jorge: For the full year of 2025, we believe our strong focus on operational excellence will enable us to achieve another year of strong profitability and cash generation and enable us to continue returning capital to shareholders via quarterly cash dividends and potentially other methods as part of our balanced.
Jorge: Our capital allocation strategy.
Jorge Martell: That concludes my remarks.
Victor Limongelli: I'll turn the call back over to Victor. Thanks, Jorge. To recap, we had a strong quarter and I'm very proud of the OneSpan team's performance. Beyond the first quarter, however, we know that we have more work to do in order to deliver an excellent year. We are committed to delivering value to our customers and to returning value to our shareholders by growing revenue efficiently and profitably. and we will continue to focus on driving towards achieving a Rule 40 performance.
Jorge: That concludes my remarks, I'll turn the call back over to Victor.
Victor: Thanks, Lori <unk>.
Victor: To recap, we had a strong quarter and I'm very proud of the <unk> team's performance.
Victor: The first quarter. However, we know that we have more work to do in order to deliver an excellent year.
Victor: We are committed to delivering value to our customers and to returning value to our shareholders by growing revenue efficiently and profitably.
Victor: And we will continue to focus on driving towards achieving a rule of 40 performance level.
Victor Limongelli: Jorge and I will now be happy to take your questions. Thank you.
Victor: Jorge and I will now be happy to take your questions.
Operator: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. please stand by while we'll compile the Q&A roster.
Speaker Change: Thank you at this time, we will conduct a question and answer session.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Please stand by global compile the Q&A roster.
Catharine Trebnick: Our first question comes from the line of Catharine Trebnick of Horizon Plot. Your line is now open. Oh, hey, good afternoon. Thanks for taking my question. You know, on your tariff on the hardware piece, you know, how much of the revenue is you expect to be from Europe? Because you really have only recently, you know, really took on marketing towards the US Bank. So I just kind of like to piece part that a little bit more if you don't mind. Thank you.
Speaker Change: Okay revenue. Our first question comes from the line of Catherine <unk> frozen.
Speaker Change: Your line is now open.
Catherine: Oh, Hey, good afternoon, Thanks for taking my question.
Speaker Change: On your on the hardware piece.
Speaker Change: How much revenue do you expect to be from Europe really have only recently.
Speaker Change: It really took on marketing towards the U S Bank. So I just kind of like the piece parts that a little bit more if you don't mind. Thank you.
Victor Limongelli: Yeah.
Victor Limongelli: Hi, Catharine. This is Victor. So, as you noted, the U.S. exposure is pretty small for us, and as Jorge mentioned, at the currently announced tariff rates, the expense impact, even if they stayed in effect for the rest of the year and we had the same orders as last year, would be pretty small. Europe is our biggest market for hardware. Jorge, I don't know if you have the specific numbers at hand, but it's definitely an important market for us. But... We haven't seen any, at least to date, any tariff impact in Europe from other markets. And we do produce some of the hardware in Europe as well.
Victor: Yes, Hi, Katherine this is Victor so the as you noted the U S exposure is pretty small for us and as Jorge mentioned.
Victor: The current currently announced tariff rates.
Victor: The expense impact even if they stayed in effect through the rest of the year and we had the same orders as last year would be would it be pretty small.
Victor: Europe is our biggest market.
Victor: For hardware work I don't know if you have the specific numbers.
Victor: At hand, but it's definitely an important market for us.
Victor: But.
Victor: We haven't seen any.
Victor: At least to date any tariff impact in Europe from other markets and we did produce.
Victor: <unk>.
Victor: Some of the hardware in Europe as well, we have a production line in within the EU, Although most of the production is in Asia.
Victor Limongelli: We have a production line within the EU, although most of the production is in Asia. Yeah, I don't have a number of hands, Catharine. But yeah, I think it's obviously meaningful. EMEA is the largest region that we that we, you know, record revenue from hardware, I would venture to say it's probably over 50%. But to this point, it is not, you know, it's not subject to tariffs or the incremental tariffs or the tariff changes in any tariffs in 2025. So far from China to the Oh, no, that's very helpful. I appreciate it.
Speaker Change: Yes, I don't have those numbers.
Speaker Change: Offhand, Catherine, but yes, I think it's obviously a meaningful EMEA is the largest region that we that we.
Speaker Change: Record revenue from hardware I would venture to say its probably over 50% but to this point.
Speaker Change: Is not.
Speaker Change: It is not subject to tariffs of incremental tariffs or the tariff changes and any Paris in 2025, so far from China to the EU.
Speaker Change: Oh, no that's very helpful. I appreciate it I'll pass it on and come back. Thank you. Thanks, Catherine Thank you for the question.
Catharine Trebnick: I'll pass it on and come back. Thank you. Thanks, Catharine. Thank you for the question.
Speaker Change: Thank you.
Trevor Rambo: Our next question comes from the line of Trevor Rambo of BTIG, your line is now open. Great. Hi, guys. This is Trevor on for Gray Powell. Thanks for taking the questions. So just two from my side. One, you talked about the two large deals slipping out of Q1 into Q2. Could you quantify the impact of those deals on ARR? And can you touch a bit more on what you saw in general in the quarter in terms of customer buying behavior compared to your expectations?
Trevor Remo: Our next question comes from the line of Trevor Remo <unk>. Your line is now open.
Trevor Remo: Great Hi, guys. This is Trevor on for Gray Powell, Thanks for taking the questions.
Trevor Remo: So just two from my side.
Trevor Remo: You talked about the two large deals slipping out of Q1 into Q2 could you quantify the impact of those deals on <unk>.
Trevor Remo: Can you touch a bit more on what you saw in general in the quarter in terms of customer buying behavior compared to your expectations.
Victor Limongelli: Yeah, yeah, to handle the first one, I'll take the second. Yeah, so to quantify, so really when you think about the ARR impact, so you have to think about, because it's on the subscription, it's on the security subscription, Trevor, really have to think about the start date of that contract, right? We talked about on-time renewals, when we measure on-time renewals, we measure them based on the expiration. So these two contracts, the expiration was the end of the Q1, but the start date was April 1st, Trevor, and so they didn't have an impact on Q2, on Q1 ARR, but and so just to differentiate between the on-time renewals, right, versus the ARR impact Trevor, okay, that makes two.
Trevor Remo: Yes, yes.
Speaker Change: Handle the first one I'll take the second yeah. So to quantify so that really when you think about the <unk> impact. So you have to think about because he is on the subscription is the security subscription Trevor.
Speaker Change: Really have to think about the start date of that contract right. We've talked about on time renewals that we measure on time renewals of <unk> based on the exploration. So these two contract exploration exploration was the end of the quarter Q1, but the start date was April.
Speaker Change: April 1st Trevor So they didn't have an impact on Q2 on Q1.
Speaker Change: But and so just to diversify but to the on time renewals right versus the impact is what I clarified that.
Speaker Change: Okay that makes sense.
Speaker Change: Uh huh.
Victor Limongelli: Yeah, just to take your second question was, how have we seen fires act so far in 2025? Is that the gist of the question? Yes, you got it. So we've been, obviously there's a lot going on in the world, but we've been pleased so far through the first four months of the year. We had, obviously we don't report bookings per se, but we had a good bookings Q1 and Q2 looks solid as well. A little hard to say how things will shake out later in the year, but we've been happy with the sales team's performance so far this year.
Speaker Change: Yes.
Speaker Change: Take your set your second question was how have how have we seen buyers act. So far in 2025 is that the gist of the question.
Speaker Change: Yes, you got it.
Speaker Change: So we've been obviously theres a lot going on in the world, but we've been pleased so far through the first four months of the year.
Speaker Change: We had obviously, we don't report bookings per se, but we had a good bookings Q1, and Q2 looks solid as well.
Speaker Change: A little hard hard to say, how things will shake out later in the year, but we've been we've been happy with the sales team's performance so far this year.
Speaker Change: And.
Victor Limongelli: You know, it's probably one of the upsides maybe that we have relatively less exposure to to the U.S. market on the security side compared to some others, but we've been doing well so far this year on a bookings perspective.
Speaker Change: It's probably one of the upsides, maybe that we have.
Speaker Change: Relatively less exposure to.
Speaker Change: So the U S market on the security side compared to some others, but.
Speaker Change: We have been doing well so far this year on a on a bookings perspective.
Trevor Rambo: Great, great. That makes a lot of sense. I appreciate the color.
Speaker Change: Great Great that makes a lot of sense I appreciate the color.
Trevor Rambo: And then maybe my second one on the guide.
Speaker Change: And then maybe my second one on the guide.
Victor Limongelli: So can you touch on the guidance and what you're seeing in terms of what's giving you confidence in keeping that outlook unchanged, despite a lot of the macro uncertainty we're seeing right now? Because we've seen a few companies previously report and take some of their expectations down. So I'm just curious as of what you're seeing specifically in your business that's driving that level of confidence to keep the guidance. Yeah, thanks Trevor. I think what I just alluded to, we've had a good year, I mean year or four months, we've had a good start to the year in terms of booking, in terms of the levels that we're booking versus our plan.
Speaker Change: So can you touch on the guidance and what Youre seeing in terms of what's giving you confidence and keeping that outlook unchanged. Despite a lot of the macro uncertainty were seeing right now because we've seen a few companies previously report and take some of their expectations down. So I'm just curious as to what you're seeing specifically in your business Thats driving.
Speaker Change: That level of confidence to keep the guide unchanged.
Trevor Remo: Yeah. Thanks, Trevor I think what I just alluded to we've had a good year I mean year four months, we've had a good start to the year in terms of booking.
Speaker Change: In terms of the <unk>.
Trevor Remo: Levels that were booking versus our plan.
Trevor Rambo: So we feel like we're on track so far. It is fuzzier of course the later you go, that's always the case, but especially this year because things are, depending on the news cycle, have been changing quite a bit. So it gets a little harder to predict a Q4 per se, but so far so good is the way we feel and that's why we maintained the guidance that we Great. Thanks for the color.
Trevor Remo: So we feel like we're on track so far it is fuzzier of course. The later you go that's always the case, but especially this year because things are depending on the new cycle has been changing quite a bit.
Trevor Remo: So it gets a little harder.
Trevor Remo: To predict our Q4 per se.
Trevor Remo: But so far so good is the way we feel and that's why we maintained.
Trevor Remo: Our guidance that we had.
Speaker Change: Alright, thanks for the color.
Trevor Rambo: I'll pause there and let other folks go. Thanks, Trevor.
Trevor Remo: Pause there and let other folks go.
Trevor: Thanks Trevor.
Anja Söderström: Thank you. Our next question comes from the line of Anja Soderstrom of Sidoti, your line is now open. Hi, and thank you for taking my questions and congrats on the nice progress here. I'm curious whether adjusted EBITDA margin being so strong in the first quarter. Why was it we expected to be better for the full year? And was there anything in particular that impacted it in the first quarter?
Trevor Remo: Thank you.
Speaker Change: Our next question comes from the line of ONEOK Soderstrom Sidoti. Your line is now open.
Speaker Change: Hi, and thank you for taking my question and congrats on the nice progress here.
Speaker Change: Im curious where that adjusted EBITDA margin being so strong in the first quarter.
Speaker Change: Why wouldn't we.
Speaker Change: Expected to be better for the full year.
Speaker Change: Particularly in our impacted it in the first quarter.
Jorge Martell: Yeah, thanks for the question, Anja. So, like I mentioned in the prepared remarks, Q1 tends to be the strongest from a revenue mix, and that flow, you know, higher software versus hardware. And so that flows all the way to the bottom line. When you look at our remaining year, I think the remaining of the year, Q2 is going to look more like last year's Q2. Obviously, the mix is going to shift. We talked about the headwinds on the hardware business. And so although we have obviously a tough compare to last year, I mentioned, you know, the revenue for hardware should be more in line with the last three quarters, kind of the average there.
Speaker Change: Yes, thanks for the question Yeah. So.
Speaker Change: Like I mentioned in the prepared remarks, Q1 tends to be the strongest from a revenue mix 'em backflow higher software versus hardware and so that flows all the way to the bottom line. When you look at our remainder of the year I think the remainder of the year Q2 is going to look more like last year's Q2, obviously the mix is going to shift.
Speaker Change: We've talked about the headwinds on the hardware business and so although we have obviously a tough compare to last year I mentioned.
Speaker Change: The revenue for harvest should be more in line with the last three quarters kind of the average there, but nonetheless still software revenue will come down naturally and so that's why the mix is going to change a little bit driving obviously.
Jorge Martell: But nonetheless, still, software revenue will come down naturally. And so that's why the mix is going to change a little bit, driving, obviously, the adjusted even a margin down. So that should behave that way. And then gradually increasing just naturally, seasonally speaking, if you look at our Q3 second half of last year, software tends to grow a little bit. And so that's why you see that similar dynamic playing this year.
Speaker Change: Adjusted EBITDA margin down so that should behave that way and then gradually increase and just naturally seasonally speaking if you look at our Q3 second half of last year.
Speaker Change: Software tends to grow a little bit and so that's why that's why you will see that similar dynamic playing this year on year and so youre going to have I would say just taking a step back similar seasonality for the remainder of the year compared to last year, and therefore is going to rebalance for the full year.
Anja Söderström: Anya, and so you're going to have, I would say, just taking a step back, similar seasonality for the remaining of the year compared to last year, and therefore is going to rebalance for the Okay, thank you. That was helpful.
Speaker Change: Okay. Thank you that's helpful and.
Victor Limongelli: And how much of your revenue is derived from outside of the U.S.? On the security side, it's almost 90%. on the security side of the business, upper 80s. And the DA businesses kind of flipped the other way around, at least for North America, let's say North America versus... versus the rest of the world.
Speaker Change: How much of your revenues derived from outside of the U S.
Speaker Change: On the security side, its almost 90%.
Speaker Change: The security side of the business operators.
Speaker Change: And the business is kind of.
Speaker Change: Flip the other way around at least for North America, Let's say North America versus.
Jorge Martell: Jorge, I don't know if you have the numbers handy for DA. I don't have the exact numbers, but that is directionally right, Victor. It is pretty much a little bit of the opposite between the DA business and the security solution business. Anja, I think you can probably do the math based on the percentages that Victor mentioned.
Speaker Change: Versus the rest of the World Jorge I don't know if you have the numbers handy for da.
Jorge: And no I don't have the exact numbers, but that is directionally right. Victor. It is it is pretty much a little bit of the opposite between the VA business and the security solution business. I mean, I think you can probably do the math based on the percentages that Victor mentioned.
Anja Söderström: Okay, so you should step the benefits from the weakening dollar then. Yeah, it's interesting, you know, obviously, with the new administration and some of the policies on tariffs and things like that, we saw in Q1, you know, a tough, right? I think, you know, we didn't call it out too much, but we did see a little bit of a headwind from an FX perspective. In Q2, we're seeing, obviously, euro to USD being more in the 113, 114-ish range. So that should benefit us, you know, going into it. But, you know, we're cautious about FX, Anja.
Speaker Change: Okay.
Speaker Change: You should spend the benefits come now weakening dollar items.
Speaker Change: Yes, it's interesting you know obviously, the with the new administration and some of the policies on tariffs and things like that we saw in Q1.
Speaker Change: Right I think you didn't call it out too much but we did see a little bit about headwinds from an FX perspective.
Speaker Change: In Q2, we're seeing obviously euro to USD EBIT more than $1 13, $1 14 ish range, so that should benefit us.
Speaker Change: Going into it but we're cautious about FX.
Victor Limongelli: There's a play with the, you know, with the trade policies, you know, the GDP, you know, the Fed just issued, and just recently, the economic projection was updated, pointing to a lower economy, weaker economy rather, higher inflation, just things like that. And so we're cautious about it. So, so far, it should have some tailwinds, but we're constantly monitoring.
Speaker Change: Lot of things in play with the.
Speaker Change: With the with the trade.
Speaker Change: Policies.
Speaker Change: The GDP the fed just issue and just recently the economic production Whatsapp data pointing to a lower economy weaker economy, rather higher inflation, just things like that and so we're cautious about it. So so far it should have some tailwind, but we're closely monitoring it.
Anja Söderström: Okay, thank you. And it seems like most of your growth has come from expansion of existing contracts.
Speaker Change: Okay. Thank you and it seems like most of your growth has come from expansion of existing contracts.
Victor Limongelli: What are you doing in terms of trying to get me a logo. Well, Anja, it varies between the two business units. On the DA side, we have proportionally more effort on lead generation in sort of online lead generation and pursuing them that way. It's a little bit different in security when you're selling to big banks, and they tend to be larger deals. So it's not so much of a, you know, pipeline from leads, but more trying to have meetings with individual banks face to face. So it's a little bit more of a classic field sales team approach, as well as cultivating channel partners that have relationships with these financial institutions that we may not have.
Daniel: Daniel Transcon ban.
Speaker Change: Trying to get new logos.
Speaker Change: Well it varies between the two business units on the da side.
Speaker Change: We have proportionately more effort on.
Speaker Change: Lead generation in sort of online lead generation and.
Speaker Change: Pursuing them that way, it's a little bit different in security when youre selling to big banks.
Speaker Change: And they tend to be larger deals so its not so much about.
Speaker Change: The.
Speaker Change: Pipeline from leads but more.
Speaker Change: Trying to have meetings with.
Speaker Change: Individual banks face to face so it's a little bit more of a <unk>.
Speaker Change: Classic field sales team approach.
Speaker Change: As well as cultivating channel partners that have relationships with these financial institutions that we may not have so both of those efforts.
Anja Söderström: So both of those efforts we pursue on the security Okay, thank you.
Speaker Change: Pursue on the on the security side.
Speaker Change: Okay.
Victor Limongelli: And just one last follow-up on the macroenvironment here. It seems like you haven't really seen a... a slowdown or your customers having a little bit of a wait-and-see approach to what's going on? Have I understood that correctly? Yeah, I think that's fair. I mean, the first quarter business was good, you know, versus our plan. April's been good. There's certainly a lot of noise. So, you know, we have our eye on it.
Speaker Change: Okay. Thank you and just one last follow up on the macro.
Speaker Change: Macro environment here it seems like you haven't really seen.
Speaker Change: A slow down or are your customers.
Speaker Change: Having a little bit of a latency approach to what's going on and I understood that correctly.
Speaker Change: Yes, I think Thats fair I mean the.
Speaker Change: First quarter business was good.
Speaker Change: Versus our plan April has been good and Theres certainly a lot of noise. So.
Victor Limongelli: And it's hard to say how things shake out in the latter half of the year. You were right, directionally, the weakening dollar would help us. It's really just to be clear, I just want to clarify this. We do business in a lot of parts of the world, but the exchange rate that matters for us as a euro dollar, because we, most of our revenues in dollars, and then a minority of it is in euros. So, and it also, although it helps on the revenue side, it increases our costs, because we have a significant employee base over in Europe.
Speaker Change: We have our eye on it and.
Speaker Change: It's hard to say how things shake out in the latter half of the year you were right Directionally. The weakening dollar would help us. It is really just to be clear I just want to clarify this we do business a lot of parts of the world, but the exchange rate that matters for us is euro dollar.
Speaker Change: Because we most of our revenues in dollars and then a minority of it is in euros. So.
Speaker Change: And it also although it helps on the revenue side it increases our cost because we have significant employee base over in Europe. So we have expense.
Victor Limongelli: So we have expenses in euros as well. So the weakening dollar would help. Overall, we You know, we try not to get too... everybody just hung up on exchange rates, whether we were hurt a little bit like, in Q1 or helps a little bit in Q2, unless they're really extreme. And we're just trying to kind of — execute as best we can and not not hang our hats on exchange.
Speaker Change: Expenses in Europe as well.
Speaker Change: So the weakening dollar would helps overall.
Speaker Change: We.
Speaker Change: We try not to get too.
Speaker Change: Hung up on exchange rates, whether we were hurt a little bit like in Q1 are helped a little bit in Q2, unless theyre really extreme.
Speaker Change: We're just trying to kind of.
Speaker Change: Execute as best we can and not.
Speaker Change: Non hang our hats on exchange rates, if that makes sense.
Anja Söderström: Okay, thank you. That was all for me. Thank you, Anja.
Speaker Change: Okay. Thank you and I will start for me.
Speaker Change: Thank you IRA.
Operator: Thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Rudy Kessinger: Our next question comes from the line of Rudy Kessinger of DA Davidson. Your line is now open. Hey, great. Thanks for my questions, guys. So there was just one of the net new ARR expectations for the year. You know, you only had 700,000 net new in the first quarter midpoint of guidance, I think applies another 14 and a half million over the next three quarters. I know last year was pretty lumpy. You know, we can Q1 massive Q2. How should we expect, you know, the new bookings and net new ARR to flow through the year?
Speaker Change: Our next question comes from the line of Rudy Kessinger of D. A Davidson your line is now open.
Rudy Kessinger: Hey, great. Thanks for taking my questions guys.
Speaker Change: Okay.
Speaker Change: Just for the net new IRR expectations for the year.
Speaker Change: You only have 700000 net new in the first quarter midpoint of guidance I think implies that a $14 5 million over the next three quarters I know last year was pretty lumpy.
Speaker Change: In Q1 massive Q2.
Speaker Change: Should we expect the new bookings and net new <unk> to flow through the year.
Victor Limongelli: Yeah, thanks for the question, Rudy. So listen, I think, you know, when you take a step back, Q1 was aligned to plan. So we grew 9% ARR, which was, again, midpoint of our guide. I think what you would expect in Q2, just because of the situation you mentioned, we had a really, really strong Q2, as a result of, you know, a couple of large, you know, seven-figure deals, dollar deals that we closed, particularly on the DA side, we had, from remember, one on the security side. And so that, that compare is going to be tough and challenging.
Rudy Kessinger: Yes. Thanks for the question Rudy So listen I think when you.
Rudy Kessinger: I can step back Q1 was what I would like to plan. So we grew 9%.
Rudy Kessinger: Which again midpoint of our guide I think what you would expect in Q2, just because of the petition you mentioned, we had a really really strong Q2 as a result.
Rudy Kessinger: A couple of large seven figure deals.
Rudy Kessinger: These are deals that we closed a particularly on the da side, we have from number one one of the security side and so that Dr. Compare is going to be tough and challenging and so I would expect our growth to be more in the <unk>.
Victor Limongelli: And so I would expect ARR growth to be more in the, you know, mid to low single digits, and then gradually increasing for the remaining, for the second half of the year, Q3 and Q4, to be back in line with the midpoint guide. got it. That's helpful. And then secondly, you know, you got a little over 100 million in cash. Now you're going to generate a lot of cash this year, even above and beyond the dividend if you don't increase it. I heard you mention maybe targeted M&A in the prepared remarks. Just how are you thinking about capital allocation?
Rudy Kessinger: Mid to low single digits, and then gradually increasing for the remaining for the second half of the year Q3 and Q4.
Rudy Kessinger: Be back in line with the midpoint of guidance.
Rudy Kessinger: Got it.
Rudy Kessinger: Helpful.
Rudy Kessinger: And then secondly.
Rudy Kessinger: Yes, a little over $100 million of cash now youre going to generate a lot of cash this year, even above and beyond the dividend if you don't increase it.
Rudy Kessinger: I heard you mentioned, maybe targeted M&A in the prepared remarks.
Rudy Kessinger: Just how are you thinking about capital allocation should we be expecting maybe another.
Victor Limongelli: Should we be expecting maybe another buyback, Dutch auction, or are you more likely going to lean to the M&A side? And if so, what kind of area?
Rudy Kessinger: Buyback Dutch auction or even more.
Rudy Kessinger: Likely going to lean into the M&A side, and if so what kind of areas.
Victor Limongelli: you know, what are you looking at at the end?
Speaker Change: What are you looking to add via M&A.
Victor Limongelli: So, let me take a stab at that. I think the board's going to look at. And then potentially, obviously the institution of dividend was a big thing for us this year and over the course of the year would be, you know, if it stays at the same level for the full year would be close to $20 million return to shareholders. The board will also look at other means of returning cash to shareholders, whether they be buybacks in the open market or a Dutch tender approach. And then on the M&A side, to answer your question directly, we're much more likely, I think, although not exclusively, much more likely to Do a deal on the security side of the business to expand our capabilities because we do have a we have a very broad and Deep, customer-based on the security side, 60 of the world's 100 largest banks.
Rudy Kessinger: So let me take.
Rudy Kessinger: I'll take a stab at that I think the board is going to look at.
Rudy Kessinger: Potentially other than obviously the institution of the dividend was a big thing for US this year and over the course of the year would be.
Rudy Kessinger: If it stays at the same level for the full year would be close to $20 million return to shareholders. The board will also look at other means of returning.
Rudy Kessinger: Cash to shareholders, whether they be buybacks in the open market or.
Rudy Kessinger: A Dutch tender approach.
Rudy Kessinger: And then on the M&A side to answer your question directly.
Rudy Kessinger: We're much more likely I think although not exclusively much more likely to two.
Rudy Kessinger: Do a deal on the security side of the business.
Rudy Kessinger: To expand our capabilities because we do have a we.
Rudy Kessinger: We have a very broad.
Rudy Kessinger: And deep customer base on the security side 60 of the world's 100 largest banks. So we can deliver more value to them.
Victor Limongelli: So if we can deliver more value to them through an acquisition that we can add to our product portfolio, we see that as a way to efficiently grow the business. So that would be what we would be looking at. It's likely, Rudy, that that is, at least in 2025, to be on the more modest size. We're unlikely to do a giant deal, just to clarify this. That's why we said targeted.
Rudy Kessinger: Through an acquisition that we can add to our product portfolio, we see that as a way to efficiently grow the business. So.
Rudy Kessinger: That would be what we would be looking at it's likely Rudy that that is.
Rudy Kessinger: At least.
Rudy Kessinger: In 2025 to be.
Rudy Kessinger: On a more modest size.
Rudy Kessinger: We're unlikely to do a giant deal just just to clarify this that's why we said targeted M&A.
Rudy Kessinger: That is all very helpful. Great. Thank you. Thanks, Rudy.
Rudy Kessinger: That is all very helpful. Great. Thank you.
Ravi: Thanks Ravi.
Operator: Thank you. I am showing no further questions at this time.
Rudy Kessinger: Thank you.
Rudy Kessinger: I am showing no further questions at this time.
Joe Maxa: I would now like to turn it back to Joe Maxa for closing remarks. Thank you, everyone. We look forward to sharing our results with you again next quarter.
Joe Maxa: I would now like to turn it back to Joe <unk> for closing remarks.
Speaker Change: Thank you everyone. We look forward to sharing our results with you again next quarter have a great day.
Operator: Have a great day. Thank you for your participation in today's conference.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Operator: This does conclude the program. You may now disconnect. Thanks for watching!
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Okay.
Speaker Change: Yes.
Speaker Change: [music].