OneSpan - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered strong profitability with non-GAAP EPS of $0.34 and Adjusted EBITDA of $17.6M, while total revenue declined 2% year over year to $59.8M amid ongoing hardware headwinds.
• Revenue and non-GAAP EPS modestly beat consensus: revenue $59.84M vs $59.05M* and non-GAAP EPS $0.34 vs $0.293*; GAAP EBITDA missed ($13.0M* vs $15.27M*) given definitional differences versus Adjusted EBITDA. Values retrieved from S&P Global.
• ARR was $177.8M (+8% y/y), NRR 101%, and the company raised full-year ARR guidance to $186–$192M (from $180–$186M), while maintaining revenue ($245–$251M) and Adjusted EBITDA ($72–$76M) guidance.
• Strategic catalyst: acquisition of Nok Nok Labs to add FIDO2 passwordless software, enhancing OneSpan’s comprehensive authentication portfolio and cross-sell potential to its large banking base.

What Went Well and What Went Wrong

What Went Well

• Subscription revenue grew 22% y/y to $36.2M, with Security Solutions subscription +39% y/y and Digital Agreements +5% y/y, supporting 73% gross margin (up 700 bps y/y).
• Management raised FY25 ARR guidance to $186–$192M and highlighted strong bookings and cash generation, ending Q2 with $92.9M cash and $6.2M operating cash flow in the quarter.
• Strategic expansion: “We’re evolving our entire authentication platform to include FIDO standards because we believe passwordless is an important part of the future” (CEO on Nok Nok acquisition), bolstering hardware+software FIDO offerings.

What Went Wrong

• Total revenue declined 2% y/y to $59.8M, as ongoing shifts to mobile-first authentication reduced hardware sales and maintenance revenue fell due to legacy contract transitions and product sunsetting.
• GAAP EBITDA lagged consensus ($13.0M* actual vs $15.3M* estimate) even as Adjusted EBITDA improved y/y to $17.6M, reflecting higher stock-based comp and acquisition-related costs; definitional differences complicate comparisons. Values retrieved from S&P Global.
• ARR contraction at a few customers (≈$3M impact across two accounts) and softer EMEA performance pressured net new ARR momentum in the half; NRR dipped to 101% vs 107% in Q1.

Transcript

Speaker 4

Welcome to the Q2 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 *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Joe Maxa, Vice President of Investor Relations. Please go ahead.

Speaker 0

Thank you, Operator. Hello everyone, and thank you for joining the OneSpan second quarter 2025 earnings conference call. This call is being broadcast and given access 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 second quarter 2025. To access a copy of the press release and other investor information, please visit our website. Following our prepared comments today, we will open the call for questions. Please note that statements made during this conference call that relate to future plans, events, or performance, including the outlook for full year 2025 and other long-term financial targets, are forward-looking statements. These statements involve risks and uncertainties and are based on current assumptions.

Consequently, actual results could differ materially from your 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 reconciliation 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 of the role briefs discussed on this call refer to a year-over-year basis unless otherwise indicated. The date of this conference call is August 5, 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.

Speaker 3

Thank you, Joe. Hello everyone, and thank you for joining us on the call today. Before we turn to our results, as we are halfway through my second year at the company, I thought I'd take a moment to review our trajectory and the overall position of our business. Last year, as you know, we focused on restructuring OneSpan Inc. to enhance its profitability so that it remains viable as a business and continues to be a long-term reliable partner for our customers. With that accomplished, our focus in 2025 has been on building the foundation necessary for OneSpan Inc. to not only be profitable, but also to grow the business and strengthen our product offerings for our customers. Right before the year started, we hired a new Chief Technology Officer, Ashish Singh, to lead our R&D team.

Part of our strategy is to augment our increased internal development efforts with targeted M&A so that we can move faster in delivering great products to our customers. You saw that in the second quarter, both with our acquisition of NomCon Labs and with the establishment of a new line of credit to facilitate that kind of targeted M&A. As we move through the second half of the year, we will continue to enhance our go-to-market capabilities so that we can deliver our great products to more customers. As we have said previously, our goal is to grow the business while delivering strong profitability and to do both of those things while also returning cash to shareholders. Halfway through my second year, I'm happy to say that our transformation of OneSpan Inc. is on track.

Looking ahead, our goal is that by the beginning of next year, we will have made significant progress in evolving our go-to-market capabilities, as well as our product suite under inclusive leadership, such that we are well positioned to accelerate top-line growth in 2026 as we continue to drive to a Rule of 40 performance. Turning to our results, I'm pleased to report another strong quarter and a flawless first half of 2025, reflecting our team's disciplined execution. This focus by our team is driving our strong performance and positions us well to deliver sustained long-term value for our shareholders. As I mentioned a moment ago, I'm also pleased and excited by our acquisition of NomCon Labs during the quarter, which brings to us FIDO2 passwordless authentication software to add to our FIDO2 hardware security suite.

We have long been an industry leader in multi-factor authentication and transaction signage technologies, with our solutions widely trusted by many of the world's largest financial institutions for their strong security, flexibility, and innovation. The addition of NomCon's FIDO2 passwordless authentication software, combined with our recently launched FIDO2 hardware security suite, enables the company to provide customers worldwide with the industry's most innovative, comprehensive, and future-ready authentication portfolio. Whether on-prem or in the cloud, OCP or FIDO, software or hardware, including DigiHash and FIDO2 protocols, and crossover solutions for transaction signage, OneSpan now offers customers maximum flexibility to meet their authentication needs. As you can see, NomCon was exactly the kind of targeted acquisition that enhances our product portfolio and delivers value to our customers. With respect to the second quarter, we were solidly profitable in the quarter, with an adjusted EBITDA of $18 million or 29.5% of revenue.

Also, for the first half of the year, we achieved a record adjusted EBITDA of $41 million, representing 33% of revenue, our highest first-half performance to date. We ended the quarter with annual recurring revenue of $178 million, up 8% year over year, including $8 million from the NomCon acquisition. Excluding NomCon, ARR grew 3%, in line with the low to mid-single-digit growth rate that we expected and described last quarter. As a reminder, we had a few very large contracts in last year's second quarter, which made for a challenging year-over-year ARR comparison this quarter. By the end of 2025, we anticipate our ARR to grow at a mid-single-digit percentage rate from the June 30th ARR level. Subscription revenue grew 22% in the second quarter of 2025, led by 39% growth in security and 5% growth in digital agreements.

Security growth was primarily driven by on-prem authentication and app shielding software. As expected, total revenue declined modestly in the quarter. Strong subscription revenue growth was primarily offset by the three trends we've discussed on prior calls. First, banks in EMEA, and to a lesser extent in ABAC, have been adopting mobile-first authentication strategies with respect to consumer banking. This has reduced security hardware revenue over time. Second, our 2024 transition of certain legacy perpetual maintenance contracts to term-based subscriptions lowered maintenance revenue compared to the prior year. Third, revenue was impacted by $1.2 million from sunsetted products. However, this was partially offset by $300,000 of acquired revenue during the quarter. Looking at geographies, in July 2024, we started a dedicated sales effort in North America, focused on our security business.

I'm pleased to report that that team had a great first half, and we expect continued high performance in that region in the second half of the year. As you know, historically, North America has represented only 10% to 12% of our overall security revenue, so we see that as a growth opportunity heading into 2026. In the first half of 2025, we also saw strong bookings performance in our Latin American region. In terms of the overall outlook, Jorge Martell will provide additional details on the second half in a few minutes. Both business units remain solidly profitable at the segment level, and we believe we are well positioned to achieve our stated goals of delivering growth and strong profitability across both segments. We also continue to generate significant cash from operations.

In the first half of the year, we generated $36 million and ended the second quarter with $93 million in cash on hand. As we've discussed previously, our board remains committed to a balanced capital allocation strategy, meaning shareholder returns, organic investments, and targeted M&A. In the first half of the year, we returned cash to shareholders through two quarterly dividend payments of $0.12 per share, which totaled close to $10 million of cash returned to shareholders. The board has also approved another $0.12 per share dividend to be paid in the current quarter. In addition, we used cash to make the strategic acquisition of NomCon Labs, consistent with our plan to pursue targeted, technology-driven acquisitions with proven market fit, enabling us to bring additional value-added products to our customers and prospects. We have a strong global customer base and a leading position in the authentication market.

With AI increasingly being used to amplify the scale and sophistication of account takeover attacks, we remain focused on innovating to stay ahead of emerging threats and to enable customers to adopt a wide range of flexible, future-proofed authentication solutions. As a result, we will continue to invest in internal R&D and explore targeted M&A opportunities to enhance our product portfolio. We plan to help our clients succeed by continuing to provide them with seamless and secure user solutions to meet their authentication needs and address related security challenges. As we look to the future, we are committed to operational excellence and to driving efficient, sustainable revenue growth while maintaining strong profitability. With that, I'll turn the call over to Jorge.

Speaker 2

Thank you, Victor, and good afternoon, everyone. I am pleased to report another strong quarter, and I'm excited about our acquisition of NomCon Labs, which enhances our authentication portfolio and allows us to bring a broader suite of authentication solutions to our customers. We acquired NomCon on June 4. As such, our second quarter results include NomCon financials from the acquisition date or for about a month. ARR grew 8% to $178 million, including $8 million from the NomCon acquisition. Our net retention rate, or NRR, was 101%. As previously discussed, we anticipated a tough year-over-year ARR and NRR comparison this quarter, primarily due to large expansion contracts that benefited last year's Q2. In addition, this quarter, there were contractions at a few customers that reduced our overall ARR.

Second quarter revenue was $69.8 million, down 2% compared to last year's Q2, primarily due to the anticipated decline in security hardware as a result of the long-term trend of banks moving to a mobile-first authentication approach. Digital agreements' revenue grew 1%, while security solutions' revenue declined 3%, thus in line with expectations. Second quarter gross margin was 73%, up from 66% in Q2 of last year. The improvement was driven by a stable product and customer mix, including increased software and reduced hardware revenues, as well as the absence of approximately $1.5 million in asset write-off charges per quarter in the second quarter of last year. GAAP operating income was $10.5 million compared to $7.6 million in Q2 last year.

The increase reflects higher gross profits and lower restructuring costs, partially offset by increased operating expenses related to share-based compensation, commission expenses, legal and consulting costs associated with the NomCon acquisition, and incremental operating expenses from NomCon. GAAP net income per share was $0.21, up from $0.17 in the same period last year. As a reminder, we made changes to our non-GAAP net income and non-GAAP net income per share reporting framework last quarter to better reflect our profitability trajectory and to ensure consistency across the interim period in 2025 and in future years. Please refer to our Q2 earnings release and investor presentation for additional details. Non-GAAP earnings per share was $0.34 compared to $0.31 in Q2 of 2024. This metric excludes long-term incentive compensation and related payroll taxes, amortization, restructuring charges, non-recurring items, and the impact of tax adjustments.

Adjusted EBITDA and adjusted EBITDA margin was $17.6 million and 29.5% compared to $16.2 million and 26.5% in the same period of last year. Turning to our security solutions business, ARR was $114.5 million, up 9% year over year. Excluding NomCon Labs, ARR grew 2%. Security revenue declined 3% to $44.2 million. Strong subscription revenue growth of 39%, including an immaterial amount of revenue from NomCon Labs, was offset by expected declines in hardware and maintenance revenues and headwinds from sunsetted products. The strong growth in subscription revenue was primarily driven by the timing of multi-year renewals and conversion to multi-year customer contracts in the quarter, expansion of licenses, and to a lesser extent, new logos. This growth was partially offset by the sunsetting of our legacy deal flow solution.

Gross margin for security was 74%, up from 67% in the second quarter of last year, reflecting favorable products and customer mix. Segment operating income was $19.8 million or 45% of revenue compared to $20.7 million or 46% of revenue in the prior year quarter. The slight decline was primarily due to higher commission expense and increased operating expenses related to the NomCon Labs acquisition. Turning to our digital agreements business, ARR grew 4.5% to $63 million. Revenue grew 1% to $15.6 million. New SaaS contracts and expansion of renewal contracts were partially offset by reduced maintenance revenue from the sunsetting of our on-premise e-signature product. Headwinds related to sunsetted products impacted revenue growth by about 3 percentage points. Subscription revenue grew 5% to $15.6 million. As mentioned earlier, we faced a tough year-over-year comparison due to a few large contracts that benefited Q2 of last year.

Maintenance and support revenue was negligible this quarter, compared to $0.5 million in Q2 of last year. The year-over-year decline is attributed to the sunsetting of our on-premise e-signature solution. Gross margin for digital agreements was 71%, up from 63% in the prior year quarter. The increase was primarily due to the absence of $1.5 million in asset write-off charges for the quarter last year. Segment operating income was $2.9 million or 18% of revenue, compared to a loss of $0.2 million or negative 1% in Q2 of last year. The improvement was driven by higher gross profits and lower operating expenses, primarily due to lower headcount and variable expenses. Now turning to our balance sheet, we ended the quarter with $92.9 million in cash and cash equivalents, compared to $105.2 million at the end of Q1 and $83.2 million at the end of 2024.

We generated $6.2 million in operating cash flow during the quarter, up from $2.3 million in the second quarter of last year. We used $4.6 million to pay our quarterly cash dividend and $12.1 million net of cash acquired as part of a consideration for the NomCon Labs acquisition. We expect to pay an additional $1.9 million in Q3 and the remaining balance in late 2026. As you are already aware, during the quarter, we entered into a five-year syndicated revolving credit facility in the amount of $100 million, which may be used for general corporate purposes, including to support our strategic growth priorities, including targeted M&A. Except for a small letter of credit supporting an office lease, we currently have no borrowings under the credit agreement and have no long-term debts. Geographically, our revenue mix was 39% from EMEA, 40% from the Americas, and 21% from ABAC.

This compares to 41%, 35%, and 24% respectively in the second quarter of last year. Moving to our modeling notes and financial outlooks, we're very pleased with our second quarter and per capita performance and expect some returns with positive revenue growth in the second half of the year. We expect double-digit subscription revenue growth for the full year 2025, along with a modest revenue contribution from the acquisition of NomCon Labs. We expect to see continued hardware headwinds, primarily in Q3, with gradual improvement in Q4. Also, in the second half of the year, as compared to the first half, we expect reduced year-over-year maintenance revenue headwinds from the transition of perpetual contracts to term-based licenses and from the impact of sunsetted products.

Regarding hardware, due to the increased visibility into order and shipping schedules as compared to earlier in the year, including the delay to 2026 of the shipment of certain already booked hardware deals, we now expect the full second half of 2025 hardware revenue to be similar to the first half, with the majority of the second half revenue recognized in the fourth quarter. On a sequential basis, in the second half of 2025, we expect an increase in year-over-year ARR growth and an increase in NRR for both the third and fourth quarters. For the full year 2025, we are maintaining our revenue guidance in the range of $245 to $251 million. We expect increments of revenue from the NomCon Labs acquisition to be offset by a similar reduction in hardware revenue.

We are increasing our ARR guidance to be in the range of $186 to $192 million, as compared to our previous guidance range of $180 to $186 million. The increase in guidance is attributed to our acquisition of NomCon Labs, partially offset by a few reductions by the customers that I discussed earlier. We are maintaining our adjusted EBITDA guidance in the range of $72 to $76 million. We expect the acquisition of NomCon Labs to be slightly accretive to adjusted EBITDA in the fourth quarter of 2025. That concludes my remarks. I will now turn the call over to Victor.

Speaker 3

Thanks, Jorge. To recap, we had another strong quarter, and I'm very proud of the OneSpan team's disciplined execution and commitment to operational excellence. I'm also excited about our strategic acquisition of NomCon Labs, which expands our authentication offering to include software-based FIDO2 capabilities and provides us with an additional proven value-added solution that we can bring to our customers and prospects. Looking ahead, we remain focused on delivering value for our customers and executing well as a business in the second half, which we believe will position OneSpan for profitable growth. To that end, we remain committed to maintaining our strong profitability as we drive towards our goal of achieving a Rule of 40 performance as a business. Jorge and I will now be happy to take your questions.

Speaker 4

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by as we compile the Q&A roster. Our first question comes from Catharine Trebnick of Rosenblatt Securities. Your line is now open.

Yes, thank you for taking my question. On this acquisition, that's interesting that you're headed in this direction. Can you give us some more detail on how competitive you feel you'll be with this, by buying NomCon Labs and adding this to your capabilities? Thanks.

Speaker 3

Victor, you want to take your call?

Speaker 0

I'll jump in. Kathleen, maybe we can chime in. Thanks for the question, Kathleen. I think this is one of the areas that we have been talking about in terms of complementing our solutions in the security software space. You know, it fits really well when it comes to, it's a custom acquisition where we like the technology and we can also plug it into an existing technology for FIDO. As you remember, we launched FIDO security keys or hardware, a few of those keys last year. When you think about where this is headed in terms of security for user seamless authentication within FIDO2, it's also going to be an important part of the mix that our banking and financial services customers will have and will move towards in the future.

We think that this is going to be a very, very good acquisition in the long term for us as it provides, again, the maximum flexibility, as Vic alluded, in terms of offering and becoming the authentication company, particularly for banks and financial institutions. Happy to answer any additional questions you have on that.

Is this more like if it's already installed, customers? Are you looking at this as maybe new landing because it's the newer test, but also an upsell into your existing banking customers?

Yeah, that's a very good question, Kathleen. When you think about one of the biggest assets, and Vic has mentioned this in the past, one of the biggest assets this company has, it's a long 10-year customer base. We service over 1,000 banks globally. When you think about that, the purpose of this acquisition was not for the revenue. Let's just be clear. The purpose of this acquisition was because of the technology and the cross-sell opportunity that we can have from this technology to our existing customer base. We see that as an opportunity, obviously more in 2026 than 2025 in terms of the cross-sell. We're getting the teams aligned. The product needs to be put in the same server so we can be a seamless product for our customer base. The teams I mentioned, sales teams, are getting aligned as well.

We feel pretty good about not only the product that we acquired, but the team that we acquired as well. Kathleen, it's a very experienced team that has been a pioneer in this area in the FIDO2 space. They also have a board seat in terms of the FIDO Alliance, and now we have a board seat as well. We feel good about where we are. Again, this is a very.

Can you hear me?

We can hear you now, Vic. This is more about the cross-sell opportunity into our existing customer base, Catharine. Vic, feel free to chime in.

Thank you.

Thanks for the question, Catharine.

Welcome to the conference, Lucy.

Speaker 4

One moment for your next question. Our next question comes from Anja Soderstrom of BTIG. Your line is now open.

Hi, and thank you for taking my question. I have a question about the ARR guidance and the increase there above $6 million, but NomCon, you said, added about $8 million for the second quarter. How should we think about that?

Speaker 0

Yeah, I can answer that. Thanks for the question, Anja. We mentioned NomCon Labs added about $8 million into our ARR pool. When we give a look at that, we increased it by $6 million on both the low end and the high end. The remaining $2 million, Anja, is primarily related to a couple of contractions that we have mentioned in past calls, really about a bank that was selling operations, particularly in the Middle East. That accelerated a little bit more than we expected in the first half of the year. The second component of that was we also had another, I would say, seven-figure customer that impacted ARR that is moving slower than anticipated in implementing our solutions because of their internal delays. Conservatively, we decided to move that out of the ARR for the remainder of the year.

That's really the footprint pick for getting the six increases on both low and high end, Anja.

Thank you. Just in general, regarding the pipeline, how is that shaping up for you?

Sorry, say that one more time, Anja. You cut off on me.

The pipeline, how is that shaping up for you, just in general?

Yeah, Victor, do you want to take that one?

Speaker 3

Hello.

Speaker 0

Yeah, we can hear you now.

Speaker 3

Okay, great. I'm sorry. Could you repeat the question? I had a little internet trouble there.

Yes, no problem. I'm just curious about the pipeline, just in general, how is that shaping up for you?

Speaker 0

We had a great first half of the year in terms of bookings. In the second half of the year, of course, the way our business works, the third quarter and the fourth quarter tend to be much bigger quarters in terms of closing business. We've been very happy with progress overall on our go-to-market. As we mentioned in the prepared remarks, the hardware business we think will be a little bit tougher in the back half of the year, but we're excited about having something new to offer to customers as well with respect to the NomCon Labs FIDO2 passwordless authentication software capability. The second half of the year, I think, is shaping up pretty well for us.

Okay, thank you. That was all for me.

Speaker 4

Thank you. One moment for our next question. Our next question comes from Trevor Rambo of BTIG. Your line is now open.

Great. Thanks for taking the question. This is Trevor on for GrayPal. A lot was happening in the quarter from a macro perspective with the tariff announcement we had in April, the 90-day pause, and an expansion to that pause. You mentioned in the prepared remarks that a few customers contracted in the quarter. Maybe from a higher level, can you give some more color on what you saw in the quarter and if the uncertainty in the macro had an impact on general customer buying behavior? Has any of that spilled over into the first month of Q3 so far? Thanks.

Speaker 0

Yeah, thanks, Trevor. We had a good first half in terms of bookings. What we report, of course, is revenue. It's not exactly analogous to our bookings, but we had a good first quarter. The tariff situation for us was very minimal. I think we talked about it last year when the initial tariffs proposed were much higher. It was still not going to be that big of an impact. The way things have shaken out, it's a few hundred thousand dollar impact for us. That's a very minor thing. The other aspect that a lot of people talked about in the second quarter was the federal touch, the DOES touch. We have, I think, 2% of our revenue from the federal government. That had a relatively small impact as well. Overall, things have been going pretty well in terms of our performance.

I would think geographically, Europe, and I mentioned this last quarter, Europe has been a little weaker for us. We've done a little bit better in the Americas and in North and South America. To me, it's typically a strong market for us. We'd love to see that turn around, but overall, it has been solid so far.

Great. That's some great color. Maybe for my second, you talked on the prepared remarks and a bit earlier about evolving the go-to-market program by the start of next year. Can you dive a bit deeper into what that's going to look like and maybe provide more color on the process and maybe what the outcome is? Thanks.

Yeah, I mean, part of it is we're just putting additional resources where things are going well. We talked about this on the call. We started up in North America. Before we had a combined team in North America, we had a sales team. If you go back a year plus ago, a sales team that was supposed to sell both product lines, very different buyers, very different competitive set. What we started last July, a year ago, is we split the North American sales team to a dedicated security team and a dedicated digital agreements team. What we're doing is continuing to invest as that's starting to pay off. We've increased the size of the North American security sales teams. We added additional resources when we did the NomCon Labs acquisition as well. That's part of it.

Part of it is us refining our approach on the digital agreements side and really trying to, without giving too many competitive details, do better in the new logo acquisition. That business, as we've talked about in the past, is just a land and expand business. We're really focused on trying to land more because we know the expansion happens.

Great. That's it for me. Thanks for taking the questions, guys.

Speaker 4

Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. Our next question comes from Rudy Kessinger of D.A. Davidson. Your line is now open.

Speaker 3

Great. Thanks for taking my questions, guys. Jorge, could you maybe expand and or just quantify maybe the crash from those two large customers? Because, you know, understanding you're saying second half bookings are stronger historically, but, you know, your first half net new ARR, $2 million relative to past years. I know last year's Q2 is tough compared even relative to several years prior to that, still down quite a bit. Could you quantify maybe what the impact there was from those two customers?

Speaker 0

Yeah, Rudy, thanks for the question. It was about $40 million, Rudy, between those two customers and the year-over-year contraction.

Speaker 3

Okay. With that one customer, you know, selling off assets in the Middle East, is there risk that they sell off more assets in other geographies or any further contraction risk from that one?

Speaker 0

Obviously, we don't have visibility of the quantifications, Rudy, specifically for that particular client. I think my sense is that, as I mentioned, this accelerated in the first half. I think they're still going to be solid, but it may be a little more muted. We'll have yet to see it.

Speaker 3

Okay. Got it. With NomCon, could you maybe just quantify or try to size up for us just the U.S. cross-sell opportunity that they bring? What % of your installed base do you believe could really use this capability or that you could sell to over the next couple of years?

Speaker 0

Yeah. This is an interesting, interesting topic because I think it's fair to say that the FIDO authentication protocol is something that has grown over the past few years and will grow even more over the next three to five years. Part of this strategy is for us to be able to offer a complete solution to our customers. We saw this if you go back 10-plus years ago when banks in EMEA and ABAC were doing largely, their consumer authentication was largely through hardware. Over time, we've talked about this before, it shifted to mobile-first, so we needed to have a mobile offering. We did it. With respect to the FIDO authentication protocol, we wanted to make sure that we had an offering both in hardware, which we introduced recently, and software.

It gives us the opportunity to grow with those banks, to grow with our customers into the FIDO ecosystem without losing them to competitors and offering them a solution where they don't have to rush all at once into FIDO, like flipping a lightbulb. They can start using FIDO and they can still use our DigiPass approach. I think ultimately, all of our customers, if you fast forward five to ten years out, will be using FIDO. Exactly how fast that goes, hard to say right now, but passkeys are here and we see banks rolling it out in some markets and other markets will probably take a little bit longer.

Speaker 4

Thank you. This concludes the question and answer session. I would now like to turn it over to Joe Maxa for closing remarks.

Speaker 0

Thanks, everyone. I invite you to join us. Have a nice day.

Speaker 4

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.