Pexip Aktie

Good morning, and welcome to this presentation of Pexip's first quarter results. My name is Trond Johannessen, and I'm the CEO. Together with me here at Lysaker, I have Øystein Hem, our CFO; and Åsmund Fodstad, our Chief Revenue Officer. Together, we will take you through the highlights of the quarter and our current focus.

The standard disclaimers apply as usual.

First, a brief overview of Pexip for those new to the company. Pexip was founded in 2012, and currently, we operate in 25 markets across the globe. We are a specialist video conferencing and infrastructure company focusing on interoperability and secure and custom meetings. We do software only, delivered as software or software delivered as a service. Pexip has unique and established partnerships with the leading companies in our industry. We complement and enhance their solutions and do not generally compete with them. Our customers are mainly large organizations, both in the public and private sectors that have complex needs when it comes to video collaboration. The financial performance has been strong and has also been continuously improving over the last quarters.

Now to the highlights of the past quarter. Our annual recurring revenues grew with $4 million during the quarter, and this gives us an ARR base of $135 million leaving Q1. In Q1, we had continued strong growth in our secure and custom business area with new ARR of $2.9 million. $1.3 million of this growth came from defense, which is a core segment to Pexip. In Connected Spaces, we had solid progress with our solutions for native rooms. This means Teams Rooms, Zoom Rooms and Google Rooms, and this was the main growth driver in this business area. EBITDA came in at $18.7 million, which corresponds to a 46% margin in the quarter. Free cash flow was just below $20 million in Q1.

If we look at our Q1 performance in the context of the last 12 months, we see that the positive trend from the previous quarters continues. Our total ARR continues to grow and year-over-year, the growth rate was 17%. Our 12-month rolling EBITDA reached $39 million, which is a 68% improvement since Q1 last year, and this corresponds to a 30% EBITDA margin. And finally, the free cash flow continues to grow, this time with 14% and ended at $32 million for the last 12 months. We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position.

As you know, Pexip has 2 main solution areas. Pexip Secure and Custom is about privately hosted video meetings that give complete privacy and data control with a desired level of customization. Pexip Connected Spaces is about video meeting interoperability by enabling any meeting room to connect to any meeting platform.

Now a few words about each business area. In Secure and Custom, we are targeting a segment of the video conferencing market that is largely unserved by the major players like Teams, Zoom, Google and Webex. The market is growing fast, and currently, we conservatively estimate an addressable annual market for Pexip of around $1 billion. We are catering to those organizations that have limitations with respect to the use of global cloud platforms like Azure, GCP or AWS. And consequently, they have a need for their video conferencing software to run in a controlled IT environment, either self-hosted or in a private or sovereign cloud.

The need for sovereign clouds in Europe has been on the agenda for some time already as a consequence of the current geopolitical situation. But only recently have we seen that regulations and mandates are coming into place to govern the establishment and use of such infrastructure. The market is developing quickly and significant investments are being put into building IT infrastructure and solutions in many countries. Pexip is highly relevant in this context, and we are actively involved in several ongoing initiatives across several countries to make video meetings available in the new sovereign clouds.

Let me briefly explain why we are so relevant in this area. As a technology built as a platform with on-premises deployment in mind, Pexip has some clear competitive advantages vis-a-vis other players in the market for European sovereign solutions. First, Pexip can be deployed in any IT infrastructure from public clouds to on-premises. Second, we are a European company operating within the European economic area. Third, Pexip integrates really well with other collaboration tools such as chat, file sharing, et cetera. And this is very important for service providers that want to provide a complete suite of collaboration solutions to customers. Finally, Pexip is a modern experience that meets the needs of an increasingly demanding group of end users that use video more and more. Together, these advantages put Pexip in a good position as the market for sovereign solutions continues to develop.

Now to Connected Spaces, a part of the video device software market that we estimate to around $1.4 billion annually. Here, we have basically completed the any room to any meeting platform vision. In close partnerships with Google, Zoom and of course, Microsoft, we provide the most comprehensive suite of interoperability solutions available in the market.

This quarter also brought some good news for MTR users because finally, we have confirmation that Pexip Connect for MTRs on Android is on Microsoft's public road map and will be rolled out in June. We know that many have been waiting for this as quite a few organizations have a combination of MTRs on Windows and on Android. AI is high up on Pexip's agenda and is being used both in the solutions we sell and in the organization. In the products, AI-powered captions and translated captions are already available. Now we are working to enable transcript export for storage or integration with other private AI systems. The common thread is, of course, that the AI solution needs to be deployed in a controlled IT environment with full data control.

Within the Pexip organization, we have enabled software developers with AI agents to support the development work. The experiences are really good, and we have seen solid results in both simple and more complex development tasks. Also outside of engineering, we have realized several AI use cases in sales enablement and back-office automation.

Now let me hand it over to Åsmund for a sales update.

Thank you, Trond, and good morning, everyone. In Q1, Pexip reinforced yet again our momentum across both Secure and Custom and Connected Spaces. Let's look at the details. It's great to present another strong growth quarter for Pexip, adding $1.1 million ARR and 12% year-over-year increase for Connected Spaces, and $2.9 million and a solid 24% increase for Secure and Custom is a strong statement to our technology and to our team. Pexip continues to win large Fortune 500 customers as well as government institutions, health care, justice, Ministry of Defense and important military organizations.

Let's look at why Pexip is successful in these spaces. We see commonalities for why we win. These are, number one, the acceleration of sovereign IT solutions and the need for data control. Governments across Europe and North America select Pexip as a standard for secure internal and cross-agency collaboration. Let me share with you a few large win examples. A European state IT provider doubled its deployment with Pexip. They were a large Connected Spaces customer who now have added secure meetings to power ministries in a sovereign self-hosted environment. And one of the largest justice systems in Europe has expanded their commitment with Pexip and now runs more than 3,000 court cases per day in a customized, sovereign and controlled environment.

The second trend is growth in health care. Pexip continues to demonstrate success in the health care market. These customers require both customized and integrated solutions and, of course, full control of their data. The wins on the slide from Canada and the U.S. are great examples of health care organizations that have adopted Pexip in a sovereign customized environment. Thirdly, Pexip's unique position for classified and mission-critical collaboration. Pexip had multiple wins across classified networks in Europe as well as large deployments at the highest impact level in the U.S. for government, underscoring our unique suitability for classified environments.

Let me highlight a couple of our wins. A European Ministry of Defense now powers their classified communication with Pexip across intelligence agencies, Ministry of Defense and National Security. The U.S. Department of War has now enabled with Pexip Secure meetings. And remember, Pexip is the only certified Microsoft vendor at IL4, IL5, IL6 and IL7 that can meet the strict security regulations of the U.S. government.

Lastly, interoperability remains a strategic differentiator for Pexip. As enterprises and government institutions are using multiple technology platforms, Pexip's ability to deliver a seamless and consistent user experience across platforms is of the highest importance for these customers. Recent wins prove our relevance and long-term competitive strength. One of the world's largest companies and a retailer doubled its commitment to Pexip as they run with both Microsoft and Zoom and need the Pexip Connect portfolio to make this work seamless across all their divisions.

In addition, one of the world's largest consumer brands are now using Pexip Connect standard as they are consolidating technology platforms. They use the Pexip solution for their meeting rooms to ensure that all their 100,000 employees can simply meet every day, not thinking about technology platforms. These 4 commonalities are core to what makes Pexip unique in the market. They explain why we continue to win major customers in both Secure and Custom and in Connected Spaces. And at the end, we continue to see a solid pipeline across both business areas and expect sustained strong traction in '26 and beyond.

And with that, I will hand it to Øystein for all the financial details.

Thank you, Åsmund. Starting with annual recurring revenue. We increased our growth to 17% overall. And this is a combination of continued strong growth in Secure and Custom of 24% and Connected Spaces growing at 12% per year. We have a diversified base of customers, both across geographies and industries, with the majority of customers in North America and in Europe.

Breaking down the growth in the relevant components. We saw Connected Spaces increase with $1.1 million in the quarter, resulting from continued strong new sales. We also saw an improvement in the net retention rate compared to previous quarters. Secure and Custom continues to deliver strong growth, growing $2.9 million from a combination of new sales and a positive net retention. We continue to see customers growing from their initial purchase as their usage of Pexip expands. Churn is back to a more normal level following a slightly higher churn in Q4. And combined across both business areas, we reached a net retention of above 100%, which is a milestone we have not reached since 2021. And this is a result of good performance in both areas as well as Secure and Custom becoming a bigger share of the total mix.

In terms of the P&L, recognized revenue came in significantly higher than last year. This is mostly due to the strong ARR growth in Q4 now becoming recognized revenue and in particular, driving our software revenues, which has earlier revenue recognition. The increased revenues drive the increase in EBITDA. On a 12-month basis, revenue growth is in line with ARR growth and is at 18% year-on-year, while EBITDA margin is up to 30%, up from 21% a year ago.

Our operating expenses were more or less flat compared to Q1 of last year. On cash-based salary, we have an increase of $1.5 million, driven by ordinary salary increases as well as the NOK-USD rate appreciating, which is impacting our cost in Norway. Share-based expenses are down almost $2.5 million compared to Q1 of last year, which is due to a reduction in the share price during Q1 of this year. Other OpEx came in at $4.4 million, up $1 million, of which $0.5 million was tied to a semiannual company event that we did not have in 2025.

Given the stable OpEx, 93% of the incremental revenue increase ended up as incremental EBITDA in the quarter, increasing quarterly EBITDA with $8.6 million as we continue to deliver strong operational leverage. Q1 is usually a strong cash flow quarter for Pexip, and this is also the case this year. In Q1, we had $20 million in free cash flow, up 7% year-on-year. This quarter, the working capital improvement was less than last year, which should be a positive for Q2. We left Q1 with a cash position of $81 million. However, it's worth noting that this position is significantly reduced now as we have distributed $45 million as a dividend in April.

Looking at the rest of the P&L, depreciation is in line with last year and similar with net financials. We also had a positive contribution from other gains and losses of $0.5 million in the quarter, taking profit before tax to $16 million.

And with that, I give it back to Trond.

Thank you, Øystein. Now to outlook. As described earlier, we maintain a positive market outlook based on the key trends we see in the markets and our unique technology, strong market position and industry partnerships. The current expectation is that we will end Q2 with an ARR in the range of $137 million to $141 million compared to $135 million we had leaving Q1. You may notice that this range is slightly wider than usual. This reflects the fact that we have a sizable number of larger prospects in our pipeline that will create extra upside if they land in the second quarter instead of the third. Longer term, our financial ambition is to consistently deliver above Rule of 40 performance across ARR growth and EBITDA margin. And last month, we are at 47% -- last 12 months, we are at 47% on this parameter.

And with that, before we go to Q&A, the next presentation from us will be on August 13. Now Q&A.

Thanks a lot. We'll start as we usually do with the questions from the analysts. And I believe we have with us live Christoffer from DNB Carnegie. Christoffer, can you hear us? I'll give him a second to align the data streams. If not, I will...

He's hopefully quiet today.

He is quiet or we are having technical problem. Markus Heiberg from SEB. Are you online?

Yes. Can you hear me?

Yes. Now we can.

Great. I have a couple of questions. So I'll start with the first one here, and it's that Secure Meetings, it's still largely upsell driven, it seems like. So 2 questions in that. Do you expect the mix of new customers to increase over the coming quarters? Or is it going to be like this upsell driven? And the second part of that is how you think about the current penetration rate in your existing customers in Secure and Custom meetings?

So I think to start with the first part of the question, yes, this quarter, you saw a lot of the sales in Secure and Custom was of upsell to existing. That varies a bit from quarter-to-quarter. Sometimes new sales outweigh upsells and sometimes the other way. I think it's fair to expect continued strong contributions from both new customers and from upsell. It's interesting to see when you sort of double-click on where that upsell is coming from. A lot of it is actually from our biggest customers, which tells me that we still have significant sort of room to grow even within our existing base. So the high watermark of how much is coming from a large customer in impact continues to grow.

But very often, we do see in the Secure and Custom area that the first order we get is relatively small and then it grows from there, because they need to start testing the product, need to understand how it works in the organization and then it's normally expanded to other parts of the organization over time. So it's a quite normal kind of dynamic that we see in the Secure and Custom area.

And we have many examples. So yes, we use one today where very often interoperability might be the first need, and then we apply secure meetings with several Ministry of Defense. We are now in the field, et cetera, et cetera. So we get basically deeper and deeper into existing customers.

So to follow up on that, how much do you think you have left generally on your existing customer base? And where is your penetration rate, high-level thinking?

So I think it's actually -- I don't see any reason why we should sort of not expect a similar level of net retention in the years ahead. So it's very difficult to -- once you're maybe closer to the -- when we're feeling fully penetrated, it would be easier to give an answer to that question. Right now, we don't feel that, that is the case. We have significant growth opportunities on most, if not all, of our securing customers.

And remember, we talked about, I think it was the last quarterly presentation, that with AI and adding AI functionality we see a sort of 30% upsell potential for current customers just by putting in the captions, putting in the translated captions and then the new AI functionality that's coming. So I believe as we continue to develop our products and solutions, the upsell potential would just increase.

And then final question for me before I leave the word. The main growth driver you mentioned here are native rooms in Connected Spaces, if I heard correctly. Is it possible to indicate how much of the new customer growth is native and government cloud in this quarter?

I would say within Connected Spaces, the vast majority of the growth is either from native rooms or from government interop in terms of the net growth and then the sort of overall state is fairly stable.

Great. Then I think we'll try Christoffer. No, we will not. I'm getting here from the studio. Let's go to ABG and Øystein Lodgaard. Øystein, can you hear us?

Can you hear me?

Yes, we can.

Congrats on a strong set of numbers. I have a couple of questions. Firstly on, kind of majority of the growth in securing customer is still with government entities and defense applications, et cetera. Of course, there is a potential trend going forward of European companies buying more European software. Can you say whether you're kind of starting to see this happening now? Are you seeing more leads with more enterprise customers in the securing customer segment and some comments on that?

Do you want to comment? I think I can start. It's not a big move from enterprise yet. We do believe that we do see some larger organizations, particularly in the sort of energy infrastructure area or in the more kind of critical areas for society as a whole, are starting to sort of evaluate business continuity solutions where Pexip will be a part of that suite of continuity solutions. But I wouldn't say -- I think it would be going too far to say that we see a huge trend around this as yet, Åsmund, but we do sort of -- we are optimistic about the longer term.

Very optimistic. I have a lot of discussions around it. I haven't seen a lot of large enterprises in Europe move yet. But on the government side, absolutely.

Interesting. And I wanted to -- you said, Trond, that you had some larger deals that could potentially land in Q2, also potentially in Q3. Can you say which segment are these related to? Why are they larger than usual? And if that means that there is potential some kind of upside risk to the Q2 guidance because of these deals?

Yes. It's a good mix. I think what's different this time -- it's always difficult to predict timing of these deals, right? I mean the customers do not always relate to our quarters the same way as we do. So the dates, if it lands in one quarter or the other quarter, they don't really care, but we care a lot. And that's really the same as it's always been. I think the difference this quarter is that we have more of these deals that are currently in play that we see that could land on either side of the quarter. So yes, I think that's kind of the short answer.

So it's not kind of that you're seeing some sort of acceleration in the market with more larger deals. It's more that kind of the timing of where you could land is more difficult to estimate?

Yes, it's more of them now and that sort of impacts how we forecast the quarter. So I think it's a positive development.

And is that a trend shift or...

I think that trend you already see to some extent in the ARR numbers that we delivered also this quarter and in the quarters past, right? I mean, we did $4 million in incremental ARR this quarter. I think last year, it was $2.4 million, so in Q1 of last year. And so in that, we are seeing an acceleration.

Is it mostly Secure and Custom or both segments?

I think the biggest growth is coming from Secure and Custom, but we also have sizable opportunities in the Connected Spaces area.

Exciting. And last question from me. Now that you're kind of above your target in terms of Rule of 40, should we kind of interpret that, that you will kind of accelerate OpEx investments going forward to kind of balance that to get more kind of back to that long-term guidance of around Rule of 40? Or are you kind of comfortable with the current level of OpEx investments that you have?

We don't have any plans to dramatically increase the OpEx. We said that we think we might move sort of towards 300 employees through the course of this year, but that's really nothing dramatic that will change the numbers. We are selectively investing where we see a need to invest in people and in competence related to people. We are also reducing where we see that there is a need to reduce and where we don't get the sort of return on investment that we need. So I think it's a balanced picture, but don't expect any major sort of increases on the OpEx or CapEx side.

Then we'll try Christoffer from DNB.

Can you hear me now?

Yes. Now we can.

Yes. I think I had some Internet issues, unfortunately. But yes, it's a great quarter. Congrats. You already touched upon this, but I have to ask given I had some issues here. But on this whole private AI theme, which seems super exciting, could you maybe talk us a bit through the unit economics there, like like-for-like if a customer adopts some of these solutions, what kind of uplift do you see to the value of the contracts and the penetration there, just broad strokes?

No, absolutely. So I think for Pexip, we've seen revenue increases of 20% to 30% for customers adopting that solution compared to where they were before buying it. So it's a meaningful revenue uplift and a margin picture which is not unlike the margin picture that we have in the company in general. We do have some cost of goods sold to [ NVIDIA ], but we are not buying the compute. I mean that cost of the GPU and the tokens, if you will, are on the customer that is paying for. And so it's a meaningful revenue uplift with a margin picture which is very similar to the products we already sell.

Great. And then on your product road map, can you maybe help us understand a bit better what you're investing in now to kind of continue to drive these incremental features and give customers maybe the reason just to further upgrade their subscriptions beyond the current portfolio?

I think we can divide that sort of into a couple of areas. It's sort of continuing to develop on the core video solution that we have to make sure that it continues to be the most modern and well-invested solution in the market. As expectations from end users continue to develop, we need to sort of stay on that flow. The second is around integrations with, for example, chat providers like Rocket.Chat, Mattermost, Element, Wire, that we're working with, to make sure that the experience for those customers that are using an integrated solution is as good as it can possibly be. And the third is within AI functionality, continuing to develop on the AI road map, making sure that we export transcripts, integrate with other AI solutions that operate in these sort of private AI context, so that we can again continue to be relevant also in this area for customers that need AI functionality, but are uncomfortable using the public cloud solutions out there today.

And then finally, on AI, I guess, it's just you've seen a lot of people using these AI note-taking services where you typically see like a separate user calling into video conferencing calls or meetings. Does that in any way kind of drive revenues in terms of representing another user? So if everyone kind of starts having their agents joining the call, does that basically double the TAM? Or just like how do we think about -- is it mostly rooms based, or is this also driving revenue opportunity? Kind of how do you price that?

I think for now, we don't see that as a big driver of revenues. It would require an additional audio channel, for example. So there is some incremental revenue in that. But as of now, we're not seeing that sort of as a big driver of demand.

So are you kind of looking to price that?

Yes. So it would be essentially requiring an additional capacity for the platform, which will require buying more licenses.

But remember that using Pexip Secure video is really about controlling data, controlling what transcripts are being made, where they're stored, exactly how this works. So I would expect some pretty strict policies around having these sort of bots joining the secure meetings within the organizations that use them. So let's see. But...

All right. I see. And then finally, I think it was last quarter or the quarter prior to that, you talked about you had some initial traction with desktop deployment of your Interop, I think. Have you seen anything you want to share there on the traction there? How has it worked? Are you looking to deploy that with more customers or push it to more customers? I think it was like a large bank or financial institution or something like that.

You're absolutely right. We continue to have several discussions with similar customers in that field, and we'll be sure to make a note of it when we close some of those.

Lovely. Thank you so much. That concludes the Q&A session for this quarter, and looking forward to seeing you after Q2. Thank you all.

Thank you.

Good morning, and welcome to this presentation of Pexip's fourth quarter results. My name is Trond Johannessen, and I'm the CEO. Together with me here at Lysaker today, I have our CFO, Oystein Hem; and our Chief Revenue Officer, Asmund Fodstad. Together, we will take you through the highlights of the quarter and what we are focusing on going forward.

The standard disclaimers apply as usual. First, a short overview of Pexip for those new to the company. Pexip was founded in 2012, and currently, we operate in 25 countries across the globe. We are a specialist video conferencing and infrastructure company focusing on interoperability and secure and custom meetings. We do software only delivered as a software or software delivered as a service.

Pexip has unique and established relationships and partnerships with the leading companies in our industry. We complement and enhance their solutions and do not generally compete with them. Our customers are mainly large organizations in both the private sector and the public sector that have complex needs when it comes to video collaboration. The financial performance is strong and has been continuously improving over the last quarters.

Now, to the highlights of the past quarter. Our annual recurring revenues, ARR, grew with USD 8.8 million during the quarter, and this gives us an ARR base of $131 million leaving Q4. This is the top end of the updated Q4 guiding we gave you in December. In Q4, we saw a significant improvement in the growth in Connected Spaces as a result of a couple of large deals that closed in the quarter.

In our Secure and Custom business area, the positive development continues, driven by increased awareness around the need for secure and sovereign communication solutions. In Connected Spaces, we also see solid progress on our solutions for native rooms and the launch of Connect for Google Meet hardware in Q4 has been a success, both technically and commercially.

EBITDA came in at NOK 94.2 million in the quarter and NOK 316 million for the full year. Free cash flow was NOK 71.9 million in Q4 and NOK 354 million for the full year. If we look at this Q4 performance in the context of the last 12 months, we see an accelerated development on all key parameters. Our total ARR continues to grow, and year-over-year, the growth rate was 16%. Our 12-month rolling EBITDA reached NOK 316 million, which is a 53% improvement since Q4 last year. This corresponds to a 26% EBITDA margin. And finally, the free cash flow in the last 12 months of NOK 354 million is 80% higher than at the same time last year.

We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position. Pexip has 2 main solution areas. Pexip Secure and Custom is privately hosted video meetings that give complete privacy and data control with the desired level of customization. Pexip Connected Spaces is about video meeting interoperability by enabling any meeting room to connect to any meeting platform.

Now, a few words about each of these business areas. In Secure and Custom, we are targeting a segment of the video conferencing market that is largely unserved by the major players like Teams, Zoom, Google and Webex. We are catering to those organizations that have limitations with respect to use of global cloud platforms like Azure, GCP or AWS. And consequently, they have a need for their conferencing software to run in controlled IT environments, either self-hosted or in private or sovereign clouds.

This is a fast-growing market as a consequence of the geopolitical situation and the need to control data. Data sovereignty is increasingly relevant, in particular in Europe. Significant investments are being made in building sovereign IT infrastructure and solutions in many countries. Pexip has a unique position in this growing market with a modern and future-proofed solution that has the flexibility to be integrated and customized to the needs of the customers, while at the same time, being certified and tested to the highest standards in the market.

Again, in this market, Pexip's offering is a secure video meeting platform that can be used exclusively or alongside, for example, Teams or Zoom. The solution includes security features such as tailored user authentication, clear meeting classification labeling and complete control over what data is stored and where. Integrating with chat is also an option.

The Pexip platform can be installed in all relevant IT environments and gives complete control to the customers as no data needs to be shared with any external third parties. The secure meeting can easily be booked through the Outlook calendar or started through a chat session, exactly the same way as for Teams meetings. We're now starting to see that large organizations deploy more than one video meeting solution, and Pexip is very well positioned as a secure meetings alternative.

Now to Connected Spaces. Here, we have basically completed the any-to-any vision and really deliver on the promise. In close partnerships with Google, Zoom, and of course, Microsoft, we provide the most comprehensive suite of interoperability solutions available in the market. In Q4, we launched a brand-new Connected Spaces product named Pexip Connect for Google Meet hardware.

With this new product that we have co-developed with Google, all meeting rooms that have Google Meet hardware can now connect to Teams meetings with excellent quality. The market interest and resulting uptake is strong, and we have closed close to USD 1 million in new ARR on this product during Q4 alone.

Now, let me leave it to Asmund for a more detailed sales update.

Thank you, Trond, and good morning, everyone. Pexip delivered a strong fourth quarter, reinforcing our momentum across both Secure and Custom and Connected Spaces.

For Secure and Custom, Pexip added USD 2.9 million in ARR and reached USD 56.3 million for the end of the quarter. It's a solid 25% year-over-year increase. Growing focus on sovereign IT solutions across Europe strengthened our position. And our solutions for defense, government and healthcare continue to be key contributors to our momentum in Q4 and beyond.

In Connected Spaces, Q4 ended as an exceptional strong quarter for us. ARR grew by USD 5.9 million, reaching USD 74.7 million, a solid 10% year-over-year increase. Growth in this segment is fueled by major customer wins as organizations transition across video platforms and rely on Pexip to ensure a seamless, consistent user experience.

Let's look at a couple of wins. This quarter, we had so many large wins that we decided to share more of them with you and as well address the commonalities that strengthen our relevance and competitive position. So, across our global wins in the last quarters, we see 4 growth drivers that contribute to our success.

Number one, the acceleration of sovereign IT solutions and the increasing need for data control. Governments across Europe, the Middle East and Asia are increasingly selecting Pexip as their standard for secure internal and cross-agency collaboration. Let me just use a few larger win examples. A central European state IT provider now powers all intergovernmental communication with a self-hosted sovereign Pexip solution. In Southeast Asia, the Ministry of Defense of a leading nation now powers all critical collaboration with a modern, integrated complete collaboration solution from Pexip.

The second trend, successful adoption of Private AI. Pexip continues to demonstrate strong net retention in the Secure and Custom segment. A key growth driver is our Private AI offering, which is gaining significant traction across justice and healthcare sectors globally. A great example is one of the world's largest healthcare organization who now adopted Pexip Private AI resulting in a 30% upsell within an already major customer for Pexip.

And thirdly, Pexip's unique position for classified and mission-critical environments. Pexip secured multiple wins across classified networks in Europe as well as deployments at the highest U.S. impact classification level IL-7, underscoring our unique suitability for sensitive environments. A couple of large wins here as well. A Nordic nation now powers all their classified and above communication with Pexip solutions across intelligence agencies, Ministry of Defense and National Security. And a U.S. IT provider for defense, intelligence and national security environments is now enabled with Pexip at Impact Level 4 and above. And remember, Pexip is the only Microsoft certified vendor at IL-4, 5, 6 and 7 that can meet the strict security regulations of the U.S. government.

And lastly, interoperability as a strategic differentiator. As enterprises and government institutions shift technology platforms, Pexip's ability to deliver a consistent user experience remains essential. And recent wins prove our relevance and long-term competitive strength. A couple of large wins. One of the world's largest technology companies now uses Pexip for Google Meet across thousands of devices and meeting rooms worldwide, as they changed the video technology platform to Google. Another example is one of the world's largest biotech companies who have used Pexip Connect standard for years and now transition to Pexip solution for their native rooms, as they have changed the technology for devices in their meeting spaces.

These 4 drivers are core to what makes Pexip unique, and they explain why we continue to win customer after customer in both Secure and Custom and in Connected Spaces. And lastly, I wanted to point out, as we came into this year with a solid pipeline across both business areas, we expect sustained strong traction in 2026 and beyond.

And with that, I will hand over to Oystein for the financial details. Oystein?

Thanks a lot, Asmund. For annual recurring revenue, as Trond mentioned, we increased our growth to 16% overall, up from 12% out of Q3. This is a combination of continued strong growth in Secure and Custom at 25% per year and Connected Spaces having a great quarter, delivering 10% growth year-on-year. The great growth come from customers in Enterprise, Government, Healthcare and Defense, and in particular, from the Americas.

In terms of net retention and new sales, Connected Spaces saw an increase of 8.6% in the quarter, driven by strong new sales. The improvement compared to previous quarters was in particular from a couple of large customers that closed in the quarter.

Secure and Custom continues to see strong growth, delivering 5.4% in the quarter and from a combination of strong new sales as well as positive net retention. Churn was slightly higher this quarter, as we saw a low renewal rate for support contracts in Asia that had an impact on churn overall. Such customers are a small part of our ARR base, hence, we expect this to be more of a onetime event.

In terms of the P&L, recognized revenue came in, in line with last year. This is mostly due to the 10% decline in the U.S. dollar to Norwegian kroner exchange rate impacting our software revenues as well as a software deal slipping from Q4 and being delivered in Q1 of 2026. In U.S. dollar terms, revenue growth was 10%. For the year, revenue growth is in line with the ARR growth going into this quarter, while the contracts closed in Q4 will have revenue impact from Q1 and onwards.

EBITDA increased in the quarter, benefiting from the same currency development, as it also reduces our costs. And for the year, we came in at an EBITDA margin of 26%, up from 18% in 2024. And the sum of our ARR growth and EBITDA margin is now at 42% for the year versus our long-term ambition of more than 40%.

On costs, they were slightly down compared to Q4 of last year. Non-share-based salary expenses are down NOK 11 million, while share-based compensation is up NOK 9 million due to the share price increasing meaningfully during Q4. And other OpEx was down NOK 3 million.

Looking at the year overall, Pexip increased our revenues with NOK 110 million and managed to convert 100% of that into incremental EBITDA. And this really shows the scalability of our software business, combining double-digit growth with good cost control. The EBITDA of NOK 316 million resulted in a free cash flow for the year of NOK 354 million, helped by a strong Q4. Q4 came in with a free cash flow of NOK 72 million, an increase of NOK 51 million compared to Q4 of 2024, with most of the improvement resulting from a better working capital development.

Looking at the rest of the P&L, depreciation is in line with previous quarters and continues to be down year-on-year, while net financials is down compared to Q4 of 2024 due to lower gains on foreign exchange differences. In total, our profits before tax came in somewhat above 2024 with NOK 87 million. And to summarize the year, we grew revenues with 10% and had no significant changes to either of the cost categories above EBITDA. Depreciation is NOK 26 million lower, and hence, our EBIT margin has crossed 20% for the first time and came in at 21%.

Lastly, an update on reporting. Pexip is currently reporting our annual recurring revenues in U.S. dollars as that is the primary currency we use with our customers. To make reporting more consistent and remove noise from currency fluctuations, we intend to consolidate all financial reporting using U.S. dollars in 2026, starting from Q1. We will provide pro forma historic figures for 2023 to 2025 in April, before the first report in the new reporting currency comes out in May.

And with that, I hand it back to Trond.

Thank you, Oystein. Yes, looking good. Well, looking ahead, we have described earlier that we maintain a positive market outlook based on the key trends we see in our markets and the unique technology, strong market position and the solid industry partnerships we have. The expectation now is that we will end Q1 with an ARR in the range of USD 133 million to USD 136 million compared to the USD 131 million we had leaving Q4. This expectation reflects that the positive trends we have seen over the last quarters, they are expected to continue or even accelerate. The financial ambition we have is to consistently deliver above Rule of 40 performance across ARR growth and EBITDA margin. And the last 12 months, as Oystein mentioned, we were at 42% on this parameter.

Now to capital distribution. Pexip's dividend policy is to distribute 50% to 100% of free cash flow. For the fiscal year 2025, we recommend a dividend of NOK 4 per share, up from the NOK 2.5 we distributed last year. As for last year, this total dividend is a combination of ordinary and extraordinary dividend, 3 plus 1. As always, this recommendation is subject to AGM approval in April with payment likely to happen in May. We believe that even with this sizable dividend, the company maintains a solid financial position and the ability to go after both short-term and long-term growth opportunities.

Finally, before we go to Q&A, our AGM will be on April 17, and the Q1 presentation is planned for May 5. Now, Q&A. Welcome back my friends.

We'll start with the questions from the analysts that are with us live, and we will start with Jorgen Weidemann from Pareto. Jorgen, can you hear us?

Yes, as always. Congratulations on yet another solid quarter. So if I may start with your increase or your guidance on ARR for the next quarter, on the midpoint that assumes $3.5 million ARR growth, which is more or less in line with the performance you saw earlier in '25. And -- but you did increase guidance quite a lot going into this quarter. So I was just wondering, could you elaborate a little bit on what sort of contracts that made you lift guidance or actually made the Q4 2025 ARR so much better than what you expected in Q3 earnings call? What sort of contracts those were? And also, what sort of visibility you have on guide or on ARR guidance when you guide the next quarter, for example, now into next quarter?

Absolutely, Jorgen. So we try to give a -- the most realistic range that we see and with our best estimate as we stand here now being the midpoint of the range. And then, in Q4, in particular, we work with a number of large deals, and when, some of those hit and several of them land in the same quarter, that has a meaningful impact on the ARR development. And so instead of doing -- I think our midpoint was around $4 million, we delivered $8.8 million, which is obviously a significant beat in terms of incremental ARR.

We always, in all quarters, work with large contracts. But then, also the larger the contract is the more difficult it is to make a meaningful range with sort of the outcome with it inside or outside. So there are at times sort of opportunities to go above the guiding range. But I think if you look at our track record for the past 12 quarters or so, we've been fairly consistent in landing roughly where we think we're going to land.

And commenting on your question around the midpoint, 3.5% on the Q1 guiding, is meant to reflect sort of a positive view from our side as this is -- the midpoint is above what we delivered in Q1 last year, which I think was 2.5% or -- so we are kind of quite a lot, so Q1 is normally not a very strong order intake quarter. But this year, as you can see in the guiding, we are kind of seeing a more positive Q1 than we delivered last year.

Great. And then also, if I may ask about costs. Once again, costs came in below our expectation, which obviously is good, but you keep the number of employees stable. And could you give some high-level reflections on when you believe you'll hit a size that makes the non-sales organization ripe for extra resources?

Yes. We're constantly reviewing the need for people in all parts of the organization. We are investing in technology development. We are investing in sales resources where that is needed. And there -- I think we have said that we think we will leave this year with maybe around 300 employees, which is up a little bit from where we are now, basically continuing to fine-tune, continuing to invest where needed, but also look at reductions where we see that being appropriate. So I think possibly the mix of employees and where we invest and where we reduce will give sort of the net will be an increase, but not a huge one.

Okay. Understand. And then finally, if I may. France now intends to ditch Teams in its government organizations and part of Germany has done the same earlier. So I was wondering if you could speak a little bit about changes you see in secure or geo-fenced video conferencing, and how you work to win contracts in situations like these when large countries are making such significant changes?

I can start, and Asmund, you can fill in. But in general, it's a very positive development for Pexip, the fact that the countries in particularly in Europe are seeing a need for not always replacing 100% the U.S. cloud platforms, but having something in addition to have backup, to have business continuity, to have an alternative to a fully U.S.-based infrastructure. So you see some countries that are building their own. You see other countries that are kind of taking other approaches to meeting these requirements. But the most important thing is the total market is growing.

And then, Pexip has a pretty unique position on the video side here with our video engine and video platform that nobody really can match when it comes to the technical capabilities around catering to all endpoints, bringing meeting rooms into the mix, solving all the more complex use cases beyond just point-to-point PC-to-PC communication. So I think you will see that Pexip will be complementing some of the kind of more basic video solutions in many of these sovereign solutions that are popping up all over. And we have a lot of discussions these days in many countries around how Pexip can support this development.

Yes. I can add because I just came out of a meeting with one of the biggest ministries in France in Paris yesterday, and it basically confirms what you're saying. We have a very strong position with them. They might be forced into solutions on the desktop side, but again, just speaks to the relevance of sovereign solutions where they have complete control of the data. And then, it's hard for us to like what's really going to be the endgame here from a geopolitical standpoint. But all in all, this is very good news for Pexip.

Also, I think we have plenty of good examples that commercial off-the-shelf software tends to outcompete and source build-it-yourself solutions over time. But of course, customers will try different venues as they go along.

Thanks a lot, Jorgen. Then, we will move on to Markus Heiberg from SEB. Can you hear us, Markus?

Yes. So first one is on the Secure and Custom opportunities are obviously vast, but you have relatively stable growth quarter-over-quarter. When do you expect to see a sort of step up in that? Or do you expect to be at this pace? That's the first one.

I think in dollar terms, the percentages get more and more difficult to kind of match as the numbers get bigger. But in general, I think we have seen an acceleration in the dollar growth quarter-over-quarter in the Secure and Custom area. And these are, as we have also said sometimes before, processes that do take a little bit of time. Typically, you can have 18-month sales cycles in the public sector when it comes to changing platforms, replacing or adding to these complex solutions. So we think it will be a stable development steadily, sort of increasing with sort of at least in dollar terms increasing quarter-by-quarter growth in Secure and Custom.

All right. And then, maybe you can elaborate a bit more on the churn you saw in Secure and Custom this quarter is a bit higher than previous quarters.

Yes. So as I commented on, the underlying development is fairly similar to previous quarters. Then, we did see an increase in churn for support contracts in Asia, where we've had a somewhat increase over the past couple of years on perpetual customers within Secure and Custom. There, they buy perpetual software. So there's -- that's not recurring revenues, but they also buy support contracts that are subscriptions, which is part of ARR. We did see an increase in churn on those. That had actually a meaningful impact on the total churn that we saw. And one, that's a very small part of our overall ARR base, as you can see from the share of revenue overall in APAC. And so we -- I do consider that somewhat of a one-off. And then, we are looking at how we can counteract that by making sure that we have multiyear commitments from customers when they're starting with those type of platforms.

And it's also been also kind of adapting to the HP partnership, where this is the model that they've been selling into Asia. And of course, we are trying to then just be complementary to them and make sure that we get into these customers. So we do also see a potential upside future here with these clients, but this hit us in Q4.

But generally, very, very sticky, the business we have in Secure and Custom. When you have implemented Pexip as a Secure Meetings solution, we have seen very few examples of organizations that are -- that replace us with something else.

And the final one for me is maybe on AI, and how you think about that across your offering now with a lot of new tools being released over recent months and the whole software sector is rethinking opportunities and risks, I would say? So how have you been thinking about this lately? And do you see any risk in, for instance, interoperability software that, that could be an area where, yes, things will change?

So I think the headline here is that we see more -- we see a lot of opportunities with AI for Pexip. We see the need for private AI solutions, the fear of data being lost, data being misused by large -- from large organizations that would like to have AI functionality, but that are afraid of what happens to the data. So we get inbound calls almost on a daily basis on this topic. So the way we provide AI in a private controlled context is really in demand these days. And that will continue to grow. And we see the upsell that was mentioned today by Asmund, it was a 30% upsell on an existing customer because they deploy AI functionality into their meeting solution.

And then, to your second part of your question, can Pexip be replaced by AI? Obviously, anything could happen. But on the interoperability side, it's difficult to see how that would happen. A lot of the -- most of the APIs and SDKs that are being used to provide the interoperability solutions we have are not really well documented and available externally.

And second, it has to do with certifications and approvals and partnerships with all these large technology companies, Teams, Zoom and so on and -- Google and so on, right? So even if AI would be able to make a solution, it wouldn't necessarily be able to be used because of the blocking or lack of approvals from one of these large organizations.

So in that area, not particularly concerned. When it comes to can we use AI to more quickly create an alternative to Pexip in the market because you use AI to code faster or make solutions faster than before, obviously, but we can do the same, right? So we also use AI actively to bring technology to the market faster and be more competitive in that respect. So I think it's -- at least it's a balanced picture and not something that we're losing a lot of sleep over these days.

Thanks a lot, Markus. Then, we will move over to e-mail, where we received a question from an investor on how is the release of the interoperability solution between Microsoft Teams and Google Meet hardware impacting Pexip?

And so Pexip launched a product for Google Meet hardware in October, where we provide a premium interoperability between the Google Meet hardware device into a Microsoft Teams Meeting. That was -- Google and Microsoft introduced a direct guest join alternative now in February, which is the same sort of base level interoperability as you have with, for example, Zoom Rooms into Microsoft Teams or Teams Rooms into Microsoft or Teams Rooms into Zoom.

So with this, our Google offering is in the same way as a -- our offering for Zoom Rooms, a premium interoperability solution that will have the sort of key features that you require so that your video room works well. But then, there is also a basic option for those that don't really have a lot of meetings on other platforms. So we think that we will have a good competitive position on Google Meet hardware as well, and then, we've enjoyed the first quarter of being the only solution, but that was never the long-term picture.

And to quote Google themselves, they referred to Pexip as the premium solution, right? So we have good -- still good traction with those opportunities.

That concludes the Q&A session for this quarter. And thank you for watching, and see you again in 3 months.

Thank you.

Thank you.

Good morning, and welcome to this presentation of Pexip's third quarter results. My name is Trond Johannessen, and I'm the CEO. Together with me here at Lysaker, I have our CFO, Oystein Hem; and our Chief Revenue Officer, Åsmund Fodstad. Together, we will take you through the highlights of the past quarter and our focus going forward. The standard disclaimers apply as usual.

First, a brief overview of Pexip for potential new viewers. Pexip was founded in 2012, and currently, we operate in 25 countries across the globe. We are a specialist video conferencing and infrastructure company focusing on interoperability and secure and custom meetings. We do software only, Delivered as a Software or Delivered as a Service. Pexip has unique and established partnerships with the leading companies in our industry. You see some of them on this slide. We complement and enhance their solutions and do not generally directly compete with them. Our customers are mainly large organizations in both the private and public sector that have complex needs when it comes to video collaboration. The financial performance is strong and has been improving over the last quarters.

Now to the highlights of the past quarter. Our annual recurring revenues grew with $3.2 million during the quarter, and this leaves us with an ARR base of $122.2 million out of Q3. In the quarter, we had particularly strong performance in our Secure and Custom business area, and the development here is supported by increased public awareness around the need for secure and sovereign IT and communication solutions.

In Connected Spaces, our Connect for Zoom product continues to perform well. We also see that our solutions for self-hosted interoperability in high-security private clouds in the U.S. is developing positively. In Q3, we also launched a brand-new product in cooperation with Google that enables Google Meet hardware to connect to Teams meetings with excellent quality. This was not possible before.

EBITDA came in at NOK 52 million in the quarter and fresh -- and free cash flow came in at NOK 29 million in the quarter. If we look at our Q3 performance in the context of the last 12 months, we see that the positive trend we have seen over the past quarters continues. Our total ARR continues to grow and is at an all-time high. Year-over-year the growth rate is 12%. Our 12-month rolling EBITDA reached NOK 310 million, which is a 74% improvement since Q3 last year, and this corresponds to a 25% EBITDA margin.

The free cash flow in the last 12 months was NOK 303 million. This is 45% higher than at the same time last year. We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position.

Pexip has 2 main solution areas. Pexip Secure and Custom is about privately hosted video meetings that give complete privacy and data control with the desired level of customization. Pexip Connected Spaces is about video meeting interoperability by enabling any meeting room to connect to any meeting platform.

First a few words about Secure and Custom. This area grew 30% year-over-year in Q3 and now constitutes 44% of our total ARR base. Here, Pexip provides a video meeting platform that can be used exclusively or alongside, for example, Teams or Zoom in those situations when you need to close the door and have a secure meeting. Our solution includes security features such as tailored user authentication, clear meeting classification labeling and complete control over what data is stored and where. Integrated chat is also an option.

The secure meeting can easily be booked through the Outlook calendar or started through a chat session exactly the same way as with Teams meetings. I believe that most large organizations will have more than one video meeting solution in the future, and Pexip is very well positioned as the secure meeting's alternative.

AI functionality is clearly in demand also for organizations that use secure meetings. Pexip works with NVIDIA to bring relevant AI features to our customers as added features in Secure meetings. Previously, we have launched live captions. And now in Q3, we introduced translated live captions covering 36 languages. Next up is exporting transcripts to enable video meeting summaries and the like. This will come in our version 3 of the Pexip AI Media Server.

A typical use case for AI-based translated live captions would be court hearings where all participants do not speak the same language. On this slide, you see an example of a satisfied customer that used translated captions in a recent court hearing in the U.K. Cleaven Faulkner, Director of the U.K. Military Court Service says, "Today, the U.K. Military Court Service used Pexip's Secure Meetings platform to enable remote participation in the hearing at the Bulford Military Court Center by native German-speaking attendees. Through Pexip, powered by NVIDIA, all spoken content was translated in real time into German, allowing the participants to follow every part of the proceedings. I think it's a pretty good testament to the perceived value and, of course, the observed quality of this Pexip functionality."

In our other business area, Connected Spaces, Pexip has the vision of connecting any meeting room to any meeting platform, a vision that now pretty much has become a reality. With Pexip's unique technology, interoperability focus and industry partnerships, we have a market-leading position in this field. The new solutions for Google hardware, Zoom Rooms and Teams Rooms are unique to Pexip and are evidence of the leading position that we have.

In Q3, we launched a brand-new Connected Spaces product named Pexip Connect for Google Meet hardware. With this new product that we have codeveloped with Google, all meeting rooms that have Google Meet hardware can now connect to Teams meetings with excellent quality. This was not possible before. The market interest is strong, and we closed $250,000 in new ARR on this product during the month of October alone. This is really no big surprise to us as Google has stated that this is the most requested feature for Google Meet hardware by their customers.

Let me show you a short demonstration of how the solution works and looks.

[Presentation]

Your Google Meet hardware can now dial into a Teams meeting. I've already dialed in 3 Teams users from their Teams application on the laptop. Let's connect the Google Meet hardware as well. Notice how we get a Teams like experience when using Pexip Connect. At any given time, we get the Teams like features seen here as exemplified with profile picture, speaking indicator on the ones speaking without sending video; someone in Teams has clicked raise hand; and at the same time, we maintain most of the screen real estate for those that are sending video. If someone wants to click share from their Teams application, down here, we have Powerpoint live list. Let's go for the top one. Content is being prepared and shared in Teams, which in turn is being projected on the Google Meet hardware as well.

I hope you like it. In my humble opinion, it looks pretty good.

Moving over to a slightly different use case within Connected Spaces where Pexip is truly unique. In the U.S. government space, various private or government clouds are in use for different classification levels up to top secret. Interoperability solutions are required to enable the use of Microsoft Teams from meeting rooms and organizations using these various government clouds. Pexip works closely with Microsoft to deliver these critical solutions. It is worth noting that Pexip is the only technology partner enabling video devices to join Teams meetings in U.S. government clouds.

This past quarter, we initiated 2 different projects within high-security government organizations that now will get access to Pexip's Connect products for the first time. We expect these projects to expand significantly in 2026. So stay tuned.

Now I hand it over to Åsmund for a sales update.

Excellent. Thank you, Trond, and good morning, everyone. I'm proud to say that Pexip's success in Secure and Custom continues with another very strong quarter, ending at USD 2.8 million in ARR growth to USD 53.4 million. It represents a 30% growth year-over-year. Pexip solutions for defense and justice are yet again significant to our growth in this space. In addition, we do see an increased demand for secure collaboration and sovereign IT, especially in Europe, adding several large customers wins and expanding opportunities for regulated privacy-focused solutions in Q3.

Let me share with you a recent win with exactly this in mind. The Spanish State Agency for Digital Administration serves as a service provider for the Spanish public sector. To enable secure and seamless communication across millions of users, [ SGAD ] turned to Pexip, the only provider certified by the National Cryptologic Center, CCN.

Pexip powers 2 distinct national platforms: Number one, citizen to government communication, a scalable platform that makes it simple and safe for Spanish citizens to connect with public services, of course, without friction or any compromise. Second, intergovernment communication, a highly secure collaborative environment with advanced authentication and data protection. And Pexip was the only provider capable of meeting Spain's strengthened security, scalability and user experience requirements, delivering a modern service to both citizens and public services.

Let me move to Connected Spaces. This is the second consecutive quarter with growth for Connected Spaces, ending the quarter at USD 68.8 million despite the one-off reduction of USD 1 million from the change of our partner business model announced back in Q2. Pexip continues to see strong momentum with all our strategic partnerships like Microsoft, Zoom and Google. And as Trond said, we have already seen very good traction with the new Pexip Connect for Google product now in Q4. Pexip maintains a solid pipeline for our Connect portfolio, and we expect continued strong traction into 2026.

Let me also share a major win from Q3. As the leader in universal interoperability, Pexip was selected by one of the world's largest banks to extend seamless video collaboration across this highly regulated environment. The bank wanted employees to move seamlessly between Zoom and Teams, this time from virtual desktops or so-called thin clients. Thousands of virtual desktops are enabled with Pexip Connect for Zoom, allowing flexible video communication between the platforms and at the same time, maintaining strict compliance and data protection standards, which is, of course, very important in the financial market. This marks Pexip's first interop for PC clients, demonstrating the company's ability to innovate in new areas for interoperability.

And with that, I'm going to hand it over to Oystein for the financial details.

Thank you, Åsmund. For annual recurring revenue, as stated, we grew 12% overall, driven by strong growth in Secure and Custom of 30%. Connected Spaces is flat year-on-year. However, it's seen modest growth for the past 2 quarters. And the growth came from customers in government, health care and defense in terms of geographies with good contributions from both Americas and Europe.

In terms of net retention and new sales, Connected Spaces saw an increase of $400,000, and it's the second consecutive quarter with a slight growth. This is despite the large downsell we mentioned in the Q2 presentation, which impacts the net retention for this quarter, and it shows a positive underlying momentum within Connected Spaces. Most of the growth, as Åsmund mentioned, continues to come from Secure and Custom, which had new sales of NOK 1.6 million and existing customers growing with 1.2 million.

In terms of the P&L, revenues grew 16% year-on-year in Q3, helped by strong software sales and the ARR growth of 12%. EBITDA came in at 20% for the quarter, up 12 percentage points year-on-year. On a 12-month rolling basis, revenues grew with 15% and EBITDA is now at 25% if you look on a full year basis.

For the quarter, Pexip increased its EBITDA with NOK 34 million compared to the revenue growth of NOK 37 million. So we're continuing to leverage the scale benefits of our software business, enabling us to grow without adding significant costs.

In terms of costs, they were flat overall compared to Q3 of last year. Cash-based salary expenses are up NOK 1.5 million. Share-based compensation is down NOK 5 million and other OpEx is up NOK 4 million compared to Q3 of last year. Other OpEx was lower in Q3 of last year, while this year, it came in very much in line with the past couple of quarters. So overall, a fairly consistent development and in line with previous quarters.

Looking at cash flow, Q3 had NOK 44 million in operating cash flow, which is up NOK 23 million year-on-year. Investments and leases are stable year-on-year. And in total, we delivered NOK 29 million in free cash flow. We also completed our buyback program in Q3, leading our cash and money market fund position in total to close slightly below Q2 and is now at NOK 526 million.

To summarize, revenues are up NOK 37 million, gross profit is up NOK 35 million and adjusted EBITDA is up NOK 34 million and is now at 20% margin. Depreciation is slightly down year-on-year, while net financials is down due to currency fluctuations this quarter going against us. And this resulted in a profit before tax of NOK 33 million for the quarter.

And with that, I hand it back to Trond.

Thank you. Now a few words about our outlook. As described earlier, we maintain a positive market outlook based on the key trends we see in our markets and the unique technology, strong market position and solid industry partnerships that we have. Our expectation going forward is that we will end Q4 with an ARR in the range of $124 million to $127 million compared to the $122 million we had leaving Q3. This expectation is a reflection of our belief that the positive trend we have seen over the past quarters is expected to continue. Our near-term targets of consistently delivering above 10% ARR growth and above 20% EBITDA margin have been reached over the last quarters. Longer term, we have an ambition to deliver above Rule of 40 performance across ARR growth and EBITDA margin. Last 12 months, we are at 37% on this parameter.

Finally, before we go to Q&A, our Q4 presentation will be given on February 12 next year. Now Q&A, and I welcome my friends back in the studio.

Thank you, Trond. We'll start with a question from the analysts that are with us live. Jørgen Weidemann from Pareto. Do you have any questions for us?

So first of all, could I ask the U.S. shutdown? Have you seen any effects on that? Or do you expect any effects of that going forward?

We still have strong momentum in both federal and public sector in the U.S. However, it's hard to really predict what's going on, on the U.S. side. So far, we haven't seen any impact on the opportunities we are working on, but it's hard to predict what's going on, on the U.S. side on a daily basis.

Yes. I think the uncertainty is higher than it has been. Some of the projects we are working on are kind of classified as sort of a kind of importance level that enables sort of those organizations to keep on working and those employees to operate as normal. But of course, there might be situations where we see delays, which I think will be the actual effect, not actually business going away, but orders being delayed if there is any effect at all. We have to just wait and see on this, I guess.

Okay. That's fair. And then considering 2026 is getting closer, could you remind us what you did on pricing this year? And if you see any possibilities of increasing prices into 2026?

So I think on average, there are some product variations. But on average, we increased our prices with 5% in 2025 and also in 2024. And I think that's a fairly fair estimate for 2026 as well, that decision is still...

Okay. That's fair. And a final question from me. It seems like the interest in Secure and Custom is still quite high. But could you give us a little color on what you see on sales compared to leads generation as of right now?

We normally don't comment on order intake. Of course, we measure our pipeline. And I think what we have said around securing customer mix is that the growth momentum we have seen, we had 27% over the -- last time we reported our year-over-year growth of 27%. This time, it was 30%. It's definitely a level that we think is achievable going forward, whether it's going to be a bit higher, I mean, let's work to make that happen. But there's at least no kind of indication that the growth here will slow down.

Then we'll move on to Christoffer Bjørnsen from DNB Carnegie. Welcome, Christoffer.

Can you hear me?

Yes, we can.

Yes. I know this is a video-focused company, but I'm traveling, so I can't really do video today, unfortunately. But I just want to -- first of all, on the revenues, it was pretty strong. We're thinking maybe there's going to be some currency headwinds and so on. So just can you maybe unpack a bit what drove that strong revenue development? Was there any -- I think you mentioned in the report that there were some renewables and some license deals and so on. So maybe unpack a bit the strength of the revenues.

Yes, happy to. So I think we benefited in terms of revenue recognition this quarter by most of the ARR growth coming on software as opposed to Software-as-a-Service, which accelerates revenue recognition somewhat. So that's the main sort of driver for it. Then we are, as you say, starting to face sort of a bit more difficult comparisons given that we invoice mostly in U.S. dollars and the currency rate is a bit stronger compared to the Norwegian kroner now than it was a year ago. But so far, we've been able to sort of offset that effect by our ARR growth.

All right. That's helpful. And then on the -- you mentioned you've won this bank, which was, I think you said is your the first use case for Connected Spaces or interop on desktop, right?

Correct.

Correct.

So -- that's super exciting. Can you maybe help us understand a bit better? Is this typically something that the customer would do when they have like a new office setting up from greenfield? Or is this also kind of relevant for retrofitting of existing office facilities? And just how much does this expand your TAM essentially because this goes from -- I think I don't know how many more webcams there are in offices than there are meeting rooms, but this sounds pretty exciting.

No, absolutely. I think there's a -- most common use case for sort of PC to PC video calls is to download another application. So that's -- if you're using Zoom in your normal work life, if you're invited to a Teams call, you will download the Teams application to do that specific call. And that's what we mostly see and what I think will be the most common sort of workflow going forward. For this bank, in particular, their virtual desktop environment made it a lot easier to just have one application than 2. And also the fact that by using one application, they can make sure that they're fully compliant with all types of compliance recordings across all calls, not just the ones that are on their platform.

So we're super excited about the opportunity and sort of having the first sort of project live out there. But it remains to see sort of to what extent will this be a common adoption, I think outside of regulated industries, having 2 apps will still be the most common workflow, but excited to see how -- if we can get more traction on this also outside of this one back.

If I can expand a bit on this. So this is already an existing customer on the room side, now expanding to the desktop and then clients. And again, of course, the main point here is the regulation being able to review all the recordings and what they have with the compliance around that. And that I do think is one thing is bank and finance, but we could see that in different industries also. But again, this is our first win, a large win with this product, and we're excited about the future for this interop solution as well.

It clearly speaks to the flexibility of the technology and the way we can work with various types of endpoints and connection points into video and be that interoperability expert even when we're talking beyond the specific room systems that's been the kind of the core business for a long time.

Yes, definitely. It's super exciting. And then just finally, on that headwind to the ARR in Connected Spaces from that shift from fixed to more variable oriented deal structure or pricing structure. Can you just give an update on like that 1 million that end up being like a pure [indiscernible] with no gain from signing new customers up on that new deal? Or just -- and then how do you expect that to develop into the kind of Q4?

Yes. We have had some minor sort of, call it -- we've reclaimed a small portion of that in Q3, and then I expect to sort of reclaim rest of that throughout the contract period ahead of us. So I would say progressing as planned.

But just -- sorry to be difficult but so -- when is it like base case to be reclaimed? What's the contract period, remind me?

So that over the next, I would say, 1 to 2 years is my best estimate. But that depends on sort of to what extent -- when those new opportunities close with that new partner or with that part.

Then moving on to Markus Heiberg from SEB.

So first one, just on the timing of revenue recognition. What do you expect for Q4 relative to ARR to help our modeling going forward?

So Q4 is usually a fairly strong software quarter. So I expect that this year as well. So my sort of main assumption will be that revenues will grow roughly in line with ARR. And then I would factor in that we are facing a bit more headwinds with regards to the currency, which was extraordinarily good for us in Q4 of last year, whereas this year, it will be more sort of normal.

And then on Connected Spaces, can you elaborate on the new revenues that you have? How much of that is from sort of new service attached rooms? And how do you expect that to develop over the coming quarters? Do you expect that pace to increase now with Google? And secondly, of course, Microsoft Teams for Android rooms that are coming? Maybe you can give some more flavor there.

Absolutely. So native rooms have increased around USD 1 million quarter-on-quarter, this quarter as well, which has been a fairly consistent pace over the past 4 quarters. Then I think it's fair to expect some acceleration of that now with the Connect for Google Meet. And then we're hopeful that with the introduction of Android that we will also get a bigger contribution from Teams. I do think that native rooms, if you look a year or 2 ahead will be a significant part of the Connected Spaces revenues overall.

And the final one for me is on the employee side, it's flat quarter-over-quarter. And how should we think about that now over the coming quarters?

We do see the scaling effects that was mentioned during the presentation that sort of even with a relatively stable cost base, we're able to grow the business. We are planning for a slight increase in number of employees. We've talked about maybe around 300 being kind of a reasonable figure. So -- but don't expect any kind of major shifts or kind of dramatic increases, but kind of a stable increase to basically mainly, I guess, on the -- to build capacity on the engineering side as we have new products and new solutions in the market and to have sort of enough salespeople in the parts of -- or in the geographies where we have significant traction, for example, in the U.S.

Then moving on to Halvor Dybdahl from Arctic. Can you hear us, Halvor?

Yes. Can you hear me?

Yes, we can.

Perfect. So just a question regarding the ARR guidance for Q4. The delta ARR seems to be quite in line with Q3, which often is more -- is the seasonally slower quarter, so how should we think going into Q4? And do you have any large contracts announced in Q3 that we sort of have to extrapolate or just some color on that.

I think the Q3 was a reasonably good normal quarter, and nothing kind of major that drove within -- in the direction it ended. So kind of across the board, pretty solid. Looking at Q4, the guiding that -- and as I said in the presentation, the guiding that we're giving for Q4 is meant to sort of send a signal that we expect the positive trend that we have seen over the last quarters to continue. It's not meant to give you kind of a decimal figure to put into your spreadsheet. It's meant to indicate that we sort of see the trends that we have seen over the last quarters will continue also in the fourth quarter and hopefully beyond.

But to add some color to that, I think we did 3.6% in Q4 of last year.

Yes, right.

And if -- from our starting points, we sort of have a range now of 2% to 5%. So our expectation is that Q4 will be a good quarter in line with the previous Q4s.

Lovely. Then we move on to Lisa Wimmer from [indiscernible]

First, I wonder what is the current progress on the Teams for Android rollout?

January? Again, I think we said that in the previous earnings call as well. We're dependent on the Microsoft putting this out in the market. We are on track, and we know they are saying Q1 2026. We also know that they are talking to some of their largest customers about this coming. So we're very optimistic about rolling that out in Q1, but it sits with Microsoft for now.

I think the official road map says -- say, January or it say Q1.

Kind of. We don't care. We have heard rumors of January.

Yes.

Okay. And what do you see in ARR potential for the Microsoft rollout of Teams for the U.S. government potential? And when do you see potential deployment from this contract?

I think that's an excellent question. The potential here could be significant. Currently, our current sort of projects are in the sort of hundred thousands kind of dollars ARR. We see sort of potential for going into the millions just with a couple of projects that we're currently working on, and there could be potential beyond that. So the uniqueness of Pexip's technology and the market position we have and the cooperation with Microsoft is really helping us in this area. But to give you a more exact answer than that is a bit difficult. We're kind of working to understand which organizations, which clouds, which deployment situations will be relevant for us here going forward.

And it's an excellent opportunity to also add some more color working with these large communities, especially on the federal side in the U.S. is long sales cycles. That's one thing. What's going on in the U.S. market currently is kind of hard to predict. And you typically go through proof of concepts, et cetera, et cetera, before you basically get the entire deployment. But we are in a very, very good place, but also hard to say when will it happen and the exact timing on it, which is a couple of components that we are not able to control basically.

But it's clearly one of the reasons why we are feeling good about the development in securing customer going forward.

Yes.

Thank you. That concludes our Q&A session. Thanks for the attention.

Thank you.

Thank you.

Good morning, and welcome to this presentation of Pexip's second quarter results. My name is Trond Johannessen, and I'm the CEO. Together with me here today at Lysaker, I have our CFO, Oystein Hem; and our Chief Revenue Officer, Åsmund Fodstad. Together, we will take you through the highlights of the past quarter and our focus going forward. The standard disclaimers apply as usual.

First, for new viewers, a brief overview of Pexip. Pexip was founded in 2012, and currently, we operate in 25 countries across the globe. We are a specialist video conferencing and infrastructure company, focusing on interoperability and Secure and Custom meetings. We do software only, delivered as a software or Software as a Service. Pexip has unique and established partnerships with the leading companies in our industry. We complement and enhance their solutions and do not generally directly compete with them.

Our customers are mainly large organizations in both the public and private sectors that have very complex needs when it comes to video collaboration. The financial performance is strong and has been improving over the last quarters.

Now to the highlights of the past quarter. Our annual recurring revenues, ARR base grew with USD 3.5 million during the quarter, and this leaves us with an ARR base of $119 million leaving Q2. In the quarter, we had particularly strong performance in our Secure and Custom business area, and the development here is supported by increased public awareness around the need for secure and sovereign IT solutions, including video communication.

We also see that our new interop solution for Zoom Rooms continues to do very well in the market. In Q2, we also renewed a partnership agreement with an important partner in Connected Spaces. And this underlines the importance of interoperability for this key player in the industry.

EBITDA came in at NOK 57 million and cash flow ended at NOK 32 million for the quarter.

If we look at our Q2 performance in the context of the last 12 months, we see that the positive trend from the last quarters continues. Our total ARR continues to grow and is at an all-time high. Year-over-year, the growth rate is 11%. Our 12-month rolling EBITDA reached NOK 276 million, which corresponds to a 23% EBITDA margin. And finally, our free cash flow in the last 12 months was NOK 281 million. We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position.

Now a bit more detail on the 2 business areas. Pexip's mission is to make seamless video communication available to all organizations, regardless of technology platforms and security requirements. Our 2 business areas, the first one being Pexip Secure and Custom Spaces is about privately hosted video meetings that give complete privacy and data control with the desired level of customization. The second business area, Pexip Connected Spaces is about video meeting interoperability by enabling any meeting room to connect to any meeting platform.

First, a few words about Secure and Custom Spaces. Here, Pexip provides a video meeting platform that can be used exclusively or alongside, for example, Teams or Zoom in those situations when you need to close the door and have a secure meeting. Our solution includes security features such as tailored user authentication, clear meeting classification labeling and complete control over what data is stored and where. Integrated chat is also an option.

The secure meeting can easily be booked through the Outlook calendar or started through a chat session, exactly the same way as for Teams meetings. I believe that most large organizations will have more than one video meeting solution in the future, and Pexip is very well positioned as the secure meetings alternative.

Those organizations that have requirements that fit well with Pexip's value proposition span over a wide range of industries and sectors. Most notably, we see that organizations within defense and national security as well as government bodies in all shapes and forms together with health care and other regulated industries constitute the sectors where we see the highest demand. As a result of this, we have increased our focus on meeting the needs of customers in these sectors to ensure that we continue to take market share in what we define as our core customer groups for secure meetings.

Åsmund will show a couple of customer use cases related to defense and health care a bit later, but let me share some recent wins we had in Q2 with government organizations that are outside of defense and health care. These include secure meetings plus chat integration for a European civil agency, a secure meeting solution for a public prosecutor's office, secure meetings with AI translation for a foreign ministry, secure meetings to a U.S. state corrections agency and finally, a secure meetings and chat solution for another civilian agency in Europe. In total, these contracts with high-profile government agencies sum up to USD 1.3 million in new ARR in the quarter.

We see significant momentum in this area, and we are often asked about the key drivers behind the decisions to purchase Pexip solutions for this customer group. There is no single answer that fits all customers. But in aggregate, we see the following key reasons for selecting Pexip, a requirement for data sovereignty, control and compliance, a need for customization capabilities as well as deployment and integration flexibility, a desire for vendor independence and reduced vendor lock-in and a need for a modern user interface also in secure environments.

To give you some more flavor to what we actually deliver to these customers, let me show you a short video describing Pexip Secure meetings, including an example of an integration with chat, and this solution is a popular replacement of legacy solutions such as Skype for Business or Cisco Meeting Server.

[Presentation]

Now moving over to Connected Spaces. This is where Pexip has the vision of connecting any meeting room to any meeting platform. With Pexip's unique technology, interoperability focus and industry partnerships, we have a market-leading position in this field. The new solutions for Google Hardware, Zoom Rooms and Teams Rooms are unique to Pexip and are evidence of the leading position we have.

Interoperability continues to be highly relevant with several platforms and hardware solutions widely used. As earlier communicated, we are working with both Google and Microsoft to deliver interop for Google Meet Hardware and MTRs on Android. The progress is good on both these joint development projects.

Also on positive partnership news, we have, in the second quarter, renewed a long-term commercial agreement with a key partner, adding an additional 3 years to the existing agreement. This renewal signals the continued importance of interoperability for one of the key players in the industry. The new business model has a higher variable unit price and a lower fixed fee, which is estimated to give Pexip higher revenues and margins over the 3 years. Short term, it will, however, have a temporary one-off ARR effect of minus $1 million in Q3 this year.

Now let me leave it to Åsmund for a sales update.

Thank you, Trond, and good morning, everyone. I'm super happy to announce that we yet again are reporting another strong quarter for Pexip in Secure and Custom, with a USD 2.6 million ARR growth to USD 50.6 million. It represents a 27% growth year-over-year.

We are especially strong in defense and see an increased awareness and pipeline for secure solutions globally. In addition, we see great progress within health care with several large wins.

Let's start with Secure and Custom. Pexip delivers secure video meetings for the world's toughest IT environments. Pexip integrates seamlessly with complex, highly regulated networks, tailors the experience to each customer and still keep the system simple to run. That's why government, defense and national security agencies choose Pexip.

Today, I'll share some of the key wins that illustrates this. The first case is a European Ministry of Defense. In this defense organization, video collaboration is a strategic capability for command and control, multi-domain situational awareness, meaning the ability to act coordinated simultaneously, governmental coordination, collaboration and program delivery.

This European Ministry of Defense was looking for a solution that could run sovereign, secure video meetings for their primary NATO command and control environment, interoperable with NATO HQ and 32 member states.

So why did the customer choose Pexip? Pexip meets the strict NATO standards, known as Federated Mission Networking. Pexip offers flexible deployment, and this is critical for mission readiness and Pexip runs on any server and any cloud. And finally, Pexip is easy to operate and delivers the rapid scale across domains that this Ministry of Defense requires.

Imagine the technology complexity across these member states and their setup, where many collaboration platforms lack the security, compliance and adaptability required. Pexip is the only one that enables full control over classified conversations.

Another major win for us in Q2 that I wanted to highlight is one of the world's largest hospital groups. This health care organization was looking to improve both patient care and agent efficiency with video while maintaining the highest quality across multiple locations and networks.

The integrated Pexip and Genesys video solution enable their contact center to deliver a personalized experience as well as giving the administrators the visibility and control needed to monitor and maintain every call.

So why did Pexip win this deal? As stated earlier and highlighted by Trond, Pexip integrates seamlessly with complex regulated networks, and we have the ability to personalize the experiences and finally, keep the system simple to run.

Let's also have a look at Connected Spaces. For Connected Spaces, we ended the quarter at $68.4 million, adding almost $1 million in ARR. Pexip continues to see strong momentum with both Microsoft and the Zoom partnership, where the Pexip Connect for Zoom Rooms had very good traction in Q2. Pipeline keep on growing for our connected products, and we expect continued traction in '25 and beyond.

Let me also share a major win within Connected Spaces from Q2. A world-leading consulting firm needed seamless interoperability and a consistent experience across meeting rooms and technologies. They refused having a walled garden approach and require the freedom for consultants to join any client meeting on any platform.

Pexip Connect for Zoom Rooms delivered a fully supported enterprise-grade solution with any to any interoperability and a consistent one-touch join experience. The outcome, platform freedom without vendor lock-in, consistent room experience across sites, reliable, high-quality meetings backed by Pexip support, all enabling their consultants to simply just meet.

As the leader in enterprise interoperability, Pexip provides a through any-to-any connectivity and the reliability global firms depend on. And Pexip is the only one that can do that across any platform or any technology.

And with that, I'm going to hand it over to Oystein for the details on the financials.

Thank you, Åsmund. Let me start off with our ARR development. As mentioned, we grew 11% in Q2, with most of the growth coming from Secure and Custom. The split of ARR across industries and regions is similar as the previous quarter, with government and health care adding the most in Q2, with the growth being fairly evenly split across Europe and U.S.

In terms of net retention and new sales, Connected Spaces saw an increase of $900,000. This is somewhat better than in Q2 of 2024 with improved churn and improved net upsell.

Secure and Custom had another very strong quarter, growing $2.7 million and maintaining the annual growth at 27%. Q2 was strong last year as well. And year-on-year, we had improvements of $100,000 to $300,000 across new sales, net upsell and churn, adding up to an improvement of $700,000 compared to Q2 of last year.

As a consequence of the strong growth, Secure and Custom has increased its share of the total ARR from 37% a year ago to 42% now. This is a positive development as Secure and Custom has the best net retention of the 2 business areas.

In terms of the P&L, revenues grew 6% year-on-year compared to the ARR growth of 11%. This is mostly due to timing effects of revenue recognition across Q1 and Q2. And year-to-date, revenues are up 13%. This is also why the growth this quarter is mostly from Software-as-a-Service.

The NOK-USD exchange rate is down compared to Q1. However, compared to Q2 of last year, currency effects are not very significant with regards to revenues. EBITDA continues to grow and is up NOK 21 million compared to the revenue increase of NOK 16 million. This is due to a significantly improved cost of goods sold due to received onetime rebates on cloud compute in Q2. This has helped us expand our profitability significantly this quarter as well, which came in at 20% EBITDA margin, up from 14% a year ago and is now at 23% on a 12-month basis. This is a testament to a strong underlying business model as double-digit growth, together with a stable cost base, has a tremendous impact on profitability.

In terms of costs, we continue to maintain a stable cost base by driving for efficiencies in some areas while also expanding in others. Salary expenses are stable year-on-year with a reduction in cash-based salary of around NOK 5 million, and this was balanced out by an increase in share-based expenses as accruals for social security costs increased due to the share price increase during the quarter. Other OpEx continues to be stable and is up NOK 1 million compared to 2024.

Looking at cash flow. Q2 had a free cash flow of NOK 32 million compared to NOK 68 million last year. This is due to working capital normalization following a very strong Q1. And in the first half, free cash flow is NOK 253 million compared to NOK 168 million in the first half of last year.

In Q2, we also distributed a total of NOK 318 million back to shareholders through the dividend and our share buyback program. The share buyback program was completed earlier in August. And combined, we have year-to-date returned close to NOK 360 million so far this year. We left Q2 with a very solid cash position of NOK 544 million.

So to summarize, revenues are up NOK 16 million. Gross profit is up NOK 24 million, and EBITDA is up NOK 23 million and is now at 20% margin for the quarter. Depreciation is also NOK 8 million better than in Q2 of last year as a result of completion of depreciation of some intangible assets. And the current level is pretty in line with our running CapEx and lease expenses.

Net financials is also NOK 11 million better than last year from better foreign exchange differences compared to Q2 of last year. In total, we improved our profit before tax, which came in at NOK 56 million, up NOK 44 million from Q2 of last year.

And with that, I give it back to Trond.

Thank you, Oystein. Well, now to outlook. As described earlier, we maintain a positive market outlook based on the key trends we see in our markets and the unique technology, strong market position and solid industry partnerships that we have. Our expectation is that we will continue the positive ARR trend we have seen over the last quarters and end Q3 with an ARR in the range of USD 120 million to USD 123 million compared to the $119.0 million we had leaving Q2. Included here is the temporary negative ARR effect of the new pricing in the renewed partnership model. As mentioned earlier, this new pricing is positive for Pexip's revenues and margins over the contract term.

As demonstrated this quarter, we are also tracking well towards our near-term targets of consistently delivering above 10% ARR growth and above 20% EBITDA margin. Longer term, we have an ambition to deliver Rule of 40 performance across ARR growth and EBITDA margin. Last 12 months, we are at 34% on this parameter. Finally, before we go to Q&A, we will have our Q3 presentation here on November 7.

Now Q&A.

Thanks a lot, Trond. As normal, we'll start with questions from the analysts that are with us on the call. I believe we have Jørgen Weidemann from Pareto. Jørgen, do you have any questions for us?

Also, first of all, congratulations on another good quarter. So my first question, could you shed some light on the way you account for variable price commitments in your ARR, especially with relation to the Connected Space contract that you now changed slightly? And if you don't account for them at all in your ARR, could you tell us something about the share of variable payments that you have in your current contracts and how we should think about that going forward?

Right. So to understand or to -- typically, we don't have variable pricing contracts. They are variable in that they scale with the number of licenses that are bought. The typical model for us will be that the price per license will be fixed for the entire contract period, which is typically 1 to 3 years. In the specific contract that we mentioned now with the partner, we had a somewhat different model with a large sort of contract fixed fee of about NOK 1 million a year. And on top of that, you had a variable price. And in the new model, you have just a higher variable price, but no fixed fee commitment. Did that help? Or were there other type of variable that you were thinking?

No, I was just wondering how we should think about it. But if you say that the old contract was a special one and the ones we usually account for is the ones we should continue to account for, then that's very clear.

And when the previous contract basically had built in a certain uncertainty around volumes and the price levels, and now after having run that contract for 3 years, we see that the volumes are coming up and sort of the pricing in the market sort of allows for a higher variable price. And when this is then more positive also for Pexip on a revenue and margin basis, that's how we -- sort of that's the way we kind of ended up renegotiating that agreement for the next 3 years.

So just to clarify then, if the contract you're switching to now is closer to the ones that you usually did, why would it reduce the ARR if it's still going to be the same coming in, that's the way you usually account for?

The reason for that is that we need to build up the volume on the new contract. And so when you have a price per unit, which is higher, it does require us to sell units into that program to get to sort of retain that revenue. That being said, based on the previous 3 years, we're very confident that, that will happen over the sort of foreseeable future.

Okay. Great. That makes a lot of sense. And then my second question is on Connected Spaces, which continues to be a little bit subdued on growth with 2% year-over-year. But I assume that's mainly from the switch between SIP and service attach endpoints. At the same time, you see a significant traction on the Zoom native products now at $4 million ARR. Is it fair to say that the Zoom product alone is enough to counter the effects in the switch and that we should expect some higher growth as the other products become available for sale?

I think that is certainly our ambition to be able to expand our growth in Connected Spaces as we, in particular, become more relevant to Microsoft Teams customers with covering both Microsoft Android -- Microsoft Teams Rooms on Windows, which we do today, but adding Microsoft Teams Rooms on Android, which we currently are in development of.

Okay. So there's no reason why Connected Spaces shouldn't return to 5% or 10% growth in the next 2 years when you have those products.

We only provide guidance to be fair on sort of the overall. If you see this quarter, we added close to $1 million in ARR for Connected Spaces. If you take that pace, you're already sort of mid-single digits. So I think it's fair, but we don't give concrete guidance for specific product areas.

Then I believe we have Christoffer from DNB on the call as well.

Can you hear me?

Yes, we can.

Yes. So could you just kind of reiterate how to think about that change in contract and how it kind of affects the kind of sets up the sequential change in ARR into Q3?

Yes. So the previous contract had a fixed fee and a variable fee for the units that were sold on to that contract over the 3-year period. When we now move into the new contract, that has no fixed fee, which is the $1 million that we feel the effect of immediately, but a significantly higher per unit volume price. And so as we sell into that contract over the next quarters and years, we expect to sort of recoup that initial loss by having higher ARR. And that is based on the sales volumes that we have seen over the past 3 years.

Can you just talk a bit about the product of the counterparty there, how they use it and why like their current user base will already just roll over into this new one and drive an equivalent or higher ARR instantly?

So I can't go into details around that contract, but there's a substantial special sort of customer base that we have not touched yet with this product. It is within the Connected Spaces and predominantly Connected Spaces with sort of Connect for Teams standard, which is our main product in this area.

Yes. I just got the sense like you said on the previous question that thinking about Connected Spaces going forward, it added almost $1 million of the ARR in Q2, and it seems like you're kind of feeling it will be the same in Q3. But if you have like $1 million headwind, is it like a gross add of $2 million and then you kind of take out $1 million to arrive at that $1 million for Q3 or...

No, I did not intend to give concrete guidance for Q3 specifically. But if you sort of zoom out on a yearly basis or even in sort of the next 2, 3 years, that we both have shown and have the current capacity to have solid growth in Connected Spaces is certainly sort of within our expectation.

I mean just to put $1 million into some context, I mean, we have single contracts that we enter into in Connected Spaces that could be $1 million or more. So the $1 million is, in my view, not really very significant in this context. What is significant is the fact that this very sort of key player in the industry has entered into a 3-year agreement with Pexip that really underlines the importance of the products and solutions we have and how important that is for this key partner to continue to drive development in their business.

Yes, that's helpful. And then just a final quick one from us. So if you just do some back of the envelope here and look at the kind of the midpoint of your guidance at $121 million, $122 million and assume you have a $1 million sequential headwind in Connected Spaces, it kind of seems to indicate that you are expecting a material step-up in growth, both in terms of DAR and year-over-year growth in ARR and Secure and Custom for the current quarter. Is that kind of the way you're thinking about it? And if yes, what is kind of driving that acceleration in Q3 for Secure and Custom? Is it like you guys pushing more? Or is it more like a pull from customers accelerating for some reason? That would be helpful.

I think I can try to answer that. Just to make that very clear, the change in contract and pricing model is already taken into account in the forecast that we are giving you for the third quarter, whether the growth, which means that if you want to correct for that or not in your estimates, you can do that. But in the $120 million to $123 million, that is kind of already taken into account.

Whether the growth in the third quarter will mostly come from Secure and Custom as it has done over the past last couple of quarters or more from Connected Spaces, I mean, we're not guiding on that. So we expect both areas to grow. And we have seen that sort of it varies a bit over time what grows the most. But what we have seen and continue to see is a very strong momentum in the Secure and Custom driven by the current geopolitical situation. The awareness around data control, sovereignty and the need for IT systems as alternatives to the major global SaaS solutions that are out there.

I mean we do see the underlying pipeline in both Connected and Secure continues, right, which I think is the most important even with this change of contract, so yes...

Yes, I think we're talking about a bit past each other, but that's I think we're on the same page.

Then we will move on to Markus from SEB. Markus, can you hear us?

Yes. So just to finish off with that new contract or the new partnership agreement, when do you expect breakeven compared with the current model? That's the first one.

I mean that could be anything from a quarter to half a year, to a year, that it's just, yes, relatively short. Let's not give any more -- that will be more guessing than anything else. If we look at our pipeline, we assume it will not be too long into the future.

That's clear. And then secondly, on Teams Rooms for Android, when do you expect to see the first revenues coming in or ARR coming in from that? And when do you expect that to launch commercially?

So to take the second part of that question first, the launch is dependent on Microsoft launching support for that on the Teams Room for Android. And so we are not really in control of that. It's currently listed at Q4 road map, but timing there is still unconfirmed. We have -- don't really expect revenues from that to be significant in 2025, but do think that will be a contributor to growth for us in 2026.

And then thirdly, on Secure Meetings. You're talking here about sort of strong momentum in the conversations. Of course, the awareness is increasing and then you have a good pipeline. If you compare that to your current booking level and contracts signed, do you sort of expect this level of bookings to continue based on that pipeline? Or do you actually see sort of the bookings pick up as some of the conversations that you have now materialize?

Åsmund, I think we see the momentum is certainly not reduced. It's more kind of being increased. We are introduced to more and more situations and the use cases where we see that we have relevant solutions, whether -- how quickly this pipeline converts when we talk about the type of customers we talk about here, the sales cycles are relatively long, so -- in the secure area as it's -- we talk about government bodies, we talk about defense organizations and so on. So I think we are quite optimistic in the development here as we're trying to signal through the presentation.

And then the final for me is on the cost base and going out of 2025, I think you previously assumed that you will have around 300 employees. That's sort of a run rate cost base. Have you made any changes to those forecasts? Or are the resources that you need to execute on the pipeline going forward?

No, that's roughly the plan. I think we've said on previous calls as well that we expect to be around 300 employees at the end of the year. I think that is still a fair estimate. We see quite a bit of opportunities, as you would expect with a 27% growth within Secure and Custom. And so for us to reinvest to sort of continue to drive that growth, I think, is prudent.

Let me check my notes. Øystein from ABG. Are you with us on the call?

Congrats on the strong report again. I think some of my questions have already been answered, but I had especially one on Secure and Custom. I was wondering, given that this is such a big mega trend that you can foresee for several years going forward that customers want to deploy, want the freedom of deployment to be able to host things at their own servers or at least in a sovereign cloud. Do you see any of your existing competitors or new entrants looking into ways of providing customers that either on-prem solutions or sovereign cloud solutions?

I think the sovereign clouds are being built by several companies around Europe that could also be some of the large hyperscalers like Google or Microsoft building sovereign solutions. And this is actually very positive also for Pexip because to be able to deploy Pexip in these sovereign clouds is something that we are working with some of these large hyperscalers to deliver, and that is something that's been -- that's in demand from the market.

In terms of competitors providing video collaboration tools tailored at deployment in these architectures and environments, we haven't seen any developments there from any of the major players or new players for that matter.

Very interesting. And on Connected Spaces, we're, of course, still waiting for the launch of Connect for Google Meet and Teams on Android. I think from previous conversations, you have indicated a launch around Q4. Is that right? And if so, do you have a pipeline built so that when these products are launched, we should expect ARR growth from these companies to start already around launch? Or is it like after launch, you need to build the pipeline and that's like a 6-month lead time or so before we can start to actually see new ARR coming in from these products?

I think in terms of timing of launch, that is still sort of what has been said publicly from those players. But again, that's sort of timing that we're not really in control of. But no new updates for me on in terms of timing.

With regards to pipeline, it's certainly a conversation we're having with the customers today. But then large enterprise customers typically want to see things and test things and pilot it themselves before buying. So for there to be an immediate effect the next day is probably a bit optimistic, so somewhere in between of...

Somewhere in between, yes. You have -- we did see that for Connect for Zoom. I got faster results than we have on Secure and Custom. It's a longer sales cycle. So we're optimistic about it. We're building pipeline as we speak, Øystein. But again, to Øystein's point, you won't see an immediate effect on the day it's being launched. And again, we're being dependent on Google and Microsoft for getting this out in the market.

And last question is you still have a very strong balance sheet. Is still the primary use of that balance sheet to be paid out to shareholders in terms of dividends and buybacks? Or do you look at other types of uses for this cash, either M&A? Or do you see other ways of deploying that balance sheet?

It's a constant discussion that we're having in the Board and in the management team, of course. No immediate plans of large-scale M&A, looking as always and as we have been doing for a period that sort of alternatives for investing into things that would accelerate growth could be acquisitions, but currently, there are no short-term plans to do anything like that.

Lisa from Arctic. Are you with us? Lisa, can you hear me? Okay. Then we'll move on. Do we have any other calls on -- questions on the call? No. Then I will check mail to see if there are any questions there.

I have a question here from Arctic in the mail. Defense growth of less than $500,000 in Q2, down from $1 million in Q1. Would you say this is just related to some timing or phasing? Or do you see that vertical slowing down a bit forward after a strong year or 2?

That's seasonality. I wouldn't even call it seasonality. It's just different quarter-to-quarter. So I wouldn't put basically anything into it. That's just the way it is. And again, as we explained, we have long sales cycles and the pipeline is good. So again, I wouldn't -- Defense is strong for us, and we have a good momentum.

Yes, it's still basically the fastest-growing segment if we look at it in a slightly bigger context.

Yes. We also had a question that you added some FTEs quarter-on-quarter. Just wondering if this is reflecting somewhat higher growth or if you still expect a flattish headcount year-on-year by year-end. And I think as I said earlier, we're expecting a headcount of around 300 at the end of the year, which has been the plan from the beginning. And then it will fluctuate a bit from quarter-to-quarter.

With that, those are the questions that we have. Thanks a lot for the attention, and we'll see you soon.

Thank you.

Thank you.