Withsecure Oyj

Very good afternoon from the very, very warm and sunny Helsinki and welcome to VidSecure. My name is Laura Viita. I am the investor relations director of VidSecure and happy to wish you welcome to this second quarter of 2025 results release. Today, we will first have our CEO Antti talk through the business highlights, especially the breakthroughs made in the proactive threat management with our new tools and other things, of course. After Antti, there's going to be the CFO Tom talking through the financials of the quarter. We will have questions and answers at the end. If you have questions, you can send them over the webcast all the time. I will take them up with the presenters at the end. So warmly welcome. And with this, I'm handing over to the president and CEO of WitSecure, Antti Koskela.

So thank you, Laura. So first, I would like to go through the strategy and then I go to the financials so that it has been a very busy quarter for us. And what has really happened during the second quarter is that digital sovereignty discussion accelerated in Europe. And this was quite a lot intensified by the removal of the email email from ICC judge by Microsoft and following the US administration decision. And a lot of discussion started on becoming more European ever since. It was not only us talking about it. So it's a theme that is in the market and it's clearly influencing already technology choices done by the partners. And we met many of our partners and customers in our Sphere event here in Finland in May. So we had around 400 customers and partners here, and majority of them were new ones, first time with us, and clearly signaling the increased trend for new partners coming to work with Secure. And we will have more smaller marketing sessions Sphere to use to the rest of 25. We actually have already had one in Germany and we will have one in Japan and France to the rest of the year. And what we launched in at Sphere event, so we launched extensions to our elements cloud and code security services as everything we do evolves around elements. We took exposure management to new level by expanding the scope to various cloud platforms and also identities. And then we extended coverage of our extended detection and response to cover well the Azure cloud environments. And then we packaged all our managed services and software into easily purchasable bundle Elements Infinite that we also launched to the market. But what Laura was suggesting in the beginning, this zero-day vulnerability detection, this is quite groundbreaking. So we are able to use telemetry from our EDR tools and the behavioral data and use that with AI models so we can detect vulnerabilities that nobody knows exist currently. This has usually been a work for security consultants and it takes a rigorous weeks and weeks of work. We have been able to do breakthroughs with the use of AI. gets to the new level of proactive threat management. And this technology will, of course, be integrated to our exposure management products as we move further. But the combination of exposure and the exterior and the whole element is here the key. That's why it's so powerful. We were also busy during the quarter, so we did two transactions. We closed two transactions during quarter two. So we closed consulting, which is now called Reversec. So that divestment was closed on 1st of June. And we also divested our Malaysian entity, And we transferred that to the buyer LS systems and who became the preferred distributor for with secure in the region. And the start has been quite quite rapid and we are we are looking positively towards the work with LS system in the region. And it's also very effective way for us to do marketing and sales in the region without having own feet in the ground. And then. Our key strategy is to work on these mid-market customers and the partners serving them, because most of our pipeline comes with the partner development, how we extend the scope with the partners. So we have extended our partnerships in Japan. So we are launching... elements MDR in Japan. We are extending many historical endpoint protection only partners to EDR to access the Japanese mid-market. In Netherlands we have a quite broad spectrum of managed service providers and we signed after Sphere actually I met the CEO at the event and had a handshake that they take with Secure as the number one supplier because they need a European solution. So that was done. And also in Finland, you may have seen that we launched partnership with DNA. And the DNA, it's going heavily to the IT part on the cyber security in collaboration with Secure and Google so that these form a combination. So a lot of groundwork is done and unfortunately not all the groundwork is in the numbers yet. But what we are doing with the partners creates a good path for the funnel for the second half. And that's where our confidence comes from, how we are talking here. We grew Elements Cloud and core security services 13%. And this growth is increasingly driven by the new products, exposure management, Elements MDR, partners going with the mid-market playbook with the wide portfolio. And of course, the deal sizes with the wider portfolio are higher than with just selling endpoint protection. And then the negative part. So unfortunately, like we said in the investor days, we had certain enterprise customers that form a revenue concentration. And as our focus is very much on the mid-market, there has been always a risk that some of these will churn. to more in-house security operation centers and the tools around them. And that has happened with one very large enterprise customer in the UK during Q2. And with the earlier managed service churn and this one, our managed services part declined 22. So this basically offsetted the good work in the element side and our ERR growth landed at 3%. And of course, that's the single topic driving the NRR number. Tom will talk about the net revenue retention on element software and managed services separately in his part. And then like we announced, we are in the process of reorganizing our partner and customer facing activities to accelerate our strategy of becoming European flagship. And what we are doing here essentially is that we are focusing our sales and marketing efforts to a very globally aligned model. where we have certain teams focusing on the mid-market expansion and certain teams focusing on revenue retention and consolidation of the more long tail channel partner environment. And so it's very important for our strategy and We could have done this earlier, but I think we have been quite busy with some of the other projects during the first half. So we thought this would be the right time that we did it right after this transaction from Malaysia and consulting. And we also align the cost structure in managed services to reflect the business reality so that we commented on that one when we announced the reorganization program. So Tom, correct me if I'm wrong, but these cost structure changes will have Q3 onwards impact so that they don't get impact Q2, just for everybody to notice. But despite investing in Sphere, despite this revenue churn from managed service being managed to do, I just did EBITDA positive, which is a material difference from the previous year at the same time, if you remember that. So maybe with this one, I invite Tom as well to talk about how we are progressing with cloud protection.

Thank you very much and good afternoon from my part as well. So on the cloud protection for Salesforce, on a comparable note, we still are growing very strongly. So 54%, of course, compared to previous quarter, this was a slower quarter for us and very back and loaded in many ways. But if you look commenting a little bit behind the numbers, We still won quite a few customers, but then unfortunately we were also hit by a pretty large FX effect on CPSF because we have a fairly sizable operation in the US. So that had a negative impact on the ARR. And then there was some timings and so on. So net together, only a slight increase from the previous quarter, but still on track to do well during this year. And of course, from this also, then the NRR for CPSS was going a bit lower. So it was still a very good number, though, 122%. But compared to the first quarter, it was slightly down. So as I said, the big largest foreign exchange effect was from the dollars. Then we have quite a bit of Australian business as well and so on. So those would be impacted as well. Altogether our ARR negative was about 400k. But the numbers are, in terms of customers, are increasing quite well and so on as well. Of course, the big thing is that, as many of you who follow Salesforce know, they are pushing very hard the agent force and the AI tool applications on that. So we have also now part of that. We are in the forefront of protecting that activity, so agent force. will be also protected by a new app by Salesforce very soon. And we see that as, of course, a great expansion to the Salesforce opportunity itself. And at the same time, to remind you everybody that, as we have said, you know, CPSF, we continue to develop it, and then we will see in the future what strategic options we will look at that. But we have a very good track and phase at the moment going, and we have patience to continue to develop it. But then maybe going to the numbers a little bit. So here you can see the cloud ARR for the Elements company and the development of that. So Elements software and co-security growing 13%. So quite solid growth continues and good good traction there and so on. And of course, the NRR and so on are also on a quite good level for this part of the business. As Antti already mentioned, then on the managed services, we see a decline year over year in the over 20%. And this is because of the large enterprises going into their own on way forward and not based on the mid-market offering that we are providing. And this is particularly for the UK and has been there already for some quarters. Then another picture, so our cloud ARR grew 3% and the combined NRR, net revenue retention, was 99%. Of course, the software part was quite higher, but then the net was driven down by the managed services. The on-premise revenue declined, and this is very much as planned and expected. And we continue to see that this way as well, but for some time in the future. But this was no really big news for those who have been following us. From a profitability point of view, I said we did a positive result despite our, as always, our Q2 for the past years has been a big investment in marketing and the Sphere event. But despite that, then we were in a positive result in Q2. And here, again, the CPSF numbers, Cloud Protection of Salesforce numbers, strong ARR growth continues, some foreign exchange impact from that, and the NRR at 122%. And the revenue, of course, follows the ARR, so good progress on the revenue side as well, as expected when the ARR also goes well. From a profitability point of view, as we have said before and continue, we are not expecting this or we don't, want to do this to do profit at this stage, we want to invest everything we generate to further growth. So this business will be break even, approximately break even and has been so in the past as well. And we will continue to invest in growth as much as we can in terms of not though harming the overall or cash flow for the company. Then here is the combined numbers for us. So 3% revenue increase in the quarter and our OPEX continues to reduce. And this is of course part of our efficiency measures that we have done before. And we of course do this continuously. And we've done some investments in sales and marketing to new customers and partners though. And of course, in R&D, we continue to optimize our cloud environments and so on. And GNA, as we have also said, we expect that to scale with the business and we keep that under control. So we have a very diligent continuous efficiency measures in place and continue to watch our spend and try to improve on the efficiency. And then of course, as Antti mentioned in the beginning, the newly launched restructuring that will have also an impact on our cost structure in the future. So at the moment we are estimating that to reduce our structure annually about 6.5 five million in on an annual basis are our cost in the future and those will come gradually q3 q4 then into our numbers then on outlook no change to the outlook so we're going into to all of our businesses with a good pipeline for the second half and there's no need to change our our guidance and we expect the arr to grow for elements for 10 to 20 percent this year and then for the CPSF we are our outlook is to grow 20 to 35 percent and then on the profitability for Elements Company we expect EBITDA to be between three and seven percent of our revenue. With that I will invite back and this is just maybe to recap then we are determined to hold on to our medium term financial target and be a rule of third plus company in a couple of years time. But with that, now I invite back Laura and then we can go to the Q&A section.