Pexip Hldg Asa

Good morning and welcome to this presentation of PECSIP's fourth quarter results. My name is Trond Johandesson and I'm the CEO. Together with me here in our PECSIP studio, I have Øystein Hem, our CFO, and Osmund Fundstad, our Chief Revenue Officer. Together we will take you through the highlights of the past quarter and what we are focusing on going forward. The standard disclaimers apply as usual. First a few words about Pexip. Pexip was founded in 2011 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 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 directly compete with them. Our customers are mainly large organizations, both in the private and public sectors 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 quarter. Our annual recurring revenues grew US dollars 3.5 million during the quarter and leaves us with an ARR base of US dollar 113 million out of Q4. In Q4, we had particularly strong performance in our secure and custom business area. EBITDA came in at 88 million Norwegian kroner in the quarter and cash flow ended at Norwegian kroner 21 million. Summing up our financial performance in 2024, we are happy to see that we ended up in the upper range of the outlook we presented at the beginning of the year. On the product side, we have now closed our first sale of our new private AI solution for secure meetings. And the partnership with Zoom continues to develop very well with good momentum on the Connect for Zoom product and now the possibility to buy this product through the Zoom marketplace. If we look at our Q4 performance in the context of the last 12 months, we see that the positive trend we have seen the last quarters continues. Our total ARR has grown 10% in 2024 and is at an all-time high. The underlying ARR has grown 12%. Our 12-month rolling EBITDA reached 207 million Norwegian kroner, which corresponds to an 18% EBITDA margin. And finally, our free cash flow the last 12 months was 196 million Norwegian kroner. We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position. PegSIP's mission is to make seamless video communication available to all organizations regardless of technology platforms and security requirements. We have two main solution areas. PegSIP secure and custom spaces 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. In Pexip, we have three market beliefs based on clear trends we see that drive the demand for our solutions. One, some meetings are more private than others. Not all video meetings are the same. There is a growing need for private solutions in addition to platforms like Teams. Two, there is a growing demand for custom workflows. Video is replacing voice and in-person meetings across sectors, increasing the demand for tailored solutions. three interoperability is increasingly important as video use grows multiple platforms will coexist making seamless connectivity essential now let me elaborate on some of the things we do to drive growth in this market environment first to the belief that privacy really matters the new ai productivity tools that more and more organizations are starting to use are really great But they do also come with new challenges within compliance and privacy. Every video meeting can now become a document. And this raises new questions around data control and compliance. Who has access to the document? Where is it stored? When is it deleted? What is the document classification? And based on this, we now see an increased awareness in organizations that all video meetings are not the same and must be treated differently. In real life, you have some meetings in the cafeteria or with the door open, while other meetings require you to close the door, draw the curtains, and make sure you are 100% certain about who is listening and what is written in the minutes. The same logic should apply to video meetings, of course. Pexip elegantly solves this challenge by introducing an additional meeting platform that can be used alongside teams and in those situations you want to close the door and have a secure meeting. Our solution includes security features such as tailored user authentication, so you know who's in the meeting, clear meeting classification labeling, so you know what kind of meeting you're in, and complete control over what data is stored and where. The secure meeting can easily be booked through the Outlook calendar exactly the same way as Teams meetings. And 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. Now to the second belief. Custom video solutions are growing, and AI functionality is a key requirement in many workflows. Pexip's new private AI for secure meetings was launched in November, and this solution is developed as a response to requests from various security conscious organizations that would like to use AI tools, but with complete control over where the data goes. Pexip Private AI is built on NVIDIA AI models and can be hosted in the private deployment with complete data control. Neither Pexip nor Nvidia will have access to any data. In addition, this solution allows for customer-specific language libraries for more accurate results. The first use case is around captioning, or speech-to-text, and translated speech-to-text, and I'm happy to announce that we now have closed our first major sale of this solution to a large healthcare provider. The third belief is that interoperability continues to be a key requirement from all users of video meetings. And it's now clear that there will be more than one meeting platform in the market going forward. And end users have a clear expectation that seamless interoperability is a must-have. With Pexip's unique technology and industry partnerships, we have a market leading position in this field. The new solutions for Zoom Rooms and Teams Rooms are unique to Pexip and are evidence of the leading position we have. One example of a very successful product in connected spaces is the new Connect for Zoom Rooms solution, where we see a very positive market response. The solution is now also available for purchase directly through the Zoom marketplace, and we have received the first orders from Zoom in January. This is a new and very efficient channel for Pexip that broadens our market reach substantially and gives Zoom a strong incentive to market the Pexip product. Now, let me leave it to Osmund to take you through a deeper sales update. Thank you, John.

Good morning, everyone. Let's go through the sales updates. So we are reporting another strong quarter for Pegsyp in Secure and Custom with a 3.9 million US dollar ARR growth to 44.9 million US dollars, which is a 24% growth year over year. And I'm excited to share some of the customer wins that made that possible. Let's review the key wins from Q4 in our key markets. Justice. In 2024, we had five new Justice wins and started 25 with another major victory. Pexip is unique within the Justice segment and is now being utilized by some of the largest and most complex Justice systems in the world. Defence. In 2024, we experienced a 70% AR growth, and we're proud to serve several of the largest and most important defence forces and alliances worldwide, who rely on Pexip's secure technology every day. And healthcare. Pexip continued to achieve success in this segment throughout 2014. Today, we support the world's largest telemedicine providers with our technology. Let's take a closer look at some of the key wins in these areas from Q4. With Ontario Ministry of Justice, they have now expanded their deployment with the PECSIP technology, replacing Cisco for both secure meetings and dedicated courtroom solutions. PECSIP stands out by offering a customized, integrated workflow experience that is unique to a justice system. The advantages of PECSIP's technology have made it the preferred solution in courtrooms and ministries of justice around the world. It's a great win for PECSIP. For defense, another major defense organization has chosen the PECSIP technology. Again, replacing Cisco for secure meetings and in-field solutions. For a defense organization, an on-premises solution is of course critical. They need complete control over the entire system, where authentication and access control are extremely important. This ensures that the right individuals are in the right meetings at the right time. And again, PECSIP's solution is second to none in this field. For AI, Tom made a very valuable point regarding our first large private AI use case with one of the world's largest healthcare organizations. But I would like to add a few additional points. Not only does these customers need to keep their AI data private, but they also have health specific jargon and abbreviations to consider. Pexip allows this customer to build and develop their own language model. completely owned and controlled by them in their own defined secure environment. This marks our first major win with our partnership with Nvidia for Pexip Private AI. For connected spaces, we deliver a flat quarter, ending the year at 66.4 million US dollars, which represent a 5% growth year over year. Pexip continues to see strong momentum with both our Microsoft and Zoom partnerships. And I'm excited to share two very large Fortune 500 customer wins that validates our competitive advantage in this space. Bakeship seems to be currently very popular within Fortune 500, and especially in bank finance, and some of you might recall our win with HSBC from Q3 with ExactlyConnect for ZoomRoom's product. The jokes aside, with these customers, also from the financial industry, we are offering the same value proposition, any to any connectivity. Connect for Zoom Rooms is very successful in the market, and Connect for Teams Rooms, which was launched just in November, we have experienced immediate success. With the increasing number of native rooms in the market, we expect the momentum to continue the growth in connected spaces. So, to summarize, Pexip had another strong quarter and a strong year in both securing custom and connected spaces. And I'm confident that the success in both areas will continue in 2025. And with that, I will hand it to Øystein for the financial details.

Thank you, Osman. Starting with the development in annual recurring revenues, we grew the ARR base with $3.5 million in Q4, and we closed the quarter at $113.1 million. With this, we're at 10% growth in ARR year on year, in line with our midterm growth ambitions, and at the top of the initial 2024 outlook. The revenue base is approximately 60% connected spaces and 40% secure and custom. The geomix is stable with 50% of revenues in Europe, 40% in the US, and remaining in Asia Pacific. Looking closer at the quarterly development in Q4, Connected Spaces and Legacy combined was pretty flat, with a slight decline of $0.4 million. Given the enterprise market we serve, we attribute this to normal quarterly variations. Last quarter, in Q3, we had a year-on-year increase in new sales in Connected Spaces of $2.6 million. This quarter, we have a year-on-year decrease of $1.8 million. Zooming out across the last year, we have an annual growth rate of 5%. The net retention rate in this quarter was similar to previous quarters at 96%. Secure and Custom, on the other hand, had a very strong quarter, growing $3.9 million, which is close to 10% growth in Q4 alone. This took the annual growth rate to 24%. The growth is a combination of both stronger new sales and stronger upsells across a number of accounts. And this led to the quarterly net retention rate being at 106%, significantly up compared to previous quarters. In terms of our P&L, revenues continue to grow. And in Q4, they were 333 million Norwegian kroner, up 17% compared to Q4 of last year. We continue to have strong revenue growth on software as a service with 23%. We also had 12% revenue growth on software. EBTA is up 29 million NOC, the 27% EBITDA margin, which is a 49% increase compared to Q4 of last year. Full year revenues grew 13%, somewhat stronger than the ARR growth, and EBTA is up 93 million NOC, improving the margin with seven percentage points to 18%. This means that for 2024 as a whole, we converted 74% of the increased revenues into increased EBTA, which is a result we're quite happy with. This result is a combination of increased revenues and improved gross margin, as well as good cost control. On the topic of costs, we did see a cost increase in Q4. The main driver behind this is the end of year bonus calculations as we finished 2024 well above our internal targets that we set at the end of 2023. This has a true up effect in Q4. We expect to be back to normal levels from Q1. This from both not having that end of year effect and from having higher internal targets reflecting the step up in performance that we have seen in the last year. We also capitalized less in Q4 than in previous quarters, which has an impact on reported costs. Looking at other OPEX, it is up 4 million NOC compared to last year, but within normal fluctuations. For 2024 as a whole, other OPEX is down 7 million NOC compared to 2023. Looking at cash flow, Q4 had a free cash flow of $21 million. We reclassified our holdings in money market funds from cash equivalents to financial investments. However, we will continue to include those holdings here as we consider them short-term cash placements in the same way as cash as we hold in the bank account. Operating cash flow is slightly down compared to Q4 of last year, as we saw a significant buildup of trade receivables, which sets us up for a good cash flow development for the first part of 2025. For Q4, we also had a positive impact of exchange rates, resulting in our cash position closing at 628 million NOC, up 105 million from the end of 2023. Taking into account the dividend that was paid in 2024, we had a net growth in cash of 217 million NOC for the year. To summarize the main points for the quarter, revenues are up 47 million NOC, or 17%, compared to Q4 of last year. And EBTA, excluding other gains and losses, is up 29 million NOC. Looking below EBTA, we did have a 3 million NOC impairment of a lease contract, as we have now completed our UK office move. The positive 20 million NOC on net financials is from a combination of exchange gains as well as received interest on cash holdings. The net result is a profit before tax of 82 million NOC, up 127 million compared to last year. Looking at the full year, the picture is similar. Revenues are up 13%, and adjusted EBITDA margin is up to 18%. Profit before tax is at 164 million NOC, up 228 million year-on-year. With that, I give the word back to Tom.