Yubico AB

I'm happy to have you on the call and to share our full year 2024 report and the results. And as usual, we'll start with a quick overview of Yubico as a company and to give a little bit of background. This will be the last quarter that we'll use these slides to give this update. So bear with us if you've seen these messages a couple of times before. We've updated the numbers though, of course. Yubico is a leader in modern authentication, so if we look at the overview, the key to our success pun intended is the ub key which is a key to all relevant locks for login and authentication so what we're in is the market we're in is securing logins for our customers and the key to our success there has been that the versatile key that fits into all relevant clocks and it also provides the highest level of protection. Those customers that have implemented the modern protocols without using our key have experienced exactly zero account takeovers, which is of course the foundation of our success. We've sold and deployed some 35 million Yubikeys to date, and we already have approximately 30% of the Fortune 500 companies as our customers. However, in most cases, these customers have only deployed our product to a subset of their employees. So there's still a lot of room for growth there, and we'll get back to that shortly. We primarily sell to enterprises and public sector across the world, but you can even use our product as a private individual. To date, we have close to 5,000 business customers and millions of consumers using our product. We're a proud hardware company, but since the majority of the focus and development is focused on the software, on the key and associated software, we've been able to maintain very healthy gross margins, consistently in excess of 80%. The size of the business today is about 2.3 billion Swedish krona, and we're slightly above 470 employees to date, about two thirds in the US, about 100 people in Sweden and the rest across the globe. Great. So what is it that we offer? As I mentioned, we offer a key that fits into all the relevant blocks. Why is this important? Well, it's important for our customers because most large enterprises face a wide array of different applications. software and systems. And you don't want different methods for all these. You want the highest level of protection. And they're able to get that with our Swiss Army knife type key, the YubiKey, which covers all of these different ways to authenticate and to securely log in. as a reminder when you talk about authentication we're a multi-factor authentication the most common way to log into any system or or software is still username and password where the username is the identity the password is how you authenticate that you're the legit user Over the years, a number of different multi-factor authentication methods have been introduced, often software-based or based on one-time messages. However, if you want the highest level of security and assurance, there's a growing consensus that you need to have a hardware-backed solution. And we are the leading in that segment, offering the highest level of security, but also a very user-friendly experience for the YubiKey. As I mentioned, we're very proud of the customers that we've attracted. Right now, we're showing a few of the public reference customers that we have. You can see that they span across a broad set of industries. We started out focusing on high-tech sales in the US. We have now broadened our footprint quite substantially. And 2024 was the first year when high-tech wasn't the biggest sector for us. It's now been secluded by public sector and financial services. Don't get me wrong, we still get a lot of sales to our high-tech customers and it's growing, it's just that other sectors are growing even more rapidly. Yes. So finally, I'd like to make a few remarks to understand our business. We mentioned earlier that we have had a focus on large customers and already today some 29% of the Global 2000 customers, so close to the 30% I mentioned for Fortune 500 companies, are customers of ours, of the Fortune, of the Global 2000 companies, I should say. And this is a significant increase from five years back, where we had about 14%. We also have a very high customer retention rate and see a lot of repeat purchases. We haven't updated this number yet, but if you look at it in a five-year perspective and our biggest customer in 2018, you could see close to 120% yearly repurchase rate, even for what we call our perpetual customers, i.e. before we introduced our YubiKey as a service offering. So very high repurchase rate and a very low penetration rate among our existing customers, leaving a lot of opportunity for growth because we want to make sure that we protect all users and all employees within our customer base. And as I mentioned, we now see bookings across and orders across a very wide set of different customers. Some highlights for the quarter. We had tough comparables this quarter, but still we were able to deliver a growth in order bookings. To be clear, it's order intake or order bookings, not order book. So new orders grew by 13% compared to Q4 2023 across a very wide set of customers. Still growth in high tech, but we're seeing public sector and telco industry as strong drivers of growth this quarter. As most of you probably know, we transitioned from the first north growth market to the Yubico share being traded on NASDAQ main market on December 5th. Unfortunately, we'll have to announce an update to the management. Camilla, my close partner over the past almost five years, has decided that she wants to retire. Camilla, being a true trooper, has offered to stay on until we have fully onboarded a replacement. I'm grateful for that, but of course, sorry to see Camilla leave. One thing that we're very proud to announce is our collaboration with T-Mobile. We signed a contract with them already back in 2023. And with them, we've deployed over 200,000 keys to all of their employees. And this is a great customer reference and a basis of continued success in telcos. We'll talk a little bit more about this towards the end of the call, but I'd like to highlight that one of the major shifts that we're seeing and one of the major opportunities that we're seeing going into 2025 is that we're moving from only protecting logins to protecting identities and users based on our customers asking us to do so. I'll get into a little bit more detail what that means in terms of product offering. But before we get there, I'd like to hand over to Camilla, who has a little bit of a rough throat, but I think she'll get through this.

Thank you, Mattias. And as Mattias said, we had a strong year behind us. It was a really good year, and it's also a good quarter, though not on the same growth level as previous ones. As mentioned also, Q4 last year, 2023, was a very strong quarter, and therefore we had tough comparisons this quarter. And we got some large orders in Q4, which were pushed over for delivery now in Q1. And this has, of course, affected the growth in net sales, and it also affects the levels in our inventory. um so uh when we look at the bookings we have a booking growth of 12.8 percent and local currencies is 11.5 percent to 771 million and net sales We saw a growth of 12.2%, local currencies 11.2% and growth to 623 million. We had a strong gross margin and the gross profit growth of 21.3% to 524 million and a gross margin of 84% this quarter and year to date we are on 82%. Adjusted EBIT, we also strengthened our profitability. So we grow the EBIT with 31.7% and reached a gross margin of, sorry, EBIT margin of 17.8% and improvement for 15.2%. And thereby we have an EBIT of 111 million for this quarter. Looking deeper into the bookings, our order intake, we have a full year bookings growth of 43%. And remember, we have a financial targets of growth of 25% over time. So we think this has been a really good achievement for this year. We see As I said, you see here in the chart very well that we in Q4 2023 started on a new baseline more or less and have then kept that level during the quarters in 2024 throughout the year. The growth was driven by a diverse customer base again, and with the largest orders from the major tech companies, the public sector and the telecom industry. Subscription bookings amounted to 146 million, and that is 18.9% of the total bookings, which is actually the same share as we had Q4 2023. we had a growth in the subscription bookings of 13%. And looking at the renewal part for this, so in the subscription bookings, we had 96.9 million of the total, which is actually related to renewals. But it's positive to see that we saw quite many of those contracts also including expansions. Looking at the net sales, we increased with 12.2% to 623 million and the full year's sales amounted to 2 billion 326 million and a growth of 27.6% again above our 25% growth target. And the subscription sales was 11.4%, a reduction compared to the 13.3% when we compare that of the total net sales. And this is due to that the perpetual offering has been growing more. uh the growth was here driven by high tech and the public sector and we see that america's has grown proportionally more than last year while i see asia pacific had a lower growth this quarter at the net sales and if you go back to earlier reports you can also see that specific asia pacific which is quite small varies a bit over the quarter so We are not worried about that, rather the contrary. The ARR, so this is the annual recurring revenue from our subscription portfolio, and we see that it has been trending positively during the quarter. And compared to last year, we have grown with 13.1% to 324 million at the end of the period. And the increase in the quarter can also be seen as the new contracts and also from renewals, or rather the expanded usage from renewals. Looking at the profitability side, we see that we have a strong gross margin, as said. This was supported by the development of the US dollar-sec ratio during the quarter, which also impacts the value in our inventory, therefore boosted by that. Also, the adjusted EBIT was 110.9 million, corresponding to the 17.8%. And we had this quarter adjustment, EBIT adjusted adjustment from 2023 and last year. So that was related to the merger we made with ACQ in September last year. uh and this quarter we had a positive effect there's there was an adjustment in the merger result uh for in 2023 just to be clear it was not adjusted 2024 sorry for messed with that Our LTIP programs amounted to 19.8 million. This is slightly higher than Q3 as new PSUs has been awarded to new employees during the quarter. So this was the last allotment from the 2024 program. Sales and marketing costs are also a bit larger. Of course, related commission. Both that we had this good order booking and we also usually see year-end effect on the commissions when we have a higher commission as a percent of the bookings when you come towards the end and reaching your quota. We also made some strategic marketing investments in APJ to support the further expansion in those regions going forward. And we also saw an unrealized currency effect, which was positive this quarter of 12.6 million. The comparable quarter last year was minus 14.2 million. and finalizing this part we're looking at the cash flow we had a strong operating cash flow plus 128 million in this quarter minus 1.2 million a year ago net cash in working and that change in working capital was also positive 19.4 compare that to the minus 98 point You see the chart to the right here where we are measuring our inventory in relation to rolling 12 months net sales. And we ended the year with 29.7% here. And this was also affected then by this delayed shipment of the orders that was pushed over to this quarter where the customers wanted to receive them after the year end. Cash at hand, end of the quarter, 824 million. Net cash, 787.6 million, comparing to 473 a year ago. And now the only debt we have left is what's related to leasing debts related to offices. We have during the quarter amortized the last part of our external loan, which we have had for some years. So the only debt is now the leasing debts. And so therefore, we think we have a very good financial position and strong cash and cash flow in this. And thereby, Mattias, I hand over to you again.

Thank you, Camilla. So as I alluded to earlier, we want to talk about how our mission evolves. Our vision remains intact. We want to be supporting a safer internet for all. Our primary focus during the last 16 years has been to ensure that you can protect your login. And the updated mission is that we want to protect the digital you, protecting users' identities. And this may sound like a subtle thing, but it's actually very important. It's our customers asking us to help them what we often call lifecycle management. How does someone get onboarded? How do you tie the YubiKey to a specific identity? How do you deal with account recovery and off-boarding? And we're, of course, working across several different platforms. And we're very proud of the cooperations that we've launched during the year with Okta and in the makings with Microsoft. But we want to make sure that this doesn't just cover their platforms. It's a robust platform. solution for enterprises to secure the identities of their users, employees and end users. And we see an opportunity and request from our customers to evolve our product offering to support this updated mission. Thinking a little deeper on that then, what does this mean? Well, as we look on some of our strategic focus areas going forward, I would put them in three different categories, expand, simplify, and evolve. What do we mean by expand? Well, the most obvious expansion opportunity for us is what we talked about earlier on the call, making sure that we get a wider deployment among the existing customer base. We also want to cover new markets where we have limited presence today. Camilla said that we're not worried about long-term growth in Asia and we see a lot of growth opportunities in Asia pack as one example. We also want to make sure as we expand that we don't do all the heavy lifting ourselves. We want to evolve our go-to-market partnerships and on the simplifying part, we want to expand our global channel model. We want to support our customers in reducing the thresholds involved with deploying the most secure authentication method out there, removing the hassle involved with deploying hardware. So there's lots to be done to making it easier for our customers to onboard and maintain a fleet of YubiKeys for their customers. On the business side, we also want to evolve and support new business opportunities. We talked about a few of the successes we've seen during the year when it comes to supporting our customers and users, particularly within banks. We are very proud to cooperate with Poland's largest bank, PKO Bank, and there are other banks that are also rolling out YubiKeys to their end users. And we want to make sure that we support that business method. So three different buckets, but it's really about expanding our product offering, not into a completely new area, but really supporting our customers as they protect their identities, the identities of their employees and users, and then making sure that we get more leverage in our go-to-market effort. And with that, I'd... like to sum up the year what i feel has been a very successful year we on the full year we grow grew our order bookings with more than 43 percent reaching 2.6 billion We grew our net sales or revenue by more than 27%, reaching 2.3 billion. We had a strong year in terms of profitability, reaching almost 19% profitability, well aligned with our long-term target of reaching 20% profitability. So we saw a 64% increase year over year in our EBIT band. We had very good, we had improving and what I feel is good cash conversion during the year, seeing that we see also a strong cash flow setting us up in a good position and a strong balance sheet as we invest in building our market further. And with that, we'd like to finish the presentation part of this meeting and we'll open up the floor for questions. And I think there are already some people that have lined up to ask questions. So over to you.