Yubico AB

Welcome to Yubico Q2 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to Acting CEO, Jared Chong and CFO, Snehana Kholiva. Please go ahead.

Hi, everyone. Thanks for joining us. we will walk through the agenda and we'll give you our key highlights to give you the details on the financial details for those who are joining us and not familiar with ubico we are a very innovative cyber security organization that continues to innovate and produce products that help companies around the world be phishing resistant and prevent account takeovers we are very excited to share our report but we do have a good strong list of our customers around the world been around for years and with a very strong direction to continue our global expansion and serve many more customers over the next few years I want to take a step back and provide an update on how we do it in our industry, the trends that we see, and the type of news that we are also part of in terms of cyber activities, both on the positive sides as well as the landscape that we see customers and organizations around the world. With AI being much more powerful with all the new models, we definitely see that the attacks are not just much larger in scale, we see that they are much more sophisticated. Many of you are aware that these models have known to attack organizations without without the control sets that we expect some of them to have. So that is just what we know. And we know that many organizations are faced with that is increasing. The good side of that is that we believe that access to these very powerful models must be protected so that the accounts do not get taken over and the attackers use these very powerful models to attack organizations. So we really believe that this trend will continue to happen and we continue to help protect organizations from not having their accounts taken over. The other area that we are very much into in the crypto industry is how the post-quantum evolution is happening. A quantum computer would break pretty much all of the existing technology stacks that we use for cryptography. So what that means is that you need a technology that is post-quantum ready. and we are part of that journey. So we will talk more a little bit about that type of innovation as we bring a YubiKey that will have quantum capabilities. The other trend that we see is that as we continue to see weaknesses of how the software supply chain is being impacted, governments around the world are doing two things they want to make sure that any product has been properly reviewed and that these products as well are has a maturity in how companies build them. And so we continue to invest in making sure our products are compliant with all the new regulations. We also help set some of these new regulations for the authentication industry. That just gives a disciplined way to build products. And so we are... very much in line with how industries should continue to close these loopholes when they build products so that we don't introduce new risks to companies deploying products in general. The last area that we see is organizations are definitely concerned with identity, digital identity. We see that they are being attacked by all types of different hackers around the world mostly because they it's much easier and it's much cheaper what hackers are focused on is to downgrade the the way that the users authenticate to be able to social engineer their way into compromising the user accounts so rather than just focused on the login a lot of companies are paying attention to how the users recover access back to the account when they have a recovery option. So recovery options are typically very weak and that's where they attack their efforts to compromise the accounts. In the next slide, I wanted to to give a highlight on where Ubico has been in the last quarter, but more collectively what we see are the continued investments for our growth. Product innovation takes center stage in the way that we look at our business. We are very focused with delivering products and innovation that solves our customers' problems, namely in the first half and Q2 releasing one focused on the regulated industries particularly as we described companies want to be compliant we released our validated devices which is relevant in a lot of markets around the world and then we also released a YubiKey that extends capabilities beyond just authentication to being able to form authorization authorization is really important in the concept where it's not just who you are to be able to identify and log in but do you have the right to do something besides just authenticating are you the right person that is authorized to access the right system so authorization plays a very important part of this evolution particularly in AI realm where you need to know who you authorized to use what and what agent was authorized to take action on your behalf. From the commercial side, we continue to partner very closely with OpenAI in terms of how they view our technology as part of their defense strategy against account takeovers. As I mentioned, The goal is to make sure that when you provide the companies with access to the most powerful models that you can add a very high amount of assurance and ensure that it's actually the right user that is accessing those models. In other news, we continue to expand the support for different operating systems and browsers to make the UPIKEY standard by the standard more easy to use so there's a huge focus on usability a good security a great security can only be adopted at scale where it's easy to use From an internal perspective, we continue to make the necessary adjustments for how we view growth in areas that we see huge opportunities. So we continue to rebalance the portfolio of resources. and investments to areas where we strongly believe are needed to grow the organization, which also means that we would reallocate resources to those areas. So that is reflected in some of the adjustments for our reduction in costs and to really organize our organization for scale and efficiency. We see some of the results in this quarter or the last quarter. Finally, just a highlight, we continue to want to share details of how we grow and we are going to have a Capital Markets Day in November. So stay tuned. We look forward to seeing a lot of you there. A summary on top focus verticals that we have invested in and will continue to invest in. You can see a significant growth in the key industries over time. We continue to see this trend. fairly stable. The growth areas in the last quarter has focused on high tech and public sector, and public sector includes the defense industrial base. the reason we see that is part of the evolution of newer threats and these type of organizations want to be ahead of it a lot of our organizations investing in AI so they certainly want to get ahead of the cyber attack trends so that they can defend against that we also continue to expand our relationship with our ecosystem partners which are also our customers but they also provide joint integrations for our customers around the world for example companies like IBM, for example, companies like Okta, which is our partners that deliver end-to-end capabilities for protecting user identities. Key figures for Q2. Overall, the numbers are in line with the direction that we're going. The investments that we've made to really be efficient obviously our profitability but it does also when you have a more efficient organization you also affect our net sales to be able to realize those bookings in the way that we can reflect the revenue and from a bookings perspective it is compared to last year part of that journey for us is to make sure that we build resilience for our differences in how companies buy a buying cycle. So what we'll explain a little bit more is how that resilience is showing up if you get some details. For example, we don't just depend on one or two deals to hit our targets. We are really looking to make sure resilience means that we have a portfolio of companies and that we can sell and make thank you jared

Let's take a closer look at the quarter-on-quarter development versus last year. We continue to have a somewhat negative impact from the currency, but this impact is starting to subside as the exchange rates are now more similar to what they were this time last year. So order bookings, organic development, minus 5%. Net sales perspective, we have 12% organic development, very positive growth. On EBIT, we continue to have negative impacts from currency, 10 million, but we have also increased quite substantially the EBIT and the profitability as compared to Q2 2025. So we've added 12 percentage points to the margin this quarter. From an order size point of view, as Gerard mentioned, the work on resilience continues and it's evident in this quarter. The small and mid-sized bookings developed very strongly with 18% growth. In Q2 2025, we've had a large in this quarter we have primarily smaller and mid-sized bookings but very good growth in this segment also what I would like to mention is that we have a very strong EMEA growth we are expanding and working very closely with our channel ecosystem and that is evident in the EMEA growth YubiKey as a service, our subscription offering represented 24% of the total bookings. Let's zoom in on the perpetual first. The perpetual bookings grew with 7%. Again, primarily deals below $3 million. And from a revenue perspective, we grew the net sales with 9% in the currency impact. As Jared mentioned, public sector remains our largest contributor in the perpetual bookings for this quarter. Part of this is defense. And we also have very strong performance in the high-tech sector. When it comes to IaaS bookings, as I mentioned, we had a very large booking last year with a multi-year subscription contract. This year, it's primarily small and mid-size bookings orders and the growth there is very healthy. From a subscription net sales, we continue to see very favorable development, 27% growth versus what it was last year. And that is a reflection of our growing annual recurring revenue. the annual recurring revenue bridge if we compare year to date it has grown 12% and the growth comes primarily from expansions of our current base so these are customers that either expand, you know, with more licenses, or they might be upgrading also to a higher tier of subscription. But we also have new contracts that also drive growth. What we are very proud is that our not renewal rate or churn rate is quite low for the industry. So gross retention rate is 98 and the net retention rate is actually 107, driven by the expansions of our customer base. When it comes with our supply chain and logistics. So a strong sales quarter also supports a strong gross profit margin. So it is the gross profit of 80% is within the guided range on the higher end of the guided range. From an EBIT perspective, we see the impact of the cost savings program and the net sales, the good quarter net sales. So we have reached, we have reported 79 million EBIT and 14.4%. The cash flow for the quarter, So strong cash flow from operating activities before working capital changes, of course, driven by the high profitability. We had a negative development in working capital. That was primarily driven by higher credit receivables, again, driven by net sales, while the inventory actually continues to decrease and had a positive impact on the cash flow. the investing activities 19 million the majority of that is related to capitalized development costs for our R&D activities financing activities is primarily these obligations so a bit weaker cash flow for the period of 29 million primarily due to the change in working capital We remain with a very healthy and strong cash position of 1.02 billion C. And with that, I'll give the word to Garrett to summarize.