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.

We are driving towards... areas that we've set out to do since we've communicated to the market earlier this year and also from the last investor day really focusing on the strategic pillars of the government and the first three of them are very much about product innovation and product execution so we continue to really focus on driving that really hard so that we deliver the next generation products that will help protect organizations that's that's the way that we look at it And with that, we have the things we care about, which is the hardware. We care about the hardware. We care about the services that make organizations around adopt the hardware as quickly and effectively as possible. and that's in the number two pillar and where we're going for the number three pillar which is really focusing on not just that hardware but focusing on the user using their hardware using the hardware so that if they are if they need a recovery solution if they need to what we consider re-enroll because of new things and new threats they can safely identify themselves to be able to and get access to the systems they need to get to. So thinking about resilient organization, so those are the services we want to bring to the table and help the organization be resilient as whatever new threats comes to the organization to protect the individual, the digital user identities as they navigate the new digital world. the last two pillars are really about driving towards this should be consistent throughout the world we continue to expand our both our sales operations but also our fulfillment operations so that we can get to customers around the world and finally we must focus on making it easy to the way to simplify, to make sure that usability is top of mind, to make sure that we take care of our customers in a very holistic way. So those are the key focus areas. We'll certainly dive into all the details when we get to our capital market stage. So I look forward to seeing many of you that will provide a very deep dive in all these five areas.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Simon Granath from ABG. Please go ahead.

Hi Jared and Medjana, and thank you for the presentation. Many of your peers have seen a significant share price surge in light of the MyFoss moments, and some talk about this giving them imminent sales tailwinds, while others anticipate a narrative to these better effects mid-term. How would you describe the impact on Ubico so far? Have you seen any changes in demand over the past few months that it could clean into orders, or is it

and then I that's my first question and then I have a follow-up thank you yeah in terms of the cyber landscape we are part of the cyber landscape we are part of how organizations use technology to both defend and increase productivity in this particular scenario which is about how do we equip defenders with the best technology to defend the organization. We're certainly part of that, whether it translates into exactly how things are aligned with other cyber companies. From our perspective, a lot of the cyber companies themselves use our technology. So it really is about broader adoption of the relevance of the product globally, so it's not just concentrated in one market. I would say that the way we look at that, there's two areas. The first area is... We're part of cyber organizations, cybersecurity portfolio products. But we continue to make sure that our technology can be available everywhere. Sometimes that poses some challenges, right? We have a physical product. We have to make sure that these physical products make it to the users all over the world. So sometimes we see that there are logical things that we've got to solve. out of the conversation why do we see a lot of smaller orders and what are the conversations with regards to the larger orders because of some of the geopolitics we have a realization that large organizations some of them apply locally to move faster so that is part of the impact to The physicality of the product, but also because there are geopolitics and terrorists around the world. So it changes the buyback. That's what I'm trying to say. So demand is not it. Demand continues to be strong, but how they actually get the technology can sometimes take a certain course. The second thing that I would say about cybersecurity is that we also have to work towards activating Beyond the Mythos conversation, which is what are the new threats in terms of what we call the cryptography, which is about the ways technology is built on top of fundamental cryptography. And that is related to the quantum computing, right? So we think about quantum computing as a next generation of technology that would to further accelerate development of all new products around the world, particularly quantum computers, things that we consider a classical computer can do. And because of that, these conversations we're having with our customers that are in the leading age, and we see that they are concerned, the market's concerned, the governments are concerned, so it will ultimately translate customers wanting to get the latest generation of product but there's a lot more build up that will happen as we continue to push on that new front as well so the long and short of it is we see demand but we don't always control every single cycle and the organizations adapting to the new world order of adopting technology

Thank you, that is helpful. And on cost levels going forward, you have, of course, recently completed the cost savings program, but demand a small catering group with further tailwinds in the H2, like the open AI mandate that you mentioned in the report. Does that improving backdrop mean that you'll start recruiting again, or do you see enough capacity in the current cost stage to capture this growth without adding more headcount?

I think we want to have disciplined growth. So what we... AB AB AB AB AB some of it will translate to headcount for sure but you will see ubico focusing on areas where it may not always be headcount right so we will invest that's that's the story there and some of those investments will translate that's very clear thank you for having my question

The next question comes from Predrank Savinovic from DNB Carnegie. Please go ahead.

Hi, guys. Thank you for the questions. I want to dive a little bit deeper into the comments around the post quantum key, which is great. elaborate a bit further. You say you engage with some key stakeholders around home migration strategy and usage and you see a bit of an increase as well. What does this mean in practice? Are they translating any commitments? It sounds very significant to us, but is it significant?

it is very significant from a technology evolution perspective we are part of standardizing a lot of the algorithms or implementation of the algorithms into different technology that we created for example FIDO we want to make sure that the FIDO technology some of you may know the husky technology is quantum ready so we are very much part of that and in terms of discussions yeah absolutely we are working with you can think about the hyperscalers that are certainly concerned with this risk because if you think about what it means all infrastructure that is provided online in the digital world will be impacted so any type of product services that is online whether you do compute whether you do storage whether you do analysis whether you do financial transactions like every system that is digitally bound will be impacted by a quantum computer so the folks that are spending the most time on this area are the folks that have the most digital assets and the most digital presence and most of them are infrastructure organizations right we we work with them and it's not like you can solve everything bigger puzzle But by leading the way, we help bring together these ecosystems to discuss and collaborate at scale. And certainly when those consider them integrations happen, then we are in the front seat to the adoption curve.

Thank you, that sounds very interesting. Do you expect large orders to return, or do you expect a medium order trend? Do you expect that even large customers become more distributed in their purchasing? So even one of your large tech companies, that they don't buy 200,000 students, but they get 20,000, 20,000, 20,000 again, which seems to have been the trend recently.

Yeah, I think the trend, I think it's a larger conversation, right? I would consider the larger conversation to be the state of the world. And so if you collectively look at the state of the world, and then if you have protectionistic approaches, then you will see some of that. But what you also see is that attacks don't really stop it just continues to expand and so sometimes there's an inefficiency to buy locally and I can provide different companies have different strategies when that happens Some may say we'll still take the local approach, which is distributed. But some become like, ah, we can't really do that because of the way that we model risk. And they would then anticipate, I want a central buy. So I do think that the macroeconomics actually affects the way that our customers buy. They are our customers. At the end of the day, our focus is to grow our business and protect more users. I would say that there are signs that customers are deciding that sometimes distributed buyers are not as effective. So we are we will see that mix change over time and I think it's really hard to predict really quarter by quarter but over a long period of time we will absolutely have large deals. It's just the reality of how we look at our way that the company for five years it's been like that there are like certain trends of how organizations think about risk and then how do they make purchasing decisions so I don't want to say when I don't want to say like because these are large organizations with a lot of risk implications to how they adopt technology and we're not certainly the only company in this type of scenario and But if you look at our trending overall, yeah, we largely use a part of our strategy to grow.

Brilliant. And finally, do you have confidence in that this recovery trajectory for the organic growth that you saw on the second quarter can be sustained for the remainder of 2016?

As long as we deliver on the products that we're committed to and add the value that we believe that we can achieve, then the numbers will follow constantly. And I've said it in the past briefings as well and presentations, watch for our product announcements because that's the indication of our growth. So when we add new products that have new capabilities that solve customer problems, we have a very strong base these customers would invest so as long as we do that in a consistent way in a scalable way in a quality driven way very good thank you so much the next question comes from eric lindholm rogestal from seb please go ahead

Thanks for taking my question. You mentioned e-commerce driver to growth in the report. Has there been any changes in activity from consumers after the announcement of the OpenAI partnership? And how much activity do you see from that channel in itself? I'll come back with another question. Thanks.

mass market is definitely one of our bright spots as we grow the business it does two major things the first thing it's a fantastic way for our customers to try the product without it's both efficient because you know it's a lot of our Thank you. the growth they are. And I would consider mass market not just for the end users. There are a lot of even large enterprises that buy through these mass market channels. You know, we've also launched a retail business right here in the US. We're launching it in Europe as well. We want to make the technology available to customers how they want to buy. Because when you get attacked, you really don't sometimes want the inefficiencies to go through a certain process to get a product. You need to get going right away. You want to try it out in a certain way. So we want to meet the customers where they are. But the exciting thing about the mass market itself is it really generates I consider the self-awareness within an industry because people can talk about it in forums and it's available and what we want to continue to invest particularly in the mass market is to make more where users can buy easily, low friction, and then help them curate the stories, which means a lot more education and how to set it up and how to use it type of approach, which is self-service. So when we get a self-service engine going, and I consider product-led growth here. Once we get into some of these product-led growth capabilities, we will really see that engine actually helps in our enterprise business or large deals. So it's hand in hand. It's not a separate type of motion. We consider it the ubiquical motion. In some ways, the tip of the spear, our indication of the future of whether there's a market, there's a customer base, there's a trending. We get a lot of that feedback from the mass market numbers. So that's very encouraging, for sure.

Right, that's encouraging, I should say. You've spoken about post-quantum readiness, I think, for the eventual future of the YubiKey 6, perhaps. And, I mean, what does the timeline look for an eventual... How does the timeline look for an eventual release of the YubiKey 6? Stay tuned. Thank you. I'll be there. Exciting. I guess also on that topic, an entire topic stated that they have found some weaknesses in some of the proposed post-custom cryptographic algorithms. Using Mithos. Does this imply any changes to your plans for cost of security and how do you think about it? it doesn't it doesn't change the fundamentals

that need to deliver post-quantum capabilities. So we are committed to that. That's definitely part of our, as I described, our pillar one, which is our hardware trust. We must deliver that. In terms of what this particular thing means is that when we build products, we must be agile. We must be able to implement new crypto standards as it evolves. Nobody can guarantee any cryptography to stay forever. Particularly with these capable models that can break down the cryptography. our goal is to make sure that we work with the ecosystem and then if the ecosystem and the standards bodies agree we are first to implement that's our commitment so just like before I mean before Mithos right we had weaknesses in the previous type of algorithms the RAC algorithm had weaknesses we had again when computers become more powerful they will bring everything that was created in the past so this is not a new situation the difference is that the speed of finding these things are much faster and much more efficient So then we can also use the same powerful models to create better cryptographic modules as well. So I think it works hand in hand. It doesn't change the way that Yubico looks at our future on delivering the most elevated hardware. It does require us to work more efficiently with both Yubico internally, but also with our partners around the world. So it's just a call to action to work more closely with all the other cyber...

great just a final question perhaps perpetual booking strong in the quarter was most of this ship already on Q2 or are you entering the second half here with some order backlog no not everything was shipped from Q2 so we do have some backlog the bid sales were of course both supported by good perpetual

but we also had backlog from before. So we do have some backlog for the coming quarter.

The next question comes from Thomas Nielsen from Nordia. Please go ahead.

thank you for taking my question

from a large opportunities perspective we've we always continue to assume that i think that that hasn't changed since i've did it you recall we've always been a focused with a portion of the organization very focused to ensure that we have the engagement with the largest companies in the world. So they will always be part of it. In terms of your questions, kind of why now, why, where is this going to happen more? As I've described before, buying a large amount of technology is a cycle. and so if you look all the way into back into 2023 or all the way back to the pandemic where they were like there's a lag and then there's changes and then people buy big about so we will continue to see this and we believe that sometimes The way that we've described it in the bookings doesn't really fully reflect what's happening behind the scenes. So I'll comment on this is that we haven't changed our go-to-market strategy necessarily. We haven't changed the way that we approach these startups. What typically is happening is that there are different buying cycles that don't land to how any company so large deals sometimes can happen really fast because of an incident or an ecosystem problem people want to move very very quickly or sometimes they because they they just don't have the same type of urgency but the demand is always there. It's just the buying cycle changes depending on a number of factors. Part of it is internal, part of it is macroeconomics, part of it is just headline use of a tax. So it's a very complicated way that some of these customers buy or make, sorry, complicated way that they make large purchasing decisions. But certainly, it's in our portfolio of... portfolio of companies that will continue to do this pattern and just just not sometimes the time that we want okay thanks very much and a final question for me with regards to the open ai collaboration would you be prepared to

are there any growth numbers you can share that relate to that OpenAI collaboration?

we don't have any numbers to share specifically with that and I will give you kind of insight with that there is a specific package that we have offered with OpenAI and it is very very geared towards like individuals so like think of an individual that wants to protect their charity account which is a little bit different than an enterprise right enterprise is a different set of requirements if they want to protect their employees or maybe their supply chain So what we see is that there's a lot of spillover. What that means is that customers engage us because they want something else besides the default package that we provided. And they want some special thing that is very unique to the enterprise. So what the real effect on for this partnership is really create the right focused on security of protecting an organization, which is the awareness and the relevance and the endorsement. And we see that translated into a lot more enterprise conversations about what it means to protect themselves. From an overall perspective, we also see sometimes people buy the products other e-commerce platform because the promotion is actually not so one of the things that we are planning to do is make it more available to users around the world which will help get it where it needs to go so we've only launched in the US and parts of Europe but there's a lot of demand from Dublin Asia and we actually don't have this type of promotion in those regions so we hope to continue to evolve where we can help customers get it but again the short story there is

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

we have two written questions the first one is well done on the quarter please can you remind us of the revenue recognition policies for subscription and perpetual revenue streams yes of course when we sell our perpetual then we recognize the revenue and shipping and delivery

so the revenue recognition depends very much on the shipment schedule and the delivery schedule small orders typically we are you know very in a short time frame when they place the purchase order when we have large enterprise perpetual order bookings the shipment schedules might be over several months depending on the deployment schedule of the customer when it comes to subscription the subscription is an obligation over the duration of the contract so when we um negotiate a three-year or five-year duration of a contract, we report in the order bookings the total contract value over this period. But when we recognize the revenue, we recognize it over these three or five years. So the subscription for the bookings and the subscription revenue is very different. We always need to think about the order bookings is a total contract value while the subscription net sales is the revenue recognized in the period. And I always tend to encourage analysts and investors and people that are interested to look also at our annual recurring revenue for subscription because this is truly our 12-month forward-looking indicator of what our net sales in subscription, how the net sales in subscription is developed. I hope that was clear. There's more. We still keep the last year in the presentation and the material there. There's been quite a comprehensive walkthrough in our revenue recognition process.

The next question is, can you say anything about the reception so far of the new products 5.8 and the new 50Q?

The reception is positive from the customers that care about these type of capabilities. So the PIPS devices are very focused on our public sector customers or customers serving the public sector. So definitely there's been a lot of movement in terms of... continue interest in adoption of the new products there in terms of the 5.8 it's really seeding the ecosystem for new use cases which is very important for us so 5.8 has some new capabilities that enables developers to build new things so in our perspective demand will continue to accelerate when the YubiKey works with more things, more use cases, more services. So we consider the build phase of our portfolio. The keys solve a specific market problem that is needed, but sometimes devices that we release are to seed new use cases, which is solving the problem for the ecosystem. which is what is going to build the pipeline so we always deliver on products that have these type of goals in mind where one is seeding one is execution one is seeding one is execution right so it's a bit of that going on what is very different is that for you this year it's been a huge velocity which I've mentioned to a number of you already that that's that's my goal to to deliver on these products at a higher cadence with a high velocity with high quality which is what we're focused on because typically we release So, you know, the scale of our operations and execution, I believe, is moving in the right direction. And that will continue to translate into business growth. thank you everyone for joining us we look forward to seeing all of you or not most of you at our capital market sale or our next report thank you