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Introduction & Market Context
Pexip Holding ASA (OB:PEXIP) presented its Q1 2025 results on May 7, 2025, showcasing continued growth in its software-only video conferencing business. The company, which positions itself as a specialist in the enterprise and public sector segments, reported solid financial performance with significant profitability improvements.
Pexip’s stock closed at 40.8 NOK on May 6, down 0.49% ahead of the earnings presentation, trading near the upper range of its 52-week price band between 26.55 NOK and 48.05 NOK.
The company continues to leverage its unique partnerships with technology leaders including Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), Zoom (NASDAQ:ZM), and Cisco (NASDAQ:CSCO), while serving major clients such as Walmart (NYSE:WMT), NASA, and various defense organizations.
Quarterly Performance Highlights
Pexip reported Annual Recurring Revenue (ARR) of $115.5 million at the end of Q1 2025, representing a 10% year-over-year increase. The company added $2.4 million in ARR during the quarter, continuing a pattern of steady quarterly growth.
As shown in the following chart of Pexip’s financial trajectory, the company has maintained consistent ARR growth while significantly improving profitability metrics:
Revenue for Q1 2025 reached 348 million NOK, a 19% increase from 292 million NOK in Q1 2024. More impressively, adjusted EBITDA surged 75% to 112.5 million NOK, representing a 32% margin compared to 22% in the same period last year.
The company’s financial results demonstrate strong operational leverage, with 86% of revenue growth converting directly to EBITDA improvement:
Free cash flow for Q1 2025 was 221 million NOK, a substantial increase of 118 million NOK compared to Q1 2024. This strong cash generation was driven by improved operating results and seasonal working capital improvements, despite a 19 million NOK loss on foreign currency exchange.
Detailed Financial Analysis
Pexip’s business model continues to deliver high gross margins of 91% over the last twelve months. The company’s comprehensive financial results show significant improvements across key metrics:
The company has maintained stable operating expenses year-over-year despite growing revenue, contributing to the expanding profit margins. This operational efficiency is particularly evident in the stable salary and personnel expenses, which have remained relatively flat while revenue has increased.
Pexip’s revenue is generated through a subscription-based model, with ARR split between two main business segments and diversified across customer types and regions:
The company ended Q1 2025 with a strong cash position of 830 million NOK, providing substantial financial flexibility for future investments and shareholder returns.
Strategic Initiatives & Segment Performance
Pexip’s business is divided into two main segments: Secure & Custom Spaces and Connected Spaces. The Secure & Custom segment, which focuses on self-hosted video solutions for organizations with stringent privacy and security requirements, has emerged as the primary growth driver.
The Secure & Custom segment grew 27% year-over-year to reach 47.9 million USD in ARR, benefiting from increased public awareness around sovereign IT solutions, particularly in Europe and the defense sector:
In contrast, the Connected Spaces segment, which focuses on video meeting room interoperability, showed minimal growth of 1% year-over-year, reaching 67.6 million USD in ARR. The company noted that 0.6 million USD in ARR was lost across two service providers in this segment.
A detailed breakdown of ARR changes by segment provides insight into the growth dynamics:
Among Pexip’s strategic initiatives, the company announced Google Meet hardware interoperability, enhancing its ability to connect various meeting platforms. This complements Pexip’s vision of connecting any meeting room to any meeting service, reinforcing its position in the interoperability market.
The company also highlighted case studies of major clients, including Walmart, which uses Pexip to connect over 4,000 Zoom rooms and 1,000 Cisco rooms to Microsoft Teams meetings, and the German Bundeswehr (armed forces), which selected Pexip for its sovereign, resilient, and interoperable capabilities.
Forward-Looking Statements
In a significant move for shareholders, Pexip announced the initiation of a share buyback program of up to 100 million NOK, to begin on May 7, 2025. This decision reflects management’s confidence in the company’s financial position and future prospects.
Looking ahead, Pexip provided guidance for Q2 2025, expecting ARR to reach 117-120 million USD by the end of the quarter. The company maintained its near-term targets of consistently delivering above 10% ARR growth and above 20% EBITDA margin.
For the longer term, Pexip expressed ambition to deliver "Rule of 40" performance, where the combined percentage of ARR growth and EBITDA margin exceeds 40%. The company cited continued positive market outlook across its business areas, driven by market trends toward private video meeting platforms, custom video workflows, and interoperability needs.
The company’s management expects the Secure & Custom segment to remain the primary growth driver, supported by increasing demand for sovereign IT solutions, particularly in Europe and the defense sector.
Full presentation:
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