D-Wave Quantum falls nearly 3% as earnings miss overshadows revenue beat
Pexip Holding ASA reported a robust Q1 2025, with revenues reaching NOK 348 million, marking a 19% year-over-year increase. The company’s earnings call highlighted strong financial performance and strategic partnerships, driving a 9.07% increase in stock price. The total annual recurring revenue (ARR) climbed to $115.5 million, supported by significant growth in the defense and aerospace sectors. According to InvestingPro data, the company maintains excellent financial health with a score of 3.3 out of 5, demonstrating solid operational efficiency with a 37.8% gross profit margin.
Key Takeaways
- Revenue increased by 19% year-over-year to NOK 348 million.
- EBITDA margin reached 32% in Q1, with a 12-month rolling margin of 22%.
- Stock price rose by 9.07% following the earnings announcement.
- New partnerships with Google, Microsoft, and Zoom bolster market position.
- The company initiated a share buyback program of up to NOK 100 million.
Company Performance
Pexip demonstrated strong performance in the first quarter of 2025, driven by increased demand for secure and interoperable video communication solutions. The company’s focus on innovation and strategic partnerships has positioned it as a leader in the market, particularly within the defense and aerospace verticals. Compared to previous quarters, the company maintained stable cost development and converted 86% of revenue growth into EBITDA. InvestingPro analysis reveals the company’s strong financial foundation, with a healthy current ratio of 1.86 and minimal debt-to-equity ratio of 0.04, suggesting robust operational efficiency. Get access to 10+ additional ProTips and comprehensive financial metrics with an InvestingPro subscription.
Financial Highlights
- Revenue: NOK 348 million, up 19% year-over-year
- EBITDA: NOK 112.5 million, representing a 32% margin for Q1
- Free cash flow: NOK 221 million
- Net cash position: NOK 830 million
Market Reaction
Following the earnings announcement, Pexip’s stock surged by 9.07% to a last close value of NOK 40.8. The stock’s movement reflects investor confidence in the company’s strategic initiatives and future growth potential. This increase positions the stock closer to its 52-week high of NOK 48.05, indicating strong market sentiment. The stock has delivered an impressive 51.25% return over the past year, while InvestingPro’s Fair Value analysis suggests the stock remains slightly undervalued. For detailed valuation insights and access to the comprehensive Pro Research Report covering Pexip and 1,400+ other stocks, visit InvestingPro.
Outlook & Guidance
Looking ahead, Pexip expects Q2 ARR to be between $117 million and $120 million, with a targeted 10%+ ARR growth. The company aims for a 20%+ EBITDA margin and continues to focus on secure and custom spaces. Long-term ambitions include achieving a Rule of 40 performance, balancing growth and profitability. With a PEG ratio of 0.15 and analysts forecasting 13% revenue growth for FY2025, the company shows promising growth potential relative to its current valuation metrics.
Executive Commentary
CEO Trond Johannelsen emphasized the importance of interoperability in the video communication market, stating, "Interoperability and the ability to use every meeting room to connect to any type of meeting platform is something that will not go away." He also highlighted the growth potential in securing customer areas. CRO Osman Futzda added, "Pexip is proud to be a key component powering some of the most important conversations in the world."
Risks and Challenges
- Currency exposure, with 80% of revenues in USD, poses a potential risk amid fluctuating exchange rates.
- The competitive landscape in video communication solutions may pressure pricing and margins.
- Macroeconomic pressures could impact corporate IT spending and project timelines.
- Dependence on strategic partnerships requires maintaining strong relationships with tech giants like Google and Microsoft.
Q&A
During the Q&A session, analysts inquired about Pexip’s currency exposure and its impact on financial performance. The company also discussed the performance of its Connected Spaces solutions and highlighted a significant customer win with Walmart. Additionally, the status of the HP/Poly partnership migration was detailed, showcasing the company’s ongoing strategic initiatives.
Full transcript - Pexip Holding ASA (PEXIP) Q1 2025:
Trond Johannelsen, CEO, Pexip: Good morning, and welcome to this presentation of Pexip’s first quarter results. My name is Trum Johannelsen, and I’m the CEO. Together with me here at Liisaakir, I have Eijs Steinheim, our CFO and our Chief Revenue Officer, Osman Futzda. Together, we will take you through the highlights of the first quarter and what we are focusing on going forward. The standard disclaimers apply as usual.
First, a few words about Pexip for potential new viewers. 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 use software only, delivered as 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 generally compete with them. Our customers are mainly large organizations, both in the private and public sector, that have complex needs when it comes to video communication. Our financial performance is strong and has been improving over the last quarters. Now to the highlights of the quarter. Our annual recurring revenues, ARR, grew with 2,400,000 during the quarter, and this leaves us with an ARR base of $115,500,000 leaving Q1.
In Q1, we had particularly strong performance in our secure and custom business area, and the development here is supported by increased public awareness around the need for secure and sovereign IT solutions, including video communication. EBITDA came in at NOK112.5 million in the quarter, and cash flow ended at NOK221 million for the quarter. Based on a strong cash position and existing commitments we have related to share option programs, we are initiating a share buyback program of up to 2,000,000 shares or up to 100,000,000, whichever happens first, would start already in Q2. In other news, we were in April proud to announce in close cooperation with Google a new solution that enables Google Meet hardware to connect to Teams meetings. If we look at our Q1 performance in the context of the last twelve months, we see that the positive trend from the last quarters continues.
Our total ARR continues to grow and is at an all time high. Our twelve month rolling EBITDA reached $255,000,000, which corresponds to a 22% EBITDA margin. And finally, our free cash flow the last twelve months was million. We take this performance as evidence that we are working in attractive markets with relevant products and a strong market position. Mission is to make seamless video communication available to all organizations regardless of technology platforms and security requirements.
We have two main solution areas: Pexip Secure and Custom Spaces is 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. First, a few words about secure and custom. Here, Pexip provides a video meeting platform that can be used exclusively or alongside, for example, Teams or Zoom in those situations where you need to close the door and have a secure meeting. Our solution includes security features such as tailored user authentication, clear meeting classification labeling and complete control over what data is stored and where.
Integrated chat is also an option. The secure meeting can easily be booked through the Outlook calendar, exactly the same way as Teams meetings. 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. Pexip’s unique technology gives us a leading position for those organizations that cannot use a global SaaS solution hosted in the public cloud for all their meetings. The Pexip platform can be deployed in all relevant environments from fully air gapped to sovereign clouds and even public clouds when relevant.
This is not the case for Teams, Zoom, Webex and Google, which are mainly operating as global SaaS services hosted in public clouds. This strong and unique market position has resulted in a solid development for our secure and custom business area with a 27% growth in our ARR base since Q1 last year. The current geopolitical situation has reintroduced self hosted and sovereign IT solutions after a period where a global cloud only strategy has been followed by many organizations. In Europe and Asia, both the large U. S.
Technology giants and local players are investing in building alternatives to public clouds to meet sovereignty requirements. Consequently, we now see organizations operating with hybrid or mixed IT environments where some data is in public clouds and other must be in more controlled IT environments. Now moving over to connected spaces. This is where Pexip has the vision of connecting any meeting room to any meeting platform. With the introduction of an interop solution enabling Google Meet rooms to connect to Teams meetings, we have completed the picture.
With Pexip’s unique technology, interoperability focus and industry partnerships, we have a market leading position in this field. The new solution for Google hardware, Zoom Rooms and Teams Rooms are unique to Pexip and are evidence of the leading position we have. A few more words about the new Google solution. We have been in partnership with Google for many years, and Pexip is already the only provider of an interop solution enabling SIP endpoints to connect to Google Meetings. Google has its own hardware software solutions for meeting rooms that is used by many organizations.
These solutions have not been able to connect to Teams meetings before now. The product is requested by large Google customers and has been developed in close cooperation between TechShip and Google. Now let me leave it to Osman to take you through a deeper sales update.
Osman Futzda, Chief Revenue Officer, Pexip: Thank you, John, and good morning, everyone. We are proud and reporting another strong quarter for Pexip in Secure and Custom with USD 3,000,000 AR growth to USD 47,900,000.0. That is a 27% growth year over year. We are especially strong in defense and see an increased awareness and pipeline for secure solutions, especially in Europe. Let me share with you a substantial customer win in more detail that made this possible in Q1.
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Juergen, Analyst, Pareto: is
Osman Futzda, Chief Revenue Officer, Pexip: a valued Pegcept customer, and this time they chose us again because of two things: our unique feature sets and our FMN readiness. So why does FMN readiness matter? Because it ensures that defense organizations and government buyers can securely connect and collaborate with NATO and allied forces across different network and setups. Before Pexip, no vendor could offer a secure, fully controlled solution that delivers on all these critical needs. Number one, again, FMN compliant with what we like to call attribute based access control.
This is a standout Pexip differentiator. It allows precise control over who joins a meeting, when they join the meeting and from which organization, regardless of the secrecy level or network. Second, European sovereignty, data and infrastructure managed within trusted borders. And thirdly, resilence up to NATO secret level, meeting the highest operational and security demands. And lastly, of course, it needs to be fully interoperable, enabling seamless collaboration across all mission partners regardless of what kind of system is in use.
Pexip is proud to be a key component powering some of the most important conversations in the world and to meet both Bonusware and NATO’s highest standards for secure video communication. Now let’s move to Connected Spaces. For Connected Spaces, we delivered a flattish quarter, ending the quarter at SEK sixty seven point six million, which represent a 1% growth year over year. In Q1, the main reason for a somewhat higher churn is the loss of two service providers for interoperability amounting to a negative $600,000 This is as expected, and there is limited service provider revenues left in our ARR base. PegSip continues to see strong momentum with both our Microsoft and Zoom partnerships and soon to come, like Tron said, PegSip Connect also for Google.
We are confident to see good results with our connected products in Q2, the rest of 2025 and beyond. And I’m excited to share a large Fortune 500 customer win that truly validates our competitive advantage and traction in this space. Walmart. Walmart is a fantastic win and another Fortune 500 under the belt for Pexip. Let’s have a look at their use case.
Walmart has, as any large enterprise organization, a mix of technologies. They have a large state of the art of Teams and Zoom rooms that does not interoperate. Walmart has evaluated standardizing on one technology that has decided to get a higher return on their existing investment and to support all meeting scenarios with their current estate. They simply just want to meet. Pexip can support this decision with a solution for seamless interoperability.
And because of that, we see customers like Walmart decide to radically expand their commitment with Pexip. We continue to see an increased interest and pipeline for Pexip Connect. And again, in Q3, we will also have Pexip Connect for Google. We’re confident about the future and our position to continue supporting Fortune 500 companies with our technology solutions. And with that, I’ll hand over to Eustan for a financial update.
Eustan Steinheim, CFO, Pexip: Thanks a lot, Osman. As Trond noted, we grew our annual recurring revenues with $2,400,000 in compared to a growth in Q1 of last year of $2,000,000 The year on year growth rate is at 10%, which is the same as it was out of Q4. Securing Custom is driving the growth and is up to a year on year growth of 27%, while as Osman mentioned, Connected Spaces is growing at 1%. As much as $1,000,000 of the incremental growth in this quarter came from defense and aerospace, and this vertical has shown significant growth in 2024 and continues now in 2025. Looking closer at the two business areas.
Connected Spaces saw a slight decline of $500,000 Compared to last year, new sales is somewhat lower than in 2024, while net retention is stable. This is from a combination of a few material up sales like Walmart, compensating for higher churn compared to last year. Secure and Custom, on the other hand, had another very strong quarter, growing $3,000,000 and this took the annual growth to 27%. Compared to last year, new sales is up $500,000 and net upsell is up $1,000,000 while churn continues to be low in this segment. We’re happy to see the shift in new sales towards Secure and Custom as this product area has shown better net retention over time.
And as a consequence, we’re now shifting the ARR mix towards Secure and Custom. In terms of our P and L, reported revenues follow ARR. And in Q1, they were NOK $348,000,000, up 19% compared to Q1 of last year. The growth is balanced between the two product areas, software and Software as a Service. It’s worth noting that in stable currency, we estimate that revenue growth would be 13% and not 19%.
EBITDA is also significantly up, growing 75% compared to Q1 of last year. For Q1, we delivered 32% EBITDA margin for the quarter, taking our twelve month rolling margin to 22%. This is in line with our near term target for 2025. We continue to convert a higher share of our revenue growth to incremental EBITDA. In Q1, we grew revenues with NOK 56,000,000, and we increased EBITDA with NOK 48,000,000, meaning that we converted 86% of the increased revenues into increased EBITDA.
This is a result from a combination of increased revenues, improved gross margins, a beneficial currency situation as well as good cost control. In terms of costs, we continue to maintain a fairly stable cost development. Salary expenses are stable year on year with a reduction in headcount compensating for inflation. Other OpEx is also stable. In Q1, we did see a cost increase on share option related costs, and this is a result from setting some exercise share options in cash rather than in shares.
This is neutral in terms of the value but it does have a negative impact on the reported P and L. On the other hand, due to a reduction in the share price during Q1, we also saw a reduced accrual for social security taxes, which has the opposite effect. Looking at cash flow. Q1 had a free cash flow of NOK $221,000,000, which is NOK 120,000,000 above 2024. Operating cash flow is driving this and was up 115,000,000 compared to last year, significantly above the growth in EBITDA.
A big part of this is a seasonal improvement in working capital as we collected on revenues that was invoiced late in Q4. Investment and leasing cash flows are slightly down compared to last year. We did see a NOK 19,000,000 reduction in our cash position due to exchange rate impact on our holdings in U. S. Dollars, which reduces their value in Norwegian kroner.
This took our net cash position to NOK $830,000,000 at the end of Q1. To summarize the main points for the quarter, revenues are up NOK 56,000,000, 19 percent. And EBITDA, excluding other gains and losses, is up NOK 48,000,000. Depreciation is down NOK 6,000,000, resulting in EBIT coming in at NOK 101,000,000 for the quarter. Net financials is down NOK36 million due to negative currency impact from the stronger NOK compared to the U.
S. Dollar. And in total, we improved our profit before tax, which came in at NOK87 million for the quarter. And with that, I hand it back to Tom.
Trond Johannelsen, CEO, Pexip: Thank you, Hestan. Capital distribution. As a result of our solid cash flow, cash position and existing outstanding commitments to deliver shares as part of employee incentive programs, we are initiating a share buyback program. Pexip will acquire up to a volume of 2,000,000 shares or shares for a value of 100,000,000, whichever happens first of those two. If we take Pexip’s Q1 cash position of NOK $830,000,000 and adjust for the maximum share buyback and the dividend paid out in Q2 or actually today, the cash position would still be $470,000,000.
So we maintain a strong balance sheet also after these distributions. Now to outlook. As described earlier, we maintained a positive market outlook based on the key trends we see in our markets and the unique technology, strong market position and solid industry partnerships we have. Our current expectation is that we will end Q2 with an ARR base in the range of USD 117,000,000 to 120,000,000. This is compared to the USD 115,500,000.0 we had leaving Q1.
Our 2024 to 2025 targets of consistently delivering above 10% ARR growth and above 20% EBITDA margin remain in place. Longer term, we have an ambition to deliver Rule of 40 performance across ARR growth and EBITDA margin. Finally, before we go to Q and A, we will have our Q2 presentation here on August 14. Now Q and A.
Eustan Steinheim, CFO, Pexip: Excellent. We’ll start off with questions from the analysts that are with us live. And I believe we have Jurgen from Pareto joining us. Jurgen, can you hear us?
Juergen, Analyst, Pareto: Let’s see. Yes, I can. Can you hear me? Great. First, thank you so much for taking my question.
I have several questions, but I would start with this. So I understood your communication earlier to mean that you could grow to about 150,000,000 ARR with with about 300 employees. But with your numbers today, you keep reducing the headcount. So I’m just wondering if you could help me bridge how low will that figure go before it eventually starts going up if you continue to grow?
Eustan Steinheim, CFO, Pexip: So I think we have around our expectation is that we will be around 300 employees by the end of the year. And so I actually do expect that to start going up somewhat from even from Q2. Then if we’ll reach 300 by the end of the year or somewhat below, let’s see. That depends both on hiring as well as any potential departures.
Juergen, Analyst, Pareto: Okay. Thanks. That’s very clear.
Eustan Steinheim, CFO, Pexip: And
Juergen, Analyst, Pareto: also if you could give some color on the FX situation in the company, both in terms of currencies that you signed contracts, but also if you’re considering any hedging or anything to sort of mitigate the high volatility that we’re currently seeing in monetary markets?
Eustan Steinheim, CFO, Pexip: So I think underlying the business has a pretty good hedge by having a lot of the to be fair, lot of the revenues are invoiced in U. S. Dollars, around 80%. But also the cost base is fairly sort of balanced with about onethree in dollars, onethree in euros and pounds and then onethree in Norwegian kroner. So the business as a whole is not that exposed to currency fluctuations.
Although as a European exporter, we do benefit from a strong dollar. I think we do not plan to do any currency hedging, but it will be a point of discussion with European customers as they come up for renewal, what their price should be in their local currency. That was the case when the dollar was sort of increasing in strength because the customers felt that it was somewhat unfair in their local market to receive a much higher price than the year before. And it will be a point of discussion now as they come up for renewal to make sure that it’s a fair outcome both for them and for us.
Juergen, Analyst, Pareto: But you would still prefer to have those quoted in U. S. Dollars and not in euros?
Eustan Steinheim, CFO, Pexip: Yes, because at the end of the day, it comes down to even if you have multiple currencies that you invoice in, you still need to keep those prices relatively consistent across the markets that you operate in. If not, customers would order from Europe and deliver it to The U. S. So whether you have one or multiple currencies, you will still need to manage how the different currency rates develop.
Juergen, Analyst, Pareto: Yes, that makes sense. And then finally from me, if I may. Great to see the buyback program. I think that answers a lot of the, let’s call it, feedback that at least analysts have had for a long time. But could you provide any color on the time frame?
Is this a one month program? Is it supposed to run until next year? Or what’s the timing here?
Eustan Steinheim, CFO, Pexip: So we’ve set an absolute deadline by the September 30. Given the sort of it will follow the standards or rules for the Oslo Stock Exchange capped at 25% of the average liquidity in the stock, which will probably with at least the current liquidity take a couple of months.
Juergen, Analyst, Pareto: That makes sense. Thank you so much.
Eustan Steinheim, CFO, Pexip: Thanks a lot, Juergen. Then I believe we’ll go to Eustein from ABG. Eustein, can you hear us?
Eustein, Analyst, ABG: I can hear you well. Good morning and thanks for taking my questions and congrats on a great quarter. First of all, let’s start with Connected Spaces. Their momentum has slowed a bit. I just thought maybe if you could give us some more flavor, how much of this is due to increased churn on, for example, SIP endpoints?
And how much is kind of that we’re still waiting to see the ramp up of new products such as MTR rooms, Google, etcetera?
Osman Futzda, Chief Revenue Officer, Pexip: Yes. In general, we pointed out the two service providers in Q1 making a bit of an exceptional churn situation in Q1. Going forward, we don’t have that many of them in the portfolio, so that’s important in itself. Then we do see great traction, especially on the Zoom and with the MTRs, and we’re excited about what Google could provide us as well. So we’re fairly optimistic about the whole connected spaces for the rest of 2025.
We’re working with several large Fortune 500 companies that we are planning to close in 2025. So I wouldn’t put too much into what we saw in Q1. Details on SIP and endpoints, and I’m less not something we don’t really go down to details, I believe.
Eustan Steinheim, CFO, Pexip: No. But in general, what we see is that customers are moving to newer platforms like MTRs, like Zoom Rooms, like Google Meetrooms, where we have launched products, but we’re quite early in terms of the adoption. I would say that on Connect Versum, that was a relevant contributor for our net development in the connected spaces this quarter. So that has contributed well. On MTRs, we see a good pipeline development, but still haven’t seen material sales yet.
That was launched quite a bit later and is also not fully out on all platforms that Microsoft deployed. But we’re confident in that product’s sort of ability to deliver as we get into 2025 in earnest.
Trond Johannelsen, CEO, Pexip: But in general, we do sorry, in general, interoperability continues to be extremely because we have all these meeting platforms out there, basically the four large ones and potentially some local and more secure platforms like Pexip being a bigger part of the mix going forward. Interoperability and the ability to use every meeting room to connect to any type of meeting platform is something that will not go away and that will we believe will continue to grow also going forward.
Osman Futzda, Chief Revenue Officer, Pexip: And to that, Dave, if I can even elaborate. Walmart is actually a fantastic example. It used to have a huge SIP estate of video conferencing endpoints, now have a good mix of MTRs and Zoom rooms. Did evaluate, which I think every large enterprise is doing, whether they should standardize on one technology. But we do see that, especially these larger ones, are not doing that.
They have the mixed ex state, again speaks to the need of interoperability in a different way than we used to see it with the Purion SIP endpoints.
Eustein, Analyst, ABG: And on the Poly partnership, we’re still, of course, in the period where they are phasing out their legacy products and migrating customers to Pexip. Can you say something about the status of that partnership? Are the majority of that effect still ahead of us? Or have you taken out a lot of potential from that partnership already?
Osman Futzda, Chief Revenue Officer, Pexip: Pavel, you want to go?
Eustan Steinheim, CFO, Pexip: No. So overall, the partnership with HP is super strong and they continue to be a very important contributor to our sales. Poly has also given some data themselves on the status on the real connect, so the connected spaces part of the migration, which is about two thirds into the migration. So on that side, I believe we’re done we have more of it behind us than in front of us, while the situation on Private Connect, is their secure and custom platform, is the other way around. So overall, still a long way to go, but it differs somewhat between the two product areas.
Eustein, Analyst, ABG: And on the very strong development in securing custom, are there any kind of large single contracts contributing to that strong growth? Or is this kind of a growth rate that you think you can sustain going forward given all the strong macro trends that we are seeing in the market?
Osman Futzda, Chief Revenue Officer, Pexip: We did in Q1, in particular, we did not have one single big contract. It’s we see the good traction all over, especially in Europe. North America has always been good for us on securing customer, that continues. We are working on some larger opportunities throughout 2025, but that’s harder to define exactly when that potentially can hit us. But we have good traction basically around the globe on securing customer multiple new opportunities.
Trond Johannelsen, CEO, Pexip: Think we talked about this before that we did see a higher potential and a higher potential growth rate in the securing customer area than we saw in the other part of the business. And I think that’s basically two years back since we communicated that. And I think we even talked about 20 plus percentage potential growth rates at that point without being at that level. What we’re seeing now is that, that’s now starting to realize and that’s starting to kick in because of the way the world is developing. So it’s really a positive picture for that business going forward.
Eustein, Analyst, ABG: Okay. Thank you very much. That was all my questions.
Eustan Steinheim, CFO, Pexip: Thank you. Thanks a lot, Eisen. It doesn’t seem like we have any questions coming in on e mail. So with that, we’ll conclude the Q and A section. Thanks a lot for listening, and we’ll see you next quarter.
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