Earnings call transcript: Pexip Q2 2025 reports strong ARR growth

Pexip Holding ASA reported its second-quarter 2025 earnings, showcasing a strong performance with an 11% year-over-year increase in Annual Recurring Revenue (ARR), reaching $119 million. The company also achieved a 20% EBITDA margin, up from 14% last year. Following the earnings report, Pexip’s stock rose by 5.09%, reflecting investor optimism. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.23, supported by strong cash flows and minimal debt, with a debt-to-equity ratio of just 0.04.

Key Takeaways

• Annual Recurring Revenue (ARR) increased by $3.5 million to $119 million.
• EBITDA margin improved to 20% from 14% year-over-year.
• Pexip distributed SEK 318 million to shareholders through dividends and share buybacks.
• The company maintains strong momentum in secure video communication markets.
• Stock price increased by 5.09% post-earnings announcement.

Company Performance

Pexip’s overall performance in Q2 2025 demonstrated notable growth, particularly in its ARR, which rose by $3.5 million, marking an 11% increase from the previous year. This growth was driven by strong demand in secure video communication solutions, especially in government, defense, healthcare, and regulated industries. The company’s focus on interoperability and secure IT solutions has positioned it well in the market.

Financial Highlights

• Revenue: Not specified in the earnings call summary.
• Annual Recurring Revenue (ARR): $119 million, up 11% year-over-year.
• EBITDA margin: 20%, up from 14% in the previous year.
• Free cash flow: NOK 32 million in Q2.
• Shareholder returns: SEK 318 million distributed through dividends and buybacks.

Market Reaction

Following the earnings announcement, Pexip’s stock price increased by 5.09%, closing at $6.08. This movement reflects positive investor sentiment, driven by the company’s strong ARR growth and improved profitability. The stock has delivered an impressive 108.89% return over the past year and is currently trading near its 52-week high of $6.35. For deeper insights into Pexip’s valuation and growth potential, InvestingPro subscribers have access to 12 additional ProTips and comprehensive financial analysis.

Outlook & Guidance

Looking ahead, Pexip has provided guidance for Q3 2025, expecting ARR to be between $120 million and $123 million. Trading at a P/E ratio of 43.14, the stock currently appears fairly valued according to InvestingPro’s Fair Value model. Discover comprehensive analysis and valuation metrics in the Pro Research Report, available exclusively to InvestingPro subscribers, along with expert insights on over 1,400 stocks. The company anticipates continued growth in its Secure and Custom Spaces business areas and is targeting a Rule of 40 performance, currently at 34. Pexip also expects minimal revenue from its Teams Rooms on Android in 2025 but remains focused on enterprise interoperability solutions.

Executive Commentary

Osman Fultzda, Chief Revenue Officer, emphasized Pexip’s unique position in enabling full control over classified conversations. CEO Trundle Johanndelson expressed optimism about growth in both business areas, highlighting significant momentum in secure video communication solutions.

Risks and Challenges

• Long sales cycles in government and defense sectors could delay revenue recognition.
• Dependence on strategic partnerships with industry players like Google, Microsoft, and Zoom.
• Potential fluctuations in foreign exchange rates impacting financial results.
• Competitive pressure in the video communication market.
• Regulatory changes affecting data sovereignty and security requirements.

Q&A

During the earnings call, analysts inquired about Pexip’s new partnership contract with a variable pricing model and the company’s strong pipeline in both business segments. Management also discussed the potential for growth in sovereign cloud deployments and emphasized the long sales cycles typical in government and defense industries.

Full transcript - Pexip Holding ASA (PEXIP) Q2 2025:

Trundle Johanndelson, CEO, Pexip: Good morning, and welcome to this presentation of Pexip’s Second Quarter Results. My name is Trundle Johanndelson, and I’m the CEO. Together with me here today at Liisa Kir, I have our CFO, Eis Steinhem and our Chief Revenue Officer, Osman Fultzda. Together, we will take you through the highlights of the past quarter and our focus going forward. The standard disclaimers apply as usual.

First, for new viewers, a brief overview of Pexip. Pexip was founded in 2012, and currently, we operate in 25 countries across the globe. We are a specialist videoconferencing and infrastructure company focusing on interoperability and secure and custom meetings. We do software only, delivered as a software or software 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 directly compete with them. Our customers are mainly large organizations in both the public and private sectors that have very complex needs when it comes to video collaboration. The financial performance is strong and has been improving over the last quarters. Now to the highlights of the past quarter. Our annual recurring revenues, ARR, base grew with USD 3,500,000.0 during the quarter, and this leaves us with an ARR base of $119,000,000 leaving Q2.

In the quarter, 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. We also see that our new interop solution for Zoom Rooms continues to do very well in the market. In Q2, we also renewed a partnership agreement with an important partner in connected spaces, and this underlines the importance of interoperability for this key player in the industry. EBITDA came in at 57,000,000, and cash flow ended at NOK 32,000,000 for the quarter. If we look at our Q2 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. Year over year, the growth rate is 11%. Our twelve month rolling EBITDA reached NOK $276,000,000, which corresponds to a 23% EBITDA margin. And finally, our free cash flow the last twelve months was NOK $281,000,000. We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position.

Now a bit more detail on the two business areas. Pexip’s mission is to make seamless video communication available to all organizations regardless of technology platforms and security requirements. Our two business areas, the first one being Secure and Custom Spaces, is about privately hosted video meetings that give complete privacy and data control with the desired level of customization. The second business area, 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 spaces.

Here, Pixi provides a video meeting platform that can be used exclusively or alongside, for example, Teams or Zoom in those situations when 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 or started through a chat session, exactly the same way as for 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.

Those organizations that have requirements that fit well with TechShip’s value proposition span over a wide range of industries and sectors. Most notably, we see that organizations within defense and national security as well as government bodies in all shapes and forms, together with health care and other regulated industries, constitute the sectors where we see the highest demand. As a result of this, we have increased our focus on meeting the needs of customers in these sectors to ensure that we continue to take market share in what we define as our core customer groups for secure meetings. Osman will show a couple of customer use cases related to defense and health care a bit later, but let me share some recent wins we had in Q2 with government organizations that are outside of defense and health care. These include secure meetings plus chat integration for a European civil agency, a secure meeting solution for a public prosecutor’s office, secure meetings with AI translation for a foreign ministry, secure meetings to a U.

S. State corrections agency and finally, a secure meetings and chat solution for another civilian agency in Europe. In total, these contracts with high profile government agencies sum up to USD 1,300,000.0 in new ARR in the quarter. We see significant momentum in this area, and we are often asked about the key drivers behind the decisions to purchase Plexip solutions for this customer group. There is no single answer that fits all customers, but in aggregate, we see the following key reasons for selecting Plexip: a requirement for data sovereignty, control and compliance a need for customization capabilities as well as deployment and integration flexibility a desire for vendor independence and reduced vendor lock in and a need for a modern user interface also in secure environments.

To give you some more flavor to what we actually deliver to these customers, let me show you a short video describing Secure Meetings, including an example of an integration with Chat. And this solution is a popular replacement of legacy solutions such as Skype for Business or Cisco Meeting Server.

Video Narrator, Pexip: Starting a Pexip secure meeting is easy. You can do it in several ways. You can schedule a meeting using the email plug in, set the optional confidentiality level, and invite your guests. You can also start secure meeting directly from a message when Pexip is integrated with a supported secure chat platform. Access and authorization levels carry over from the platform you use.

Meetings can be direct one to one or multi party. When you’re done meeting, the in meeting chat conversation is stored individually and accessible for the participants. Pexip integrates securely and seamlessly with a number of self hosted chat platforms and supports a number of critical shared features. Verification, such as access and permission levels, is seamless and secure, and supports for instance granular access control. Secured with leading encryption and certifications, Pexip seamlessly integrates with existing infrastructure.

You control where to deploy. With Pexip, it’s your meeting, your data, your rules.

Trundle Johanndelson, CEO, Pexip: Now moving over to connected spaces. This is where Pexip has the vision of connecting any meeting room to any meeting platform. With Pexip’s unique technology, interoperability focus and industry partnerships, we have a market leading position in this field. The new solutions for Google hardware, Zoom Rooms and Teams Rooms are unique to Pexip and are evidence of the leading position we have. Interoperability continues to be highly relevant with several platforms and hardware solutions widely used.

As earlier communicated, we are working with both Google and Microsoft to deliver interop for Google Meet hardware and MTRs on Android. The progress is good on both these joint development projects. Also on positive partnership news, we have, in the second quarter, renewed a long term commercial agreement with a key partner, adding an additional three years to the existing agreement. This renewal signals the continued importance of interoperability for one of the key players in the industry. The new business model has a higher variable unit price and a lower fixed fee, which is estimated to give Pegcept higher revenues and margins over the three years.

Short term, it will, however, have a temporary one off ARR effect of minus $1,000,000 in Q3 this year. Now let me leave it to Osman for a sales update.

Osman Fultzda, Chief Revenue Officer, Pexip: Thank you, Tron, and good morning, everyone. I’m super happy to announce that we yet again are reporting another strong quarter for Bexzip in Secure and Custom with a $2,600,000 ARR growth to $50,600,000 It represents a 27% growth year over year. We are especially strong in defense and see an increased awareness and pipeline for secure solutions globally. In addition, we see great progress within Healthcare with several large wins. Let’s start with the secure and custom.

Pexip delivers secure video meetings for the world’s toughest IT environments. Pexip integrates seamlessly with complex, highly regulated networks, tailors the experience to each customer and still keep the system simple to run. That’s why government, defense and national security agencies choose Pegasus. Today, I’ll share some of the key wins that illustrates this. The first case is a European Ministry of Defense.

In this defense organization, video collaboration is strategic capability for command and control, multi domain situational awareness, meaning the ability to act coordinated simultaneously, governmental coordination, collaboration and program delivery. This European Ministry of Defense was looking for a solution that could run sovereign secure video meetings for their primary NATO command and control environment, interoperable with NATO HQ and 32 member states. So why did the customer choose Pexip? Pexip meets the strict NATO standards known as Federated Mission Networking. Pexip offers flexible deployment, and this is critical for mission readiness, and Pexip runs on any server and any cloud.

And finally, Pexip is easy to operate and delivers the rapid scale across domains that this Ministry of Defense requires. Imagine the technology complexity across these member states and their setup, where many collaboration platforms lack the security, compliance and the adaptability required. Pexip is the only one that enables full control over classified conversations. Another major win for us in Q2 that I wanted to highlight is one of the world’s largest hospital groups. This health care organization was looking to improve both patient care and agent efficiency with video, while maintaining the highest quality across multiple locations and networks.

The integrated Pexip and Genesys video solution enable their contact center to deliver a personalized experience as well as giving the administrators the visibility and control needed to monitor and maintain every call. So why did Pexip win this deal? As stated earlier and highlighted by Trom, Pexip integrates seamlessly with complex regulated networks, and we have the ability to personalize the experiences. And finally, keep the system simple to run. Let’s also have a look at Connected Spaces.

For Connected Spaces, we ended the quarter at $68,400,000 adding almost $1,000,000 in AR. Pexi continues to see strong momentum with both Microsoft and the Zoom partnership, where the Pexi Connect for Zoom Rooms had very good traction in Q2. Pipeline keep on growing for our connected products, and we expect continued traction in 2025 and beyond. Let me also share a major win within Connected Spaces from Q2. A world leading consulting firm needed seamless interoperability and a consistent experience across meeting rooms and technologies.

They refused having a walled garden approach and required the freedom for consultants to join any client meeting on any platform. Pexip Connect for Zoom Rooms delivered a fully supported enterprise grade solution with any to any interoperability and a consistent one touch join experience. The outcome: platform freedom without vendor lock in, consistent room experience across sites, reliable high quality meetings backed by Pexip support, all enabling their consultants to simply just meet. As the leader in enterprise interoperability, Pexip provides a through any to any connectivity and the reliability global firms depend on. And Pexip is the only one that can do that across any platform or any technology.

And with that, I will going to hand it over to Istan for the details on the financials.

Eis Steinhem, CFO, Pexip: Thank you, Osman. Let me start off with our ARR development. As mentioned, we grew 11% in Q2, with most of the growth coming from Secure and Custom. The split of ARR across industries and regions is similar as the previous quarter, with government and health care adding the most in Q2, and with the growth being fairly evenly split across Europe and U. S.

In terms of net retention and new sales, Connected Spaces saw an increase of $900,000 This is somewhat better than in 2024 with improved churn and improved net upsell. Secure and Custom had another very strong quarter, growing $2,700,000 and maintaining the annual growth at 27%. Q2 was strong last year as well, and year on year, we had improvements of $100,000 to $300,000 across new sales, net upsell and churn, adding up to an improvement of $700,000 compared to Q2 of last year. As a consequence of the strong growth, Securing Custom has increased its share of the total ARR from 37% a year ago to 42% now. This is a positive development as Securing Custom has the best net retention of the two business areas.

In terms of the P and L, revenues grew 6% year on year compared to the ARR growth of 11%. This is mostly due to timing effects of revenue recognition across Q1 and Q2. And year to date, revenues are up 13%. This is also why the growth this quarter is mostly from Software as a Service. The NOKUSD exchange rate is down compared to Q1.

However, compared to Q2 of last year, currency effects are not very significant with regards to revenues. EBITDA continues to grow and is up NOK 21,000,000 compared to the revenue increase of NOK 16,000,000. This is due to a significantly improved cost of goods sold due to received onetime rebates on cloud compute in Q2. This has helped us expand our profitability significantly this quarter as well, which came in at 20% EBITDA margin, up from 14% a year ago and is now at 23% on a twelve month basis. This is a testament to the strong underlying business model as double digit growth, together with a stable cost base, has a tremendous impact on profitability.

In terms of costs, we continue to maintain a stable cost base by driving for efficiencies in some areas while also expanding in others. Salary expenses are stable year on year with a reduction in cash paid salary of around NOK 5,000,000, and this was balanced out by an increase in share based expenses as accruals for social security costs increased due to the share price increase during the quarter. Other OpEx continues to be stable and is up NOK 1,000,000 compared to 2024. Looking at cash flow. Q2 had a free cash flow of NOK 32,000,000 compared to NOK 68,000,000 last year.

This is due to working capital normalization following a very strong Q1. And in the first half, cash flow is SEK $253,000,000 compared to SEK 168,000,000 the first half of last year. In Q2, we also distributed a total of SEK $318,000,000 back to shareholders through the dividend and our share buyback program. The share buyback program was completed earlier in August and combined we have year to date returned close to NOK $360,000,000 so far this year. We left Q2 with a very solid cash position of NOK $544,000,000.

So to summarize, revenues are up NOK 16,000,000, gross profit is up SEK 24,000,000 and EBITDA is up SEK 23,000,000 and is now at 20% margin for the quarter. Depreciation is also SEK 8,000,000 better than in Q2 of last year as a result of completion of depreciation of some intangible assets. And the current level is pretty in line with our running CapEx and lease expenses. Net financials is also SEK 11,000,000 better than last year from better foreign exchange differences compared to Q2 of last year. In total, we improved our profit before tax, which came in at NOK 56,000,000, up NOK 44,000,000 from Q2 of last year.

And with that, I give it back to Tom.

Trundle Johanndelson, CEO, Pexip: Thank you, Oestijn. Well, now to outlook. As described earlier, we maintain 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 that we have. Our expectation is that we will continue the positive ARR trend we have seen over the last quarters and end Q3 with an ARR in the range of USD 120,000,000 to 123,000,000 compared to the 119,000,000 we had leaving Q2. Included here is the temporary negative ARR effect of the new pricing in the renewed partnership model.

As mentioned earlier, this new pricing is positive for Pexip’s revenues and margins over the contract term. As demonstrated this quarter, we are also tracking well towards our near term targets of consistently delivering above 10% ARR growth and above 20% EBITDA margin. Longer term, we have an ambition to deliver Rule of 40 performance across ARR growth and EBITDA margin. Last twelve months, we are at 34 on this parameter. Finally, before we go to Q and A, we will have our Q3 presentation here on November 7.

Now, Q and A.

Eis Steinhem, CFO, Pexip: Thanks, Lautaro. As normal, we’ll start with questions from the analysts that are with us on the call. I believe we have Jurgen Weidmann from Pareto On. Jurgen, do have any questions for us?

Jurgen Weidmann, Analyst, Pareto: Thank you so much for taking my question. And also, first of all, congratulations on So another good my first question, can you shed some light on the way you account for variable price commitments in your ARR, especially with relation to the connected space contract that you’ve now changed slightly? And if you don’t account for them at all in your ARR, could you tell us something about the share of variable payments that you have in your current contracts contracts and how we should think about that going forward?

Eis Steinhem, CFO, Pexip: Right. So to understand or to typically, we don’t have variable pricing contracts. They are variable in that they scale with the number of licenses that are bought. Typical model for us will be that the price per license will be fixed for the entire contract period, which is typically one to three years. In the specific contract that we mentioned now with the partner, we have a somewhat different model with a large sort of contract fixed fee of about $1,000,000 a year.

And on top of that, you have a variable price. And in the new model, you have just a higher variable price, but no fixed fee commitment. Did that help? Or were there other type of variable outlets you were thinking?

Jurgen Weidmann, Analyst, Pareto: No, I was just wondering how we should think about it. But if you say that the old contract was a special one and the ones we usually account for is the ones we should continue to account for, then that’s very clear.

Trundle Johanndelson, CEO, Pexip: When the previous contract basically had built in a certain uncertainty around volumes and the price levels, And now after having run that contract for three years, we see that the volumes are coming up and sort of the pricing in the market sort of allows for a higher variable price. And when this is then more positive also for Pexip on a revenue and margin basis, that’s how we sort of that’s the way we kind of ended up renegotiating that agreement for the next three years.

Jurgen Weidmann, Analyst, Pareto: So just to clarify then, if the contract you’re switching to now is closer to the ones that you usually do, why would it reduce the RO if it’s still going to be the same coming in that’s the way you usually account for

Christoph Verd, Analyst, DNB: it? The

Eis Steinhem, CFO, Pexip: reason for that is that we need to build up the volume on the new contract. And so when you have a price per unit, which is higher, it does require us to sell units into that program to get sort of retain that revenue. That being said, based on the previous three years, we’re very confident that, that will happen over the foreseeable future.

Jurgen Weidmann, Analyst, Pareto: Okay, great. That makes a lot of sense. Then my second question is on Connected Spaces, which continues to be a little bit subdued in growth with 2% year over year. But I assume that’s mainly from the switch between SIP and service attach endpoints. Yeah.

And at the same time, you see a significant traction on the Zoom native products now at 4,000,000 ARR. Is it fair to say that the Zoom product alone is enough to counter the effects in the switch and that we should expect some higher growth as the other products become available for sale?

Eis Steinhem, CFO, Pexip: I think that is certainly our ambition, to be able to expand our growth in connected spaces as we, in particular, become more relevant to Microsoft Teams customers with covering both Microsoft Teams Rooms on Windows, which we do today, but adding Microsoft Teams Rooms on Android, which we currently are in development of.

Jurgen Weidmann, Analyst, Pareto: Okay. And there’s no reason why Connected Space shouldn’t return to 5% or 10% growth in the next two years when you have those products?

Eis Steinhem, CFO, Pexip: We only did provide guidance, to be fair, on sort of the overall. If you see this quarter, we added close to $1,000,000 in ARR for Connected Spaces. If you take that pace, you’re already sort of mid single digits. So I think it’s fair, but we don’t give concrete guidance for specific product areas.

Jurgen Weidmann, Analyst, Pareto: Okay. That’s fair. Thank you so much.

Eis Steinhem, CFO, Pexip: Thanks a lot, Jurgen. Then I believe we have Christoph Verd from DNB on the call as well.

Christoph Verd, Analyst, DNB: Yes. Great. Can you hear me?

Eis Steinhem, CFO, Pexip: Yes, we can.

Christoph Verd, Analyst, DNB: Cool. Yes. So could you just kind of reiterate how to think about that changing contract and how it kind of affects the kind of sets up the sequential change in ARR into Q3? Yes.

Eis Steinhem, CFO, Pexip: So the previous contract had a fixed fee and a variable fee for the units that were sold onto that contract over the three year period. When we now move into the new contract that has no fixed fee, which is the $1,000,000 that we feel the effect of immediately, but a significantly higher per unit volume price. And so as we sell into that contract over the next quarters and years, we expect to sort of recoup that initial loss by having higher ARR. And that is based on the sales volumes that we have seen over the past three years.

Christoph Verd, Analyst, DNB: Can you just talk a bit about the product of the counterparty there, how they use it and why like their current user base will already just roll over into this new one and drive an equivalent or higher ARR instantly?

Eis Steinhem, CFO, Pexip: So I can’t go into details around that contract, but there’s a substantial sort of customer base that we have not touched yet with this product. It is within the connected spaces and predominantly connected spaces with sort of Connect for Teams standard, which is our main product in this area.

Christoph Verd, Analyst, DNB: Yes. I just got the sense, like you said on the previous question that thinking about Connected Spaces going forward, it’s added almost 1,000,000 of DAR the ARR in Q2 and it seemed like you’re kind of feeling it will be the same in Q3. But if you have like SEK 1,000,000 headwind, is it like a gross add of SEK 2,000,000 and then you kind of take out SEK 1,000,000 to arrive at that SEK 1,000,000 for Q3 or?

Eis Steinhem, CFO, Pexip: No, I did not intend to give concrete guidance for Q3 specifically. But if you sort of zoom out on a yearly basis or even in sort of the next two, three years that we both have shown and have the current capacity to have solid growth in connected spaces, it’s certainly sort of within our expectation.

Trundle Johanndelson, CEO, Pexip: I mean just to put the $1,000,000 into some context, I mean we have single contracts that we enter into in connected spaces that could be $1,000,000 or more. So the $1,000,000 is, in my view, not really very significant in this context. What is significant is the fact that this very sort of key player in the industry has entered into a three year agreement with Pexip that really underlines the importance of the product and solutions we have and how important that is for this key partner to continue to drive development in their business.

Christoph Verd, Analyst, DNB: Okay. And then just a final quick one from us. So if you just do some back of the envelope here and look at the kind of the midpoint of your guidance at €121,000,000 €122,000,000 and assume you have that €1,000,000 sequential headwind in Connected Space, it kind of seems to indicate that you are expecting a material step up in growth both in terms of DAR and year over year growth in ARR and Secure Custom for the current quarter. Is that kind of the way you’re thinking about it? And if yes, what is kind of driving that acceleration in Q3 for Securing Custom?

Is it like you guys pushing more? Or is it more like a pull from customers accelerating for some reason? Yes, that would be helpful.

Trundle Johanndelson, CEO, Pexip: I think I could try to answer that. Just to make that very clear, the change in contract and pricing model is already taken into account in the forecast that we are giving you for the third quarter, whether the growth which means that if you want to correct for that or not in your estimates, you can do that. But in the 120,000,000 to 1 and 23,000,000, that is kind of already taken into account. Whether growth in the third quarter will mostly come from secure and custom as it has done over the past last couple of quarters or more from connected spaces. I mean, we’re guiding on that.

So we expect both areas to grow. And we have seen that the day sort of it varies a bit over time what grows the most. But what we have seen and continue to see is a very strong momentum in the securing custom driven by the current geopolitical situation, the awareness around data control, sovereignty and the need for IT systems that as alternatives to the major global SaaS solutions that are out there.

Osman Fultzda, Chief Revenue Officer, Pexip: The underlying pipeline in both connected and secure continues, right, which is I think is the most important even with this change of contract. So yes, that’s

Christoph Verd, Analyst, DNB: the Yes, I think we’re talking about a bit past each other, but that’s I think we’re on the same page. So thanks a lot. I’ll jump in the back

Eis Steinhem, CFO, Pexip: Josef. Then we will move on to Markus from SEB. Markus, can you hear us?

Markus, Analyst, SEB: Yes. Thank you. So just to finish off with that new contract or the new partnership agreement, when do you expect breakeven compared with the current model? That’s the first one.

Trundle Johanndelson, CEO, Pexip: I mean that could be anything from a quarter to half a year to a year to year. Mean that’s it’s just yes, relatively short. Let’s not give any more that will be more guessing than anything else. If we look at our pipeline, we assume it will not be too long into the future.

Markus, Analyst, SEB: That’s clear. And then secondly, on Teams Rooms for Android. When do you expect to see the first revenues coming in or ARR coming in from that? And when do you expect that to launch commercially?

Eis Steinhem, CFO, Pexip: To take the second part of that question first, the launch is dependent on Microsoft launching support for that on the Teams Room for Android. And so we are not really in control of that. It’s currently listed at Q4 road map, but timing there is still unconfirmed. We have don’t really expect revenues from that to be significant in 2025, but do think that will be a contributor to growth for us in 2026.

Markus, Analyst, SEB: Thank you. And then thirdly, on Secure Meetings. You’re talking here about sort of strong momentum in the conversations. Of course, the awareness is increasing. And then you have a good pipeline.

If you compare that to your current booking level and contracts signed, do you sort of expect this level of bookings to continue based on that pipeline? Or do you actually see sort of the bookings pick up as some of the conversations that you have now materialize?

Trundle Johanndelson, CEO, Pexip: I think we see the momentum is certainly not reduced. It’s more kind of being increased. We are introduced to more and more situations and the use cases where we see that we have relevant solutions, whether how quickly this pipeline converts. When we talk about the type of customers we talk about here, the sales cycles are relatively long.

Osman Fultzda, Chief Revenue Officer, Pexip: Yes, especially in

Trundle Johanndelson, CEO, Pexip: the area. As it’s we talk about government bodies, we talk about defense organizations and so on. So I think we are quite optimistic in development here as we’re trying to signal through the presentation.

Markus, Analyst, SEB: Thank you. And then the final for me is on the cost base and going out of 2025. I think you previously assumed that you will have around 300 employees. That’s a run rate cost base. Have you made any changes to those forecasts or the resources that you need to execute on the pipeline going forward?

Eis Steinhem, CFO, Pexip: No, that’s roughly the plan. I think we’ve said on previous calls as well that we expect to be around 300 employees at the end of the year. I think that is still a fair estimate. We see quite a bit of opportunities as you would expect with a 27% growth within Secure and Custom. And so for us to reinvest to sort of continue to drive that growth, think, is prudent.

Markus, Analyst, SEB: Very clear. Thank you. Thank

Eis Steinhem, CFO, Pexip: you. Let me check my notes. Eestein from ABG. Are you with us on the call?

Eestein, Analyst, ABG: Yes. Good morning. Congrats on the strong report again. I think some of my questions have already been answered, but I had especially one on securing custom. I was wondering, given that this is such a big megatrend that you can foresee for several years going forward that customers wants to deploy wants the freedom of deployment to be able to host things at their own servers or at least in a sovereign cloud.

You see any of your existing competitors and new entrants looking into ways of providing customers that either on prem solutions or sovereign cloud solutions?

Trundle Johanndelson, CEO, Pexip: I think the sovereign clouds are being built by several companies around Europe that could also be some of the large hyperscalers like Google or Microsoft building sovereign solutions. And this is actually very positive also for Pexip because to be able to deploy Pexip in these sovereign clouds is something that we are working with some of these large hyperscalers to deliver, and that is something that’s been that’s in demand from the market. In terms of competitors providing video collaboration tools tailored at deployment in these architectures and environments, We haven’t seen any developments there from any of the major players or new players for that matter.

Eestein, Analyst, ABG: Very interesting. Thank you. And on Connected Spaces, we’re, of course, still waiting for the launch of Connect for Google Meet and Teams on Android. I think from previous conversations, you have indicated launch around Q4. Is that right?

And if so, do you have a pipeline built so that when these products are launched, we should expect ARR growth from these companies to start already around launch? Or is it like after launch, you need to build the pipelines, then that’s like a six month lead time or so before we can start to actually see new ARR coming in from these products?

Eis Steinhem, CFO, Pexip: I think in terms of timing of launch, that is still sort of what has been said publicly from those players. But again, that’s sort of timing that we’re not really in control of. But no new updates from me on in terms of timing. With regards to pipeline, it’s certainly a conversation we’re having with customers today. But then large enterprise customers typically want to see things and test things and pilot it themselves before buying.

So for there to be an immediate effect the next day probably a bit optimistic. So somewhere in between. Somewhere in

Osman Fultzda, Chief Revenue Officer, Pexip: between, yes. Have we did see that for Connect for Zoom. I got faster results than we have on securing customers, a longer sales cycle. So we’re optimistic about it. We’re building pipeline as we speak, Kristian.

But again, to Kristian’s point, you won’t see an immediate effect on the day it’s being launched. And again, we’re being dependent on Google and Microsoft for getting this out in the markets.

Jurgen Weidmann, Analyst, Pareto: You very much.

Eestein, Analyst, ABG: Last question is you still have a very strong balance sheet. Is still the primary use of that balance sheet to be paid out to shareholders in terms of dividends and buybacks? Or do you look at other types of uses for this cash, either M and A? Or do you see other ways of deploying that balance sheet?

Trundle Johanndelson, CEO, Pexip: It’s a constant discussion that we’re having in the Board and in the management team, of course. No immediate plans of large scale M and A looking as always and as we have been doing for a period that sort of alternatives for investing into things that would accelerate growth could be acquisitions. But currently, there are no short term plans to do anything like that.

Eestein, Analyst, ABG: Very clear. Thank you very much.

Eis Steinhem, CFO, Pexip: Thanks a lot, Isa. Lisa from Arctic, are you with us? Okay. Then will move on. Do we have any other calls on questions on the call?

No? Then I will check mail to see if there are any questions there. I have a question here from Arctic in the mail. Defense growth of less than $500,000 in Q2, down from billion dollars in Q1. Would you say this is just related to some timing or phasing?

Or do you see that vertical slowing down a bit forward after a strong year or two?

Osman Fultzda, Chief Revenue Officer, Pexip: That’s seasonality. I wouldn’t even call it seasonality. It’s just different quarter to quarter. So I wouldn’t put basically anything into it. That’s just the way it is.

And again, as we explained, we have long sales cycles and the pipeline is good. So again, I would defense is strong for us, we have good momentum.

Trundle Johanndelson, CEO, Pexip: Yes. It’s still basically the fastest growing segment if we look at it in a slightly bigger context.

Eis Steinhem, CFO, Pexip: We also had a question that you added some FTEs quarter on quarter. Just wondering if this is reflecting somewhat higher growth or if you still expect a flattish headcount year on year by year end. And I think, as I said earlier, we’re expecting a headcount of around 300 at the end of the year, which has been the plan from the beginning, and then it will fluctuate a bit from quarter to quarter. With that, those are the questions that we have. Thanks a lot for the attention, and we’ll see you soon.

Osman Fultzda, Chief Revenue Officer, Pexip: Thank you. Thank you.

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