Meet the world with video communication as it should be
Quarterly Presentation Q2 2021
August 12, 2021
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Recent highlights
41% y-o-y
growth in ARR to
USD 93 million |
NOK 177 million in
revenue for Q2 2021 |
Executing on growth
strategy; -23% EBITDA
margin for Q2 2021 |
Pexip Control Center,
Direct Peering and Avaya
Videoconferencing
Registration |
"Best Telehealth
Platform" award in the
annual MedTech
Breakthrough Awards |
Continued to add several
new Fortune 500
companies as customers |
Addressing a global market with a recurring revenue business model
- Users in ~190 countries
- Over 300 partners in 70+ countries
- Over 451 employees in 20+ countries
- ~97% of revenue from subscriptions
|
EMEA |
Americas |
APAC |
| Share of ARR |
56% |
34% |
10% |
Video communications as it should be
- ✓A better way to meet with business-quality audio/video
- ✓Securely join from anywhere across multiple technologies
- ✓Customize the platform to meet the unique needs for the organization and IT
- ✓Full control of data privacy and sovereignty, and compliance with data security standards
Large organizations choose Pexip for three main use cases
High-quality video meetings with focus on privacy and security
Vertical market applications and integrations
Expanding access to Microsoft Teams and Google Meet
Pexip's differentiated customer offering is underpinned by unique technology
- Proprietary real time media engine
- Unique interoperability
- Unique AI capabilities in the cloud
Smart transcoding Cloud agnostic deployment flexibility
- Proprietary technology allows Pexip's experience to be delivered on any existing platform or cloud provider (On-premise, GCP, Azure++)
- Unique data privacy and control
- Unique security capability through by-passing the internet
- Unique customization capabilities
Solid growth path to long-term value creation
Pexip is targeting USD 300 million in ARR by end of 2024
Q2 Operational Update
Recent market developments
Broad adoption of video in knowledge worker organizations – early adoption in frontline customer care
Increased competitiveness on cloud-based meetings from large known brands, with customers mainly focused on PC-to-PC meetings during pandemic
Return to the office has taken longer time than expected at the start of 2021
Market impact on Pexip's main use cases - exemplified with recent customer wins
High-quality video meetings with focus on privacy and security
Vertical market applications and integrations
Expanding access to Microsoft Teams and Google Meet
Pexip continues to win the trust of new large enterprises and public organizations
Currently ~15% of Fortune 500* as customers
*Fortune 500 and Global 500
Pexip's product and go-to-market model designed for large organizations
Continue to build growth capacity and culture
Scaling the team
Number of employees
Strong team and culture is key for future growth
- Plan for 550-600 employees year end 2021
- Approx 100-150 new employees in 2022
- 50-100 new employees in 2023 and 2024
- Investing 60% in sales and marketing, 30% in R&D and 10% in other
- Strengthening the team is a key enabler for building stronger growth capacity
Sales and Financial Performance
41% growth in Annual Recurring Revenue – Added 5.5 million in Q2 2021
- Q2 2021 growth in ARR of USD 5.5 million, compared to USD 9.1 million in Q2 2020 and USD 2.4 million in Q2 2019
- Strong development in new Fortune 500 logos
Solid growth contributions from all geographies and product lines
New sales is the main driver for ARR growth with 40% in the last twelve months
- Continue to increase last twelve months new sales
- New sales were USD 1.8 million lower than Q1 2021, impacted by delayed returns to office
- Strong performance in new logos and F500 additions, but on average somewhat smaller deal sizes in the quarter
- ARR net retention is at a good level at 101%, compared to 118% in 2020 and 99% in 2019
ARR growth driving revenue growth
Quarterly revenue development
Comments
Pexip as-a-Service Operating revenues – Pexip as-a-Service
• Overall growth of 68% year-on-year to NOK 75 million, in line with ARR growth despite development in NOK/USD exchange rate.
Operating revenues – Self-hosted Software
- Overall decline of -14% year-on-year to NOK 102 million
- Q2 2020 saw extraordinary upsell to existing customers, with some contract renewals in Q4 2020, resulting in revenue recognized in Q4 2020 instead of Q2 2021
- Software revenue mainly recognized at time of delivery, which leads to quarterly variations in revenue recognition.
- Currency impacting negatively, as NOK/USD is down ~15% compared to Q2 2020
Gross margin
- Higher cost of goods sold mainly due to high Pexip as-a-Service revenue growth and higher usage, as well as lower self-hosted software revenue due to periodization
- Modernized service platform from own hardware to cloud compute, for better scale, resiliency and operations as well as lower investments in own hardware going forward
- Expect COGS to grow less than as-a-Service revenue going forward as some of the costs related to the platform modernization are fixed and not volume driven.
Increase in operating expenses from planned investments in Sales and R&D capacity
Executing on communicated growth strategy
- Significant investments into growth acceleration, as indicated at the IPO
- Main investments in strengthening the global sales team as well as R&D
- Ramp-up to productivity for quarterly growth in ARR for new sellers normally 9-12 months
- Headcount increased by 80% to 451 in Q2
Targeting negative 25-35% EBITDA margin in 2021/2022, break-even in 2023 and above 25% EBITDA margin by 2025
Capitalized investments
Cash flow from investing activities per quarter
NOK million, cash outflow
2.3
8.5 (11%)
6.3 7.3
1.0
8.3 (7%)
1.8 7.5
9.3 (6%)
Software dev. PPE and intangibles
7.9 (10%) 0.3
7.6
Comments
12.0 (7%)
4.5
- Lower spend on PPE and intangibles compared to Q4 2020 and Q1 2021 as majority of UK office move is completed and no spend related to customer base acquisitions
- Capitalization of software development in line with previous quarters
2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2
(9%)
7.2
3.2
10.7 (8%)
7.5 7.5
14.5
26.7 (15%)
12.3
27.9
39.1 (17%)
11.2
7.5
Cash flow bridge
Cash flow bridge Q2 2021
NOKm
Comments
- Negative EBITDA and CAPEX main contributors to cash flow, in addition to share buy back
- Negative cash flow of NOK 72 million, on the same level as the net proceeds from March employee option share issue
- Net H1 cash flow of NOK 0.6 million from share issuance and share buy backs
- Cash position of NOK 1,031 million out of Q2 2021, Pexip has a solid cash position to fund the acceleration plan
Summary and Outlook
Q2 2021 in brief
Solid top line growth
- Continued ARR growth with USD 5.5 million in Q2 2021/41% y-o-y growth
- NOK 177 million in revenue for Q2 2021, +9% compared to Q2 2020
Executing on the acceleration plan
- Launch of Pexip Control Center, Direct Peering and Avaya Collaboration
- Continue to build sales and R&D capacity reached 451 employees end of Q2 2021
- Negative EBITDA in line with announced strategy
- Solid cash position to invest in further growth
Outlook
Positive outlook for video communication
- Majority of enterprises shifting to hybrid working
- Organizations looking to embed video into their workflows towards customers
- Pexip's technology is uniquely positioned to meet these new customer needs
- Sales pipeline for 2H 2021 is strong
Will continue to execute on growth plan
- Increase investments in future growth by adding talent in sales and marketing as well as R&D – targeting 550-600 employees by end of 2021
- Plan for negative 25-35% EBITDA margin in 2021/2022, neutral to positive EBITDA in 2023
- Target 2025 EBITDA of +25% with +25% revenue growth
Expect to reach long-term target of USD 300 million in ARR by end-of-2024
Upcoming dates
October 7, 2021 Update on Annual Recurring Revenue
Q3 2021 quarterly presentation
November 11, 2021
Q&A