Thanks, Christian. Warm welcome also on my behalf. We can skip right on to the first slide, if you please. First of all, I'm pleased to be able to report solid double digit growth rate for Q2. We grew 27% versus the comparison period, mainly driven by consolidation of the Delta configures, While the all SSH subscription revenue also grew by 55%, with Privyag showing its ability to scale, delivering a growth rate of 168%.
So, the growth came from our scalable subscription business where at the end of the reporting period, our rapidly growing revenue surpassed our maintenance revenue for the first time. Our EBITDA was back in black numbers in the quarter, and we turned the direction of our profitability development versus the 2 previous quarter, which were characterized by upfront growth investments. At the end of Q2, we had 123 employees in 7 countries. I'll summarize this slide with a sentence back in black, back on track. Next slide, please.
Looking into the balance sheet side. During the quarter, we put our balance sheet into profitable use by closing the Deltacon acquisition. Now this puts some pressure on our liquidity level, but at the same time, the investment that we made generates stable, Recurring and positive cash flow, which we expect to start showing and be able to grow in the coming quarters. Our equity ratio remained good at 47%. Next, Teemu will tell you about some of our highlights during Q2.
Dem, please. Next slide.
Chris, can you put on the next slide, please?
I can see it.
I cannot see.
Slide 4 is showing. For Q2 highlights.
For some reason, I can't see
I guess you have to just trust that it's there.
So, I'm very happy with the Q2 results. We would have done even better on the revenue, but We all in all were able to bring in our strategic target of getting more subscription revenue out of the business, Which was helped a lot by the DeltaCon acquisition. We also got a significant new order From a previous customer in the U. S, Fortune 500 Technology Company after a Long period of negotiations and we are seeing pre backs really taking on the track Of accelerated growth during the second half of the year. We also were able to Establish new additions of pre VEX, one for the site To Cloud OT Technology Solutions and the other one of our outsourcing companies that provide managed services.
And we've been able to sell the first deals on both of these additions and we see that the previous market That we can address is much bigger than it has been before. We also made 1st, deliveries on products and services to the cryptographic contract we announced Last year and we see that the business that we are building For our cryptographic solutions is really taking off now in multiple different directions. And that refers to the next bullet point that we also got other demanding customers from public sector And we are looking into going to private sector with NQX as well. So, NQX is really Taking off the ground in this year and next year. We also Expanded our CRO Trust principles that were built already with 3 years ago, 3 years ago and we have now building 0 Trust versions of our products For Techtia, for UKM, for NQX, so all our products will be following the 0 thrust design principles.
And we also further got some new support from market analysts That see us as the leaders in the industry. Next slide, please. So the numbers almost look too good to be true. And we are delivering finally what we have been saying that we can do. Our subscription business has really taken off.
Prebit continues to grow impressively. TechTeA is also moving to subscription revenue. And at the moment, we are at the stage that most Our revenue 85 percent is based on recurring revenue, which is a healthy base for a software company to be in. Next slide, please.
Okay. To give investors an idea of the baseline on which the next 12 months revenue will be built, we published a new alternative performance measure. This KPI is calculated by multiplying the last month's revenue from a given reporting period slide 12, so effectively annualizing the monthly revenue. To put it very simply, this will give investors a snapshot of what the baseline annual subscription revenue will be if all things remain equal and what the incremental sales will be needed to reach particular growth objectives. And this KPI will also tell investors in concrete terms how the scalable subscription base develops.
In June of this year, so the last month of Q2, the subscription ARR was close to SEK7 1,000,000, which is up by SEK6 200,000 from the comparison period. You can find the KPIs comparisons from the Q2 release key figure section. The key driver for growth of this metric are DeltaCo products, NQX and Prevex, for which we have released 2 new Interesting additions, as Teemu mentioned, to meet customer demand. And I'll let Teemu tell you more about that on the next slide, please.
So we have been Developing pre VEX with our key customers and over the last 9 months, we have been working With the U. S. Fortune 500 company and we have been successfully Expanding the functionality of the product and we are using a child development. So, we come in with new products, New versions between 8 to 10 weeks. And working with the Fortune 500 company and also some European companies, we have defined New versions, which we call additions, MSP, which is provided for companies who host Smaller companies, IT environments and OT which is from the site to the cloud And we have been able to secure first orders for both of these additions And we believe that there will be a significant growth opportunity regarding The opportunities in the MSP and OT marketplaces.
Next slide, please. And back to Niklas.
As Teemu mentioned, we are progressing here And we have started now the multi year agreement deliveries by delivering the 1st cryptographic products and services. We also received new orders and made deliveries to new security critical customers in non certified environments, and this is positive as it's an indication of the product's competitiveness also in commercially competitive use cases. We expect that the second half of the year will bring positive developments for our encryption business. Now next, then we will tell you a little bit about 0 Trust and what, for example, Joe Biden thinks about that concept. Next slide, please.
Demu, please go ahead.
Sorry, I was still on mute. Yes. I'm happy to refer to Joe Biden, the President of United States, because we were 3 years ahead of him. He has now in May announced that ferro trust is the future. We did that already 3 years ago.
And the whole concept of pre VEX 0 trust, which is kind of a difficult concept to understand, it means that you grant the trust All the time, every 5 minutes, you don't just give a password out, you grant the trust as you go. And that is where United States government is going. That's where we have been going for the last 3 years. We have done significant investments in Privex, which is all based on 0 Trust. And now with the expansion of the 0 Trust additions of all our products, we believe that there is a great growth opportunity, Which will already convert the meaningful growth for us in the Q2 in the second half of the year.
And I am even more convinced than before that the opportunity is there. We have the right architecture. We have proven our case and now not only In Europe, we have proven it with Western Union. We have proven it with the new Fortune 500 company. Prevex can do 0 thrust better than anybody else.
And that's the opportunity we want to drive on. So next slide, please. So, on that note, we want to reiterate our guidance. We believe that the second half of the year will be good for us. And it will be good for the top line.
It will be good For our EBITDA and our cash flow from operations, so we feel very confident that the 2nd half of the year will deliver the results that we have been promising. And now I would like to open the floor for questions.
Hi, it's Art from Inderes. Could you still open up a little bit that what were the key points why that big Fortune 500 customer chose PrivX over Other big competitors?
I think big part biggest part was our engineering capability, Our flexibility that we were able to adapt to their expectations on what they call the best of breed. They wanted to have the best solution. I think the more established players Had less room to operate on providing solutions fast enough for the customers' requirements. And That I think was the biggest single reason that our product is microservices based. It is based on capabilities that you can integrate to any environment very easily And that's where I believe we are well ahead of our competition.
Can you say anything about that? Do you have any other that kind of big contracts in your sales pipeline?
Well, we have other whales still waiting. But before the fat lady sings, nothing is final.
And then about your license sales, do you still expect them to pick up in the coming Orders despite the fact that you're still like focusing on the subscription sales?
Well, we still are driving License sales, we unfortunately, we are not able to close some key license sales at the end of Last quarter and when we see that they will be a significant part of license sales And professional services that will impact the second half growth. So Yes, we will continue license sales and we will see also professional services Picking up and those are the growth drivers that we believe Will impact the second half. And maybe, Niklas, you might want to Expand on the NQX business because that is purely subscription based business. And the even if we can proceed as we plan, the conversion to revenue On the second half of the year, will be very difficult if we wouldn't focus Also on the subscription on the license sales and professional services. So Nicolas, how do you see the Enquex business picking up this year and how much does that convert to revenue?
So, asset subscription business, even if we get a big delivery order at the end of the Here, it doesn't convert the revenue due to the fact that the revenue is phased over the period of the order, But you have to remember that this multi year agreement is for cryptographic products and services. So, there is a service component And this, I think, is sort of front weighted in terms of delivery. So, We expect professional services to pick up also during H2.
All right. Thank you.
Any other questions?
Hello, this is Forbes from Redeye. Can you hear me fine? Yes. Hello, Paul. Hi, thank you for the presentation and nice work with the quarterly report.
So I have a few questions on Deltagorn. Now these figures are consolidated now for the first time. So, firstly, is it possible to disclose some more information on Deltagon's contribution in the quarter like Sales and operating profit?
I can take that, Teemu, if that's all right. So, we don't report the sale of individual products or businesses. But as a whole, as I mentioned, I'm very pleased that we were able to report a healthy double digit growth rate for Q2, which was achieved for the main part due to DeltaCon, but it was also supported by excellent pre vax performance. Out of the regions, Americas was our biggest challenge. In Americas, we started the transition to subscription based business later than in Europe.
And this shows in the numbers. So, we are getting subscription based deals, but they haven't fully replaced old licensing revenue quite yet. So, to make a conclusion, despite the healthy top line growth for the quarter, we're not still Satisfied with the growth rate, and we are working to make Q3 or and H2 even better across all of our regions.
And if I can add on that, I think we are in a very good phase with Europe, we are very well positioned in Finland. We have challenges, as Nicolas mentioned, in the U. S. And I think we also have growth opportunity in APAC. So, at least me personally, I'm focusing on Getting APAC back to the winning mode and getting U.
S. Back to where it used to be And these will be 2 key elements on getting the second half growth Supported by the already well working Europe and Finland.
Perfect. Thank you. I'll ask one more question. So, Telstra Gorn, you have a lot of customers there, 2,000 and more, I think. So apart from adding new ones, do you see an opportunity to grow the average revenue per customer there?
So that's the first question. And then secondly, are you happy with the consolidation process so far?
Niklas, I guess this is for you.
Yes. So We are very happy with the consolidation process so far. So everything is going according to plan. Summer holidays have unfortunately sort of come in the middle of everything, but we expect to be able to close Everything by September, including renovating new spaces and every Delta Goon, as they like to call themselves, I'm moving here in the same office. As for the shared customer base, so we have previously mentioned that we see a lot of synergies There, we see a lot of cross selling opportunities as well as opportunities to grow the share of wallet within the existing customers.
So previously, Deltacon hasn't really had this kind of account management. And As a part of the strategy process that is now ongoing with Deltagon, this has been identified as one of the key places where we can sort of grab some low hanging fruits. Understand. Yes, go
ahead. Maybe, Nicolas, Could you say some words about June for Deltagon? June was excellent.
Good. Thank you.
That was a few words. Of course, June was supported also by an excellent April, an excellent Q1, so it's looking good.
Great. That is all for now. Thank you.
Maybe, Niklas, since we are lacking a little bit of questions, Maybe you could expand your view on the outlook of NQX for the rest of the year.
So, it's In an interesting phase right now, we have a number of sort of open positions, New customers, we are seeing a lot of demand for certified connections. This is important. But also, we are seeing demand in non certified environments for a device for an encryption device, which is separated from a firewall. So, what we are seeing, for example, in the public sector is that firewalls are taken out from the line encryption functionality. And as you remember, NQX is a line encryption device.
And this decision was also made years ago. So, we have a good 8 ball that we take here to see how things develop in the future.
We got the question on the chat about the sales organization in the USA. So, As maybe some of you might remember, we moved the U. S. Headquarters from Boston to New York, which ended up us changing the whole sales organization. And now we have just got the 2nd salesperson starting in the U.
S. Last month, we are looking for a third one and we are revitalizing the partner network in the U. S. So and we also have 2 new people on the marketing side, digital phase And general marketing, so yes, it's early steps and that's maybe one of the reasons why Our U. S.
Sales didn't perform last quarter and we are very confident that we can get U. S. Up and running With the sales and marketing, with the new people in New York closer to customer than we have had in the last 9 months. Nicolas, there's another question.
Yes, I can take that. So as I mentioned, NQX is a line encryption device. We are competing In technology and functionality against large enterprises, if I may, a few Secunet, Thales, Turtus, just to name a few. So, in the encryption device realm, Also then there are the next generation firewall providers such as Checkpoint, Forcepoint, Palo Alto, Fortinet or SD WAN providers such as Juniper, VMware or Cisco. So, we are in the encryption device market.
And even though the benefits of NQX Our efficiency, so very cost efficient, it's scalability, safety and post quantum Endurance, the go to market strategy in the first phase is going to be in Finland. So, that's where we are focusing on. And in Finland, the major advantage that we have is domestic and certified status. This is something that makes the entry barrier for foreign operators extremely high
in Finland. And on the next question about Walmart, we don't quote Anything about single customers, I think we are dealing well with Walmart. We are dealing well with all our key customers. And we have about 120 significant customers that impact Our business performance, Walmart is one of them, but we will not quote any comments on any single customer. On the NQX side, Niklas, this is back to you.
We have Just reviewed the strategy for NQX and can you tell something about the focus geographical focus of NQX moving forward?
Yes, the focus or the central theme of our strategy period for ANQX, which As SSH's strategy extends to the end of 2020, it's going to be very tight focus, Avoid doing everything. Just focus on The key security critical whales that exist in the Finnish market, And we need to be able to establish our foothold in this market first, establish the required process our organizations to support these kind of big and demanding customers before we can start conquering the world. So, the regional scope, the regional focus during the strategy period is in Finland. So, we don't have to go fish, how do you say it in English? Merkad, how do you say that?
Across the ocean.
We don't need to go to fish across the ocean to be able to generate significant revenue for this product. You would be surprised how many officials, agencies, municipalities there are Just in Finland, a nation of just over 5,000,000 people.
Hi, this is Forbes again. So I remember from your Capital Market Day Last year, you said that the typical range for your PrivX customers are €50,000 to €150,000 in ARR. Would you say The €1,000 in ARR, would you say that this latest customer Fits within this range as well?
No. I think we have also generally seen That our average deal size is increasing. Again, we cannot quote on any single customer, but Our sweet spot for prebanks is €20,000 per month, so a quarter of €1,000,000 a year And we can see that there are more and more customers where we end up in this range. So, The average deal size that we have been able to achieve over the last 18 months has been growing From what you mentioned to typically, the interesting deals we have are now Above 200,000 ARR. So, we are really, really happy and that's one of the reasons That what we can see with the success of pre VEX is that we have less customers, but we are showing Significant growth over 150% with less customers than before.
So, We are really focusing on the vital few. And as I said, we might as a company have 5,000 customers. All in all, We have 120 meaningful customers that really make or break our day. Did I answer your question?
Yes, certainly. And then Following on that as well, you write in the press release that this customer could potentially scale 10 times the number of hosts Initially assigned. So, you could see your ARR increase significantly here as well, I assume.
Yes, let's see. Niklas is very nasty to me on How he recognizes the revenue? But yes, I think we are really getting to a solid growth base By growing the share of the wallet of the customers we have been able to acquire. And that also applies to the Fortune 500 customer we were saying. As mentioned in the press release, the potential just to grow inside that customer is tenfold And we can see that with many other prefect customers, it takes time for them to be able to roll it out And it just takes time, but I think we are on the right track.
Okay. Thank you.
Then there's a question in the chat About company cash flow, I can maybe comment on that. So our balance sheet is now in much More efficient use than before. Our cash position is smaller than historically, but it's sufficient to drive the execution of our strategy. And we still employ a gated approach to spending. And we have also shared the loan facility with our banks and pension companies.
So, we are in a pretty good position regarding cash currently.
So, from an operational point of view, we can operate. There is still the topic of the hybrid loan That we have, which is not anymore hybrid in the sense it's not convertible. We are also looking at alternatives to Strengthen our own balance sheet, but this is very early to say anything about that at the moment. But we felt that it was important for us to move ahead as a company And put the capital in better use and I think the Deltagon acquisition has been recognized as a good move And it was a logical step for us especially to establish ourselves stronger in the home market Because traditionally, we have been mainly exporting software. Now we have almost 1 third of our In Finland, we have a lot of synergies between our other products and Deltagon and that's the primary reason we saw It is a good step moving ahead and Deltagon found a good home In Kuperlaionna, which is our joint venture with the Finnish government and It was an essential step for us to be strong in Finland.
And we also have with DeltaCon A strong starting position in Sweden. We have initial steps in Norway. And maybe, Niklas, you might want to say some words about the Nordic potential we have with DeltaCon.
Yeah, so we have recognized Sweden and Norway as the primary places to grow. And we are currently strengthening the organization in that region to sort of to get those Low hanging fruits, for example, in Sweden, the largest Customer I think the 2nd largest customer is now in the municipal sector where we see a lot of potential also for in other municipalities there. And Norway and Sweden are Pretty similar markets and they share the same language. So, we can sort of really take advantage of that when we design our go to market strategy there.
There was another question, Niklas, for you on the chat On the line encryption devices market, would you like to answer that?
We are talking about in 2 years from now, we are talking about Several 1,000,000 of euros per annual turnover. So, it's going to be NQX and Encryption services are going to be a significant growth driver for SSH in terms of percentage as well as in terms of absolute growth.
There was also a question about pre vets 3 years from now. I guess that's a crystal ball That nobody can have, I would say that as said, we have been able to increase the average size of the customer. We have been able to increase the number of customers and privax Being already in a global market, we see that is the highest potential for growth. But I don't think we are in a position to make any commitments on what is our belief On the market, at least we are not market limited. We have the opportunity.
We have the brand And we need to go after the business and only time will tell what we can reach with Brevard. The question on the how much Should we invest in go to market? I have been quoted in the company by saying that Making a product costs 1 and taking it to market costs 5 or 10. I don't think we are investing enough into our go to market at the moment, but that's because Of our balance sheet limitations, we are not an American stock listed company that has SEK 100,000,000 on the bank account. We are leaving out of our operational cash flow.
And that's where Niklas is absolutely critical for us because He keeps me honest. I can't hire people at the right hand center. And I think where we Impressively good is to keep our costs predictable and under control. Yes. I would like to invest more on the go to market and I believe there would be more potential, Sure.
But we are not in a position to do it at the moment. Nikolas, can you help me out here a little bit?
I think you said it well. We need to have visibility into the development of the business before we invest out of pocket money. And this is what we call gated approach. And as
a company, we have done major investments in NQX that It's starting to pay back. Brevex that is starting to pay back, but these products both are still in investment mode. We can see the potential, but it doesn't convert to cash on the bank account yet. And we see there is potential and we are limited by our capability to invest in sales and marketing.
There is a question about The possibility of pre VEX market being tens of 1,000,000 per annum sales in a few years' time. I'll just make A short comment on what we mentioned in the in one of the headers of the slides. So, pre VEX expands beyond PAN. I think this is a significant Thing, the new two additions, as it sort of opens up a whole new market of controlling access to operational technology. Maybe, Teem, you would like to mention a couple of interesting use cases That's where the drivers behind the addition.
Yes. If I take For me, where we are even more advanced is the MSP side, so managed service providers because we have been always bad At Middlesized Companies, we have been good at small companies and huge companies. But companies between CHF 500,000,000 to CHF 5,000,000,000 have been limited. And with the outsourcing trend, There are a lot of companies that are providing managed services To host customers, cloud environments and the on premise environments, Companies like Tieto, Fujitsu, CGI, Tata Consulting And these companies provide us an access to the Medium to large sized companies that don't have their own IT environment, So that's the MSP addition where I think we are in a good way. The OT, the operational technologies, which is basically connecting the sites to the cloud It's something that is very close to my own heart and I can see that Customers are moving there and we have the first customers that are already committed to us To make their operational sites to be connected to their clouds or to their MSP providers.
And, yeah, the sites can be factories, they can be harbors, They can be anything where actually real work is being done and that work is connected more and more to The cloud where the digital data processing, artificial intelligence is being done and I think we are in a good way Also on the OT side, we have significant global companies working with us And they can see that protecting their data, their operational data That they need to analyze their business, protecting it on the way from the site to the cloud is key. And these 2, the MSP and the OT, they are also connected because a lot of these OP companies actually outsource their IT and that is also the reason why we saw that Expanding the focus from the traditional IT PAM to OT and MSP brings us A competitive edge, which we don't believe our competition has. So, we can do Managed service providers, we can do from site to cloud with the basically same technology that we use traditional Hi, Deepam. And that is the big promise for me why I believe that pre tax can be Multiplied by a big factor moving forward.
Yes. And so these Applications can be in, for example, harbors, trains, sites, Elevators, anything that require connection to the cloud. And I think one Further point worth mentioning is that this enables customers to meet their critical ICE and ISO certification goals. So, very often, regulation is a driver for Big changes. So, this cannot be overlooked.
And the last question on the chat, it is impossible for us to Give any estimates how big prebuex can be? So in a quantified way, I can see the previous potential is huge. And I think we have done Over the last 3 years, significant investment in prevex and it is bearing fruit now. It might sound a long time or 3 years to expect a return, But I do believe that pre VEX has grown to the phase that we can really scale it. But numbers I cannot give.
So, we are coming to the end of the time. Are there still some questions that People would like to ask?
If not, Kristian will put this presentation as well as the recording on our investor site for people to review it.