Welcome everyone to Appear's Q2 2026 presentation. My name is Thomas Bostrøm Jørgensen. I am the CEO at Appear, and today I also have with me our CFO, Per Øyvind Stene. Let's get straight to the numbers. We kick off with the Q2 highlights, and as we have already announced in July, our revenue came in at NOK 189.6 million, which is down 30% year-on-year. This is predominantly driven by weaker short-term commercial execution in the regions outside the Americas, so in EMEA and APAC, and also based on some market timing that we will get into a bit later. I am happy to say that our gross margin stayed at 70%, even in the face of an adverse revenue quarter. It has experienced some headwinds based on weaker US dollar and we are continuously impacted by the U.S. tariffs, of course.
The underlying EBITDA came in at NOK 11.6 million, equals a 6.1% margin, obviously a direct result of lower product revenue for the quarter. Our free cash flow came in at NOK -54.3 million, which is down NOK 15.8 million, negatively impacted by higher working capital, and that also includes corporate tax payments. Now, if we look at H1 as a whole, revenue came in at NOK 421.3 million, which is close to where we were last year. It is -2.8% year-on-year shortfall, predominantly coming from the same sort of sources, weaker commercial execution outside the Americas, and also negatively impacted by currency.
Gross margin at 70.1%. It is slightly down from first half last year. Again, negatively impacted primarily by Forex and U.S. tariffs. The underlying EBITDA came in at NOK 37.5 million, equals an 8.9% margin, driven by lower gross profit and of course, increased operating costs. Our free cash flow came in at NOK -82.3 million. That is down NOK 31.6 million year-on-year. This is really impacted negatively by working capital, including purchases of buffer inventory for long lead time components that we have secured.
Now, we are going to move straight into updates, and I really want to start first off with the FIFA World Cup. Appear, I think, delivered incredible customer value as part of this event. We are really proud to be part of the infrastructure that drove all the 104 matches, over 4,500 camera feeds, and the content that we were part of creating and the viewer experience that we were part of creating had just for the final for Fox, almost 40 million viewers, and of course, over 5 billion global viewers. Even though we had a negative quarter, revenue-wise, we are still delivering a lot of customer value and have taken a very, very significant and strong position in the sports live production market at the top of the pyramid, and that is a very strong position to keep.
Now, if we go into the shortfall, I want to spend a little time explaining what happened in Q2. The headlines here is market timing and coverage. First of all, as I will get to in a bit more detail, we clearly see a timing air pockets currently happening in procurement, basically, particularly relating to Tier 1 events. That has and is sort of negatively impacting, not the value of the market, but procurement timing, essentially. The good thing is that we see that ramping strongly up through 2027 and the following years after that, just based on the calendar of large events and rights deals.
The other part that has impacted us is coverage, so basically our channel mix. We have historically built up a very strong position with Tier 1s who are concentrated mostly in the Americas and in the U.K. However, in order to properly penetrate the EMEA and the APAC markets, we need to build out a much stronger indirect sales channel, and that is something that we are working very hard on and have been building out this year and we believe will strongly impact our growth and also slightly even out the peaks and the valleys in the years to come. A bit more on how we think about the value of the market and the timing of investments in live production technology.
As I think we have said before, our market is strongly correlated with the rights value market. As you can see on the right side, the purple line sort of shows the rights spent from 2024 to 2031 estimated. It is currently this year at $67 billion. The market is there because it is correlated with the rights value market, and we are positioned very strongly with Tier 1s. What is impacting our business currently is the timing, so procurement timing in that market. Because, as you can see in the bar chart underneath, we have mapped out the procurement behavior relating to all global events, and of course, particularly impacted by Tier 1 events where we are super strong.
The procurement window runs 12 - 24 months ahead of the actual events. The way they are spread out over time, the big rights windows, and the big events, create some big peaks and some deeper valleys in timing, so in procurement timing. That is obviously impacting us as a business because we have indexed very heavily on the global Tier 1s that love Appear as a vendor. The other part of this is route to market. As I said initially, we have strongly proven out our direct sales model, particularly in the U.S. and in the U.K., since 2021. We have built a very strong base of global broadcasters, leagues, rights holders. We kind of have the numbers to witness it. We have grown our average deal size with over 400%.
Our gross margin is up almost 7%, and we have grown our last 12 months revenue, from NOK 255 million in 2021 to almost NOK 800 million in June 2026. The direct model works. However, we need also to expand into a channel model to reach markets that cannot naturally be served by direct selling. That would typically be a large part of the EMEA market and certainly the Asia-Pacific markets because of culture, language barriers, and so on. We have this year invested in building a very strong platform for channel selling. It is one of the biggest initiatives we have internally to drive growth into EMEA and into APAC using this indirect sales channel model. That kind of those are the two elements that I would say explain the shortfall that we have seen this quarter.
Fundamentally, how we look at expanding revenue is really across three elements. I am happy to say that we are going to come back to this in much more detail in the Capital Markets Day that we are doing in relation to the Q3 results presentation on October 29th. Fundamentally, we are looking to expand our business in terms of route to market. We are winning strong in the Tier 1 market today, and we are extending our reach with channel partners to open the APAC market and larger parts of EMEA. Then in terms of selling deeper, you have heard me say before that we have a land and expand strategy, and this still stands.
However, we are predominantly winning today with the same capabilities we had yesterday per se. We are investing heavily in widening our portfolio, going into adjacent markets where we are selling to the same customers based on technology and knowledge that we already have in-house. This is attainable expansion along the portfolio vector. Then finally, the software layer. Everyone that is following the market knows that there is a growing market for purely software-based live production technology solutions. It is something we have been investing in strategically, and will be going forward. I am happy to say that we had our first customer using the VX platform live this summer during the Tour de France. There will be much more to come in that area, in the years to come.
Now I am going to go into Q2 2026 in a bit more depth, but quickly looking at on the revenue side of things, if you take on the longer glasses and look from Q1 2022 to Q2 2026, we have still delivered 32% annual or CAGR annual growth over that period. Obviously, as we said, we had a drop from Q2 last year to Q2 this year of 30%, but as you can see from the graph or the bar chart against the strongest comp and the strongest quarter we have ever delivered by far in Q2 last year. Looking a bit deeper, I am really happy to say that Q2 this year witnessed a very strong buildup of support revenue. For us, that is recurring revenue. Most of our support contracts are long, they are recurring, and they are compounding. This is really high-quality revenue for Appear.
Looking at the regions, you will see that the Americas in Q2 itself dropped a bit, 7%. But on H1 isolated, Americas grew almost 20%. So we still see strong American markets even in the face of the procurement timing that we talked about earlier. If we look at EMEA, we are clearly not happy with how it has developed. It has dropped 54% since Q2 last year. As you can see, again, it is against a very strong comp. We had a couple of large one-offs or large deals that landed in Q2 last year. But we strongly believe that we will be able to get EMEA back into growth by investing heavily in the channel sales motion and of course, riding the rights waves that are coming and the procurement windows opening again.
In APAC, we are basically doing a full pivot or have done a full pivot from focusing mostly on direct selling to now focusing mostly on channel selling. The outcome of that will take some time. Rebuilding a commercial engine does take some time, but we strongly believe that is the right thing to do, and that we will see strong outcomes of that going forward as well. On that, I am going to hand it over to our CFO, Per Øyvind Stene.
Thank you. Let us begin with the Q2 P&L. Thomas has taken us through the revenue variance. Revenues for Q2 ended at NOK 190 million, 30% down year-on-year. We had a negative currency contribution of about NOK 10 million. Gross margin for the quarter was 70%, at par with the same period last year. Product mix had a positive impact, but that impact was offset by negative currency effects. If we look at operating expenses, including capitalized development expenditures, the figure for Q2 2026 was NOK 121 million versus NOK 123 million in the same quarter last year, resulting in an EBITDA of NOK 12 million at a 6.1% margin compared to 25.6% margin last year. Profit for the period was NOK 21 million versus NOK 64 million in Q2 2025. Looking at the first half of 2026, we began the year with a very strong Q1.
Then we had a weak Q2. Revenues for the first half of the year was NOK 421 million, down 2.8%. We had a slight positive volume effect, but that was more than offset by negative currency effects of NOK 28 million. Gross margin for H1 was 70.1%. That is 1.3 percentage points down from the same period last year. The variance is explained by Q1 tariffs. There were no tariffs in the U.S. in Q1 2025 and the weaker U.S. dollar. With the reversal of bonus accruals in Q2, looking at the operating expenses for the full first half year is probably going to give a better and clearer perspective of our cost base. Total operating expenses, including, again, capitalized development expenditures, was NOK 258 million in H1 2026 compared to NOK 220 million in H1 2025.
Bearing in mind that the 2026 figures have no company bonuses, that variance was mainly explained by us increasing our number of employees, going from an average FTE count of 195 - 235 for the first half of 2026. The EBITDA for H1 2026 was NOK 37.5 million at an 8.9% margin compared to NOK 94.2 million and 21.7% margin last year. Operating profits were down to NOK 59 million from NOK 112 million, and the profit for the period was NOK 46 million compared to NOK 85 million. Going to cash flow. Free cash flow for Q2 was NOK -54 million. For H1, the figure was NOK -82 million, and that is the same as the net cash flow as the figure highlights.
Cash outflows are a bit tilted towards the first half of the year with corporate tax payments and also company bonuses for 2025 being paid in the first half of the year. And we funded an increased inventory investment and investments in development of new technology with a drawdown of NOK 100 million from our money market funds, resulting in a cash balance of NOK 78 million at the end of June. Concluding the financial review with available liquidity, we had NOK 426 million in available funds at the end of June. That is NOK 73 million down from the beginning of the year. Our working capital is up, as we mentioned a few times, mainly due to higher inventory levels and our metric of working capital over revenues that we want to keep below 10%, also increased due to lower revenues.
Thank you, Per Øyvind. So on the financial targets, this is, of course, the same we have communicated before. Our guidance for the year continues to be NOK 880 million-NOK 920 million after the update in July, which equals a revenue growth in the interval between 10%-15%. And our long to medium-term trajectory stays the same. So revenue growth in the interval between 25% and 30%, recurring revenue in the interval between 15% and 25%, gross margin at or about 70%, and the EBITDA margin in the interval between 17% and 20%. Finally, we are happy to invite for our first Capital Markets Day in collaboration with ABG to be held in their offices on October 29th between 10:00 A.M. and 2:00 P.M. So basically right after this webcast for the Q3 results.
We have done quite a lot of work that we are excited to share, both on market data. So the next layer of what the market looks like in terms of segmentation, in terms of adjacent opportunities for Appear and where we are looking to invest. We have, as you have seen, also mapped out a procurement intensity model. Which essentially takes all the global events, maps the purchasing window for those out in time, and develops this procurement intensity curve that I was taking you through earlier. And of course, go more into how we are looking to expand our revenue. So our revenue engine, more customer insights from key accounts and fundamental baselining of our strategy and our plan for execution going forward. Please sign up using the link on the page. With that, I think we will move to the Q&A.
Thank you so much, Thomas and Per Øyvind. So, for the Q&A, we have organized that through the Teams web link that has been provided. And participants can signal with the raise hand function if you want to ask a question. First one out in the line is Øystein Lodgaard at ABG. Good morning, and please unmute yourself and ask your questions, Øystein.
Thank you. I wanted to start with EMEA. EMEA was down around 50% year-over-year. Can you give some more color on this? I know you had a good quarter in EMEA in Q2 last year. Is this simply due to tough comps, or can you give some more flavor on why this was so weak this quarter?
Yes. I think for EMEA, we have predominantly gone direct. As I said, that puts our EMEA business more as a function of the procurement in windows driven by the large players and the large rights. We have learned and are now executing on the fact that the market is much more channel-driven than we originally anticipated. I think those are the kind of fundamental components. In order to get to the available deal flow, we have to develop a much stronger channel in the market.
One of your key success factors the last few years has been the fact that you have invested heavily in your direct sales method. Are you afraid that this is a risk to go more through the channel that this direct sales method has proven very valuable to you, is that that could not be as good as the direct method?
No, I think different markets require different channels, essentially. The big global customers have very high concentration in the U.S. market and in the U.K. market and some parts of EMEA. That has worked really well. But it also makes us susceptible to timing, essentially, driven by large rights and large events. Under the large events, there's a big market that To have to be served indirectly because they don't really have the operational and/or technical capability to engage directly with vendors. They're relying on service providers, system integrators, or resellers to actually either build their infrastructure or operate it.
Makes sense. And longer term, this requires, of course, less direct salespeople. Can this be positive for margins if you can drive more sales through the channel in these areas?
It clearly doesn't need less direct salespeople because we are expanding our business in the U.S., so we still have direct sales runway to go, even with our existing product portfolio in the U.S. market. But this is an extension to the direct sales approach. And of course, that extension doesn't require that many new salespeople because selling is then done by the partners. But it does require a stronger, let's say, operational partner engine, essentially. And that's what we've been building this year.
Hmm. And lastly, one last question on OpEx for the remainder of the year. Is there anything you can do to reduce OpEx now in the second half of the year? Or should we expect that if we add back that reversal of the incentive programs that you have, that that level is the same, essentially? The same level should be in the second half of the year?
Well, we are looking at getting our cost base in line more with the revenues and these ranges of profitability that we want to be within. So we are looking at reducing our costs to get in line there. But I don't want to go into specifics on that more than that there is a bit of a rebasing of the cost base to be more in line with where we are on our revenue growth trajectory.
I think it is fair to say we are not looking necessarily to reduce costs. We are looking not to increase costs. That is two very different things.
Yeah, sure.
Okay. Those are all my questions. Thank you very much.
Thank you, Øystein. We will pause for a few seconds to allow more people to sign up. Apparently, we have reached the end of the line, so I will hand it back to you, Thomas.
All right. Well, thank you very much for tuning in. We really hope that as many of you as possible will join our next session, the Q3 and the Capital Markets Day. Thank you.