Q2 2026 Octave Intelligence PLC Earnings Call

August 12, 2026

Operator: Good day, everyone. Welcome to the Octave Q2 2026 earnings call. All participants will be in listen-only mode until the question and answer session begins. Following the presentation, we will conduct a question and answer session. This call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Elizabeth Chwalk, Vice President of Investor Relations. Go ahead.

Operator: Good day, everyone. Welcome to the Octave Q2 2026 Earnings Call. All participants will be in listen-only mode until the question-and-answer session begins. Following the presentation, we will conduct a question and answer session. This call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Elizabeth Chwalk, Vice President of Investor Relations. Go ahead.

Speaker #1: Good day, everyone. Welcome to the Octave Q2 26 earnings call. All participants will be in listen-only mode until the question-and-answer session begins. Following the presentation, we will conduct a question-and-answer session.

Speaker #1: This call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Elizabeth Talke, Vice President of Investor Relations.

Speaker #1: Go ahead.

Speaker #2: Thank you, Operator, and welcome to everyone joining us for Octave's second quarter 2026 earnings call. With me on the call today are Matias Stenberg, our Chief Executive Officer, and Ben Maslen, our Chief Financial Officer.

Elizabeth Chwalk: Thank you, operator, and welcome to everyone joining us for Octave's second quarter 2026 earnings call. With me on the call today are Mattias Stenberg, our Chief Executive Officer, and Ben Maslen, our Chief Financial Officer. We have distributed our earnings press release over the wire, and it is now posted on our website at investors.octave.com, along with an updated company presentation and our 10Q filing. This call is being broadcast live via webcast, and following the call, an audio replay will be available at investors.octave.com. Before we get started, I would like to note that certain statements we make on this call may constitute forward-looking statements, which are subject to risks, uncertainties, and other factors as discussed further in Octave's filings with the SEC, including on Form 10-K, 10Q, and 8-K. Actual results could differ materially from our historical results or our forecasts.

Elizabeth Chwalk: Thank you, operator, and welcome to everyone joining us for Octave's Q2 2026 earnings call. With me on the call today are Mattias Stenberg, our Chief Executive Officer, and Ben Maslen, our Chief Financial Officer. We have distributed our earnings press release over the wire, and it is now posted on our website at investors.octave.com, along with an updated company presentation and our 10-Q filing.

Speaker #2: We have distributed our earnings press release over the wire, and it is now posted on our website at investors.octave.com, along with an updated company presentation and our 10-Q filing.

Speaker #2: This call is being broadcast live via webcast, and following the call, an audio replay will be available at investors.octave.com. Before we get started, I would like to note that certain statements we make on this call may constitute forward-looking statements, which are subject to risks, uncertainties, and other factors as discussed further in Octave's filings with the SEC, including on Forms 10, 10-Q, and 8-K.

Elizabeth Chwalk: This call is being broadcast live via webcast, and following the call, an audio replay will be available at investors.octave.com. Before we get started, I would like to note that certain statements we make on this call may constitute forward-looking statements, which are subject to risks, uncertainties, and other factors as discussed further in Octave's filings with the SEC, including on Form 10-K, 10-Q, and 8-K. Actual results could differ materially from our historical results or our forecasts.

Speaker #2: Actual results could differ materially from our historical results or our forecasts. We assume no responsibility to update forward-looking statements other than as required by law.

Elizabeth Chwalk: We assume no responsibility to update forward-looking statements other than as required by law. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures can be found in today's earnings press release. Our SEC filings, earnings materials, press release, and a replay of today's call can be found on our website, investors.octave.com. I'll now hand the call over to Mattias.

Speaker #2: During this call, we will present both gap and non-gap financial measures, a reconciliation of non-gap-to-gap measures can be found in today's earnings press release, our SEC filings, earnings materials, press release, and a replay of today's call can be found on our website, investors.octave.com.

Speaker #2: I'll now hand the call over to Matias.

Speaker #3: Thank you very much, Elizabeth, and hello to everyone joining us on the call today. This is our first earnings call as an independent public company.

Mattias Stenberg: Thank you very much, Elizabeth, and hello to everyone joining us on the call today. This is our first earnings call as an independent public company. I want to start by saying a thank you to our shareholders, many who joined us during our investor day in March and have been strong supporters throughout the spin-off process. Also, to the 7,000-plus Octave employees who delivered a solid set of results while simultaneously standing up a public company. And of course, to our customers who trust us every day to keep their mission-critical businesses running without ever missing a beat. We are proud of this first step in our journey to drive value for all of our stakeholders. Again, thank you.

Speaker #3: So I want to start by saying thank you to our shareholders, many of whom joined us during our Investor Day in March and have been strong supporters throughout the spin-off process.

Mattias Stenberg: Also, to the 7,000-plus Octave employees who delivered a solid set of results while simultaneously standing up a public company. And of course, to our customers who trust us every day to keep their mission-critical businesses running without ever missing a beat. We are proud of this first step in our journey to drive value for all of our stakeholders. Again, thank you.

Speaker #3: Also, to the 7,000-plus Octave employees who delivered a solid set of results while simultaneously standing up a public company. And, of course, to our customers who trust us every day to keep their mission-critical businesses running without ever missing a beat.

Speaker #3: We are proud of this first step in our journey to drive value for all of our stakeholders. So, again, thank you. If we turn to our results in the second quarter, our ARR grew 7% on an organic basis over the prior year.

Mattias Stenberg: If we turn to our results in the second quarter, our ARR grew 7% on an organic basis the prior year to $1.143 billion, in line with our expectations for the quarter and at the midpoint of our guidance range for the full year. Recurring revenue grew 6% organically, with the SaaS revenue growing at 21%. Our adjusted operating margin came in at 29%, which was also in line with expectations and only modestly lower than the prior year. This, to me, is evidence of our strong cost discipline in a quarter where we have incremental public company launch cost and lower perpetual sales versus the prior year. Ben will walk you through the additional details in a few minutes. If I step back, here's how I would characterize the quarter. The recurring business performed well with year-over-year growth in SaaS bookings that accelerated from Q1.

Mattias Stenberg: If we turn to our results in the Q2, our ARR grew 7% on an organic basis the prior year to $1.143 billion, in line with our expectations for the quarter and at the midpoint of our guidance range for the full year. Recurring revenue grew 6% organically, with the SaaS revenue growing at 21%. Our adjusted operating margin came in at 29%, which was also in line with expectations and only modestly lower than the prior year.

Speaker #3: To 1.143 billion dollars. In line with our expectations for the quarter, and at the midpoint of our guidance range for the full year. Recurring revenue grew 6% organically, with the SaaS revenue growing at 21%.

Speaker #3: Our adjusted operating margin came in at 29%, which was also in line with expectations and only modestly lower than the prior year. This, to me, is evidence of our strong cost discipline in a quarter where we have incremental public company launch cost and lower perpetual sales versus the prior year.

Mattias Stenberg: This, to me, is evidence of our strong cost discipline in a quarter where we have incremental public company launch cost and lower perpetual sales versus the prior year. Ben will walk you through the additional details in a few minutes. If I step back, here's how I would characterize the quarter. The recurring business performed well with year-over-year growth in SaaS bookings that accelerated from Q1.

Speaker #3: Ben will walk you through the additional details in a few minutes, but if I step back, here’s how I would characterize the quarter: the recurring business performed well.

Speaker #3: With year-over-year growth in SaaS bookings that accelerated from Q1, approximately one-third of our total ARR growth came from new customers, and roughly two-thirds came from expansion within our existing customer base.

Mattias Stenberg: Approximately one-third of our total ARR growth came from new customers, and roughly two-thirds came from expansion within our existing customer base. This is very much in line with the growth framework that we laid out earlier in March. Each of the workflow environments grew over the prior year on an organic recurring basis. We saw continued strength in our field solutions, and this continues to be an under-penetrated market with strong demand for supply chain, materials management, and project performance software. That's what generated the double-digit growth in the quarter. In design, growth accelerated on a recovery in subscription licenses, and for the operate and protect areas, we saw continued steady growth. If we look at our total revenue, it was down 1% year over year on an organic basis due to the decline in perpetual license deals.

Speaker #3: And this is very much in line with the growth framework that we laid out earlier in March. Each of the workflow environments grew over the prior year on an organic, recurring basis.

Speaker #3: We saw continued strength in our Build solutions, and this continues to be an underpenetrated market with strong demand for supply chain, materials management, and project performance software.

Speaker #3: And that's what generated the double-digit growth in the quarter. In design, growth accelerated on a recovery in subscription licenses, and for the operate and protect areas, we saw continued steady growth.

Mattias Stenberg: That's what generated the double-digit growth in the quarter. In design, growth accelerated on a recovery in subscription licenses, and for the operate and protect areas, we saw continued steady growth. If we look at our total revenue, it was down 1% year over year on an organic basis due to the decline in perpetual license deals.

Speaker #3: If we look at our total revenue, it was down 1% year over year on an organic basis, due to the decline in perpetual license deals.

Speaker #3: This is primarily driven by the strategic shift we described at our investor day, to drive more customers to recurring revenue models. Which, of course, are worth more over the life of a customer.

Mattias Stenberg: This is primarily driven by the strategic shift we described at our investor day to drive more customers to recurring revenue models, which of course, are worth more over the life of a customer. To a lesser extent, the decline was because of timing delays related to our public safety business that did not close in the quarter. Those deals amounted to approximately $5 million. We believe that those deals will close this year or early in 2027, but they do have long sales cycles and are less predictable in terms of timelines. This is, of course, why we are actively shifting the business towards subscription. Our recurring revenue now stands at 69% of total revenue on an LTM basis, and that is up from 65% in the prior year. We are making good progress towards our targeted medium-term mix of 75% recurring revenue.

Speaker #3: To a lesser extent, the decline was because of timing delays related to our public safety business that did not close in the quarter, those deals amounted to approximately 5 million dollars.

Mattias Stenberg: Those deals amounted to approximately $5 million. We believe that those deals will close this year or early in 2027, but they do have long sales cycles and are less predictable in terms of timelines. This is, of course, why we are actively shifting the business towards subscription. Our recurring revenue now stands at 69% of total revenue on an LTM basis, and that is up from 65% in the prior year. We are making good progress towards our targeted medium-term mix of 75% recurring revenue.

Speaker #3: We believe that those deals will close this year or early in 2027, but they do have long sales cycles and are less predictable in terms of timelines.

Speaker #3: And this is, of course, why we are actively shifting the business towards subscription. Our recurring revenue now stands at 69% of total revenue on an LTM basis, and that is up from 65% in the prior year.

Speaker #3: So we are making good progress towards our targeted medium-term mix of 75% recurring revenue. If we look at the customer spending environment in the second quarter, it was broadly similar to Q1.

Mattias Stenberg: If we look at the customer spending environment in the second quarter, it was broadly similar to Q1. Customer budget conversations and deal cycles were largely consistent with what we have seen over the past 12 to 18 months. While we are diversified across four workflow environments, dozens of industries, and present in 140 countries, many of our customers are exposed to the same underlying variables: supply chain conditions, commodity prices, and industrial capital cycles. When those move, they tend to move for a number of our end markets at once. For some of our customers, higher oil prices are beneficial and supportive of investment. On the other hand, broader market uncertainty can make final investment decisions harder to make. There is clearly an offset there.

Mattias Stenberg: If we look at the customer spending environment in the Q2, it was broadly similar to Q1. Customer budget conversations and deal cycles were largely consistent with what we have seen over the past 12 to 18 months. While we are diversified across four workflow environments, dozens of industries, and present in 140 countries, many of our customers are exposed to the same underlying variables: supply chain conditions, commodity prices, and industrial capital cycles.

Speaker #3: Customer budget conversations and deal cycles were largely consistent with what we have seen over the past 12 to 18 months. While we are diversified across four workflow environments, dozens of industries, and present in 140 countries, many of our customers are exposed to the same underlying variables, supply chain conditions, commodity prices, and industrial capital cycles.

Speaker #3: When those move, they tend to move for a number of our end markets at once. For some of our customers, higher oil prices are beneficial and supportive of investment.

Mattias Stenberg: When those move, they tend to move for a number of our end markets at once. For some of our customers, higher oil prices are beneficial and supportive of investment. On the other hand, broader market uncertainty can make final investment decisions harder to make. There is clearly an offset there.

Speaker #3: On the other hand, broader market uncertainty can make final investment decisions harder to make. So there is clearly an offset there. We, of course, pay close attention to the owner-operator capex budgets, and the timing of their final investment decision.

Mattias Stenberg: We, of course, pay close attention to the owner-operator CapEx budgets and the timing of their final investment decision, as well as EPC backlogs. From what we can see here, the trends seem stable. Overall, our priorities and strategic focus are unchanged, and it is worth restating what they are and how we are progressing. Our strategy really begins from a structural problem in the industry we serve. Information does not carry across the life cycle of mission-critical assets and infrastructure. A decision taken in design becomes separated from the people who build, operate, and protect that asset. The cost of this problem compounds the further downstream it appears. Our response to this problem is to operate as a single platform across all four of these work environments, with a common context layer beneath the portfolio so that the record created in one workflow is available to the next.

Speaker #3: As well as EPC backlogs. And from what we can see here, the trends seem stable. So overall, our priorities and strategic focus are unchanged.

Speaker #3: And it's worth restating what they are, and how we're progressing. Our strategy really begins from a structured problem in the industry we serve. Information does not carry across the lifecycle of mission-critical assets and infrastructure.

Speaker #3: A decision taken in design becomes separated from the people who build, operate, and protect that asset. And the cost of this problem compounds the further downstream it appears.

Mattias Stenberg: A decision taken in design becomes separated from the people who build, operate, and protect that asset. The cost of this problem compounds the further downstream it appears. Our response to this problem is to operate as a single platform across all four of these work environments, with a common context layer beneath the portfolio so that the record created in one workflow is available to the next.

Speaker #3: Our response to this problem is to operate as a single platform across all four of these work environments. With a common context layer beneath the portfolio so that the record created in one workflow is available to the next.

Speaker #3: That is why we sell a workflow as an entry point, rather than as a standalone product. Using Octave software across more workflows drives more value for our customers and expands the associated revenue opportunity for our business.

Mattias Stenberg: That is why we sell a workflow as an entry point rather than as a standalone product. Using Octave software across more workflows drives more value for our customers and expands the associated revenue opportunity for our business. Regarding AI, our view is the same as the one we described in March. Customers in the industries we serve need answers and decisions that they can audit and defend. Value sits in models grounded in specific customer asset history, engineering standards, and operating record. Our software has this context. We think AI expands what we can sell rather than commoditizing it. We are being deliberate about the pace. Our agentic work is being used by early customers, and the conversations have changed. Customers are asking us to help them build on top of our system of record, and that was not happening 18 months ago.

Speaker #3: Regarding AI, our view is the same as the one we described in March. Customers in the industry we serve need answers and decisions that they can audit and defend.

Speaker #3: Value sits in models grounded in specific customer asset history, engineering standards, and operating record. And our software has this context. We think AI expands what we can sell rather than commoditizing it.

Mattias Stenberg: Value sits in models grounded in specific customer asset history, engineering standards, and operating record. Our software has this context. We think AI expands what we can sell rather than commoditizing it. We are being deliberate about the pace. Our agentic work is being used by early customers, and the conversations have changed. Customers are asking us to help them build on top of our system of record, and that was not happening 18 months ago.

Speaker #3: We're being deliberate about the pace, our agentic work is being used by early customers, and the conversations have changed. Customers are asking us to help them build on top of our system of record, and that wasn't happening 18 months ago.

Speaker #3: As part of this overall strategy, a key priority for us is to drive ARR growth sustainably above 10%. We expect two main drivers to close that gap.

Mattias Stenberg: As part of this overall strategy, a key priority for us is to drive ARR growth sustainably above 10%. We expect two main drivers to close that gap. The first is product innovation, where we are building a single platform beneath what has historically been a collection of strong but largely independent products. A common data and context layer, shared integration and governance, and an agentic layer above it. Alongside that, we are both consolidating and deepening each of the four environments so that each operates from a single control surface instead of a set of adjacent tools. We are also moving more of the portfolio to multi-tenant SaaS, which helps us ship faster and supports our margin ambition over time. The second driver of growth is improving how we go to market. We are building a commercial engine capable of sustaining double-digit growth over time.

Speaker #3: The first is product innovation, where we are building a single platform beneath what has historically been a collection of strong, but largely independent, products.

Speaker #3: A common data and context layer shared integration and governance, and an agentic layer above it. Alongside that, we are both consolidating and deepening each of the four environments, so that each operates from a single control surface, instead of a set of adjacent tools.

Speaker #3: We're also moving more of the portfolio to multi-tenant SaaS. Which helps us ship faster and supports our margin ambition over time. The second driver of growth is improving how we go to market.

Mattias Stenberg: We are also moving more of the portfolio to multi-tenant SaaS, which helps us ship faster and supports our margin ambition over time. The second driver of growth is improving how we go to market. We are building a commercial engine capable of sustaining double-digit growth over time.

Speaker #3: We are building a commercial engine capable of sustaining double-digit growth over time. That means better customer coverage and segmentation. Repeatable salesplace, pricing, and packaging run as a disciplined in its own right.

Mattias Stenberg: That means better customer coverage and segmentation, repeatable sales plays, pricing and packaging run as a discipline in its own right, and broader reach through our channel, our marketing, and the geographies and verticals we serve. The largest single pool inside that engine is the wide space in our own installed base. The majority of our customers operate on a single workflow, and we expect roughly two-thirds of our growth to come from customers we already serve, with the balance remaining coming from new customers. Let me update you on how we are progressing in both of these areas. On the product side, we moved several largely independent product groups into one organization with a unified roadmap and rebuilt the teams around smaller cross-functional groups with single ownership. This means fewer steps between customer feedback and shipped code, and we are seeing better velocity with releases.

Speaker #3: And broader reach through our channel. Our marketing and the geographies and verticals we serve. The largest single pool inside that engine is the white space in our own installed base.

Speaker #3: The majority of our customers operate on a single workflow, and we expect roughly two-thirds of our growth to come from customers we already serve.

Speaker #3: With the balance remaining coming from new customers. So, let me update you on how we are progressing in both of these areas. On the product side, we moved several largely independent product groups into one organization with a unified roadmap, and rebuilt the teams around smaller, cross-functional groups with single ownership.

Mattias Stenberg: Let me update you on how we are progressing in both of these areas. On the product side, we moved several largely independent product groups into one organization with a unified roadmap and rebuilt the teams around smaller cross-functional groups with single ownership. This means fewer steps between customer feedback and shipped code, and we are seeing better velocity with releases.

Speaker #3: This means fewer steps between customer feedback and shipped code, and we are seeing better velocity with releases. Across the portfolio, we're deepening each of the four environments.

Mattias Stenberg: Across the portfolio, we are deepening each of the four environments. In design, we bring 3D plant design schematics and engineering analysis onto a common foundation with changed governance across them. In operate, we are putting asset management, asset performance, and quality on the same platform. In build, connecting completions and construction back to the design model. In protect, we continue the rollout of our next-generation SaaS dispatch solution that we call Octave OnCall. Underneath the portfolio, we are building a common context and data layer with shared integration and governance, and an agentic layer above it. That is what makes a customer's asset history in one workflow usable in another, and it is the same foundation the AI work depends on. The proof points here are getting concrete. We have deepened our AI capabilities and reach in production across the portfolio.

Speaker #3: In Design, we bring 3D plant design schematics and engineering analysis onto a common foundation, with change governance across them. In Operate, we're putting asset management, asset performance, and quality on the same platform.

Speaker #3: And in Build, we're connecting completions and construction back to the design model. In Protect, we continue the rollout of our next-generation SaaS dispatch solution that we call On Call.

Speaker #3: Underneath the portfolio, we're building a common context and data layer with shared integration and governance, and an agentic layer above it. That's what makes a customer's asset history in one workflow usable in another, and it's the same foundation the AI work depends on.

Mattias Stenberg: Underneath the portfolio, we are building a common context and data layer with shared integration and governance, and an agentic layer above it. That is what makes a customer's asset history in one workflow usable in another, and it is the same foundation the AI work depends on. The proof points here are getting concrete. We have deepened our AI capabilities and reach in production across the portfolio.

Speaker #3: So the proof points here are getting concrete. We have deepened our AI capabilities and reach in production across the portfolio. This includes deep document and data search in concert, natural language query in a tune EAM product, dispatch summarization in On Call, and we also have a new cohort of AI innovation launching in the second half of the year.

Mattias Stenberg: This includes deep document and data search in Octave InConcert, natural language query in Octave Attune EAM product, dispatch summarization in Octave OnCall, and we also have a new cohort of AI innovation launching in the H2 of the year. Octave Assist is now running more than 2 million assists a day inside customer workflows. That is the embedded layer, and it is live. Above it, we have Octave Aria, our multi-agent framework, which remains in private preview and is tracking to its planned release. Another signal is what customers are asking us to do. In July, we launched Octave CoLabs, where we put our own product and technical leaders directly alongside a customer's team to build agentic workflows on that customer's real data, each one ending in a validated economic benefit.

Speaker #3: Octave Assist is now running more than 2 million assists a day inside customer workflows. That's the embedded layer, and it's live. Above it, we have Octave Aria, our multi-agent framework, which remains in private preview and is tracking to its planned release.

Mattias Stenberg: That is the embedded layer, and it is live. Above it, we have Octave Aria, our multi-agent framework, which remains in private preview and is tracking to its planned release. Another signal is what customers are asking us to do. In July, we launched Octave CoLabs, where we put our own product and technical leaders directly alongside a customer's team to build agentic workflows on that customer's real data, each one ending in a validated economic benefit.

Speaker #3: Another signal is what customers are asking us to do. In July, we launched Octave Collabs, where we put our own product and technical leaders directly alongside a customer's team to build agentic workflows on that customer's real data.

Speaker #3: Each one ending in a validated economic benefit. We have five more key accounts signed, including Bechtel and Fluor, who are two of the world's largest EPCs.

Mattias Stenberg: We have five marquee accounts signed, including Bechtel and Fluor, who are two of the world's largest EPCs, and three of these five accounts are already live. The use cases came from them, not from us, validating drawings before anything gets built, planning materials across a fabrication yard, checking design rules against a 3D model in plain language, and managing project change, which is the single largest cause of write-offs of capital projects. On the question of who owns the context layer, we are building a framework that understands the life cycle, and it is open to working with our customers' environments. Our customers are not asking hyperscalers, generic LLMs, or point solution vendors to organize 30 years of their engineering and operating record. They are asking us, because that record already lives in our system, and because they trust us with it.

Speaker #3: And three of these five accounts are already live. The use cases came from them, not from us. Validating drawings before anything gets built, planning materials across a fabrication yard, checking design rules against a 3D model in plain language, and managing project change which is the single largest cause of write-offs on capital project.

Speaker #3: And on the question of who owns the context layer, we are building a framework that understands the lifecycle and is open to working with our customers' environments.

Mattias Stenberg: On the question of who owns the context layer, we are building a framework that understands the life cycle, and it is open to working with our customers' environments. Our customers are not asking hyperscalers, generic LLMs, or point solution vendors to organize 30 years of their engineering and operating record. They are asking us, because that record already lives in our system, and because they trust us with it.

Speaker #3: Our customers are not asking hyperscalers, generic LLMs, or point solution vendors to organize 30 years of their engineering and operator operating records. They're asking us.

Speaker #3: Because that record already lives in our system. And because they trust us with it. And that is the position that we intend to capitalize on.

Mattias Stenberg: That is the position that we intend to capitalize on. Our product leadership was illustrated in the quarter by multiple compelling customer wins. A leading European renewable energy operator selected Octave InConcert as the engineering environment for six of their bioenergy plants, delivered as a cloud-native SaaS on a five-year term. Separately, two of the world's largest owner-operators signed important deals in the quarter, one of them for Octave InConcert and the other one for Octave Sequence. Both wins represent the consolidation of fragmented systems into one environment, validating the breadth and the depth of our offerings. If we then look at the execution on our go-to-market efforts, the changes we described in March saw traction in the quarter, and I would describe the progress as real but early.

Speaker #3: Our product leadership was illustrated in the quarter by multiple compelling customer. A leading European renewable energy operator selected in concert as the engineering environment for six of their bioenergy plants.

Speaker #3: Delivered as a cloud-native SaaS on a five-year term. Separately, two of the world's largest owner-operators signed important deals in the quarter. One of them for in concert, and the other one for Cequence.

Mattias Stenberg: Separately, two of the world's largest owner-operators signed important deals in the quarter, one of them for Octave InConcert and the other one for Octave Sequence. Both wins represent the consolidation of fragmented systems into one environment, validating the breadth and the depth of our offerings. If we then look at the execution on our go-to-market efforts, the changes we described in March saw traction in the quarter, and I would describe the progress as real but early.

Speaker #3: Both wins represent the consolidation of fragmented systems into one environment, validating the breadth and the depth of our offerings. If we then look at the execution on our go-to-market efforts, the changes we described in March saw traction in the quarter.

Speaker #3: And I would describe the progress as real, but early. On cross-sell, we now run a scored target account list with a value-based sales process against it.

Mattias Stenberg: On cross-sell, we now run a scored target account list with a value-based sales process against it, meaning we lead customer conversations with how Octave drives better business outcomes and higher margins instead of discussions around product features. We also introduced updated compensation designs and sales enablement playbooks, including having expansion opportunities under our customer success managers. Early signs of these changes are, as I said, positive, and more than 100 customers added another solution during the quarter, and the average size of those deals is well above a typical new customer land. On renewals and pricing, we consolidated the renewals team into the sales organization this year with best practice enablement and incentives behind it. This effort is still underway with plenty of unrealized benefit from pricing discipline and annual uplift opportunities. For new customers, our marketing organization is now integrated and running a number of targeted campaigns.

Speaker #3: Meaning we lead customer conversations with how Octave drives better business outcomes and higher margins. Instead of discussions around product features. We also introduced updated compensation designs and sales enablement playbooks including having expansion opportunities under our customer's success managers.

Speaker #3: Early signs of these changes are as I said positive. And more than 100 customers added another solution during the quarter. And the average size of those deals is well above a typical new customer land.

Mattias Stenberg: Early signs of these changes are, as I said, positive, and more than 100 customers added another solution during the quarter, and the average size of those deals is well above a typical new customer land. On renewals and pricing, we consolidated the renewals team into the sales organization this year with best practice enablement and incentives behind it. This effort is still underway with plenty of unrealized benefit from pricing discipline and annual uplift opportunities. For new customers, our marketing organization is now integrated and running a number of targeted campaigns.

Speaker #3: On renewals and pricing, we consolidated the renewals team into the sales organization this year, with best practice enablement and incentives behind it. This effort is still underway with plenty of unrealized benefit from pricing discipline and annual uplift opportunities.

Speaker #3: For new customers, our marketing organization is now integrated and running a number of targeted campaigns. We landed large new customers across a wide set of end markets in the second quarter.

Mattias Stenberg: We landed large new customers across a wide set of end markets Q2, including a data center operator, a brewery, an offshore wind developer, a global manufacturer, and a transit authority. That range is evidence that our platform continues to drive value across a broad range of industries. Finally, before I hand the call over to Ben, who will take you through our numbers in greater detail, I want to spend a few minutes on our outlook. Our updated total revenue growth ranges are the result of lower expected contribution this year from perpetual licenses. This is based on timing of large deals in our public safety business. These large perpetual deals are the lumpiest line in our P&L and less relevant to the underlying health of the business, and we are not going to chase or discount those deals to fill a quarter.

Speaker #3: Including a data center operator, a brewery, an offshore wind developer, a global manufacturer, and a transit authority. That range is evidence that our platform continues to drive value across a broad range of industries.

Speaker #3: Finally, before I hand the call over to Ben, who will take you through our numbers in greater detail, I want to spend a few minutes on our outlook.

Speaker #3: Our updated total revenue growth ranges are the result of lower expected contribution this year from perpetual licenses. This is based on the timing of large deals in our public safety business.

Mattias Stenberg: Our updated total revenue growth ranges are the result of lower expected contribution this year from perpetual licenses. This is based on timing of large deals in our public safety business. These large perpetual deals are the lumpiest line in our P&L and less relevant to the underlying health of the business, and we are not going to chase or discount those deals to fill a quarter.

Speaker #3: These large perpetual deals are the lumpyest line in our P&L, and less relevant to the underlying health of the business. And we are not going to chase or discount those deals till a quarter.

Speaker #3: We are focused on driving stronger recurring revenues, accelerating ARR growth to over 10%, while expanding our free cash flow margin over the medium term.

Mattias Stenberg: We are focused on driving stronger recurring revenues, accelerating ARR growth to over 10%, while expanding our free cash flow margin over the medium term. Our strategy is unchanged, and we are operating at a faster pace. H2 of this year depends on our execution, particularly on continued SaaS momentum, the go-to-market improvements, the platform and agentic work reaching more customers. Those are the things inside our control, and one quarter in, they are working. I would ask you to hold us to recurring revenue growth, our ability to address the wide space in our own installed base, and to whether the platform work shows up in customer expansion. That is how we are running the company, and that is what we will report against every quarter. With that, thank you very much, and I will hand over to you, Ben.

Speaker #3: Our strategy is unchanged. And we're operating at a faster pace. The second half of this year depends on our execution, particularly on continued SaaS momentum the go-to-market improvements, the platform and agentic work reaching more customers, those are the things inside our control.

Mattias Stenberg: Those are the things inside our control, and one quarter in, they are working. I would ask you to hold us to recurring revenue growth, our ability to address the wide space in our own installed base, and to whether the platform work shows up in customer expansion. That is how we are running the company, and that is what we will report against every quarter. With that, thank you very much, and I will hand over to you, Ben.

Speaker #3: And one quarter in, they are working. So I would ask you to hold us to recurring revenue growth, our ability to address the white space in our own installed base, and to whether the platform work shows up in customer expansion.

Speaker #3: That is how we are running the company, and that is what we will report against every quarter. So with that, thank you very much.

Speaker #3: And I'll hand over to you, Ben.

Speaker #1: Thank you, Matthias. And hello to everyone on the call today. Many of the metrics I discussed today are non-gap measures, which are reconciled in our press release and on Octave investor website.

Ben Maslen: Thank you, Mattias, and hello to everyone on the call today. Many of the metrics I will discuss today are non-GAAP measures, which are reconciled in our press release on our Octave investor website. We ended Q2 with ARR of $1.148 billion, up 7% year on year on an organic constant currency basis, and in line with our expectations. We ended the quarter with 3,267 total customers, up from 3,223 at the end of last year. We define total customers as those with more than $25,000 in ARR. This customer group represents approximately 97% of total ARR and provides better visibility into the underlying trends in our business. For your reference, we have disclosed these customer figures on a historical annual basis in the earnings presentation posted to our website today.

Speaker #1: We ended the second quarter with ARR of 1.14 billion, up 7% year on year on an organic constant currency basis, and in line with our expectations.

Speaker #1: We ended the quarter with 3,267 total customers, up from 3,223 at the end of last year. We define total customers as those with more than 25,000 dollars in ARR, this customer group represents approximately 97% of total ARR, and provides better visibility into the underlying trends in our business.

Ben Maslen: We ended the quarter with 3,267 total customers, up from 3,223 at the end of last year. We define total customers as those with more than $25,000 in ARR. This customer group represents approximately 97% of total ARR and provides better visibility into the underlying trends in our business. For your reference, we have disclosed these customer figures on a historical annual basis in the earnings presentation posted to our website today.

Speaker #1: For your reference, we've disclosed these customer figures on a historical annual basis in the earnings presentation posted to our website today. We also ended the second quarter with 438 large customers, defined as those above half a million dollars of ARR, which was up from 421 a year end.

Ben Maslen: We also ended the Q2 with 438 large customers, defined as those above $0.5 million of ARR, which was up from 421 at year-end. They represent around half of our overall ARR. Recurring subscription revenue, which is comprised of subscription licenses, SaaS revenue, and maintenance revenue, was $283 million in the Q2 and grew 6% year on year on an organic constant currency basis. This was in line with our expectations and the commentary given at our March Investor Day. Within recurring revenue, SaaS revenue grew to $87 million in the Q2, increasing 21% in organic constant currency terms over the prior year. SaaS bookings growth accelerated from Q1, reflecting healthy demand trends, the shift in perpetual sales, and positive early traction on cross-sell activity within our different workflows.

Speaker #1: They represent around half of our overall ARR. Recurring subscription revenue, which is comprised of subscription licenses, SaaS revenue, and maintenance revenue, was 283 million dollars in the second quarter, and grew 6% year on year on an organic constant currency basis.

Speaker #1: This was in line with our expectations and the commentary given at our March investor day. Within recurring revenue, SaaS revenue grew to $87 million in the second quarter, increasing 21% in organic constant currency terms over the prior year.

Ben Maslen: Within recurring revenue, SaaS revenue grew to $87 million in the Q2, increasing 21% in organic constant currency terms over the prior year. SaaS bookings growth accelerated from Q1, reflecting healthy demand trends, the shift in perpetual sales, and positive early traction on cross-sell activity within our different workflows.

Speaker #1: SaaS bookings growth accelerated from Q1, reflecting healthy demand trends. The shift from perpetual sales and positive early traction on cross-sell activity within our different workflows.

Speaker #1: Monthly subscription license revenue grew 5% on a constant currency basis, and is now showing stabilization after the declines we saw last year. Maintenance subscription revenue of 123 million dollars was roughly flat, which was in line with our expectations.

Ben Maslen: Monthly subscription license revenue grew 5% on a constant currency basis and is now showing stabilization after the declines we saw last year. Maintenance subscription revenue of $123 million was roughly flat, which is in line with our expectations. Altogether, total revenue for the Q2 was $398 million. This figure is down 4% on an as-reported basis, which reflects a 4% drag from businesses divested at the end of Q2 2025 and a 1% benefit from currency. As such, total revenue was down 1% over the prior year on an organic constant currency basis. In addition to the ongoing revenue model shift that Mattias spoke to, total revenue came in around $5 million lower than we expected on the slippage of some perpetual deals, mainly in our public safety business.

Speaker #1: Altogether, total revenue for the second quarter was $398 million. This figure is down 4% on an as-reported basis, which reflects a 4% drag from businesses divested at the end of Q2 2025, and a 1% benefit from currency.

Speaker #1: As such, total revenue was down 1% over the prior year, on an organic constant currency basis. In addition to the ongoing revenue model shift that Matthias spoke to, total revenue came in around $5 million lower than we expected.

Ben Maslen: As such, total revenue was down 1% over the prior year on an organic constant currency basis. In addition to the ongoing revenue model shift that Mattias spoke to, total revenue came in around $5 million lower than we expected on the slippage of some perpetual deals, mainly in our public safety business.

Speaker #1: On the slippage of some perpetual deals, mainly in our public safety business. The pipeline here is strong, but the timing of new projects naturally has some uncertainty, given the long sales cycles in that business.

Ben Maslen: The pipeline here is strong, but the timing of new projects naturally has some uncertainty given the long sales cycles in that business. Lower perpetual revenue also had some impact on professional services, which declined compared to the prior year. Turning to profitability, the gross margin was 77%, up 260 basis points compared to the prior year. This improvement reflects the divestitures made in the middle of last year, which carried margin profiles below that of the core business, as well as a lower level of professional services revenue. Adjusted operating income was $116 million for the quarter, representing an adjusted operating margin of 29% compared to 31% in the prior year period.

Speaker #1: Lower perpetual revenue also had some impact on professional services, which declined compared to the prior year. Turning to profitability, the gross margin was 77%, up 260 basis points compared to the prior year.

Speaker #1: This improvement reflects the divestitors made in the middle of last year, which carried margin profiles below that of the core business, as well as a lower level of professional services revenue.

Ben Maslen: This improvement reflects the divestitures made in the middle of last year, which carried margin profiles below that of the core business, as well as a lower level of professional services revenue. Adjusted operating income was $116 million for the quarter, representing an adjusted operating margin of 29% compared to 31% in the prior year period.

Speaker #1: Adjusted operating income was 116 million dollars for the quarter, representing an adjusted operating margin of 29%, compared to 31% in the prior year period.

Speaker #1: This was in line with our expectations and the commentary we gave at Q1 results, that we would incur additional costs related to becoming an independent public company at the point of separation from Hexagon.

Ben Maslen: This was in line with our expectations and the commentary we gave with Q1 results that we would incur additional costs related to becoming an independent public company at the point of separation from Hexagon, including listing audit fees and insurance costs. This step-up in cost was factored into the full-year outlook we presented to the financial markets in March. Adjusted operating income also reflects additional R&D expense. R&D capitalization in the Q2 was around 7% of revenues, down from 8% a year ago, which represents around 100 basis point drag on the adjusted operating margin compared to the prior year. As previously communicated, this stems from capitalizing less research and development expense than we did last year as we transition more of our product portfolio to SaaS and not from higher cash spending.

Speaker #1: Including listing, audit fees, and insurance costs, this step-up in costs was factored into the full-year outlook that we presented to the financial markets in March.

Speaker #1: Adjusted operating income also reflects additional R&D expense. R&D capitalization in the second quarter was around 7% of revenues, down from 8% a year ago, which represents around a 100 basis point drag on the adjusted operating margin compared to the prior year.

Ben Maslen: Adjusted operating income also reflects additional R&D expense. R&D capitalization in the Q2 was around 7% of revenues, down from 8% a year ago, which represents around 100 basis point drag on the adjusted operating margin compared to the prior year. As previously communicated, this stems from capitalizing less research and development expense than we did last year as we transition more of our product portfolio to SaaS and not from higher cash spending.

Speaker #1: As previously communicated, this stems from capitalizing less research and development expense than we did last year, as we transitioned more of our product portfolio to SaaS.

Speaker #1: And not from higher cash spending. These higher expenses were partly offset by ongoing cost discipline, and the took in the second half of last year.

Ben Maslen: These higher expenses were partly offset by ongoing cost discipline and the savings from the restructuring actions we took in the H2 of last year. Overall, the adjusted operating margin was around 30% for the H1 of 2026, and we believe we are on track to achieve our 30% margin target for the full year, despite having a lower level of perpetual software sales. Adjusted net income was $0.36 per share on 268.4 million diluted weighted average shares outstanding. On a GAAP basis, you will see two non-cash charges this quarter. First, as previously communicated, an impairment charge of approximately $464 million related to the launch of our new Octave brand and the corresponding write-down of the legacy brands. The second is an impairment of goodwill.

Speaker #1: Overall, the adjusted operating margin was around 30% for the first half of 2026, and we believe we are on track to achieve our 30% margin target for the full year.

Speaker #1: Despite having a lower level of perpetual software sales. Adjusted net income was 36 cents per share on 268.4 million diluted weighted average shares outstanding.

Speaker #1: On a gap basis, you'll see two non-cash charges this quarter. First, as previously communicated, an impairment charge of approximately 464 million dollars, related to the launch of our new Octave brand, and the corresponding write-down of the legacy brand.

Ben Maslen: On a GAAP basis, you will see two non-cash charges this quarter. First, as previously communicated, an impairment charge of approximately $464 million related to the launch of our new Octave brand and the corresponding write-down of the legacy brands. The second is an impairment of goodwill.

Speaker #1: The second is an impairment of goodwill. As our market valuation is a newly public company and is below the balance sheet carrying value as at June 30th, this created a triggering event requiring an interim goodwill impairment assessment.

Ben Maslen: As our market valuation as a newly public company was below the balance sheet carrying value as of 30 June, this created a triggering event requiring an interim goodwill impairment assessment. As Octave now has its own observable market valuation, we moved to utilize a combination of market and income approaches in our assessment of company fair value, as opposed to using purely an income approach prior to listing. This change in methodology determined that the carrying value of our goodwill exceeded its market value, and therefore a $1.7 billion goodwill impairment charge was recognized for the quarter. Both of these impairment charges, which were triggered by the separation from the parent company, are one-time non-cash items that we have excluded from adjusted operating income and did not affect our liquidity or outlook for cash flow from operating activities.

Speaker #1: As Octave now has its own observable market valuation, we are moving to utilize a combination of market and income approaches in our assessment of company fair value, as opposed to relying purely on an income approach prior to listing.

Speaker #1: This change in methodology determined that the carrying value of our goodwill exceeded its market value, and therefore a $1.7 billion goodwill impairment charge was recognized for the quarter.

Ben Maslen: This change in methodology determined that the carrying value of our goodwill exceeded its market value, and therefore a $1.7 billion goodwill impairment charge was recognized for the quarter. Both of these impairment charges, which were triggered by the separation from the parent company, are one-time non-cash items that we have excluded from adjusted operating income and did not affect our liquidity or outlook for cash flow from operating activities.

Speaker #1: Both of these impairment charges, which were triggered by the separation from the parent company, are one-time non-cash items that we've excluded from adjusted operating income and did not affect our liquidity or outlook for cash flow from operating activities.

Speaker #1: They're also not indicative of any changes to our operating outlook for the business. Turning to our balance sheet and cash flow statement, we ended the second quarter with just over 304 million dollars of cash and cash equivalents, and 644 million dollars of gross debt, bringing our net debt at the 30th of June to 340 million dollars.

Ben Maslen: They are also not indicative of any changes to our operating outlook for the business. Turning to our balance sheet and cash flow statement, we ended the Q2 with just over $304 million of cash and cash equivalents and $644 million of gross debt, bringing our net debt at 30 June to $340 million. Our blended cost of debt is roughly 5%, and we have a healthy balance sheet heading into the H2. We generated $125 million in cash from operations in the Q2. Together, our CapEx and capitalization of software development costs were $32 million, which is below the $36 million reported Q2 last year and in line with our expectations.

Speaker #1: Our blended cost of debt is roughly 5%, and we have a healthy balance sheet heading into the second half. We generated $125 million in cash from operations in the second quarter.

Ben Maslen: Our blended cost of debt is roughly 5%, and we have a healthy balance sheet heading into the H2. We generated $125 million in cash from operations in the Q2. Together, our CapEx and capitalization of software development costs were $32 million, which is below the $36 million reported Q2 last year and in line with our expectations.

Speaker #1: Together, our capex and capitalization of software development costs were $32 million, which is below the $36 million reported in the second quarter last year and in line with our expectations.

Speaker #1: Net of this, we generated strong pre-cash flow of $93 million, which represents a 23% margin for the quarter and 22% for the first half of the year.

Ben Maslen: Net of this, we generated strong free cash flow of $93 million, which represents a 23% margin for the quarter and 22% for the H1 of the year, which supports our confidence in achieving our 20% free cash flow margin target for full year 2026. This brings us to the outlook. Now we are a standalone company, we are introducing our guidance for the Q3 and full year 2026. There are a few things to note on this topic. On revenue, we are going to provide organic constant currency growth rates for subscription revenue on a quarterly and full-year basis. In addition to ARR growth, we expect this metric to be the primary indicator of underlying top-line performance for our business.

Speaker #1: This supports our confidence in achieving our 20% free cash flow margin target for full year 2026. This brings us to the outlook. Now that we're a standalone company, we are introducing our guidance for the third quarter and full year 2026.

Speaker #1: There are a few things to note on this topic. On revenue, we're going to provide organic constant currency growth rates for subscription revenue on a quarterly and full-year basis.

Ben Maslen: There are a few things to note on this topic. On revenue, we are going to provide organic constant currency growth rates for subscription revenue on a quarterly and full-year basis. In addition to ARR growth, we expect this metric to be the primary indicator of underlying top-line performance for our business.

Speaker #1: In addition to ARR growth, we expect this to be the this metric to be the primary indicator underlying top line performance for our business.

Speaker #1: We'll also provide ranges for total revenue, but given the mix shift away from perpetual license revenue, combined with the variability and timing of closing perpetual deals, we believe this is a less meaningful indicator of the health of our business.

Ben Maslen: We will also provide ranges for total revenue, but given the mix shift away from perpetual license revenue, combined with the variability in timing of closing perpetual deals, we believe this is a less meaningful indicator of the health of our business. The business disposals made in mid-2025 will no longer create a headwind to reported figures in the H2 of this year, and the range of total revenue growth for the year largely reflects the timing of larger perpetual deals in the Protect, where customer groups continue to predominantly favor on-premise software. On profitability, we are guiding to a targeted adjusted operating margin on a quarterly and full-year basis. One thing to note here, as we flagged at the March Analyst Day, is that as we push more of our products to SaaS and continuous development cycles, we will capitalize less research and development costs.

Speaker #1: The business disposals made in mid-2025 will no longer create a headwind to reported figures in the second half of this year, and the range of total revenue growth for the year largely reflects the timing of larger perpetual deals in the protected where customer groups continue to predominantly favor on-premise software.

Speaker #1: On profitability, we are guiding to a targeted adjusted operating margin on a quarterly and full year basis. One thing to note here, as we flagged at the March analyst day, is that as we push more of our products to SaaS and continuous development cycles, we will capitalize less research and development costs.

Ben Maslen: On profitability, we are guiding to a targeted adjusted operating margin on a quarterly and full-year basis. One thing to note here, as we flagged at the March Analyst Day, is that as we push more of our products to SaaS and continuous development cycles, we will capitalize less research and development costs.

Speaker #1: This will be a gradual process, but will be a drag on our reported adjusted operating margin going forward, as more costs will be expensed directly to the P&L.

Ben Maslen: This will be a gradual process but will be a drag on our reported adjusted operating margin going forward as more costs will be expensed directly to the P&L. There is no effect of this on our free cash flow margin, which we expect to improve over time and be a better indicator of the underlying improvement in profitability. Turning to the numbers, for the Q3 of 2026, we expect total revenue of $400 to $410 million, representing organic constant currency growth of 2% to 4%. Recurring revenue of $285 to $290 million, representing organic constant currency growth of between 3% and 5%, and adjusted operating margin of approximately 27%, reflecting normal seasonality. For the full year 2026, we expect ARR of $1.185 to $1.205 billion, representing organic constant currency growth of 6% to 8%.

Speaker #1: There is no effect of this on our free cash flow margin, which we expect to improve over time, and be a better indicator of the underlying improvement in profitability.

Speaker #1: Turning to the numbers, for the third quarter of 2026, we expect total revenue of 400 to 410 million dollars, representing organic constant currency growth of 2% to 4%.

Ben Maslen: Turning to the numbers, for the Q3 of 2026, we expect total revenue of $400 to $410 million, representing organic constant currency growth of 2% to 4%. Recurring revenue of $285 to $290 million, representing organic constant currency growth of between 3% and 5%, and adjusted operating margin of approximately 27%, reflecting normal seasonality. For the full year 2026, we expect ARR of $1.185 to $1.205 billion, representing organic constant currency growth of 6% to 8%.

Speaker #1: Recurring revenue of $285 to $290 million, representing organic constant currency growth of between 3% and 5%. And adjusted operating margin of approximately 27%, reflecting normal seasonality.

Speaker #1: For the full year 2026, we expect ARR of 1.185 to 1.205 billion dollars, representing organic constant currency growth of 6% to 8%. Total revenue of 1.635 to 1.665 billion dollars, representing organic constant currency growth of 0 to 2%.

Ben Maslen: Total revenue of $1.635 to $1.665 billion representing organic constant currency growth of 0% to 2%. Recurring revenue of $1.14 to $1.15 billion representing organic constant currency growth of 5% to 6%, an adjusted operating margin of approximately 30%, which is down from the prior year by roughly 100 basis points on public company launch costs, revenue model shifts, and lower levels of R&D capitalization, partly offset by integration cost savings. We expect a free cash flow margin of approximately 20%. Before we open the call for questions, one thing to note on the full-year total revenue growth outlook. In March, we framed an organic constant currency revenue growth outlook of 3% to 4% for 2026. Based on where the H1 landed and what we see in the H2, we now expect organic constant currency revenue growth of between 0% and 2% for the full year.

Speaker #1: Recurring revenue of 1.14 to 1.15 billion dollars, representing organic constant currency growth of 5% to 6%. And adjusted operating margin of approximately 30%, which is down from the prior year by roughly 100 basis points, on public company launch costs, revenue model shifts, and lower levels of R&D capitalization, partly offset by integration cost savings.

Speaker #1: And we expect a free cash flow margin of approximately 20%. Before we open the call for questions, one thing to note on the full year total revenue growth outlook.

Ben Maslen: We expect a free cash flow margin of approximately 20%. Before we open the call for questions, one thing to note on the full-year total revenue growth outlook. In March, we framed an organic constant currency revenue growth outlook of 3% to 4% for 2026. Based on where the H1 landed and what we see in the H2, we now expect organic constant currency revenue growth of between 0% and 2% for the full year.

Speaker #1: In March, we framed an organic constant currency revenue growth outlook of 3% to 4% for 2026. Based on where the first half landed and what we see in the second half, we now expect organic constant currency revenue growth of between 0% and 2% for the full year.

Speaker #1: The reason for this change is that we have removed from the guidance a number of large public safety perpetual deals in the protected, which we still expect to win, but may now slip into 2027.

Ben Maslen: The reason for this change is that we have removed from the guidance a number of large public safety perpetual deals in the Protect, which we still expect to win but may now slip into 2027, including the $5 million in slipped deals from the Q2. They may still be recognized in 2026, but we have decided to adopt a prudent approach in our guidance to reflect these large potential order wins, where sales cycles are naturally long and timing is less predictable. As a reminder, the Protect represents around 20% of overall Octave revenues. What is not changing is everything else. Our focus remains on driving the business towards subscription. Here we delivered 7% ARR growth in the H1 of the year, and we are reiterating full-year ARR growth of 6% to 8%.

Speaker #1: Including the $5 million in slip deals from the second quarter. They may still be recognized in 2026, but we have decided to adopt a prudent approach in our guidance to reflect these large potential order wins, where sales cycles are naturally long and timing is less predictable.

Speaker #1: And as a reminder, the protected represents around 20% of overall octave revenues. What is not changing is everything else. Our focus remains on driving the business towards subscription, and here we delivered 7% ARR growth in the first half of the year, and we are reiterating full year ARR growth of 6 to 8%.

Ben Maslen: As a reminder, the Protect represents around 20% of overall Octave revenues. What is not changing is everything else. Our focus remains on driving the business towards subscription. Here we delivered 7% ARR growth in the H1 of the year, and we are reiterating full-year ARR growth of 6% to 8%.

Speaker #1: We are reiterating an adjusted operating margin of approximately 30%, which we expect to maintain while absorbing public company launch costs and the lower level of perpetual revenue volume.

Ben Maslen: We are reiterating an adjusted operating margin of approximately 30%, which we expect to maintain while absorbing public company launch costs, the lower level of perpetual revenue volume. We reiterate a free cash flow margin of approximately 20% for the year. The core medium-term ambition we outlined in March is unchanged. ARR growth above 10%, total revenue growth of between 6% and 8%, an adjusted operating margin of approximately 30%, and 300 to 400 basis points of free cash flow margin expansion. We have a large and growing market, an exceptionally sticky customer base, 30 years of industrial and customer context that AI makes more valuable rather than less, and for the first time, a single company focused entirely on customers with mission-critical infrastructure. With that, thank you for joining us today, and we will now open the line for questions.

Speaker #1: And we reiterate a free cash flow margin of approximately 20% for the year. The core medium-term ambition we outlined in March is unchanged: ARR growth above 10%, total revenue growth between 6% and 8%, and an adjusted operating margin of approximately 30%.

Speaker #1: And 300 to 400 basis points of free cash flow margin expansion. We have a large and growing market, an exceptionally sticky customer base, and 30 years of industrial and customer context that AI makes more valuable rather than less.

Ben Maslen: We have a large and growing market, an exceptionally sticky customer base, 30 years of industrial and customer context that AI makes more valuable rather than less, and for the first time, a single company focused entirely on customers with mission-critical infrastructure. With that, thank you for joining us today, and we will now open the line for questions.

Speaker #1: And for the first time, a single company focused entirely on customers with mission-critical infrastructure. So with that, thank you for joining us today. And we'll now open the line for questions.

Speaker #2: We will now begin the question and answer session. If you would like to ask a question and have joined via the webinar, please use the raise hand icon, which can be found in the black bar at the bottom of the webinar application screen.

Operator: We will now begin the question and answer session. If you would like to ask a question and have joined via the webinar, please use the raise hand icon, which can be found in the black bar at the bottom of the webinar application screen. When you hear your name called, you will be prompted to unmute your line and ask your question. We will now take a moment to allow the queues to form. Our first question comes from John DiFucci at Guggenheim. Please unmute your line and ask your question.

Speaker #2: When you hear your name called, you will be prompted to unmute your line and ask your question. We will now take a moment to allow the queues to form.

Speaker #2: Our first question comes from John Difucci at Guggenheim. Please unmute your line and ask your question.

Speaker #1: Thank you. Thanks for taking my question. Matthias and Ben, first of all, congrats on getting your first quarter out as an independent public company.

John DiFucci: Thank you. Thanks for taking my question. Mattias and Ben, first of all, congrats on getting your first quarter out as an independent public company. That is quite a milestone. Your numbers look fine relative to expectations. In the case of what you have the most control over, the bottom line, including cash flow, is very strong. As you said, your total organic constant currency revenue growth rate was a touch below what you anticipated, and you gave the reasons. You said move to recurring revenue, which we fully understand how that works, and timing delays on public safety business. I guess I am wondering how confident you are on your assessment of both those variables today, especially the first one, because you are guiding to an acceleration of organic constant currency total revenue growth next quarter and for the year.

John DiFucci: Thank you. Thanks for taking my question. Mattias and Ben, first of all, congrats on getting your Q2 out as an independent public company. That is quite a milestone. Your numbers look fine relative to expectations. In the case of what you have the most control over, the bottom line, including cash flow, is very strong.

Speaker #1: That's quite a milestone. Your numbers look fine, relative to expectations. In the case of what you have the most control over, the bottom line—including cash flow—is very strong.

Speaker #1: But as you said, your total organic constant currency revenue growth rate was a touch below what you anticipated, and you gave the reasons you said moved to recurring revenue, which we fully understand how that works.

John DiFucci: As you said, your total organic constant currency revenue growth rate was a touch below what you anticipated, and you gave the reasons. You said move to recurring revenue, which we fully understand how that works, and timing delays on public safety business. I guess I am wondering how confident you are on your assessment of both those variables today, especially the first one, because you are guiding to an acceleration of organic constant currency total revenue growth next quarter and for the year.

Speaker #1: And timing delays on public safety business. I guess I'm wondering how confident you are in your assessment of both of those variables today, especially the first one.

Speaker #1: Because your guiding to an acceleration of organic constant currency total revenue growth next quarter and for the year. Listen, octave is a really good story.

John DiFucci: Listen, Octave is a really good story, and I think a lot of people believe that, but the stock pre-open is reflecting some concerns about that right now.

Speaker #1: And I think a lot of people believe that, but the stock pre-open is reflecting some concerns about that right now.

Speaker #3: Yeah. Thank you, John. Yeah, how to answer that? I think how confident do we feel? I mean, obviously this is the guidance we have given now.

Mattias Stenberg: Yeah. Thank you, John. How to answer that? I think, how confident do we feel? Obviously, this is the guidance we have given now, so it is our best judgment of all the scenarios, right? Ben said, we have taken a prudent and cautious approach with the timing of those perpetual deals, right? I would say we feel confident in that. Anything to add to that, Ben?

Speaker #3: So it is our best judgment of all the scenarios, right? And, like Ben said, we have taken a prudent and cautious approach with the timing of those perpetual deals, right?

Speaker #3: So yeah, I would say we feel confident in that. Anything to add to that, Ben?

Speaker #1: No, hi John. I would agree with that, Matthias. I mean, I think if you look at the quarter, most KPIs were bang in line with their expectations.

Ben Maslen: No. Hi, John. I would agree with that, Mattias. I think if you look at the quarter, most KPIs were bang in line with our expectations. So subscription growth, free cash generation, the operating margin. It was just the large perpetual deals where you have long sales cycles, and they are more unpredictable. We have decided to take those out of the forecast, and if they come in, they become positives.

Speaker #1: So subscription growth, free cash generation, the operating margin, it was just the large perpetual deals where you have long sales cycles and they are more unpredictable.

Speaker #1: We've decided to take those out of the forecast, and if they come in, they become positives.

John DiFucci: To be clear, Ben, those deals, you have not lost them to someone else right now. They are still out there.

Speaker #4: But to be clear, Ben, those deals—you haven't lost them to someone else right now. They're still out there.

John DiFucci: To be clear, Ben, those deals, you have not lost them to someone else right now. They are still out there.

Speaker #3: No, absolutely not. No, we're still very confident in these deals. You're selling to governments and states—they have their own kind of procurement cycles. But we're more a taker of it, if you know what I mean.

Ben Maslen: No, absolutely not. No, we are still very confident in the deals. You are selling to governments and states. They have their own kind of procurement cycles that we are more a taker of, if you know what I mean. Sometimes these deals can take one to two years to actually put together. Given there is only four months left of the year, that window to close those deals is narrowing. So we thought it made sense to take them out and adopt a more prudent approach for the year as a whole. Our view on the likelihood of winning them has not changed at all.

Speaker #3: And sometimes these deals can take one to two years to actually put together. So, given there's only four months left in the year, that window to close those deals is narrowing.

Speaker #3: So we thought it made sense to take them approach for the year as a whole. But our view on the likelihood of winning them hasn't changed at all.

Speaker #4: Great. Okay, thank you very much. And congrats again. Welcome to the public markets.

John DiFucci: Great. Okay, thank you very much. Congrats again. Welcome to the public markets.

Speaker #3: Thank you. Thanks.

Ben Maslen: Thank you.

Mattias Stenberg: Thanks.

Speaker #2: Our next question comes from Matt Hedberg at RBC. Please unmute your line and ask your question.

Operator: Our next question comes from Matt Hedberg at RBC. Please unmute your line and ask your question.

Matt Hedberg: Great. Thanks for taking my questions, guys. I will offer my congrats again on the first quarter as a public company. Maybe just to follow up on John's question, on some of the protect public sector deals, I just wanted to better understand what exactly is being excluded. It feels like just maybe the perpetual pieces, but maybe kind of a two-parter, just a little bit more color on what is in, what is out on protect. Then also just Ben, just kind of as this being your first quarter as a public company, just what is your overall guidance philosophy?

Matt Hedberg: Great. Thanks for taking my questions, guys. I will offer my congrats again on the Q1 as a public company. Maybe just to follow up on John's question, on some of the protect public sector deals, I just wanted to better understand what exactly is being excluded. It feels like just maybe the perpetual pieces, but maybe kind of a two-parter, just a little bit more color on what is in, what is out on protect. Then also just Ben, just kind of as this being your Q1 as a public company, just what is your overall guidance philosophy?

Speaker #5: Great. Thank you for taking my questions, guys. I'll offer my congrats again on the first quarter as a public company. Maybe just to follow up on John's question, on the some of the protect public sector deals, I just wanted to better understand what exactly is being excluded?

Speaker #5: It feels like just maybe the perpetual pieces, but maybe kind of a two-parter just a little bit more color on what's in, what's out on protect.

Speaker #5: And then also just, Ben, just kind of as this being your first quarter as a public company, just what's your overall guidance philosophy?

Speaker #3: Yeah, I think I'll let you take that one, Ben. But, I mean, what we can say more about the public safety and those deals—I would say it's around a handful of deals, right?

Mattias Stenberg: Yeah, I think I will let you take that one, Ben. But what we can say more about the public safety and those deals, I would say it is around a handful of these. It is not hundreds of these. So it is a handful of these we have taken out.

Speaker #3: It's not hundreds of deals; so, it's a handful of deals we have taken out.

Speaker #1: Yeah. And that mostly impacts perpetual licensed software, but a little bit of services. Attached to it. So hi Matt. Sorry. In terms of the philosophy, we obviously want to set guidance that explains the trajectory of the business well to you guys.

Ben Maslen: Yeah. That mostly impacts perpetual license software, but a little bit of services.

Mattias Stenberg: Yeah

Ben Maslen: Attached to it. Hi, Matt. In terms of the philosophy, we obviously want to set guidance that explains the trajectory of the business well to you guys. There is only four months left of the year, so we have set guidance that is primarily focused on the full year, with a little bit of extra color on Q3 to help you guys model it. Yeah, I think that the philosophy is we want to set guidance that we can achieve, and we will develop this framework over time. We did not have adjusted net income or EPS in the framework at this point. It is probably something that we can add in the future. As I said at the analyst day, we will evolve the guidance framework or philosophy into next year.

Speaker #1: There's only four months left of the year. So we've set guidance that is primarily focused on the full year with a little bit of extra color on Q3 to help you guys model it.

Speaker #1: And yeah, I think that the philosophy is we want to set guidance that we can achieve. And we'll develop this framework over time. Now, we didn't have adjusted net income or EPS in the framework at this point.

Ben Maslen: Yeah, I think that the philosophy is we want to set guidance that we can achieve, and we will develop this framework over time. We did not have adjusted net income or EPS in the framework at this point. It is probably something that we can add in the future. As I said at the analyst day, we will evolve the guidance framework or philosophy into next year.

Speaker #1: It's probably something that we had in the future. As I said at the analyst day, we'll evolve the guidance framework or philosophy into next year.

Speaker #2: Our next question comes from Peter Berkeley at Evercore ISI. Please unmute your line and ask your question.

Operator: Our next question comes from Peter Berkley at Evercore ISI. Please unmute your line and ask your question.

Speaker #1: Yeah, hi guys. This is Peter Berkeley on for Kirk McKern with Evercore. Appreciate you taking the question here. So I actually just wanted to ask about the recurring revenue piece and sort of the seasonality that we're seeing in the implied gap with the back half of the year here.

Peter Berkley: Yeah. Hi, guys. This is Peter Berkley on for Kirk Materne with Evercore. Appreciate you taking the question here. I actually just wanted to ask about the recurring revenue piece and sort of the seasonality that we're seeing in the implied guide for the back half of the year here. I think the Q3 maybe came in just a touch below what we were expecting, and then that resultantly implies a little bit of an acceleration in the Q4. Sounds like bookings remain pretty strong. Curious for you to sort of walk through the moving parts there, whether that's just a factor of the year-over-year compares or any other factors that might be coming into play there. Thanks.

Peter Burkly: Yeah. Hi, guys. This is Peter Berkley on for Kirk Materne with Evercore. Appreciate you taking the question here. I actually just wanted to ask about the recurring revenue piece and sort of the seasonality that we're seeing in the implied guide for the back half of the year here.

Speaker #1: So I think the 3Q maybe came in just a touch below what we're expecting. And then that resultantly implies a little bit of an acceleration in the fourth quarter.

Peter Burkly: I think the Q3 maybe came in just a touch below what we were expecting, and then that resultantly implies a little bit of an acceleration in the Q4. Sounds like bookings remain pretty strong. Curious for you to sort of walk through the moving parts there, whether that's just a factor of the year-over-year compares or any other factors that might be coming into play there. Thanks.

Speaker #1: So it sounds like bookings remain pretty strong. Could you sort of walk through the moving parts there, whether that's just a factor of the year-over-year comps or any other factors that might be coming into play there?

Speaker #1: Thanks.

Speaker #3: Yeah. Hi, Peter. So, in Q3, the recurring revenue—as you say—we've guided to 3 to 5% organic, constant currency. That's probably just over a percent lower than the underlying run rate.

Ben Maslen: Yeah. Hi, Peter. In Q3 on the recurring revenue, as you say, we've guided to 3% to 5% organic constant currency. That's probably just over 1% lower than the underlying run rate, and that reflects last year in Q3, we had a one-off maintenance catch-up, which creates a slightly more difficult comparative. I think if you look back to the prior year quarters, you'll see that in Q3 stepped up on maintenance, then it went back down in Q4. If you edit that out, then the underlying kind of guidance implies similar constant currency growth for recurring revenue that we've seen in the H1 of the year. So very good SaaS momentum, a gradual pickup in subscription licenses, as we guided back in March, and then a fairly stable development in the maintenance stream.

Speaker #3: And that reflects last year in Q3, we had a one-off maintenance catch-up. Which creates a slightly more difficult comparative. And I think if you look back to the prior year quarters, you'll see that in numbers Q3 stepped up on maintenance and it went back down in Q4.

Speaker #3: If you exit that out, then the underlying kind of guidance implies similar constant currency growth for recurring revenue that we've seen in the first half of the year.

Ben Maslen: If you edit that out, then the underlying kind of guidance implies similar constant currency growth for recurring revenue that we've seen in the H1 of the year. So very good SaaS momentum, a gradual pickup in subscription licenses, as we guided back in March, and then a fairly stable development in the maintenance stream.

Speaker #3: We saw very good SaaS momentum, with a gradual pickup in subscription licenses as we guided back in March, and then a fairly stable development in the maintenance stream.

Speaker #1: Yeah. No, I agree. And then I would add also that I mean, maybe the most say the best number to look at to understand the guidance would be to look at the ARR.

Mattias Stenberg: Yeah. No, I agree. I would add also that maybe the best number to look at to understand our guidance would be to look at the ARR, where we are guiding for 6% to 8% for the full year.

Speaker #1: Right? Where we are guiding for 6 to 8, right, for the full year.

Operator: Our next question comes from Gabriela Borges at Goldman Sachs. Please unmute your line and ask your question.

Speaker #2: Our next question comes from Gabriella Borg at Goldman Sachs. Please unmute your line and ask your question.

Speaker #6: Hi, good morning. Thank you. I also wanted to stay on this topic of organic guidance. For Ben and Matthias, I'm trying to figure out—

Gabriela Borges: Hi. Good morning. Thank you. I also wanted to stay on this topic of organic guidance. For Ben and Mattias, I am trying to figure out, the dynamics that are happening in public safety, it sounds like those are par for the course, meaning there are not new dynamics. I am trying to understand what was the thinking to originally include those deals on guidance, or what changed? Why are those deals elongating now? Why are those deals pushing out now? If I put it all together, when do you think you will be back consistently in the 3% or 4% organic range? Thank you so much.

Speaker #6: So the dynamics that are happening in public safety, it sounds like they're par for the course—meaning there are no new dynamics. So, I'm trying to understand what was the thinking to originally include those deals in guidance?

Speaker #6: Or what changed? Why are those deals elongating now? Why are those deals pushing out now? And then if I put it all together, when do you think you'll be back consistently in the three to four percent organic range?

Gabriela Borges: Why are those deals elongating now? Why are those deals pushing out now? If I put it all together, when do you think you will be back consistently in the 3% or 4% organic range? Thank you so much.

Speaker #6: Thank you so much.

Speaker #3: Yeah, I mean, if we start maybe with the second half of the question, I would say, I mean, long-term we are guiding for that our organic reported growth should close in on the ARR growth, right?

Mattias Stenberg: Yeah, if we start maybe with the H2 of the question, I would say, long term, we are guiding for that our organic reported growth should close in on the ARR growth. We are not guiding for 3% to 4% long term. That was a guidance for this year. I think maybe that is a good distinction to make. What has changed? I agree with you, it is not a new dynamic. I guess what has changed it is that some deals slipped here in Q2, and then we took a more cautious approach on the rest of the year. I guess that is a transparent answer on that. Like we said, it is possible that some of these deals actually come in the H2, but yeah, we have chosen to take a prudent approach on it.

Speaker #3: So we are not guiding for three to four percent long-term, right? That was a guidance for this year. So I think maybe that's a good distinction to make.

Speaker #3: But what has changed? I agree with you—it's not a new dynamic. I guess what has changed is that some deals slipped here in Q2.

Mattias Stenberg: I guess what has changed it is that some deals slipped here in Q2, and then we took a more cautious approach on the rest of the year. I guess that is a transparent answer on that. Like we said, it is possible that some of these deals actually come in the H2, but yeah, we have chosen to take a prudent approach on it.

Speaker #3: And then we took a more cautious approach on the rest of the year also. I mean, I guess that's a transparent answer on that, right?

Speaker #3: I mean, like we said, it's possible that some of these deals actually come in the second half, but yeah, we have chosen to take a prudent approach on it.

Speaker #6: And that approach is what you will be sticking with over the next several quarters as a public company where you'll be taking a more prudent approach to these types of large deals.

Gabriela Borges: That approach is what you will be sticking with over the next several quarters as a public company, where you will be taking a more prudent approach to these types of large deals? As in, does it reset you to a new, more conservative baseline on a go-forward basis?

Speaker #6: As in, does it reset you to a new, more conservative baseline on a go-forward basis as well?

Ben Maslen: No, I don't think so. I think we will adopt a consistent approach to these orders guidance going forward. I think that makes sense. The potential for those orders coming in hasn't changed. It is just a question of timing. If they don't happen in the H2 of this year, perpetual is weaker in 2026. If they flow into 2027, it will be a bit stronger. You end up with the same growth overall.

Speaker #1: No. No, I don't think so. I think we will adopt a consistent approach to these orders and guidance going forward. So I think that makes sense.

Speaker #1: But the potential for those orders coming in hasn't changed. It's just a question of timing, right? So if they don't happen in the second half of this year, perpetual is weaker in 2026.

Speaker #1: If they flow into 2027, it'll be a bit stronger. You end up with the same growth. Overall.

Speaker #6: That makes sense.

Gabriela Borges: That makes sense.

Speaker #1: Yeah.

Ben Maslen: Yeah.

Speaker #6: Okay. Thank you.

Gabriela Borges: Okay. Thank you.

Speaker #3: Thanks.

Ben Maslen: Thanks.

Speaker #2: Our next question comes from Lachlan Brown at Rothschild & Co. Redburn. Please unmute your line and ask your question.

Operator: Our next question comes from Lachlan Brown at Rothschild & Co Redburn. Please unmute your line and ask your question.

Speaker #7: Hi Matthias, Ben, congrats on the first quarter reporting as an independent company. On the reduced full-year organic revenue guidance, could you just break down that reduction a little bit further?

Lachlan Brown: Hi, Mattias, Ben. Congrats on the Q1 reporting as an independent company. On the reduced full year organic revenue guidance, could you just break down that reduction a little bit further? Appreciate most of it was driven by perpetual license slowdown and the deal delays that you have called out. Should we consider much attribution to broader macroeconomic or general softness within that?

Speaker #7: Appreciate most of it was driven by perpetual license slowdown and the deal delays that you've called out. But should we consider much attribution to broader macroeconomic or general softness within that?

Speaker #3: No, I wouldn't. I would say it's purely related to those perpetual deals in the public safety sector. Any other macro forces and so on, we had considered in our original guidance.

Mattias Stenberg: No, I wouldn't. I would say it's purely related to those perpetual deals in the public safety sector. Any other macro forces and so on, we had considered in our original guidance. I think that would be my comment to that.

Speaker #3: I think that would be my comment to that.

Speaker #7: That's clear, thanks. And on the subscription license side, it does sound like the monthly usage trends were quite reasonable in this quarter. What are your underlying assumptions for that, I guess, more variable component as we move into the second half of the year?

Lachlan Brown: That's clear. Thanks. On the subscription license side, it does sound like the monthly usage trends were quite reasonable in this quarter. What are your underlying assumptions for that, I guess, more variable component as we move into the H2 of the year?

Speaker #3: Yeah. Hi Lachlan. Yeah, the expectation hasn't really changed since we described it in March. It was down in the first half of the year against tougher comps.

Ben Maslen: Yeah. Hi, Lachlan. Yeah, the expectation hasn't really changed since we described it in March. It was down in the H1 of the year against tougher comps. It started now to flip to mild growth in Q2, and I think you can see that in the slide that we put in the investor deck, and we assume a similar trend through the H2. We're not baking in an acceleration here in the monthly subscriptions, more of a sequentially flattish trend against easier comps.

Speaker #3: It started now to flow to mild growth in Q2. I think you can see that in the slide that we've put in the investor deck.

Speaker #3: And we assume a similar trend through the second half. We're not baking in an acceleration here in the monthly subscriptions. More of a sequentially flattish trend against easier comps.

Speaker #7: I appreciate the question. Thanks.

Lachlan Brown: Appreciate the questions. Thanks.

Speaker #3: Thanks.

Ben Maslen: Thanks.

Speaker #2: Our next question comes from Daniel Gerberg at Handelsbanken. Please unmute your line and ask your question. Hi Daniel. Please unmute your line to ask your question.

Operator: Our next question comes from Daniel Sjöberg at Handelsbanken. Please unmute your line and ask your question. Hi, Daniel. Please unmute your line to ask your question.

Daniel Sjöberg: Yes. Can you hear me now?

Daniel Djurberg: Yes. Can you hear me now?

Speaker #5: Yes. Yeah. Can you hear me now? Hi, Daniel. Can you hear me? hi there. Hi Matthias. Hi Ben and Elizabeth. Yeah. A few questions from my side.

Mattias Stenberg: Hi, Daniel.

Ben Maslen: Yeah. Hi, Daniel.

Daniel Sjöberg: Okay. Can you hear me? Hi there. Hi, Mattias. Hi, Ben and Elizabeth. A few questions from my side. First, a little bit on you are working, I guess, to expand the workflow adaption cross and upselling. You mentioned here in the deck 86% of customers still on a single workflow. Are there any targets we can follow, or how are you working with this to really get this going?

Daniel Djurberg: Okay. Can you hear me? Hi there. Hi, Mattias. Hi, Ben and Elizabeth. A few questions from my side. First, a little bit on you are working, I guess, to expand the workflow adaption cross and upselling. You mentioned here in the deck 86% of customers still on a single workflow. Are there any targets we can follow, or how are you working with this to really get this going?

Speaker #5: First, a little bit on you're working I guess to expand the workflow adoption across an upselling. You mentioned here in the deck 8 to 6 percent of customers still on a single workflow.

Speaker #5: So are there any targets we can follow or how are you working with this to really get this going?

Mattias Stenberg: Yeah. I do not think we said anywhere that it is still 86%. It might be a slide from the investor day that we have not updated, to be honest. I did say in the call that, or in my intro, that 100 customers added another solution in the quarter. We have not updated 86% numbers. I am not going to give you a number here. I think that is a number we will probably give more like once a year. I could say that it is lower than 86% today, so we are making progress.

Speaker #3: Yeah. I don't think we said anywhere that it's still 86%. It might be a slide from the investor day that we haven't updated, to be honest.

Speaker #3: I did say in the call that or in my intro that 100 customers added another solution in the quarter. We haven't updated 86% numbers.

Speaker #3: I'm not going to give you a number here. I think that's a number we'd probably give more like once a year. But I can say that it is lower than 86 today.

Speaker #3: So we are making progress.

Speaker #5: Perfect. And if I may also, on the guidance, on the perpetual referrals, in protect, I guess this is only in America, in public safety and nothing.

Daniel Sjöberg: Perfect. If I may also, on the guidance on the perpetual deferrals in Protect, I guess this is only in Americas, in public safety and not elsewhere.

Daniel Djurberg: Perfect. If I may also, on the guidance on the perpetual deferrals in Protect, I guess this is only in Americas, in public safety and not elsewhere.

Speaker #5: Not elsewhere.

Speaker #3: Yeah. Yeah, that's correct.

Mattias Stenberg: Yeah. That is correct.

Speaker #5: And fine. Yeah. And finally, also on the highlighted data center win you spoke about. Can you comment a little bit more on your direct or indirect revenue exposures to these growing areas like AI data centers and related energy solutions and so on?

Daniel Sjöberg: And finally, also on the highlighted data center win you spoke about, can you comment a little bit more on your direct or indirect revenue exposures to these growing areas like AI data centers and related energy solutions and so on?

Daniel Djurberg: And finally, also on the highlighted data center win you spoke about, can you comment a little bit more on your direct or indirect revenue exposures to these growing areas like AI data centers and related energy solutions and so on?

Speaker #3: Yes, so a couple of things to say about that. I think we have several customers that are in the data center business. I'm not going to name them.

Mattias Stenberg: Yes. So a couple of things to say about that. I think we have several customers that are in the data center business. I am not going to name them, but we won another one, another hyperscaler in the quarter, like I mentioned. Also important to say is that for us so far, it has been mainly on the operate side with our Octave Attune product where we have seen the most success. So it has been mainly when these centers are being built or have been built. That is where we have seen the most business. We have not had so much wins. We have a few, but not so many wins on the design side yet. And I guess that is because they tend to use simpler design solutions.

Speaker #3: And but we won another one, another hyperscaler in the quarter, like I mentioned. Also important to say is that for us so far, it's been mainly on the operate side with our Attune product where we've seen the most success.

Speaker #3: So it's been mainly when these centers are being built, or have been built. That's where we've seen the most business. We have not had so much wins.

Mattias Stenberg: So it has been mainly when these centers are being built or have been built. That is where we have seen the most business. We have not had so much wins. We have a few, but not so many wins on the design side yet. And I guess that is because they tend to use simpler design solutions.

Speaker #3: We have a few, but not so many wins on the design side yet. And I guess that is because they tend to use simpler design solutions.

Speaker #3: Obviously, we are trying to educate them and obviously sell the whole concept of life cycle intelligence and digital twins, etc., to get them to adopt more advanced designs.

Mattias Stenberg: Obviously, we are trying to educate them and obviously sell the whole concept of life cycle intelligence and digital twins, et cetera, to get them to adopt more advanced designs. But we will see on that. But clear is that we are having very good success on the operate part of the data centers.

Speaker #3: But we'll see on that, right? But what is clear is that we're having very good success on the operate part of the data centers.

Speaker #1: And if I can add, Daniel,

Ben Maslen: If I can add, Daniel, on the indirect side, which I think was part of your question. As the data center build-out happens, you are going to need a lot of power generation and distribution to support it. We obviously have geospatial tools that go to mapping those grid networks, and for very large power plants, so kind of turbines, nuclear plants, and things like that, you would use the design tools to help build those plants.

Speaker #5: On the indirect side, which I think was part of your question, as the data center build-out happens, you're going to need a lot of power generation and distribution to support it.

Speaker #5: We obviously have geospatial tools that go to mapping those grid networks. And for very large power plants, so kind of turbines, nuclear plants, and things like that, you would use the design tools to help build those plants.

Speaker #5: Perfect. And when you're talking to you, Ben, the restriction shortage 10 billion US dollars for six months, roughly one and a half percent of total revenue.

Daniel Sjöberg: Perfect. When talking to you, Ben, the restructuring charges, $10 million US first six months, roughly 1.5% on total revenue. Is this the level we should expect going forward as well, around 1% to 2% of revenue as restructuring?

Daniel Djurberg: Perfect. When talking to you, Ben, the restructuring charges, $10 million US first six months, roughly 1.5% on total revenue. Is this the level we should expect going forward as well, around 1% to 2% of revenue as restructuring?

Speaker #5: Is this the level we should expect going forward as well—around 1 to 2 percent of revenue as restructuring?

Speaker #3: Yeah. No.

Ben Maslen: Yeah, no.

Speaker #5: Ballpark?

Daniel Sjöberg: Full park.

Daniel Djurberg: Full park.

Speaker #3: Yeah, I think a bit lower than that. I mean, there wasn't a huge amount of restructuring spend in Q2. There was in Q1.

Ben Maslen: Yeah, I think a bit lower than that. There wasn't a huge amount of restructuring spend in Q2. There was in Q1, to follow through the cash spend from the restructuring program that we announced as part of Hexagon in the back end of last year. We still have some work to do to integrate the different businesses and extract synergies. I don't think it will be as much as we saw last year, or implied in your question.

Speaker #3: So the kind of follow-through, the cash spend from the restructuring program that we announced as part of Hexagon in the back end of last year.

Speaker #3: We still have some work to do to integrate the different businesses and extract synergies. But I don't think it will be as much as we saw last year.

Speaker #3: Or implied in your question.

Speaker #5: Perfect, and thank you. Good luck getting those deals in this year, hopefully. Thanks, Daniel.

Daniel Sjöberg: Perfect. Thank you and good luck getting those deals into this year, hopefully.

Daniel Djurberg: Perfect. Thank you and good luck getting those deals into this year, hopefully.

Mattias Stenberg: Thank you, Daniel.

Ben Maslen: Thanks, Daniel.

Speaker #2: Our next question comes from Ari Freeman with BNP Paribas. Please unmute your line and ask your question. Hi Ari, your line is open to ask your question.

Operator: Our next question comes from Ari Freeman with BNP Paribas. Please unmute your line and ask your question. Hi, Ari, your line is open to ask your question.

Ari Freeman: Hey, can you hear me now?

Ari Friedman: Hey, can you hear me now?

Speaker #6: Hey, can you hear me now?

Speaker #3: Yes. Hi.

Mattias Stenberg: Yes. Hi.

Speaker #6: Hello. Hi. Yeah. Hey. Thanks for taking my question. I had a question about the medium-term guidance on ARR growth and organic revenue growth. Comparatively to when you guys first gave it out at the investor day, how much confidence do you have in that now?

Ari Freeman: Hi. Yeah. Hey, thanks for taking my question. I have a question about the medium-term guidance on ARR growth and organic revenue growth. Comparatively to when you guys first gave it out at the investor day, how much confidence do you have in that now? I guess what has changed today versus the last time you gave it?

Ari Friedman: Hi. Yeah. Hey, thanks for taking my question. I have a question about the medium-term guidance on ARR growth and organic revenue growth. Comparatively to when you guys first gave it out at the investor day, how much confidence do you have in that now? I guess what has changed today versus the last time you gave it?

Speaker #6: And I guess, what has changed today versus the last time you gave it?

Speaker #3: Yeah. The only thing that has changed, like we said, was that we've taken down the organic reported, right, for this year. Because of the timing of this perpetual deal.

Mattias Stenberg: Yeah. The only thing that has changed, like we said, was that we have taken down the organic reported, right, for this year because of the timing of this perpetual deal. I would say medium to long-term, nothing has changed, right? We are confident in our ARR guidance and, like I tried to say, eventually over time, the organic reported will get closer and closer to that ARR, right? Since the perpetual becomes a smaller and smaller part of total revenue.

Speaker #3: So I would say medium to long-term, nothing has changed, right? We are confident in our ARR guidance. And like I've tried to say, eventually over time, the organic reported will get closer and closer to that ARR, right, since the perpetual becomes a smaller and smaller part of total revenue.

Speaker #6: Great. Thank you.

Ari Freeman: Great. Thank you.

Ari Friedman: Great. Thank you.

Speaker #3: No worries. Thanks.

Mattias Stenberg: No worries. Thanks.

Speaker #2: Our next question comes from Alice Jennings with Barclays. Please unmute your line and ask your question.

Operator: Our next question comes from Alice Jennings with Barclays. Please unmute your line and ask your question.

Alice Jennings: Hi. Thanks for taking my question. I also just have a question on the two-thirds of growth that came from existing customers. We would be interested in a bit more color around that. So in terms of how can we think about how that's split up into pricing, churn, and then cross and upselling in the quarter?

Speaker #7: Hi. Thanks for taking my question. I also just have a question on the two-thirds of growth that came from existing customers. And we would be interested in a bit more color around that.

Speaker #7: So, in terms of how we can think about how that's split up into pricing, churn, and then cross- and upselling in the quarter?

Speaker #3: Yeah. I mean, we don't we haven't broken out that on a quarterly basis, Alice, to be honest, right? So it's a bit hard to give you live.

Mattias Stenberg: Yeah. We haven't broken out that on a quarterly basis, Alice, to be honest. It's a bit hard to give you live. But obviously it's a combination of price increases, upsell, and a little bit of churn. But like we said at our investor day we have a 97% gross retention. We don't have a lot of churn, but of course a little bit. Yeah, I won't break it down in exact percentages, but yeah, roughly two-thirds came from the installed base and one-third from new customers.

Speaker #3: But obviously, it's a combination of price increases, upsell, and a little bit of churn. But like we said at our Investor Day, we have a 97% gross retention.

Speaker #3: So we don't have a lot of churn, but of course, a little bit. But yeah, I won't break it down in exact percentages. But yeah, roughly two-thirds came from the installed base and one-third from new customers.

Speaker #7: Okay. Cool. That's helpful. Thank you. And then if I could just ask a bit of a bigger picture question. On AI, so the AI products that you have at the moment, how is how does the monetization of that work in terms of its adoption?

Alice Jennings: Okay, cool. That's helpful. Thank you. If I could just ask a bit of a bigger picture question on AI. The AI products that you have at the moment, how does the monetization of that work? In terms of, is adoption voluntary or is it included in the subscriptions that you're offering? Yeah, just some details there would be really good.

Speaker #7: Voluntary or is it included in the subscriptions that you're offering? Yeah, just some details there would be really good.

Speaker #3: Yeah, no, good question. It is early days, I would say, for the monetization part. We are expanding our AI, let's say, offering and agents, and the embedded AI.

Mattias Stenberg: Yeah, no, good question. It is early days, I would say, for the monetization part. We are expanding our AI, let's say, offering and agents and the embedded AI we have in our products every day. We launched, I think it was 9 different agents in the quarter, and we have another cohort of agents being released in the H2. Then we also have our Octave Aria platform, right? That we haven't given a date yet to our customers, so I won't tell you, but that we're going to release relatively soon. There's lots of stuff happening on the AI front. So far, we've focused on getting usage up and getting really outcomes, I would say. Get our customers more effective, solving problems for them. For example, like we're doing in the Octave CoLabs, right?

Speaker #3: We have our products every day. We launched, I think, nine different agents in the quarter, and we have another cohort of agents being released in the second half.

Speaker #3: And then we also have our Octave Aria platform, right, that we are we haven't given a date yet to our customers. So I won't tell you.

Mattias Stenberg: That we haven't given a date yet to our customers, so I won't tell you, but that we're going to release relatively soon. There's lots of stuff happening on the AI front. So far, we've focused on getting usage up and getting really outcomes, I would say. Get our customers more effective, solving problems for them. For example, like we're doing in the Octave CoLabs, right?

Speaker #3: But that's something we're going to release relatively soon. So there's lots of stuff happening on the AI front. So far, we've focused on getting usage up and really getting outcomes. I would say, getting our customers more effective—solving problems for them.

Speaker #3: For example, like we're doing in the co-labs, right? We're focusing on a set of use cases and seeing how much that can generate for our customers.

Mattias Stenberg: We're focusing on a set of use cases and see how much that can generate for our customers. We have not 100% decided how to monetize AI as a feature of the product or more as of an outcome of what we build together.

Speaker #3: And we have not 100% decided how to monetize AI as a feature of the product or more as an offering together.

Speaker #7: Okay, cool. That's very helpful. Thanks a lot. And yeah, good luck for the next quarter.

Alice Jennings: Okay, cool. It is very helpful. Thanks a lot. And yeah, good luck for the next quarter.

Speaker #3: No worries.

Mattias Stenberg: No worries.

Speaker #2: Our next question comes from Michael Leeson at BNB Carnegie. Please unmute your line and ask your question. Your line is unmuted to go ahead and ask your question.

Operator: Our next question comes from Mikael Laséen at DNB Carnegie. Please unmute your line and ask a question. Your line is unmuted. You go ahead and ask your question. I think we are having some audio issues, so I will move on to the next question from Johan Eliason at CB1 Markets. Please go ahead and ask your question. Hi, Johan. To unmute your phone line, please dial star six and ask your question.

Speaker #2: I think we're having some audio issues. So I will move on to the next question from Johan Eliasson at CB1 Markets. Please go ahead and ask your question.

Speaker #2: Hi, Johan. To unmute your phone line, please dial star six and ask your question.

Johan Eliason: Good morning. This is Johan Eliason at SP1. I was just-

Speaker #5: So, good morning. This is Johan Eliasson at SB1. I was just curious about the capitalization of R&D. You mentioned it's a 1%, or 100 basis points, headwind on the margin in this quarter, as you've moved from 8% of sales to 7% of sales.

Johan Eliason: Good morning. This is Johan Eliason at SP1. I was just-

Mattias Stenberg: Hi

Johan Eliason: curious about the capitalization of R&D. You mentioned it's a 1%, 100 basis point headwind on the margin in this quarter, as you moved from 8% of sales to 7% of sales, and your target longer term is 4%. Do you have any pace for this? In terms of gross R&D spend, how should we think about this number? Is it sort of estimated to be stable going forward or up or down? Thank you.

Speaker #5: And your targets longer term is 4%. Do you have any pace for this? And in terms of gross R&D spend, how should you think about this number?

Speaker #5: Is it sort of estimated to be stable going forward, or is it expected to go up or down? Thank you.

Speaker #3: Yeah. Hi, Johan. Yeah. For this year, we guided that R&D capitalization as a percentage of sales would be between 7% to 8% for the year.

Ben Maslen: Yeah. Hi, Johan. For this year, we guided that R&D capitalization as a percentage of sales would be between 7% to 8% for the year. So that's still what we feel. It was towards the low end of that range in Q2, and I would expect that for Q4 as well. But we still expect to be in range. When we set guidance for 2027, I think we can give you a more specific range. But for now, I would assume in your models, a fairly linear direction between what we've guided for this year and then the medium-term outlook that we gave, which is 2030. In terms of growth spend, sorry, the second part.

Speaker #3: So that's still what we feel. It was towards the low end of that range in Q2, and I would expect that for Q3 and Q4 as well.

Speaker #3: But we still expect to be in the range. We'll have to when we set guidance for '27, I think we can give you a more specific range.

Speaker #3: But for now, I would assume in your models, a fairly linear direction between what we've guided for this year and then the medium-term outlook that we gave, which is 2030.

Ben Maslen: But for now, I would assume in your models, a fairly linear direction between what we've guided for this year and then the medium-term outlook that we gave, which is 2030. In terms of growth spend, sorry, the second part.

Speaker #3: In terms of gross spend, sorry, the second one.

Johan Eliason: In terms of growth. Yep.

Speaker #5: And then in terms of yeah.

Johan Eliason: In terms of growth. Yep.

Speaker #3: Yeah. Yeah. We're aiming to keep gross spend pretty flat level going forward as a percentage of revenues. Jay, Vivek, and their teams are using a lot of AI tools at the moment to accelerate product development and get efficiencies.

Ben Maslen: Yeah. We're aiming to keep growth spend at a pretty flat level going forward as a percentage of revenues. Jay, Vivek, and their teams are using a lot of AI tools at the moment to accelerate product development and get efficiencies. As I said back in March, we're reinvesting those savings in new product and accelerating growth. So all in, we expect cash spend or growth spend, if you like, sorry, to stay at a stable level going forward.

Speaker #3: But as I said back in March, we're reinvesting those savings in new products and accelerating growth. So, all in, we expect cash spend, or gross spend if you like—sorry—to stay at a stable level going forward.

Johan Eliason: Excellent. Then just on these restructuring charges, how much of that is likely to be a cash impact in this year? Thank you.

Speaker #5: Excellent. And then, Justin, these restructuring charges—how much of that is likely to be a cash impact in this year? Thank you.

Mattias Stenberg: For restructuring charges, I think is the question.

Speaker #3: For restructuring charges, that's the question. okay. Yeah. I mean, I think for the second half of the year, probably restructuring will be somewhere between 5 and 10 million dollars.

Ben Maslen: Okay. I think for the H2 of the year, probably restructuring will be somewhere between $5 million and $10 million. So as I said earlier, down from the run rate we saw in Q1.

Speaker #3: So, as I said earlier, that's down from the run rate we saw in Q1.

Speaker #5: And it's sort of a cash the cash impact is similar.

Johan Eliason: It's sort of the cash impact is similar?

Speaker #3: Yeah, yeah, I would assume that.

Ben Maslen: Yeah, I would assume that.

Speaker #5: Okay, excellent. Many thanks, and good luck with the next quarter.

Johan Eliason: Okay, excellent. Many thanks and good luck with the next quarter.

Speaker #3: Yeah. Thanks.

Ben Maslen: Yeah, thanks.

Speaker #2: Our next question comes from Michael Lassine at DNB Carnegie. Please unmute your line and ask your question.

Operator: Our next question comes from Mikael Laséen at DNB Carnegie. Please unmute your line and ask your question.

Speaker #5: Yeah. I hope you can hear me now.

Mikael Laséen: Yeah, I hope you can hear me now.

Speaker #3: Yeah. We can. Hi, Michael.

Mattias Stenberg: Yeah, we can. Hi, Mikael.

Speaker #5: Great. Hi, okay, thanks for taking my question. I just had a couple of questions on the end markets. I think you mentioned in Q1 that you had some issues in the Middle East due to the situation there.

Mikael Laséen: Great. Hi. Thanks for taking my question. I just had a couple of questions on the end markets. I think you mentioned in Q1 that you had some issues in the Middle East due to the situation there. I do not know if you have had any delays or things like that in Q2 and going into Q3 still affecting you.

Speaker #5: I don't know if you've had any delays or things like that in Q2 and going into Q3. Are those still affecting you?

Speaker #3: Yeah. I mean, on the Middle East, I would say the last couple of years and also going forward, we think this is one of our fastest growing regions.

Mattias Stenberg: Yeah, on the Middle East, I would say, the last couple of years and also going forward, we think this is one of our fastest-growing regions. It was not in Q1, and it was not in Q2. It was not declining either, right? It is just kind of flat. Yes, it has an impact, right? I would not say dramatic.

Speaker #3: It was not in Q1, and it was not in Q2. It was not declining either, right? This is kind of flat. So yes, it has an impact, right?

Speaker #3: But I wouldn't say dramatic.

Mikael Laséen: Okay. Got it. When it comes to these four workflow or applications, you mentioned or indicated the growth rate. Can you be a bit more specific and talk to us about design, build, operate, protect, how much they are growing roughly?

Speaker #5: Okay. Got it. And when it comes to these four workflow or applications, you mentioned or indicated the growth rate. Can you be a bit more specific and talk to us about design, build, operate, protect, how much they are growing roughly?

Mattias Stenberg: Yeah. We have a slide on it also in the earnings presentation that you will find on our website. I think what we are doing there is the classic arrows, right? We are trying to indicate that build was growing the strongest and the other three also growing, but not as fast. They were all growing at a healthy pace where build was the strongest. That is what I will say.

Speaker #3: Yeah. We have a slide on it also in the earnings presentation that you'll find on our website. And I think what we're doing there is the classic arrows, right, where we're trying to indicate that build was growing the strongest and the other three also growing, but not as fast.

Speaker #3: But they were all growing at a healthy pace, where build was the strongest. That's what I'll say.

Speaker #5: Okay. And final one. When it comes to maintenance subscriptions, it looks like it's flat this year on year in terms of revenue here. And in the second half, you have a bit more difficult comps.

Mikael Laséen: Okay. A final one. When it comes to maintenance subscriptions, it looks like it is flat this year in terms of revenue here. In the H2, you have a bit more difficult comps. Is that a seasonality phenomenon or anything that you can help us out with here to model it for the H2? It is a relatively big part of the subscriptions, of course.

Speaker #5: Is that the seasonality phenomenon, or anything that you can help us out with here to model it for the second half? It's relatively big part of the subscriptions, of course.

Speaker #3: Yeah. No. Hi, Michael. No. As I said in an earlier question, in Q3, we do have a more difficult comparison in maintenance because we had a kind of one-off catch-up in Q3 last year that obviously won't repeat this year.

Ben Maslen: Yeah. No. Hi, Mikael. No, as I said in an earlier question, in Q3, we do have a more difficult comparison in maintenance because we had a kind of one-off catch-up in Q3 last year that we obviously will not repeat this year. So that takes just over a percent off the year-on-year growth, and that is reflected in the 3% to 5% organic constant currency growth we have in Q3. But on an underlying basis, the growth would be pretty similar to what we have seen in the H1, ex that.

Speaker #3: So that takes just over a percent off the year-on-year growth. And that's reflected in the three to five percent organic constant currency growth we have in Q3.

Speaker #3: But on an underlying basis, the growth would be pretty similar to what we've seen in the first half. Ex that.

Speaker #5: Okay. Thanks.

Mikael Laséen: Okay, thanks.

Speaker #2: This concludes our Q&A session. I will now turn the call back to Mattias Stenberg for closing remarks.

Operator: This concludes our Q&A session. I will now turn the call back to Mattias Stenberg for closing remarks.

Speaker #3: Thank you very much, operator. And thank you to everyone on the call. Thank you for joining us on our first public call as a public company.

Mattias Stenberg: Thank you very much, operator. Thank you to everyone on the call. Thank you for joining us on our first public call as a public company. We are excited about the future and looking forward to talk to you again soon. Thank you very much.

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Q2 2026 Octave Intelligence PLC Earnings Call

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