Pexip Holding ASA (PEXIP.OL) | Investment Case

1. Company Snapshot

1.a. Company Description

Pexip Holding ASA provides a video-first meeting platform worldwide.The company offers self-hosted software application and as-a-service deployment options for enterprise video conferencing, built on its proprietary Infinity technology.Its interoperability solutions are integrated into Microsoft Teams, Skype for Business, and Google Hangouts Gateway interop, a video system device registration and a meeting and calling service.

The company serves government, healthcare, education, finance, legal, and retail industries.Pexip Holding ASA was founded in 2011 and is headquartered in Oslo, Norway.

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1.b. Last Insights on PEXIP

Pexip Holding ASA's recent momentum is fueled by its adaptability to evolving market conditions and technological advancements. The company's ability to navigate economic uncertainties and leverage innovation to sustain growth is crucial. With the eurozone's ongoing economic recovery and strengthened business confidence, Pexip's robust growth potential and resilience are attractive. According to recent analyses, identifying high-growth tech stocks like Pexip requires a focus on companies that can capitalize on technological advancements and demonstrate strong fundamentals.

1.c. Company Highlights

Last Price	62.9
Change Percentage	-2.02%
Open	63.5
Previous Close	64.2
Market Cap ( Millions)	6446
Volume	93586
Year High	79.6
Year Low	34
M A 50	73.71
M A 200	64.12

FCF Yield	5.71%
Dividend Yield	3.97%
ROE	15.96%
Debt / Equity	3.20%
Net Debt / EBIDTA	-104.85%
Price To Book	4.16
Price Earnings Ratio	27.12
Price To FCF	17.52
Price To sales	5.25
EV / EBITDA	19.16

2. Pexip's Q4 Results Exceed Expectations with Strong ARR Growth

Pexip's fourth-quarter results showcased a robust financial performance, with annual recurring revenue (ARR) reaching $131 million, at the top end of the updated Q4 guidance. The company's EBITDA was NOK 94.2 million in Q4 and NOK 316 million for the full year, demonstrating a significant improvement in profitability. Earnings per share (EPS) came in at $0.967, beating estimates of $0.83. The strong financial performance was driven by a 25% year-over-year ARR growth in the Secure and Custom business area, reaching $56.3 million, and a 10% year-over-year increase in Connected Spaces ARR, reaching $74.7 million.

Publication Date: Feb -22

                                    📋 Highlights
                                    ARR Growth::
                                                Annual recurring revenue (ARR) reached $131 million in Q4, up $8.8 million, hitting the top end of updated guidance.
EBITDA/Free Cash Flow::
                                                Q4 EBITDA was NOK 94.2 million, with full-year EBITDA at NOK 316 million and free cash flow of NOK 354 million.
Secure & Custom Growth::
                                                25% YoY ARR growth to $56.3 million, driven by demand for secure, sovereign communication solutions.
Connected Spaces Expansion::
                                                ARR grew to $74.7 million, a 10% YoY increase, fueled by major customer acquisitions.
Q1 Guidance::
                                                Expected ARR of $133–$136 million by Q1 2024, maintaining a positive outlook amid global trends toward non-U.S. cloud alternatives.

                                

Business Segment Performance

The Secure and Custom business area saw significant growth, driven by increased awareness around secure and sovereign communication solutions. As Trond Johannessen noted, "The trend of countries seeking alternatives to U.S. cloud platforms is a positive development for Pexip." The Connected Spaces ARR grew by $5.9 million, reaching $74.7 million, fueled by major customer wins. The company's two main solution areas, Pexip Secure and Custom, and Pexip Connected Spaces, continue to drive growth and demonstrate a strong market position.

Valuation and Outlook

With a P/E Ratio of 27.68 and an EV/EBITDA of 19.58, the market is pricing in a certain level of growth. Analysts estimate next year's revenue growth at 13.2%, which is slightly lower than the current valuation implies. However, the company's strong track record of growth and its unique technology position it for continued success. The recommended dividend of NOK 4 per share, up from NOK 2.5 last year, also provides a attractive yield of 3.89%. The company's guidance for Q1 ARR in the range of $133 million to $136 million is also positive, indicating continued growth momentum.

Growth Prospects and Challenges

The company's Secure and Custom area growth has accelerated in dollar terms quarter-over-quarter, and management expects stable growth to continue. However, the increase in churn in this business area was higher than in previous quarters, mainly due to support contracts in Asia. Management considers this a one-off, and the business is generally very sticky. The release of the interoperability solution between Microsoft Teams and Google Meet hardware has not impacted Pexip's competitive position, as their solution remains premium.

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.96%)

6. Segments

Self-hosted Software

Expected Growth: 7.5%

Pexip Holding ASA's self-hosted software growth is driven by increasing demand for secure, flexible, and scalable video conferencing solutions. Key drivers include rising remote work adoption, growing need for enterprise-grade security, and increasing adoption of cloud-based infrastructure. Additionally, Pexip's software integrates with popular platforms, expanding its addressable market.

Pexip As-a-service

Expected Growth: 8.5%

Pexip As-a-service growth driven by increasing demand for cloud-based video conferencing solutions, fueled by remote work adoption, digital transformation, and cost savings. Strong partnerships with Microsoft and Google, expanding into new markets, and innovative product offerings also contribute to the 8.5% growth.

7. Detailed Products

Pexip Infinity

A scalable and flexible video conferencing platform that enables organizations to deploy and manage video conferencing infrastructure

Pexip Service

A cloud-based video conferencing service that provides a scalable and secure platform for video meetings and collaboration

Pexip Fusion

A software-based video conferencing solution that enables organizations to integrate video conferencing with existing infrastructure

Pexip Insync

A meeting room solution that provides a seamless and intuitive video conferencing experience

8. Pexip Holding ASA's Porter Forces

Forces Ranking

Threat Of Substitutes

Pexip Holding ASA operates in a niche market, providing video conferencing solutions. While there are substitutes available, they are not as comprehensive as Pexip's offerings, reducing the threat of substitutes.

Bargaining Power Of Customers

Pexip's customers are largely enterprises and organizations, which have limited bargaining power due to the customized nature of Pexip's solutions.

Bargaining Power Of Suppliers

Pexip relies on a few key suppliers for its hardware and software components. While there are alternative suppliers available, Pexip's dependence on these suppliers gives them some bargaining power.

Threat Of New Entrants

The video conferencing market is attractive, and new entrants may be drawn to it. However, Pexip's established brand and customer base provide a barrier to entry, reducing the threat of new entrants.

Intensity Of Rivalry

The video conferencing market is highly competitive, with established players like Zoom, Microsoft, and Cisco. Pexip faces intense competition, which may lead to pricing pressures and reduced market share.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	1.17%
Debt Cost	4.33%
Equity Weight	98.83%
Equity Cost	9.33%
WACC	9.27%
Leverage	1.18%

11. Quality Control: Pexip Holding ASA passed 4 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Pexip

A-Score: 4.7/10

Value: 1.1

Growth: 7.1

Quality: 7.5

Yield: 3.1

Momentum: 7.0

Volatility: 2.7

1-Year Total Return ->

Fabasoft

A-Score: 4.6/10

Value: 3.6

Growth: 6.8

Quality: 6.8

Yield: 2.5

Momentum: 3.0

Volatility: 5.0

1-Year Total Return ->

Lectra

A-Score: 4.3/10

Value: 4.5

Growth: 5.8

Quality: 6.8

Yield: 2.5

Momentum: 2.0

Volatility: 4.3

1-Year Total Return ->

Esker

A-Score: 4.2/10

Value: 0.0

Growth: 7.2

Quality: 6.8

Yield: 0.0

Momentum: 5.5

Volatility: 5.7

1-Year Total Return ->

Cerillion

A-Score: 3.6/10

Value: 1.8

Growth: 5.2

Quality: 9.5

Yield: 1.2

Momentum: 0.5

Volatility: 3.0

1-Year Total Return ->

Swvl

A-Score: 2.5/10

Value: 7.2

Growth: 4.4

Quality: 3.1

Yield: 0.0

Momentum: 0.0

Volatility: 0.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

4.89%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.27%

Pexip Holding ASA - NO0010840507

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on PEXIP

1.c. Company Highlights

Average Quality

Stable Momentum

Medium Volatility

Earnings Beats

Revenues Beats

Strong Momentum

Lower Growth

Average Yield

Fairly Valued

Expensive

Better Quality

Revenues Miss

Earnings Miss

2. Pexip's Q4 Results Exceed Expectations with Strong ARR Growth

Business Segment Performance

Valuation and Outlook

Growth Prospects and Challenges

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.96%)

6. Segments

Self-hosted Software

Expected Growth: 7.5%

Pexip As-a-service

Expected Growth: 8.5%

7. Detailed Products

Pexip Infinity

Pexip Service

Pexip Fusion

Pexip Insync

8. Pexip Holding ASA's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Pexip Holding ASA passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

62.9$

Current Price

62.9$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA