Good day everyone. Welcome to the Octave Q3 26 earnings call. All participants will be in a 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 Chalk, Vice President of Investor Relations. Go ahead.

Thank you operator and welcome to everyone joining us for Octave's third 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've 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 and 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 under forward-looking statements in today's earnings press release available at investors.octave.com and in Octave's filings with the SEC, including on Forms 10, 10Q, and 8K. Actual results could differ materially from those expressed or implied by these forward-looking statements. We assume no responsibility to update these 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.

Thank you, Elizabeth, and hello to everyone joining us today. The third quarter results were broadly as we expected, and in some areas a bit better. ARR grew 7% on an organic basis to $1.171 billion in line with our expectations and at the midpoint of our full year 6-8% growth range. Recurring revenue grew 5% organically at the top of our guidance range with SaaS revenue up 18%. Total revenue was 415 million, up 6% organically and above our guidance range. And our adjusted operating margin was 28% ahead of guidance and up roughly 100 basis points over the prior year. Ben will take you through additional details in a few minutes, but I want to note a few key points. We came in at the high end of our expectations for recurring revenue growth. which is the better indicator of the health of our business. SAS continues to be our growth engine and now makes up roughly a third of total ARR. All four workflow environments grew ARR in the quarter with the strongest contributions coming from build and design. Over one third of our new ARR in the quarter was from new customers and roughly two thirds came from expansion within our customer base in line with our medium term growth framework. All in all, we are happy with our continued progress as we shift towards subscription based revenue models. The customer environment was broadly consistent with the past several quarters. Budget conversations and deal cycles have not changed in any meaningful way. EMEA grew double-digit in the third quarter despite continued uncertainty in the Middle East. The Americas grew steadily, APAC was more mixed with fewer new project starts in some markets, and China was softer on the timing of a few perpetual deals. Owner-operator capex budgets and EPC backlogs from what we can see remain stable to slightly improved. Across our global EPC base subscription licenses which EPCs flex up and down along with their project load. This grew 6% organically and approved again sequentially and September was our strongest month for the year. We said in March we expected this stream to recover in the second half and that is what we are seeing. We are not assuming a sharp acceleration from here but the direction is positive. Before I turn to execution on this year's growth initiatives I want to spend a few minutes on AI. It's a topic that comes up often in investor meetings and I want to reiterate our position. So let me start with the Octave strategy because the AI opportunity has been built into it from the start. In the industries we serve, information does not always carry across the life of an asset. Disconnected information in the lifecycle of mission-critical assets becomes more costly the further downstream it appears. Our answer to this persistent industry challenge is a single platform across all four workflows with a common context layer underneath. So the record created in one workflow is available in the next. By doing this, we aim to close the gaps our customers face between digital intelligence and physical outcomes. We see AI as an opportunity that accelerates our strategy and makes our context more valuable. General purpose LLMs and models are widely available, though they are limited by the context they are grounded in. What is scarce is decades of a customer's engineering standards, asset history, and operating record. And that record lives in our systems. When the asset is something highly complex and mission critical, like a refinery, a food processing plant, or a 911 center, customers need answers they can audit and defend. So far, AI has improved our products in two ways. The first is embedded AI inside the products customers use every day. In the third quarter, we moved an additional 10 AI capabilities from prototype into product. That includes an in-concert assistant, a data sheet converter that turns PDFs and scans into structured engineering data, Predictive Pipe Routing in Forte 3D and the latest version of our public safety SaaS offering OnCall which ships this quarter with three assistants for dispatchers. The second is Agentic AI and our Collabs program is at the forefront of this effort. Colabs puts our product leaders alongside a customer's team to build agentic workflows on the customer's own data, each tied to a measurable economic benefit. An example of one of the delivered applications is an agent that checks isometric drawings at more than 95% validation accuracy. Another agent validated more than 300 general arrangement drawings, Both saving hundreds of engineering hours and catching discrepancies before anything is built. Engineers can spend 10-15% of their modeling time checking design rules and our agent lets them write those rules in plain language, reducing configuration time from weeks to hours. Many of the customer use cases are around rework, one of the most expensive problems in a capital project. Every one of them depends on context from more than one workflow, which is what our platform provides. And customers are now asking how to take these into production and what the pricing looks like. To me, that is the clearest signal of traction. So the earlier results of collabs are promising and there is strong interest in the program from additional customers. The technology stack that supports these agentic AI use cases is coming together rapidly. We've been beta testing the platform this year with an aim to have it generally available early next year. At the base is connectivity and governance, so we connect to any cloud, any system and any model. Above that is the context layer, a living knowledge graph of the asset that every application and agent shares. Then our domain engines and agentic workflows sit across design, build, operate and protect. I want to pause on the context layer for a moment because yesterday we announced an acquisition that strengthens it, Cerebrae. Cerebrae takes legacy plant drawings like piping and instrumentation designs and turns them into a connected knowledge graph of every piece of equipment, pipe, valve and instrument. and how material flows between them. The technology is already running in production at more than 25 sites for some of the world's largest energy companies. Many owner-operators have decades of drawings that were never digitized and that keeps their plant data out of reach for AI. Cerebra gives us a fast way to bring that data into the Octave platform and from there into in concert our design tools and our other build and operate solutions. Why does the context layer matter so much? Our own research gives a good answer. In September, we published a survey of more than 750 industrial leaders. 7 in 10 said they are not retaining the knowledge that will matter most for future operations. And nearly half said their core processes are documented, but the real expertise is not. With a wave of retirements coming, the business constraint for many customers is experienced people and the critical context they bring to their organizations. If we capture that know-how and put it in the flow of work, we expand what customers can do with the people they have. That is new capacity, and over time, capacity is something customers pay for. We think that supports our pricing power. So this brings us to monetization, where we are in the early innings. Today the AI value we are bringing to our customers is embedded in our subscriptions and is supporting retention, expansion and pricing. Alongside that, we are testing consumption-based pricing and building the technology consumption models depend on. We expect to make more progress on this next year as we bring customers our Octave platform and a governed gateway for AI agents. Let me now turn to execution on our two growth drivers starting with product. This year we brought somewhat independent product groups into one organization with one roadmap and we continue to see progress here. Our internal use of AI continues to bring down our R&D cycle time by over 25% or so over the last six months. And we continue to direct that incremental capacity into innovation, not headcount reduction. Examples of progress in the third quarter include a new release for Build Sequence Enterprise, that gives owners and contractors one system of record with a handover ready audit trail. A new version of our SaaS public safety solution OnCall brings sub-second performance and is now ready for agentic workflows. And our effort to bring multi-tenant SaaS ready products across our entire portfolio is well underway with multiple solutions scheduled for 2027 deliveries. Our product leadership continues to see validation from leading third-party industry research. In October, ARC Advisory Group named Octave the only leader in both its enterprise asset management and its digital worker technologies market maps. We were also named a transformation pioneer in EAM. And our products continue to win against competitors. A large US county replaced a competing system with Attune EAM and is expanding into more public works divisions. And in South Korea, an EPC selected on-site completions over the incumbent. And this was our first completions win in that market. So turning to go to market, in August I described our progress as real but early. That is still true and we are making incremental progress. Our consolidated renewals team now runs as one global discipline. We've standardized how we forecast and manage renewals with a focus on on-time execution, smarter pricing and uplift, and closer coordination with customer success and sales. Over time, this revamped function will give us better visibility into recurring revenue and more consistent execution, as well as serving as a contributor to growth. We have already seen improved on time renewal rates and higher average annual uplift. On indirect sales and expanding our channel relationships, we are laying a solid foundation. Sequence and onsite are now transactable on the Microsoft Azure marketplace, and we're working toward a broader co-sell agreement with Microsoft. On cross-sell, we see strong pipeline growth and SaaS bookings for sales of new products to existing customers. Over 10% of new ARR in the third quarter came from cross-sell and we are seeing that the easiest motions are the ones closest to where a customer already works. For example, we see good traction selling BricsCAD into design customers, particularly EPCs. We also see strong expansion around Reliance QMS and Attune EAM in Operate and around on-site completions in Build. As in these examples, many of the early cross-sell motions are happening within one of the four main workflow environments. Two recent customer examples show cross-sell traction happening more broadly across the workflow environments. One of our long-standing design customers, a large EPC, added a tuned EAM in the quarter to manage its equipment across projects worldwide. This started from a sales-led renewal conversation that expanded into a cross-sell win in a new workflow. and a renewable fuels producer became our first cloud native SaaS customer for both Attune EAM and Inconsert, a design and operate deal from day one. Both of these deals bring more than one of our workflows to the same customers, which is what our go-to-market changes are designed to do. This brings us to our outlook for the remainder of the year. We are well on track to achieve our full year guidance, including ARR growth of 6-8%, recurring revenue growth of 5.5-6%, and free cash flow margin of approximately 20%. We will share details on our 2027 outlook alongside our fourth quarter and full year results in February. Before I hand the call over to Ben, I am pleased to report that our board recently authorized a share repurchase program of up to $200 million, which gives us flexibility to buy back shares over time. This new program reflects confidence in our strategy, in the strength of our free cash flow and conviction in our medium term plan. This was our first full quarter as a standalone company, and the building blocks are now in place. We are investing in the product, the go-to-market opportunity in front of us is large, and everything I see gives me confidence in our medium-term plan. Our balance sheet is strong, our cash generation is good, and our priority is unchanged. driving higher ARR growth while expanding our free cash flow margin. So with that, thank you very much for joining and over to you Ben.

Thank you Mattias and hello to everyone on the call today. Many of the metrics I'll discuss today are non-GAAP measures which are reconciled in our press release and on our Octave Investor website. As Mattias said earlier, our third quarter results were broadly in line with expectations and a bit better in certain areas. We ended the third quarter with ARR of $1.17 billion, up 7% year on year on an organic constant currency basis and in line with our expectations. We ended the quarter with 3,293 customers with ARR above $25,000 up from 3,267 at the end of the second quarter. Our largest customers continue to grow nicely as we address the white space within our customer base. We now have 450 customers above $500,000 in ARR up from 438 last quarter and 200 customers above 1 million in ARR up from 186 at the end of last year. Recurring revenue, which is comprised of subscription licenses, SAS revenue and maintenance revenue was 291M dollars in the 3rd quarter and grew 5% year on year on an organic constant currency basis. This landed at the high end of our 3 to 5% guidance range for the quarter. Within recurring revenue, SAS revenue grew to $91 million in the third quarter, increasing 17% in organic constant currency terms compared to the prior year. This was slightly better than we expected, given continued strength in SAS bookings, which reflects solid customer demand and the shift in our sales focus. Monthly subscription license revenue grew 6% compared to the prior year and continues to see a gradual sequential improvement on a monthly basis. and as expected, maintenance subscription revenue of $125 million was down slightly from the prior year and higher sequentially from Q2. Altogether, total revenue for the third quarter was $415 million, which was up 6% compared to the prior year. Non-recurring revenue came in slightly higher than we expected in the third quarter, both in terms of perpetual license revenue and also services and other. This was largely a function of timing, and none of the large public safety deals we referenced last quarter closed during Q3. Turning to profitability, the gross margin was 76% up from 75% in the prior year, reflecting underlying improvements in pricing and good cost management. Research and development expense was 13% of revenue in the third quarter, up from 12% in the prior year, whilst R&D capitalization was 7% of revenues, down from 9% a year ago. As we expense more R&D as opposed to capitalizing it, there will be a drag on the adjusted operating margin, a dynamic that we guided to at the March Investor Day. And as a reminder, this stems from capitalizing less R&D costs as we transition our product portfolio towards SaaS and continuous development cycles and not from changes in the underlying level of cash spend. Sales and marketing expense was 24% of revenue in the third quarter, down from 25% in the prior year. G&A expense was 10% of revenue compared to 11% a year ago. Adjusted operating income was $116 million for the quarter, representing an adjusted operating margin of 28%, which was up roughly 100 basis points from the prior year. Taking into account the lower level of R&D capitalization in the third quarter, the underlying margin expansion was closer to 300 basis points compared to the prior year, reflecting both the stronger revenue growth seen in the quarter and continued cost discipline. On the cost side, we continue to balance synergies extracted from a tighter integration of the Octave structure post the spin with the investments we're making in our products and our market presence. Third quarter adjusted net income was 0.32 cents per share on 268.5 million diluted weighted average shares outstanding, which was in line with our expectations. Turning to our cash flow statement and balance sheet. We generated $95 million in cash from operations in the third quarter. Together our fixed asset capex and capitalization of software development costs total $30 million, which is below the $38 million we reported in the prior year, and reflects again the underlying improvement in profitability. We generated 65 million of free cash flow in the third quarter, which represents a 16% margin. This was in line with our expectations and the dynamics of the prior year, as Q3 tends to be seasonally softer than the other quarters. Looking at our balance sheet, we ended the third quarter with just under 300 million of cash and cash equivalents and 518 million of gross debt, bringing our net debt to $222 million. Pro forma for the Cerebrae acquisition, our net debt would be just under $350 million at the end of Q3. Our blended cost of debt remains around 5% and our balance sheet remains healthy, flexible and supportive of our capital allocation plans. Our broader capital allocation framework is focused on delivering the strongest value to our shareholders. In terms of priorities, we invest organically in the business first, with continued product innovation, including the Octave platform and a leading AI-driven technology stack. M&A comes second, but is an important part of our growth ambition. Every acquisition has to support our technology and financial objectives. To more tightly integrate Octave's solutions, to enable cross-selling, accelerate growth, increase recurring revenue and contribute to improving profitability. We compare every acquisition we make to the alternatives of developing a product ourselves or buying back shares to make sure we maximize shareholder value over the longer term. The Cerebra acquisition we announced yesterday has a strong returns profile based on both the expected contribution to our technology stack as well as the opportunity to cross sell into existing and new customer relationships. Today the board approved a share repurchase program for up to $200 million of Class B ordinary shares through the end of 2029. As we said in March, this is primarily intended to offset dilution from equity based compensation, but also gives us flexibility for additional opportunistic repurchases as part of our broader capital allocation strategy. Repurchases will be made in cash and we're not obligated to use the full authorization. This brings us to the outlook the remainder of 2026. As a reminder, we provide organic constant currency growth ranges for recurring revenue on a quarterly and full year basis. Alongside ARR growth, we see this metric as the primary indicator of top line performance of our business. We'll also provide ranges for total revenue, but given the mix shift away from perpetual licenses, combined with variability in timing of closing perpetual deals, we believe this is a less meaningful indicator of the health of our business. For ARR, we are on track with our original plan and we are reiterating our organic constant currency ARR growth outlook of 6 to 8%. For this reported range, a mid single digit ARR contribution from Cerebrae will be largely offset by foreign exchange headwinds from a stronger dollar seen since the end of the third quarter. As such, we are maintaining our reported ARR range of 1.185 to 1.205 billion US dollars. and I'll reiterate that there is no change to our organic constant currency ARR growth outlook for the year as a whole. Third quarter recurring revenue landed at the high end of our range, so we are slightly raising our full year outlook to 1.145 to 1.15 billion US dollars, representing organic constant currency growth of 5.5 to 6%. We are narrowing our full year total revenue outlook to a range of 1.64 to 1.66 billion US dollars which maintains the midpoint at 1.65 billion dollars and represents organic constant currency growth of 0.5 to 2% which is also a slight increase compared to our previous guidance. We did not close any large public safety transactions in the quarter and as before our fourth quarter outlook assumes none of one Although the public safety pipeline remains strong and we continue to make progress on key tenders. And for the year, we continue to expect an adjusted operating margin of approximately 30% and a free cash flow margin of approximately 20%. And the Cerebra contribution to recognize revenue and profit for 2026 is de minimis. So, based on these full year ranges for the fourth quarter of 2026, we expect. total revenue of 440 to 460 million dollars representing organic constant currency growth which is roughly flat over the prior year period at the midpoint recurring revenue of 292 to 297 million dollars representing organic constant currency growth of between five and six percent an adjusted operating margin of 31 to 32 percent This implies a level of R&D capitalization that is roughly 2% of revenue lower than the prior year. And as usual, these accounting effects have no impact on underlying cash profitability. So with that, thank you for joining us today and we will now open the line for questions.

We will now begin the question and answer session. If you would like to ask a question and have joined by the webinar, please use the raised 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 queue to form. Your first question will come from the line of John DeFucci with Guggenheim Securities. Please unmute your line and ask your question.

Thank you. Thank you for all the detail here, Mattias, especially on AI, your prepared remarks. The acquisition of Cerebrae really looks interesting. It seems like it heavily leverages AI to accomplish what it does. I guess, is that true? And can Jay's product team apply this technology more broadly across your product portfolio? Or is it more a standalone product? And sort of related to this, Mattias, with your prepared remarks, it already sounds like you're getting a lot of leverage around AI. And when we look at other companies, it's unclear what they're doing. Just talk to us a little bit about how this positions you competitively and perhaps give any anecdotes that demonstrate this.

Yeah, thanks, John. Yes, I mean, we're very excited about the Cerebra acquisition. We certainly think it will have a bigger impact on the company and our growth and our outlook going forward than and the metrics you see for this year right it's a relatively small company but we think it has great growth potential it is a AI-native company not because simply of their own growth outlook right more than that that you said we think it's a key building block of the platform that we are to launch early next year so very much the latter of what you said that right we we see this as the The context engine, the ingestion engine for the plant. And then on top of that, we will connect it to our products like InConcert and many, many more. So yeah, I think I'll stop there. But I mean, I think we feel really good about our position in the market. And we really think we are doing something unique with this platform and together with Cerebra.

That makes a lot of sense. Thank you. If I could just ask a quick follow up for Ben and maybe Mattias too. Nice job on this quarter. The numbers look really strong and a lot of progress from last quarter. But the guidance for the fourth quarter implies a noticeable fall off in business momentum, especially if you take in some assumptions about the acquisition. Is there something there we should be thinking about regarding the macro backdrop or something specific to Octave's business or is there some unique numerical effects this quarter? I know Ben talked a lot about foreign, mentioned foreign exchange effects. Anything we should be thinking about in regards to the fourth quarter guide?

John, there hasn't really been much change. I think if you look at it, we've slightly nudged up The growth does step down in Q4 relative to Q3 as you said and that was always the kind of shape of the year when we looked at it back in Q1 So when you look at Q426, we've guided for organic growth with a midpoint that's effectively flat. We expect continued solid momentum in recurring revenue, but perpetual will be there So there's been no big change in the operating environment. As I say, it's a slide up and revision to the constant currency growth rates. It was just the shape of the year based on last year's comparisons.

Okay, thank you, Ben. And I get that now, the perpetual drop off. I remember that now. Thank you very much, guys.

Thanks, John. Your next question. Next question will come from Kirk Matern with Evercore. Please unmute your line and go ahead with your question.

Yeah, thanks for taking the question and congrats on a really solid quarter. um can you guys say you guys are right sort of a smack dab in the middle of your ARR guide at seven percent can you just remind us you know what needs to happen just in terms of um you know upselling cross-selling to kind of get you to the higher end uh of that you know what are you you know what should we be watching to maybe see that that number move towards the higher end of that range over the next few quarters

Thank you, Maria. I can start with without selling and cross-selling and then can take the guidance question. But I mean, we are quite happy with the progress we are seeing in the cross-sell as you probably heard in my prepared remarks. We said that cross-selling represented a little more than 10% of the new ARR in the quarter. And I think that's a number I'm quite happy with considering all of this came together I do expect that number to be a lot higher going forward. I'm not going to give you a specific number, but we do expect the cross-sell to gradually increase from there.

In terms of what would take us to the top end of that range, it would be two things. It would be the timing of SaaS bookings, and if more came into December versus Q1 next year. And then if you remember, we have a revenue line within ARR, which is our monthly subscription business. If you saw a kind of an acceleration in that month on month towards the end of the quarter, that would obviously move us above mid-week.

That's super helpful. And just one follow-up question. I know you guys are expanding your channel partnerships. How long does it take for you all to bring on a new partner to start to see that show up in your numbers? I assume there's a lag there. I don't know if it's, you know, three, six, nine months. Is there any way we should sort of be thinking about, you know, announcements on that front, you know, then converting into either bookings or revenue?

Yeah, that's a good question. I mean, of course, it depends on what type of partner it is, right? Whether it's a really large one, like we talked about this quarter or an increased partnership with Microsoft, right? That is something that we've worked over a long time or whether you bring on a small channel partner. So it's a bit hard to give you a standard answer there, right? But I would say it's fair to say that We have done a lot of progress with partnerships this year, but we still have a long way to go. I would say it would be a fair representation. So I would expect it to have a positive impact on numbers as of next year, I would say. Great. Thank you all. Thanks, Kurt.

Your next question will come from the line of Elizabeth Porter with Morgan Stanley. Please unmute and go ahead.

Great. Thank you so much for the question. I wanted to follow up on the cross-sell. Great to hear it was over 10% of new ARR. The question is, how much of the early success is coming from cross-selling within individual workflow environments versus the cross-workflow environments? What may be the biggest hurdle to making a bigger impact on the cross workflow selling becoming more repeatable? And what are the milestones that you're looking for to accelerate that motion? Thank you.

Thanks, Elizabeth. No, great question. In short answer, I would say it's roughly 50-50 in terms of split of within pillar and cross pillar. And frankly, I mean, You know, it doesn't really matter to us which one it is. I mean, it's still great cross selling and great progress, right? It's a bit arbitrary, right, to me, whether it's a cross selling between design and build or within operator, right? It's still two different product lines that have come together in the last year, right? Yeah, we're happy with the progress. What's the biggest hurdle? I wouldn't call it a hurdle, but I think the platform that we will launch next year, right, to me, should have a really good impact to this, right? Because it will automatically connect a lot of our solutions together in a native way, right? So I think to me that will hopefully dramatically improve our cross-up.

Great. And then just as a follow up, you described some of the governed gateways for AI agents and starting to test some of the consumption pricing. So when customers are using like their own agents to access Octave's context and domain capabilities, how are you envisioning capturing that value? And, and what are some of your early learnings from that process?

Yeah, I mean, it's still early days, I would say, and, you know, we're not kind of ready to disclose the full strategy here, but like we said in our prepared remarks, we are building models to monetize this, and it will be a consumption-based, you know, pricing is what we're thinking, and of course we are going to charge if agents access our system of records. so that's the model we are thinking.

Great, thank you.

Thanks. Next question will come from Daniel Gerberg with Handelsbanken. Please unmute your line and go ahead with your question.

Thank you operator and good morning Mattias, Ben and Elizabeth. Two questions from my side as well. First would be If we could go back a little bit, Mattias, on the topic you had on the, I think you said, multi-tenant SaaS products that will be launched in 27. To me, it sounded like it would be a first-half event early 27. Is that correct? And also possibly if the board can give any views on how this can contribute to recurring revenue growth numbers, but also if it could be a hurdle to Hi Daniel, I will start with the multi-tenant SaaS.

Yes, it is. I would say first half next year, we're going to launch or launch really, it's an upgrade of some of the products, right? I mean, we are on a journey to move, I would say most of our products into multi-tenant, right? Of course, there are some smaller legacy products that are not part of that roadmap, but all of the major products are already on multi-tenant or they will be Very soon, right? So that's kind of the journey that we're on. On your second question, I interpreted it like, will the platform hurt license sales? I don't, I mean, I guess so in the long term, that's, you know, it may switch, I think, from licenses to more consumption-based, but ultimately, I think it will you know it will drive use and adoption of our underlying technology right whether you if you use the platform you still need to access the system of record to get that information right on the system of record or or various products whether that's in concert or EAM or or ecosystem etc right so we don't view it as a as a replacement we view the platform as a way to And Daniel, maybe if I could add, when we laid out the financial plan for the medium term back in March, we said that licenses would come down from around 12% of revenue

And that's fair. And another question from my side, obviously a bit biased here, but perhaps not the right forum, but again, I want this to the record.

In our view, your share price is still held back a bit on your board's decision to keep a temporary SDR listing. You still have 20 US investors holding 22.5% capital while some 500 Swedes holding on to 53% and so on. My question is really if it would be, in your view, possible to have a SDR listing going forward and then to have and at the AGM instead going to come back to a time constraint version just for the record.

Yeah thanks Daniel I think I mean ultimately it's a question for the board right and the major shareholders right so I don't think it's for me to answer but what we have what they have said is that They will constantly evaluate this based on the volume, the trading, the interest and so on. So we will see. I guess it's the best answer I can give at this point. I mean, we said that we will keep the SDR for up to two years and that is the current communication. But we take note of your question for sure.

That's great, Mattias. We want to hear your notes. Thank you. Thanks.

As a reminder, if you would like to ask a question and have joined by 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. Next up will be Andrew Degasperi with BNP Paribas. Please unmute your line and go ahead.

Hi, can you hear me?

Hi, yes.

Hello? Hi. So thanks for this. And I just wanted to maybe ask a question on the public sector public safety deals. You said that didn't they didn't close in the quarter. Just wondering if you know if you have an idea in terms of timing of when you think those will close? Did they already happen in 4Q? and then I think you also mentioned China as well as being pressured and just wondering if you saw a change since 3Q I guess and or is this something that is more related to the transition from perpetual to subscription? Thanks.

Yeah sorry Andrew. So on the public safety this yeah none of the you know big ones that we mentioned in the last quarter closed in this quarter and we are still confident that we are going to win most of them or hopefully all of them it's a handful of large ones right and I could say we will know in the fourth quarter if we win them or not most of them I would say then they won't have material impact on Q4 revenue right but if we win them in Q4 we will know and that will That set us up, I would say, nicely in terms of backlog for next year.

And then on China, there's not really been a big change in the underlying demand environment. The comment in the queue was just saying that we had a difficult comparative in China. In Q3 last year, we won a couple of large orders and just didn't repeat. So that explains the weaker trend in China, not the underlying environment.

That's helpful, thank you. And then I guess, you know, given the 4Q numbers or guidance includes that perpetual license sort of moving more to SAS and helping AR, I was just wondering, do you think, do you still feel confident about that midterm guide of 6% to 8%? Or do you think it could get at the higher end of the range if that perpetual license is falling off faster than you expected?

Yeah, I would say the decline in perpetual this year, Andrew, has been in line with our planning at the start of the year. It was down around 20% year on year in Q1 and Q2. Q3 had easier comparatives, so it was flatter. And then Q4, it'd probably be down high teens to 20% again. And that really is what we baked in back in March. The transition is going on, but it's in line with our expectations.

Got it. Thank you. Thanks. Your next question will come from Sannika Merchant with RBC Capital Markets. Please unmute your line and go ahead with your question.

Hey guys, this is Sannika on for Matt Hedberg. Thanks for taking the question. You've talked about several go-to-market changes across the business. Could you tell us more about early success and learnings from that and maybe what else is on the horizon for potential go-to-market changes? And also when do you expect to see the impact of these changes materially play out across the business? Thanks.

So Thanks, yeah, I had a bit hard hearing the second part of the question, but the first one I think was around go-to-market changes and there I would say, you know, we've done a lot this year, right, when it comes to cross-sell, when it comes to incentives, when it comes to partnerships, alliances, so we've done a lot and I'm happy with the progress, like I said, exemplified by the The cross-sell number we had in the quarter. Does that mean that we are done? Obviously not, right? I mean, you constantly got to improve this every year, right? So we raised the bar this year and we're going to raise the bar again next year when it comes to go to market. And the second part of the question, I didn't really catch.

I guess it was just more about when you expect to see the impact of these changes so this materially play out across the business over time?

Right. Yeah, I mean, I think we're already seeing some impact, right? And then it will improve from here. I mean, I don't want to give a different guidance than what we have. We will obviously come back in February when we report and then we will lay out our guidance for next year. So maybe we can say something more about it then, but yeah, that's what I would say at this point.

Okay, thank you.

Next question will come from Victor Trollston with Dansky. Please unmute your line and go ahead with your question.

Yes, thank you. I hope you can hear me.

Yeah, yeah, no problem.

Yeah, yeah, super, super. Hi, Mattias. Hi, Ben. Thanks for taking my questions. So it's just a bit curious on capital allocation. I thought I caught you there, Ben, talking about the net debt position performer with acquisition around $350 million versus reported $120 million. From that context, I guess I'd note that you paid $130 million for the acquisition. And if you could just discuss a little bit, given that you have a very strong balance sheet and will appear very much stronger ahead if you generate the good cash flows that we anticipate, how should we or you think around acquisitions versus buying back your own shares, given the valuation you're trading at? If you could just elaborate a bit on that, please.

Yeah, I hope so. You know, I think obviously we spun Optiv out, you know, partly with a view to grow this faster. So that's where the investments that we do are going to prioritize, you know, firstly organically, you know, the investments we're making in the platform and JNVX team, but also doing ultimate acquisitions onto the platform like Cerebrae that you saw yesterday. So I think driving growth is the priority. But as you say, we still have a good balance sheet after the acquisition. We generate a lot of cash, I think 240 million of free cash after nine months. And we're going to be very disciplined on M&A. So if we don't find the right targets or the right targets of valuations that we're happy with, it doesn't make sense to have an inefficient balance sheet. So we will use the buyback mandate to buy back shares.

um but we have capacity to go beyond that if it makes sense just to um sorry i hope my uh microphone works here but but just to get the feeling when you look at the M&A pipeline is the you know sort of 16 times rr the valuation multiples you typically pay for This sort of asset or how should we think around that? I guess my point here is that you have a lot of opportunities in the balance sheet. I just want to think around the sort of return profile in that opportunity if you go for, should we call it more expensive acquisitions versus buying back your own shares. So just to get a sense of the values and multiples you typically pay in the pipeline, that would be helpful.

Yes, hi Victor. No, I would not say this is a typical multiple, obviously, right? I mean, the acquisition is expensive if you look at it from that perspective, but it's obviously a very small company, right? So the multiple reflects that and it's very, very high growth, right? And super attractive synergies. So we would not expect to pay those kind of multiples for A bigger, more mature company, right? That is not what you should take away from it. But we are happy with the acquisition and we think it's a price that reflects that type of asset.

No, that's brilliant, Mattias. That's a reassuring message and it does seem to be a very good fit. Just finally on my side, you discussed a bit of the subscription licenses. which from my point of view was you know very strong I guess EPCs are flexing up you know their activity you did mention there Mattias that you perhaps not do extrapolate that trend just curious to hear are there any reasons more than conservatives and not to extrapolate that trend given what we're seeing across the EPC landscape or just any sense of that because it does seem to be on a very good trend for the moment

Yeah, no, it is. I mean, like I said in my prepared remarks, it's gradually increased over the year and September was our strongest month of the year, right? So it is moving in the right direction. What I said was I don't expect a sharp acceleration from here, but yeah, I do expect it to improve.

Okay, that's good. Thank you very much, guys. Thank you.

Thanks.

Your final question will come from the line of Lachlan Brown with Rothschild and Co. Redburn. Please unmute your line and go ahead.

Hi Mattias, Ben. Thanks for the questions. Just regarding the launch of Attune facilities and the new Alto release, how are these being monetized? I guess, are they being sold as a standalone, separately priced add-on, or are they being bundled into existing subscription packages that can perhaps drive more value and then will be monetized at renewal? Thanks.

Hi Logan, I think, correct me if I'm wrong, but I think you asked how we monetize EAM, was that the question?

The new products that you announced, the Attune facilities and the new Alto release.

Ah, okay, gotcha. Yes, I mean, they are, you could say, add-ons to the Attune product, the facilities one, so it's a different, yeah, different skew, different add-on to the Attune products. and the other one you mentioned was the Alto one?

Correct, yeah.

Right, that one is more of a new version of the product, so it's more of an upgrade.

Okay, thanks, that's very helpful. And then on the Cerebro deal, given it was founded in 2019, you know, would it be fair to assume that this is a cloud native SaaS business? And can you just share any color on the organic growth rate alongside that 8 million in revenue?

Thanks. On the first part, yes, that would be fair. It is a very modern technology and cloud based, etc. On the growth rate, I don't think I will give you that, but I mean, it's a small company. And like I said, it's growing very, very fast. So very high growth rates.

Thanks for the call.

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

Well, thank you very much for dialing in and paying attention and talk to you again next week.