Octave Intelligence plc (OCTV) Earnings Call Transcript & Summary

Good day, everyone. Welcome to the Octave's Q2 '26 Earnings Call. [Operator Instructions]. I would now like to turn the call over to Elizabeth Chwalk, Vice President of Investor Relations. Go ahead.

Thank you, operator, and welcome to everyone jumping us for Octave's Second Quarter 2026 Earnings Call. With me on the call today are Matthias 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. This call is being broadcast live via webcast. And following the call, an audio replay will be available at investors.ocu.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 SEC, including on Forms 10, 10-Q and 8-K. Actual results could differ materially from our historical results or [indiscernible]. 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 or 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.

SP-2 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. So I'm going to start by saying thank you to our shareholders, many who joined us during our Investor Day in March and have been strong supporters throughout the spinoff process. Also to the 7,000-plus Octave employees, we delivered a solid set of results while simultaneously standing up a public company. And of course, 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. So again, thank you. If we turn to our results in the second quarter, our ARR grew 7% on an organic basis the prior year to $1.43 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 costs and lower perpetual sales versus the prior year. Then we'll 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. with year-over-year growth in SaaS bookings that accelerated Q1. Approximately 1/3 of our total ARR growth came from new customers and roughly 2/3 came from expansion within our existing customer base. 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. 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. And that's what generated a 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 [indiscernible]. This is primarily driven by the strategic shift we described at our Investor Day to drive more customers to recurring revenue model, 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 time lines. 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. 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. 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 workflow environments, subtends 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 moves, 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. 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 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. And it's worth restating what they are and how we're progressing. Our strategy really begins from a structural problem in the industry see. Information does not carry across the life cycle of mission-critical assets and interest. A decision taken in design to come separated from the people who build, operate and protect that asset. And it cost at this problem compounds the further downstream with the peers. Our response to this problem is to operate as a single platform across all 4 of these work environments. With a common contact player beneath the portfolio so that the record created in 1 workflow is available to the next. That is why we sell a workflow at an entry point better than as a stand-alone product. using Okta software across more workflows drives more value for our customers and expand the associated revenue opportunity for our business. 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 understand. 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. We're being deliberate about the pace. Our genetic 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. As part of this overall strategy, a key priority for us is to drive ARR growth sustainably above 10%. We expect 2 main drivers to close that gap. The first is product innovation, where we are building a single platform the need what has historically been a collection of strong but largely independent products. A common data and contact player, shared integration and governance and [indiscernible] layer above it. Alongside that, we are both consolidating and deepening each of the 4 environments so that each operates from a single control surface instead of a set of adjacent to. We're also moving more of the portfolio to multi-tenant SaaS which helps us shift 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. That means better customer coverage and segmentation, repeatable sales pace, pricing and packaging run as a discipline in its own right and broader reach through our channel for 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 2/3 of our growth come from customers we already serve 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 group into 1 organization with a unified road map and rebuilt the teams around smaller cross-functional groups single ownership. 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. In design, we bring 3D plan to sign schematics and engineering analysis onto a common foundation to change governance across them. In operate, we're putting asset management, asset performance and quality on the same platform and 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 [indiscernible]. Underneath the portfolio, we're building a common contact and data layer to share the integration and governance and an agentic layer above it. And that's what makes a case history in one workflow, usable in another. And it's the same foundation the AI works depend on. 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 acute EAM product dispatch summarization in [indiscernible]. And we also have a new cohort of AI innovation launching in the second half of the year. Optimist is now running more than 2 million assist a day inside customer workflows. That's been embedded layer and it's light. Above it, we have Octavia, 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 [indiscernible], where we put our own products and technical leaders directly alongside a customer's team to build a genetic workflows on that customer's real data, each one ending in a validated economic benefit. We have 5 marquee accounts signed, including [ Bestel and Flor ] who are two of the world's largest PCs. And three of these five accounts already live. The use cases came from them, not from us, validating drawings before anything gets built planning materials across the fabrication yard, checking design rules against the 3D model in plain language and managing project change, which is the single largest cause of write-offs of capital projects. And on the question of who owns the contact layer, we are building a framework that understands the life cycle, and it's open to working with our customers' environment. Our customers are not asking hyperscalers, generic LMM or point solution vendors to organize 30 years of their engineering and operating record. They're asking us 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. Our product leadership RECONNECT was illustrated in the quarter by multiple compelling customers, a leading European renewable energy operator selling concert at the engineering environment for of their bioenergy plants delivered as a cloud-native SaaS on a 5-year term. Separately, 2 of the world's largest owner operators signed important deals in the quarter. One of them were in concert and the other one for Sequent. 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. RECONNECT And I would describe the progress as real, but we now run a score target account list with a value-based sales process against it, meaning we need customer conversations with how Okta 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 trees is well above a typical new customer land. On renewals and pricing, we consolidated the renewals team into the sales organization this year, the best practice enablement and incentives behind it. This effort is still underway with plenty of unrealized benefits from pricing discipline and annual uplift opportunities. Our 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 second quarter, including a data center operator, a brewery and offshore wind developer, a global manufacturer and a transit authority. That range is evident that our platform continues to drive value across a broad range of industries. 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 fees 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 in a quarter. We are focused on driving stronger recurring revenues, accelerating ARR growth to over 10%, and while expanding our free cash flow margin over the medium term. 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 and 1 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. 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, and I'll hand over to you, Ben.

Thank you, Mattias, and hello to everyone on the call today. Many of the metrics I discussed today are non-GAAP measures, which are reconciled in our press release and Octave Investor website. 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. 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. In 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 $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 second quarter 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 second quarter 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. Monthly subscription license revenue grew 5% on a constant currency basis 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 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 second quarter 2025 and a 1% benefit from currency. As such, total revenue was down 1% over 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. The pipeline here is strong, but the timing of new projects naturally have some uncertainty given the long sales cycles in that business. Lower perpetual revenue also had some impact on professional services to decline 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. This was in line with our expectations the commentary we gave 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 costs 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 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. As previously communicated, this stems from capitalizing less research and development expense than we last year as we transition more of our product portfolio to SaaS and not from higher cash spending. These higher expenses were partly offset by ongoing cost discipline and the savings from the restructuring actions we took in the second half of last year. Overall, the adjusted operating margin was around 30% for first half 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'll see 2 noncash charges this quarter. First, as previously communicated, an impairment charge of approximately $464 million related to the launch of our new [indiscernible] brand and the corresponding write-down of the legacy brands. The second is an impairment of goodwill. As our market valuation is a newly public company is below the balance sheet carrying value as of June 30. This creates a triggering event requiring an interim good work parent assessment. As also now have its own observable market valuation. We move 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, our onetime noncash items that we've excluded from adjusted operating income and did not affect our liquidity or outlook for cash flow from operating activities. We're also not indicative of any changes to our operating outlet of the business. Turning to our balance sheet and cash flow statement. We ended the second quarter with just over $304 million of cash and cash equivalents and $644 million of gross debt, bringing our net debt at the 30th of June to $340 million. 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. 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. Net of this, we generated strong free cash flow of $93 million, which represents a 23% margin for the quarter and 22% for the first half of the year. It supports our confidence in achieving our 20% free cash flow margin target for full year 2026. This brings us to the outlook. Now we're a stand-alone company, we are introducing our guidance for the third quarter and full year 2026. 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 for year basis. In addition to ARR growth, we expect this to be this metric to be the primary indicator of underlying top line performance for our business and also provide ranges for total revenue. But given the big 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 health of our business. The business disposals made in mid-2025 or 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 budget perpetual deals in the Protect or 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. 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 third quarter of 2026, we expect total revenue of $400 million to $410 million, representing organic constant currency growth of 2% to 4%. And Recurring revenue of $285 million to $290 million, representing organic constant currency growth of between 3% and 5%, and adjusted operating margin of approximately 27% and reflecting normal seasonality. For the full year 2026, we expect ARR of $1.185 billion to $1.205 billion representing organic constant currency growth of 6% to 8%. Total revenue of $1.635 billion to $1.665 billion represents an organic constant currency growth of 0% to 2%. Recurring revenue of $1.14 billion to $1.15 billion, representing organic constant currency growth of 5% to 6% and adjusted operating margin of approximately 30% in 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 and 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 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. The reason for this change is that we have removed from the guidance on a number of large public faced perpetual deals in the Protect which you said that we still expect to win the main once it into 2027, including the GBP 5 million in IP 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. And 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. And we delivered 7% ARR growth in the first half of the year, and we are reiterating full year ARR growth of 6% to 8%. We are reiterating an adjusted operating margin of approximately 30%, which we expect to maintain while absorbing public company costs and a lower level of perpetual revenue volume 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 of between 6% and 8% and 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, the AI makes more valuable rather than less. 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.

[Operator Instructions]. Our first question comes from [ John Difucci ] at Gugenheim.

First of all, congrats on getting your first quarter out as an independent public company, 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. But as you said, your total organic constant currency revenue growth rate was a touch below what you anticipated and you did the reason you said, move to recurring revenue, which we fully understand how that works in timing delays on public safety business. I guess I'm wondering how confident you are on your assessment of both those variables today, especially the first one. because you're guiding to an acceleration of organic constant currency total revenue growth next quarter and for the year? Listen, Octave is a really good story, like I think a lot of people believe that. And but the stock preopen is reflecting some concerns about that right now.

Yes. Thank you, John. Yes, how to answer that? I think how confident do we see? I mean, obviously, this is the guidance we have given now. So it is our best judgment of 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. So yes, I would say we see we see confidence in that. Anything to add to that?

No, 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, and it was just the large perpetual deals where you have long sales cycles, and they are there more unpredictable. We've decided to take those out of the forecast. And if they come in, they become positive.

But to be clear, Ben, those deals, they're not -- they're not -- they're not lost [indiscernible] to someone else right now. They're still out there?

No, absolutely not. We're still very confident [indiscernible] deals. You're selling to governments and states and we have their own kind of procurement cycles that would more take off, if you know what I mean. And sometimes these deals can take 1 to 2 years to actually put together. So given only 4 months left of the year, that we know 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. But our view on the likelihood of winning them hasn't changed at all.

Our next question comes from [indiscernible].

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? It feels like just maybe the perpetual piece, but maybe kind of a 2-part or -- just a little bit more color on what's in and what's out on PROTECT. And then also just then, just kind of as this being your first quarter as a public company, what's your overall guidance philosophy?

Yes. I think I'll let you take that one, Ben. I mean it's a well, we can't say more about the public safety and those fees, I would say it's around the hand [indiscernible]. It's not hundreds of these. So it's a handful of deals taken out.

Yes. And that mostly impacts perpetual license software, but a little bit of services that has to it. Matt, sorry, in terms of the philosophy, we obviously want to set guidance that explains the trajectory of the business well to you guys. There's only 4 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 price model it. And yes, I think that the philosophy is we want to set guidance that we can achieve. And we'll develop this framework over time we didn't have adjusted net income or EPS in the framework at this point. 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.

Our next question comes from [indiscernible] at Evercore ISI.

This is [ Peter Burkly ] on for [indiscernible] from Evercore. I appreciate you taking the question here. SP1 I just wanted to ask about the recurring revenue piece and sort of the seasonality that we're seeing in the implied in the back half of the year here. So I think the 3Q maybe came in just a touch below what we're expecting, and then that resultantly implied a little bit of an acceleration in the fourth quarter. So it sounds like bookings remain pretty strong. Just curious if you just sort of walk the moving parts there, whether that's just a factor of the year-over-year compares or any other factors that might be coming to play there.

Yes. Peter. In Q3, on the recurring revenue, you say, we've guided to 3% to 5% of [indiscernible] constant currency. That's probably just over 1% lower than the underlying run rate, and that reflects the 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 3 steps up on maintenance and it went back down in Q4. If you ex 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. So very good SaaS momentum, a gradual pickup in subscription licenses as we guided back in March and then a fairly stable development the main too.

Yes. No, I agree. And then I would add also that, I mean, maybe the most say the best number to look at on the state guidance would be to look at the ARR, it where we are guiding for 6% to 8% for the full year.

Our next question comes from Gabriela Borges at Goldman Sachs.

I know I wanted to say on this topic of organic guidance. So that native, I'm trying to figure out, so the dynamics that are happening in public safety. It sounds like there's a par for the course, meaning there are not new dynamics. So I'm 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? And then if I put it all together, when do you think we'll be back consistently in the 3% to 4% organic range.

Yes. I mean, if we start a little bit 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? So we are not guiding for 3% to 4% long term, right? That was the guidance for this year. So I think maybe that's a good distinction to make. 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, and then we took a more cautious approach on the rest of the year also. I mean, I guess that's transparent answer on that, right? I mean, like we said, it is possible that some of these deals actually come in the second half. But yes, we have chosen to take a prudent approach on it.

And that approach as 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? Does it does it reset you to a new more conservative base line on a go-forward basis as well?

No, I don't think so. I think we will adopt a consistent approach to these orders guidance going for. So think that makes sense. But the potential for those orders coming in hasn't changed. It's just a question of timing. So if they don't happen in the second half of this year, perpetuals weaker in 2026. If they flow into '27, it will be a bit stronger turned up with the same growth overall.

Our next question comes from Lachlan Brown at Rothschil and co., Redburn.

Matt, Ben, congrats on the first quarter reporting as an independent company. On the reduced organic revenue guidance, could you just break down that reduction a little bit further? I appreciate most of that 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?

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 have considered in our original guidance. I think that would be my comment to that.

That's clear. 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?

Yes. Yes, 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. It started now to mild growth in Q2. I think you can see that in the slide that we put in the investor deck, and we assume a similar trend second half. We're not making an acceleration here in the monthly subscriptions or were sequentially flattish trend against easier comps.

Our next question comes from Daniel Djurberg, Handelsbanken.

A few questions from my side. First, a little bit on your working I guess, to expand the workload adoption cross and upselling, you mentioned here in the deck, 86% of customers still on a single workflow. So are there any targets we can follow? Or how are you working with this to really that is going?

Yes, I don't think we said anywhere that it's still 86%. It might be a slide from the Investor Day that we have it updated to be honest. I did say in the call that in my intro that 100 customers added another solution in the quarter, we haven't updated that 6% number. I'm not going to give you a number here. I think that's a number we'll probably give more like once a year. But I could say that it is lower than 86% today. So we are making progress.

Perfect. And if I may also, on the guidance on the perpetual referrals in Protect. I guess this is only in Americas, in public safety and nothing, [indiscernible]?