Digia Q1 2025 presentation: Profit falls 17.6% despite stable revenue

Introduction & Market Context

Digia Plc (HEL:DIGIA) presented its Q1 2025 business review on April 25, 2025, revealing a challenging start to the year with stable revenue but declining profitability. The Finnish IT services provider, which positions itself as a "trusted partner in intelligent business" with over 1,500 professionals, faced headwinds from cautious customer spending and project delays.

CEO Timo Levoranta highlighted the company’s resilience in an unstable global environment, noting that despite challenges, Digia secured several significant new contracts during the quarter, particularly in AI and data services.

As shown in the following chart illustrating Digia’s long-term growth journey, the company has maintained a consistent growth trajectory over the years, though Q1 2025 showed minimal expansion:

Quarterly Performance Highlights

Digia reported Q1 2025 net sales of €53.8 million, representing a modest 0.2% increase year-over-year. However, operating profit (EBITA) declined significantly by 17.6% to €4.6 million, with the EBITA margin falling to 8.5% from 10.3% in the same period last year. Earnings per share dropped 19.7% to €0.10.

The following financial highlights summary illustrates the key metrics for the quarter:

According to Digia, the profit decline stemmed from cautious customer investment behavior, with delayed decision-making and project launches affecting several business segments. The company noted that its Digital Solutions business area continued strong organic growth, particularly in modern software development, while Managed Solutions, Business Platforms, and Financial Platforms faced challenges.

"Good performance in March allowed us to return to our profitable growth track," Levoranta stated, suggesting improvement toward the end of the quarter.

A detailed breakdown of Digia’s business model shows an even split between project and service business, with each representing 50% of net sales in Q1 2025:

Strategic Initiatives

Despite financial headwinds, Digia continued to execute its 2023-2025 strategy titled "Unlock your intelligence," focusing on expanding its AI and automation capabilities. The company secured contracts worth over €10 million involving data and AI during the first quarter, including a five-year, €7 million contract with Business Finland.

The company highlighted its competitive advantages in the presentation, emphasizing its trusted customer relationships, versatile service offerings, and growing AI capabilities:

Digia made significant investments in cloud partnerships during the quarter, strengthening its Microsoft (NASDAQ:MSFT) cooperation within the Dynamics 365 ecosystem and securing Google (NASDAQ:GOOGL) Cloud Platform Infrastructure specialization. These partnerships aim to enhance the company’s AI and cloud service capabilities.

The company also continued productization efforts, particularly with its Envision ERP product, which will include AI features with a commercial launch planned for Q2 2025. Additionally, Traficom approved Digia Linja for its list of security-critical products, expanding the company’s security credentials.

As illustrated in the following slide summarizing Q1 2025 strategy implementation:

Forward-Looking Statements

Despite the challenging start to 2025, Digia maintained its full-year guidance, projecting net sales growth compared to 2024 (€205.7 million) and operating profit (EBITA) to either remain on par with or increase from 2024’s €21.2 million.

The following chart illustrates Digia’s profit guidance in the context of its historical performance:

The company’s outlook acknowledges ongoing market uncertainties but emphasizes Digia’s competitive resilience and strategic focus on long-term profitable growth. Management pointed to the company’s strong new deals, including contracts with the Finnish Defence Forces (€8 million), HSL HRT (€3 million), and Valtori (two €4.5 million contracts), as evidence of continued customer trust.

Digia also highlighted external validation of its service quality, noting that Whitelane Research ranked it among the best IT service providers in Finland with a 76% general satisfaction rate, comparable to TCS and not far behind industry leaders Accenture (NYSE:ACN) and ATEA.

For a comprehensive view of Digia’s Q1 2025 financial performance, the following table provides detailed comparisons with Q1 2024 and full-year 2024 results:

As Digia navigates through 2025, the company’s ability to execute its AI-focused strategy while addressing customer spending caution will be crucial for achieving its full-year targets and returning to stronger profitability growth.

Full presentation:

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