SmartCraft Q1 2025 slides: 23% ARR growth amid construction market headwinds

Introduction & Market Context

SmartCraft ASA (SMCRT), a leading Nordic provider of SaaS solutions for the construction industry, presented its Q1 2025 results on May 7, 2025, highlighting both achievements and challenges in a difficult construction market environment.

The company, which serves over 13,400 customers with 130,000+ users across Norway, Sweden, Finland, and the UK, reported strong headline growth figures while acknowledging headwinds from increased customer churn and downgrades as construction companies face economic pressures.

SmartCraft’s stock closed at 22.60 NOK on May 6, 2025, down 2.59% ahead of the earnings presentation, and currently trades 35.4% below its 52-week high of 35.00 NOK.

Quarterly Performance Highlights

SmartCraft reported Annual Recurring Revenue (ARR) of 494 million NOK in Q1 2025, representing a 23% year-over-year increase. However, organic growth slowed to 6%, down from 15% in Q1 2023, as the company faced challenges from customer bankruptcies and downgrades.

As shown in the following chart of ARR development and growth drivers:

The company’s adjusted EBITDA-capex margin improved to 27.3%, an increase of 3.1 percentage points year-over-year, demonstrating the company’s ability to maintain profitability despite market challenges.

SmartCraft reported a 16% increase in new customers compared to Q1 2024, but noted that uncertainty in the construction market has caused delayed buying decisions, with conversion rates from customer meetings to sales declining from 50-60% in 2023 to just 30% in Q1 2025.

Detailed Financial Analysis

Revenue for Q1 2025 reached 137.0 million NOK, up from 109.7 million NOK in Q1 2024. The company maintained strong profitability metrics despite market headwinds, as illustrated in the following chart:

Performance varied significantly across SmartCraft’s key markets:

• Sweden: Revenue grew 27% to 65.5 million NOK, with EBITDA increasing to 30.2 million NOK. This strong performance was driven by the acquisition of Locka and continued solid new sales.

• Norway: Revenue growth was more modest at 3%, reaching 47.6 million NOK, while EBITDA declined to 18.1 million NOK from 20.0 million NOK in Q1 2024. The company cited increasing churn and downgrades as key factors affecting growth.
• Finland: Revenue grew 5% to 12.8 million NOK, with EBITDA slightly declining to 3.3 million NOK. The company noted that user activity among existing customers increased by 33% in the last six months, suggesting potential for future growth.

SmartCraft’s financial position remains solid with 152.5 million NOK in cash and cash equivalents. However, operating cash flow declined by 26.2% year-over-year to 54.3 million NOK in Q1 2025, as shown in the following chart:

Strategic Initiatives

Despite market challenges, SmartCraft continues to advance key strategic initiatives. The company’s "born global" solution, SmartCraft Spark, designed for electrician companies, has attracted over 100 paying customers since its soft launch in Norway and Sweden.

The company highlighted the progress of SmartCraft Spark in the following slide:

On the day of the presentation, SmartCraft also announced the official launch of its Building Information Modeling (BIM) feature in Congrid for the Finnish and Swedish markets. This feature aims to improve quality and safety workflows on construction sites while enhancing customer stickiness and upsell opportunities.

Forward-Looking Statements

SmartCraft maintained its medium-term financial targets of 15-20% organic growth, though acknowledged that current market conditions are challenging these goals. The company expects revenue growth and margin to improve gradually in H2 2025 as the construction market recovers.

In a significant announcement, SmartCraft revealed that its CEO will be stepping down after seven years at the helm. The CEO will serve until a successor is in place, but no longer than Q4 2025, and will be joining a Norwegian software company that does not compete with SmartCraft.

The company’s board will initiate a thorough international recruitment process for a new CEO, as illustrated in the following announcement:

SmartCraft identified several factors affecting its organic growth, including a 4-5 percentage point increase in customer churn due to bankruptcies and a 5-8 percentage point reduction in organic ARR growth due to customer downgrades. The company also noted that price increases were approximately 5% lower year-over-year due to lower inflation.

The following chart illustrates these organic growth challenges:

Despite these headwinds, SmartCraft emphasized its continued focus on marketing and sales excellence, capitalizing on investments in SmartCraft Core, realizing synergies, and pursuing value-accretive M&A opportunities as it navigates through the current challenging construction market environment.

Full presentation:

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