Earnings call transcript: SmartCraft’s Q2 2025 revenue hits NOK 140.6 million

SmartCraft ASA reported its second-quarter 2025 earnings, revealing a revenue of NOK 140.6 million, slightly below the forecast of NOK 143.17 million. The stock reacted positively, rising by 1.92% to NOK 26.50. According to InvestingPro data, the company has maintained strong revenue growth with a 29% increase over the last twelve months. The company highlighted its growth in Annual Recurring Revenue (ARR) and innovations like SmartCraft Spark, contributing to its resilient performance amid industry challenges. InvestingPro analysis indicates the company is currently trading at premium valuations, with multiple ProTips highlighting its valuation metrics.

Key Takeaways

• SmartCraft’s revenue for Q2 2025 was NOK 140.6 million, with over 95% being recurring.
• The stock price increased by 1.92%, closing at NOK 26.50.
• ARR grew by 9%, reaching NOK 504.8 million.
• New product launches, including SmartCraft Spark, are gaining traction.
• The company is exploring a potential listing change from Oslo to Stockholm.

Company Performance

SmartCraft demonstrated a robust performance in the second quarter of 2025, driven by its focus on recurring revenue and product innovation. The company’s ARR increased by 9%, showcasing its ability to maintain steady growth even as the construction industry slowly recovers. The launch of SmartCraft Spark in Norway and Sweden has been a notable success, with nearly 200 paying customers acquired, half of whom joined in the last quarter.

Financial Highlights

• Revenue: NOK 140.6 million, with over 95% recurring
• Annual Recurring Revenue (ARR): NOK 504.8 million, up 9%
• Adjusted EBITDA minus CapEx margin: 29.4%
• Positive cash flow increased by 20% in Q2

Earnings vs. Forecast

SmartCraft’s Q2 2025 revenue of NOK 140.6 million was slightly below the forecast of NOK 143.17 million. However, the company’s focus on recurring revenue and innovation seems to have mitigated investor concerns, as reflected in the positive stock movement.

Market Reaction

Following the earnings release, SmartCraft’s stock price climbed by 1.92%, closing at NOK 26.50. The stock is trading within its 52-week range, with recent performance indicating investor confidence in the company’s strategic direction and growth prospects.

Outlook & Guidance

SmartCraft is optimistic about its future, anticipating reduced churn as the construction market improves. The company plans to continue investing in innovation and accelerate product development and sales. It is also considering a potential listing change from Oslo to Stockholm, which could enhance its market visibility and investor base.

Executive Commentary

Interim CEO Hannah Kornil stated, "We’re not just surviving, we are positioning to accelerate," emphasizing the company’s proactive approach to growth. She also highlighted the resilience of SmartCraft’s SaaS model, which continues to deliver growth and profitability.

Risks and Challenges

• Market Saturation: With only 10-15% market penetration, expanding market share remains a challenge.
• Economic Conditions: The construction industry’s slow recovery could impact growth.
• Competitive Landscape: Increasing competition in digital tools for construction may affect market share.
• Product Adoption: Ensuring widespread adoption of new products like SmartCraft Spark is crucial for sustained growth.

Q&A

During the earnings call, analysts inquired about SmartCraft’s customer retention strategies and the potential impact of AI on its operations. The company confirmed its proactive approach to retaining customers and leveraging AI in research and development, customer success, and sales training.

Full transcript - Smartcraft ASA (SMCRT) Q2 2025:

Hannah Kornil, Interim CEO, SmartCraft: Good morning, everyone, and thank you for joining us today. My name is Hannah Kornil, and I’m proud to be here as an interim CEO of SmartCraft. Even though I’m new newly appointed to this role, I’ve been a part of this journey and the executive leadership team for the past seven years, starting as CEO of Biglet, one of our core brands. Since 2022, I also been responsible for the Swedish market, which has grown to be the largest in SmartCraft. Presenting together with me, we have Chetan Ber, our CFO.

For those who have followed SmartCraft, you know Chetan from before. It’s been a dynamic quarter, full of momentum, strategic execution and a strong financial performance. Today, we will walk you through our Q2 result, highlight key initiatives and share why we’re confident about the road ahead. So let’s dive in. I will start with Q2 in brief and then Shantan will deep dive a bit further into our financials.

And we will finish off with a summary and open the floor for questions. The focus is on growth, margins and how our strategy continues to deliver. SmartCraft is a leading SaaS provider for the construction industry in The Nordics and The UK. We serve over 13,800 customers and I’m happy to see that we have originally gained approximately 400 additional customers in the first six months of 2025 despite an elevated churn level. Our solutions are built for SME, helping them to digitize operations, improve margins and stay competitive.

We’re growing and our scalable model with strong recurring revenue puts us in a great position to keep us doing so. We’re here to serve the construction industry, so they can be more profitable, create better working conditions and deliver a more sustainable product. And how do we help our customer to do great business? Construction companies face real challenges. They have tight margins, complex workflows and high risk.

Our products give them insights and visibility into their business, so that they can better manage their people, materials and documentation. That means fewer disputes, safer projects and better profitability. Our tools streamline scheduling, reduce admin and give teams one source of truth. It’s also about clarity, control and confidence, so our customers can focus on their daily work. The opportunity ahead of us is massive.

We see a total addressable market of billion across The Nordics and The UK, with only 10% to 15% penetration of mission critical solution leaving huge room for growth. The UK alone now represents more than 60% of our TAM. This makes The UK our greatest and single greatest largest growth opportunity. And we are well positioned to scale geographically, deepen market penetration and lead the digital transformation of construction. One area that I have focused on and will continue to do as interim CEO is to increase the speed of both product development and sales effort in order to capture this opportunity.

Let’s look into the highlights from Q2. First of all, this is a huge milestone for us and makes me really proud that we passed the million in ARR. Organic ARR growth increased by one percentage point, the first time we’ve seen that since Q4 twenty twenty two. This has been achieved by stronger sales efforts and we’re also now starting to sense more optimism in the construction industry. Our adjusted EBITDA minus CapEx margin rose to 29.4%, up 2.1 percentage points quarter on quarter, even if the margin was affected by the recent acquisition of Lokka, which a much lower margin than the group average.

Operating cash flow came in strong at million despite elevated churn and downgrades, which affected our growth. Our SaaS model continues to deliver resilient growth and profitability. This is the beauty of a scalable recurring revenue business. Going forward, as the construction market is expected to improve, we expect to see reduced churn and gradual improvements in both growth So, let’s talk about our commercial momentum.

In Q2, we saw an 8% increase in new customer contracts year over year. That’s a strong single end and continued demand. But what’s even more encouraging is what’s happening earlier in the funnel. Sales leads are up 22% year over year and the number of leads in our pipeline has grown by 45%. That’s a record high.

We also saw an increase in web traffic, which tells us that interest in SmartGraph solution is rising. It’s fair to say that this level of pipeline activity gives us confidence. It suggests that our visibility in the market is strong and that we’re well positioned to convert interest into growth going forward. We’ve built a scalable marketing and sales engine and it’s working. The lead generation we saw in Q2 is a result of targeted campaigns, improved messaging and strong execution across the teams.

We are investing innovation to fuel future growth. SmartCross Spark has launched in Norway and Sweden and we already have nearly 200 paying customers of which approximately 100 added in Q2. More features are coming later this year to boost average revenue per customer and strengthen product value. We also launched BIM capabilities in May and within weeks we had 60 users and 20 customers on board. These initiatives are expanding our product offering and opening new revenue streams.

In addition, we are also working on new product suits that could potentially be launched next year. We are building for the future. Now let’s look at some insights from our Digimiters survey. This is our annual deep dive into digitalization trends in construction. We surveyed over eight forty professionals across Norway, Sweden and Finland and the results are clear.

87% says digital tools are essential to their business. Six out of 10 have already seen improvement, thanks to digitalization and 30% plan to increase their investments in digital tools. This confirms strong underlying demand and a clear willingness to invest. Worth noting is the large figure, 40% to 55% of all office and field workers are still using pen and paper or Excel to solve their business needs. This really shows us the huge possibility to make a true impact within the industry.

You will find the full report at smartkraut.comdtmeter. And over to you, Shantan, to dive into financials.

Chetan Ber, CFO, SmartCraft: Good morning. So our ARR has passed the NOK 500,000,000 milestone. The ARR is ending at NOK 504,800,000.0 in Q2, and it’s growing by 9%. Organically, we grow now by 7%, which is an increase from last quarter, and Sweden is the primary driver of this growth. The growth is paired with a decline in downgrades.

Downgrade go slightly down from last quarter, although churn has an increase in the same period. The overall picture is the same. Churn a high level of churn due to the bankruptcies and the elevated downgrade level does affect our organic growth heavily. Our revenue ended at NOK 140,600,000.0, of which now more than 95% is recurring. We continue to transition nonrecurring revenue, especially in the latest acquisitions.

And this puts a damper on growth in the short term, but will be very positive in the longer term. We do also increase the profitability, both the EBITA and the EBITA minus CapEx margin is increasing. The EBITDA margin is increasing by 3.5 percentage points quarter over quarter, and it includes a 0.4 percentage point dilution compared to Q2 last year. The latest acquisitions do have a lower margin than the rest of the group. So the effect from the acquisitions is higher than 0.4 percentage points, and it keeps a pressure on margin for the group.

But we are good at increasing the margin over time, and we do think that we will be able to increase in both these solutions, and it will be an increase going forward. We do capitalize roughly the same amount this time around compared to last year. But in terms of in share of revenue, it’s a decline to 8.8 percentage points. We do continue to invest in strategic development projects, and we expect roughly 9% overall for the full year. Sweden continued to perform well.

We have a good activity among sales activity and customers, and recurring revenue is growing by 10%. Sweden do have an elevated churn and downgrade level compared to the normal market, But we do have a focus on that and continue to focus and trying to decrease everywhere we can. Sweden has a decline in total revenue growth, but this is not a dramatic thing. LOCA, when we acquired them last year, had a high had a very large nonrecurring revenue in Q2, which normalized in Q3. So this is just this quarter and this quarter effect.

Sweden also increased the profitability by 3.5 percentage points year over year. The Norwegian market continues to be challenging, and we see a lower growth in revenue in Norway. The macro picture is, of course, highly affecting the growth. But also in Q2, we have a negative short term effect as we relocated one of the sales offices. This will be back on track in 2025.

So this is regarded as a temporary effect. The revenue performance in Norway is trickling down to the margin and we see also a decline in margin in Norway, which also is due to lower capitalizations. However, in Norway, we have a very good traction among customers when it comes to SmartCraft Spark, and this will be a very future a very potential growth opportunity in the future. We have positive signals in the Finnish market. We have more contract starts when it comes to the build sector.

So the general market in Finland looks better than before. This being said, we see a decline in revenue growth in Q2, which is related to the downgrade from a large customer. Unfortunately, we do know that the downgrade will continue. So we expect Finland to take a larger downgrade in Q3. This will also be at not temporary, a short term effect.

So we do see Finland probably be a bit lower in the short term, but the overall market is more positive than before. When it comes to cash flow, we’re still very good position on the cash flow. We increased cash flow in Q2 by 20% and we have a positive cash inflow all quarters still. The balance sheet is solid. We’re still net cash positive and we now hold roughly 3.4% treasury shares.

So, Anna, with that, I give the word back to you.

Hannah Kornil, Interim CEO, SmartCraft: Thank you, Sarta. Let’s wrap up with the key takeaways from Q2. Let’s talk about each point and explain why it’s matter. Passing the million ARR milestone, we crossed a major milestone. ARR now stands at over NOK500 million.

This is a strong signal of scale and stability. We built a recurring revenue engine that keeps growing even in a tough market. And we’re proud to say this is the result of consistent execution, a great team at SmartCraft and customer value. Increased organic ARR growth. For the first time since Q4 twenty twenty two, we’ve seen an increased organic growth in ARR.

That’s a turning point and shows that our efforts to drive new sales and improve onboarding are starting to pay off. We’re building a momentum and we’re doing it the right way. Strong sales and marketing. Our funnel is buzzing. We increased web traffic, leads and new customer contracts.

That’s not just activity, it’s conversion. It proves that our message resonates and our solutions solve real problems. We are visible, we are relevant and we are winning trust in the market. New initiatives. We launched SmartCraft Spark and BIM features and the early traction is great.

These aren’t just product updates. They’re strategic growth drivers. Spark is already attracting nearly 200 paying customers and BIM is expanding our footprint in quality and safety. In addition, the management team is focusing to increase speed of product development and sales effort. We are working on new product suites using the core platform.

We are investing in innovation to fuel future ARR. Growth, yes, we see headwinds. Churn is elevated mainly due to bankruptcies. Downgrades are still high and we kept the price increase moderate to stay competitive. But we are addressing these challenges head on with early risk detection, effective onboarding, stronger customer care and a clear upsell strategy.

As the construction market improves, we expect to see reduced churn and downgrades and might eventually also see net upgrades. Solid financial position. Our financial foundation is strong. We’re cash positive, well capitalized and ready to invest. That means that we can keep building great products, improve efficiency and be fully prepared when the market turns.

And we also continue to build our merchant acquisition pipeline. With a strong balance sheet and a proven integration model, we’re ready to act when the right opportunities arise. We’re not just surviving, we are positioning to accelerate. And finally, we have informed earlier that we are evaluating a potential change in listing from Oslo to Stockholm. So to sum this up, we’re growing, we’re innovating and we’re ready.

Q2 shows that our strategy is working and we’re excited about what’s next. So let’s open up for Q and A.

Moderator/Analyst: Very good. And just to remind everyone on the webcast, please submit your questions on the through the webcast player. There’s a button there that you can use. We have several questions already, but please keep them coming. So first one, reading your opening remarks in the press release, it sounds like you’re taking a more proactive approach to driving growth in this tough market.

For example, through earlier risk detection, stronger onboarding and targeted retention actions. Is this a correct read and interpretation? And could you give us a bit more flavor on the actions you are putting in place?

Hannah Kornil, Interim CEO, SmartCraft: Yes. As we talked about in the presentation, we are doing several things in the CS teams across all teams. We are trying to always see where do we have risk with our customers when because we know if there are low usage in our products, they probably will leave us. So this is really important for us to have a early risk detection and we work really close to our customers to find out that. But we’re also working on all our sales processes.

In Norway, for example, we have reorganized, we have centralized and we have also brought in a new sales manager. So, yeah, we are definitely putting a lot of effort into growth.

Moderator/Analyst: Thank you. Should we be concerned about the growth in new customers on a year on year basis goes down from 16% in Q1 to 8% in the second quarter?

Hannah Kornil, Interim CEO, SmartCraft: Yes, it is a tough market, but we have a really efficient new sales process I would say. So we’re working on that. And I don’t think that worry is the word, but the market is tough and we need to have the market with us when it turns, but we are prepared. We’re doing a lot of things to during this period. We’re not only surviving, we are working on processes, we are bringing more data, we always try to align our processes and make them better.

So I would say that’s what we are doing during this period.

Moderator/Analyst: Thank you. You are reporting, obviously, still a high level of churn and downgrades, although it’s positive to see the latter coming down. Would you be able to give an indication on how churn and downgrades look like in the different geographies? Is it around this group level in all geographies? Or are some standing out either positively or negatively?

Chetan Ber, CFO, SmartCraft: Yes. We’ve commented on this before as well. In general, we can say that the churn is higher in markets where we have smaller customers. It tends to be the smallest customer that churn, while the higher the larger customer is higher on downgrades. So with that in mind, Finland is higher on downgrades as is Norway, although Norway has both small and large customers, while Sweden is higher on churn and lower on downgrades.

But in all markets right now, both levels are higher than what used to see. So yes, that’s the short one.

Moderator/Analyst: Thank you. Just to remind everyone, please submit more questions. One more from the webcast. Have you seen any additional competition from new competitors as AI makes it easier to build competing solutions?

Hannah Kornil, Interim CEO, SmartCraft: I would say we haven’t seen that, but we really can’t tell that in detail, but we haven’t had more competitors than usual I would say.

Moderator/Analyst: And could you talk a little bit on how you apply and leverage AI in your business?

Hannah Kornil, Interim CEO, SmartCraft: We are applying that in every processes that we have I would say. And definitely mostly we using it in R and D for a long time. So yes, we are using AI, but we also use it for customer success that will make easier for for our employees to have a quick answer. And so so we are being more efficient in in CES processes, but we also use it in sales actually to train our sales employees and sales persons to be better in sales. So yes, we use this in different ways I would say and also built in our R and D processes of course.

Moderator/Analyst: Thank you. Final question for now from the webcast, although we see a few more coming in now, so please continue to send in questions. How has the initial response to SmartCraft Spark in Sweden been? Can you provide an approximate split between existing and new customers for the 100 customers that you added during Q2?

Hannah Kornil, Interim CEO, SmartCraft: I would say that SmartCraft Spark in general is off to a strong start. It’s a new solution. And as we said before, it’s already close to 200 paying customers across Norway and Sweden. Early feedback is very positive. And also that in Norway, we already secured several chain agreements.

And the strategy is primarily focused on attracting new customers in the short term. And in all of our existing markets I would say SmartCar Spark is designed to meet the needs of electricians who are looking for modern mobile first solution. But it also represents a long time term ambition to unify all our existing niche offers for electricians into one integrated ecosystem. So while the short term focus is on new customers acquisition, SmartPath Spark also creates migration path for existing users and also a strong upsell opportunity. We use the base of Elvis in Sweden to do upsells for SmartCraft Spark.

Moderator/Analyst: Thank you. Just one question on the downgrade that you mentioned in Finland. How much did it impact Q2 and will it impact Q3 as well?

Chetan Ber, CFO, SmartCraft: Yes. We see the start of a large customer downgrade. We saw the very first beginning we saw slightly in Q1. We see a bit more in Q2. It’s not affecting as much as it will be in Q3.

So Q3 will actually be a bit higher. So far, we see the underlying market in Finland being good. We would be fairly high, roughly in line with Q1, if it hadn’t been for the downgrade. So yes, but in Q2, we see a very positive signal, and that’s what we’re focusing on. We do however worth mentioning here.

The downgrade means that we’re not losing the customer, it doesn’t churn. So we have a possibility for win back at a later stage. So we’re focusing on working on win backs on all downgrades. And when the market turns, hopefully, that will be a key driver for growth.

Moderator/Analyst: Very good. One question on locker. Is the biggest part of the switch of locker from nonrecurring to recurring revenue done? Or should we expect some bigger impact on margins?

Chetan Ber, CFO, SmartCraft: I think we shouldn’t expect a bigger impact on margin, although it’s a work in progress in LOCA. So we are constantly working on transitioning non recurring revenue. But as we are, we’re building the recurring revenue base, which will help on the growth going forward. And once we’re into the 2025, we’ll have comparable figures as well. So it’s a stable transition and not any major highs or lows.

Moderator/Analyst: Good. We have one question on The UK. Have you advanced cross selling in The UK? How is that developing?

Hannah Kornil, Interim CEO, SmartCraft: Yes, have started that process and we are definitely since UK is a really important market for us and we have a great opportunity in that market, we have started to do that.

Moderator/Analyst: Thank you. You mentioned value based pricing. Is your approach to pricing evolving? Does it represent a change from your previous practice?

Chetan Ber, CFO, SmartCraft: I think we do do changes all the time. We haven’t made any significant change in in our practice. We do increase prices where we can, but but still our our mind is on securing market share first, although we will will increase prices where we can.

Moderator/Analyst: Thank you. We’re coming to an end to the list of questions that we received so far, but it’s still time for some more if you have, so please submit them. One question on the search for a new CEO. How is that progressing? And a question to you, Hannah, is are you only being here for the interim period?

Or are you a candidate for the permanent position?

Hannah Kornil, Interim CEO, SmartCraft: I would say that’s up to the Board. But during this period, I intend to do my best and I do this with energy and engagement. And but the rest is up to the Board, let’s say.

Moderator/Analyst: Perfect. I think that is the end of the questions we received. So back to you guys.

Hannah Kornil, Interim CEO, SmartCraft: Okay. So thank you everyone for listening in. And, yeah, I hope you enjoyed the session, and have a great day.

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