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Techstep ASA, with a market capitalization of $7.56 billion, reported its Q1 2025 earnings, revealing a 3% decline in total revenues to SEK 249 million, while maintaining a stable net gross profit of SEK 86 million. Despite the revenue drop, the company saw slight growth in its adjusted EBITDA to NOK 2.3 million. The stock, however, fell 5.26% following the announcement, closing at SEK 10.8, reflecting investor concerns over the revenue decrease. According to InvestingPro data, the company’s revenue growth over the last twelve months stands at 4.72%, suggesting potential recovery from the quarterly decline.
Key Takeaways
- Techstep’s total revenues fell by 3% to SEK 249 million.
- Adjusted EBITDA increased slightly to NOK 2.3 million.
- Stock price dropped 5.26% post-earnings announcement.
- Positive cash flow from operations at SEK 2.2 million.
- Expansion plans in Spain, Hungary, and Poland.
Company Performance
Techstep’s performance in Q1 2025 highlighted a challenging revenue environment, with a 3% decline compared to the previous year. However, the company’s strategic focus on recurring revenue models and operational efficiencies helped maintain a stable gross profit. The managed mobility services market, where Techstep is a notable player, is expected to grow at a double-digit CAGR, which could bolster future performance.
Financial Highlights
- Revenue: SEK 249 million, down 3% year-over-year.
- Net gross profit: SEK 86 million, stable from last year.
- Adjusted EBITDA: NOK 2.3 million, up from NOK 1.5 million.
- Net loss: SEK 16.4 million, impacted by intangible asset amortization.
- Positive cash flow from operations: SEK 2.2 million.
Market Reaction
Techstep’s stock fell 5.26% in pre-market trading, closing at SEK 10.8. This decline reflects investor apprehension about the company’s revenue dip despite stable profitability. The stock remains within its 52-week range of SEK 8.74 to SEK 15, indicating moderate volatility. InvestingPro analysis suggests the stock is currently undervalued, with analysts setting price targets between $51 and $90, and maintaining a bullish consensus recommendation of 1.87 (where 1 is Strong Buy and 5 is Strong Sell).
Outlook & Guidance
Techstep anticipates double-digit growth in recurring revenue and profitability for 2025, with further acceleration expected into 2026. The company aims to expand its market presence in Europe, particularly targeting Spain, Hungary, and Poland, where significant opportunities exist in mobile device management. InvestingPro data reveals a solid Financial Health Overall Score of 2.6, labeled as "GOOD," supporting the company’s expansion plans. For deeper insights into Techstep’s growth potential and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
Executive Commentary
CEO Morten emphasized the potential in the Spanish market, stating, "Only in Spain, the addressable market we’re now targeting represents more than 5,000,000 devices." He also highlighted the strategic shift towards recurring revenue models, predicting exponential profitability growth through long-term managed services contracts.
Risks and Challenges
- Revenue decline: Continued revenue decreases could impact profitability.
- Market competition: Intense competition in managed mobility services could pressure margins.
- Expansion risks: Expansion into new markets like Spain and Poland carries execution risks.
- Economic conditions: Macro-economic factors in Europe could affect business operations.
- Technological changes: Rapid tech changes require constant adaptation and innovation.
Q&A
During the earnings call, analysts focused on the growth potential of Techstep’s Essentials MDM product and the company’s expansion strategy in Europe. Discussions also covered the balance between cloud and on-premise solutions, reflecting market interest in diverse deployment options.
Full transcript - Techstep ASA (TECH) Q1 2025:
Morten, CEO, Techstep: Good morning, everyone, and welcome to our Q1 presentation today, followed by a Q and A session. It’s a beautiful sunny Friday morning, and we can feel the good vibes and heat building up here at Techstep today. So let’s get started. I’m here with our CFO, Elen, and we have been looking forward to sharing more insight with you about our progress, improvements, results, achievements last quarter and the strong momentum we see across markets. It’s already more than fifteen months since I got the opportunity to lead Techstep, and it has been a great ride so far.
As we reflect on the first quarter of twenty twenty five, which also marks the first full year for me as CEO, I’m pleased to report that TextEp has maintained and accelerated its positive commercial and financial momentum from 2024. We continue to develop and optimize our organization as well as tuning our strategic direction, including go to market model, key priorities and positioning of our different business areas for growth and scalability. The key aspects we’re looking at are increased profitability, potential going forward and our own productivity. For the tenth consecutive quarter, we delivered positive EBITDA adjusted in what is the weakest seasonal quarter for TextEp. This development is driven by growth in our recurring revenue offerings, with our own software contributing the most with 11% year over year.
Our consistent positive performance underscores the strength of our software offerings and the value they deliver to our clients. Strategic partnerships remain important to our growth strategy. The successful onboarding of customers through collaborations with partners like Device. NOW and ICE continues. Furthermore, two new strategic partner letter of intent have been signed, one with a new IT vendor in Ireland and The UK and one with a new Nordic telecom operator.
Also, we are happy to announce that we have recently started to deliver on our major agreement with Sykius Partner under the exclusive agreement umbrella with Sykius Insche, which also has been prolonged for two additional years. Among enterprise and public sector across Nordics, we also see increased need for comprehensive managed mobility services, spanning both office workers and field workers to increase their flexibility, productivity and security as well as sustainability. We have increased our share of wallet with several key customers by delivering more end to end services and managing their mobile estate more effectively. As we advance through 2025, we remain dedicated to our mission of becoming Europe’s leading mobile and circular technology company. Our team’s dedication, combined with the trust of our customers and partners, positions us well to achieve our strategic objectives.
As a mobile and circular tech provider, we are enabling organizations to achieve more with more flexible, innovative and productive ways of working. We are highlighted by Gartner in their latest market guide as a recognized managed mobility service provider, managing more than 3,000,000 devices across Europe. We are serving private enterprises and public sector across The Nordics with our direct sales and delivery model, covering both office and fieldwork use cases, and our strong partner community are handling the European and global market through our indirect partner model. By combining our own software, our unique and world class expertise and delivering a broad range of certified devices, we help our customers create more value from their mobile estate and better equip all kinds of users with the best mobile tools to optimize their work. In the indirect partner model, we are empowering partners to deliver and integrate our highly scalable solutions and services into their core business models or as value added services and new capabilities to serve their customers in a better and more efficient way.
We continue our increased focus on transitioning our business model from transactional and point solutions to recurring and end to end services, becoming a strategic partner, helping customers transform and drive innovation with secure and sustainable mobile technology solutions. Let me take you through some of the many highlights from the first quarter. Recurring revenue is up 7% year over year, and our contracts are all time high, 21,000,000 higher than twelve months ago. And again, our own software is growing the fastest, with double digit growth at 11% in recurring revenue. We have improvements in EBITA and margins, and we continued to generate positive cash flow from operations last quarter with SEK 2,200,000.0, strong improvement year over year.
Another solid commercial quarter with several new signings and renewed contracts with key customers and partners. We see good traction with the trade broker agreement, now representing 84 large enterprises with more than 200,000 employees. We’ve had several new customer wins as well as upsell and expansions to existing customers as well as strong wins in Sweden with large enterprise clients with a lot of potential going forward. We have secured and prolonged the exclusive agreement with Sikus in Europe until July 27, and we’ve started deliver, provision, manage and support clinical devices based on the new agreement in place with Sikus partner, including own software, professional services and delivery of thousands of devices. This agreement will continue to grow during the year and represents a significant potential in the years ahead, rolling out tens of thousands of clinical devices across Health Region Southeast.
We continue to have strong momentum related to building a strong partner ecosystem, signing two new letter of intents, which both represents a potential market launch and some financial effects from Q4 this year. I’ll come back to some more updates at the end of the presentation. But first, I will hand over to Ellen, who will take you through more details of our financial results for the quarter.
Ellen, CFO, Techstep: Thank you, Morten, and good morning. We are pleased to present the numbers for the first quarter, showing that we are continuing on the path towards profitability and delivering on our strategy of increasing recurring revenues and transforming our business model. But the first quarter is typically seasonally weak as our results still largely depend on transactional device sales, while we continue to build our base of recurring revenues. The total revenues in the first quarter decreased with 3% to two forty nine million. However, the net gross profit was stable at SEK 86,000,000, in line with last year.
Although device revenues decreased with 5% in the quarter compared to first quarter last year, the margin increased. This is due to an expired public sector frame agreement with the for delivery of iPads. This agreement represented very low margins, and we made a decision not to participate in the new tender for extension of the contract. This is in line with our strategy of focusing on higher margin contracts instead of chasing volume. The total margin on devices, including revenues from device as a service, was 15.9% in this quarter compared to 15% last year.
Revenues from our own software continued the positive growth from 2024 and is up 11% year over year. All the product portfolios performed well, but it is in particular the Essentials MDM software product delivered from our Polish office that is showing the highest growth. Revenues from advisory and services include both transactional and recurring revenues. In the first quarter, we see that the transactional revenues, including third party software and consulting revenues, are coming in slightly lower than last year. The previously announced partner agreements with AdviceNow and ICE, which are currently in full operation, are contributing insignificantly to revenue, and more significant financial effects are anticipated towards the end of the year and into 2026.
EBITDA adjusted was NOK 2,300,000.0 in Q1, representing a slight growth compared to last year EBITDA adjusted of NOK 1,500,000.0. This is due to a 1% reduction in total operating costs, including personnel costs. Although we have reduced the total number of FTEs with 4% year over year, this is partly offset by salary increases and inflation effects on our other operating costs. We are also currently driving two major internal system and enterprise architecture implementation projects, adding temporary additional OpEx to our results. However, these projects are expected to contribute to considerable efficiency gains in addition to reducing running IT expenses when finalized in 2026.
Net loss in the quarter was SEK 16,400,000.0 after amortization of intangible assets of NOK 16,900,000.0. Out of the total amortization, 7,200,000.0 is amortization of purchased technology and customer contracts from previous M and As. These assets will be fully amortized in the first half of twenty twenty six, and total amortization in the income statement will be reduced with approximately this amount per quarter from thereon. Next step works across three main markets, and the revenue mix is a bit different between these markets. In the Norwegian market, about 40% of the revenues are from devices, while the remaining 60% is from higher margin services and software.
The Swedish market is split about 25%, twenty seven % from devices, while the remaining is services and software. The Polish market, which encompasses a significant volume of partner driven sales across Europe, has historically centered around our Essentials MDM offering. As such, the revenues from the Norwegian market is in much larger degree subject to seasonal variations in revenues and profits, the Swedish market to a lesser degree, while the Polish market consists almost entirely of recurring software contracts. In the first quarter, we observed varying development across the markets. In Norway, there was a 7% decline in total revenues.
However, this was caused by the exit of the unprofitable iPad frame agreements. So the net gross profit from devices was stable year over year with a 1% increase in margin. Revenues from owned software grew 12% year over year with a 1% increase in margins to 93%. However, the decline in total net gross profit of 9% was driven by declining margins on third party software as well as reduction in consulting revenues in the period. Sweden had a positive development with 2% growth year over year in total revenues in the quarter, but with a slight decline of 1% in net gross profit, driven by a two percentage point margin decline on the device revenues.
Offsetting this effect is increased profitability in the advisory and services revenue. As the newly announced contract with LKAB that was implemented in March includes revenues for implementation, support and services in the quarter. The Polish European market is continuing the growth from last year with 17% growth both in revenues and in net gross profit. The net gross profit for the quarter was in line with last year at million and the mix between low margin device profits of NOK26 million and higher margin software and services of million is stable. However, as we move towards recurring revenue business model, we will see decline in the transactional revenue type of services in the short run.
Our focus is shifting toward contracts that strengthen customer relationships and support recurring revenue growth. This strategic pivot may temporarily affect transactional sales, but positions us for stronger long term performance. Net gross profits from advisory and services was million in the quarter versus NOK36 million last year. However, last year, approximately 37% of the profits was from recurring contracts, while this has increased to about 42% in the first quarter this year. Looking back at the first quarter of twenty twenty three, the share of recurring contracts in advisory and services was about 34%.
Profits from owned software are growing steadily at 8% year over year and are primarily from recurring revenue contracts from new customers as well as upsell on existing customers. Our own software is primarily sold as recurring revenue license models. But over time, there are some variations between quarters as there are some occasional perpetual license sales, in particular historically in the public sector in Poland. As you may have noticed, revenues from our own software increased with 11% year over year, while net gross profit increased 8% year over year. This is because a significant portion of the growth stems from the Essentials MDM project in Poland, which has a gross margin of about 80% compared to our other software products, where we have margins of about 90% plus.
Net gross profits from sale of devices was in line with last year, and the mix between Device as a Service and transactional has been slightly increasing over time to about 35%. We are currently enhancing our device as a service delivery model to streamline operations and provide an improved customer experience as we firmly believe this represents a compelling business opportunity when combined with our broader service and software offering. Leaving the first quarter, we see a continued growth in the recurring revenue contracts with a 7% increase year over year to million, driven by 11% growth in owned software contract as well as an 8% increase in advisory and services contracts. The newly implemented contract with LKAB is driving the growth in the advisory and services since the fourth quarter last year. The slight decline in owned software since Q4 is caused by normal variations in number of users or devices.
The same is the case for variations in the device as a service contracts. At expiry of contracts, the implementation of renewals may take a few months before reflected in the financial numbers. The new agreement with Sikus Partner will be in effect from Q2 this year, and we add additional recurring revenues going forward. Additionally, we have strong faith in the European expansion of the Essentials mobile device management software with exciting opportunities that Martin will talk more about shortly. Our LTMnet gross profit has been declining since 2023, driven by a decline in device revenues, reflecting both challenging market conditions and our ongoing strategic transition towards a business model focused on recurring revenues.
As part of this shift, we are prioritizing the bundling of services and software and ensuring that any pure device agreements contribute positively to profitability. Since the third quarter last year, we believe we see a turning point in terms of net gross profit, and we should be poised to be building profits going forward as the recurring contracts grow. At the same time, we have been able to improve our profitability through managing our cost base and continuously improving efficiency in the organization. This is a long term effort that will take time, but we are steadily building a stronger foundation, improving customer satisfaction and delivery capabilities step by step while also driving cost efficiencies. A key KPI for this cost efficiency is our conversion of net gross profit to EBITDA adjusted.
Going from minus three percent two years ago to 12% in the current quarter proves we are moving in the right direction. The first quarter is typically a weak quarter for working capital changes. But for the first time in several years, Texta produced positive cash flow from operations before investments in Device as a Service in the first quarter of million. Cash flow after investments in Device as a Service was negative NOK19 million, which is an improvement of NOK17 million year over year. The change is driven by an improvement in working capital this year.
For the last year, since I joined Techstep, we have maintained a strong strategic focus on enhancing our liquidity and cash management and aligning the organization towards improving cash generation across our operations. Cash spend on investments of NOK 10,000,000 consists primarily of development costs for adjusting our portfolio to the partner agreements, work that began in the last half of ’20 ’20 ’4 and will continue as long as we add on additional partner agreements. Our portfolio is partner ready, and there are a large extent of reuse of developed functionality. But each new agreement will, to some extent, drive a minimum of adoption development. Net cash flow from financing activities was NOK11 million in the quarter and includes NOK21 million in drawdown of short term credit facilities, offset by a payment of debt of NOK4 million and interest and leasing payments of NOK6 million.
Net cash flow in the quarter was negative NOK18 million, resulting in a cash position at the end of the quarter of NOK12 million. In addition, we have undrawn credit facilities available in the amount of NOK25 million. Looking at our balance sheet. We had at the end of the quarter total non current assets of NOK970 million, of which NOK636 million is goodwill. We have a total of NOK117 million in capitalized investments in technology and customer relations, of which NOK21 million is related to M and As, which I mentioned will be fully amortized next year.
Total borrowings was SEK156 million, which includes both long term loan of SEK127 million and SEK30 million drawn on the RCF. Over the last five quarters, we have repaid SEK23 million of our long term loans, even though we have been in a demanding turnaround phase challenging our cash flows. Net interest bearing debt was NOK145 million at the end of the first quarter versus NOK109 million at the end of last year as we are utilizing short term credits in the first quarter. Liabilities related to Device as a Service was million and consists of prepaid revenues and buyback obligations of NOK38 million. These future cash effects of the buyback obligations will be offset by future cash inflows when the assets are sold at the end of the lease term.
Then I’ll hand the word back to Morten.
Morten, CEO, Techstep: Thanks a lot, Elen. First, let’s have a quick look at the market we operate. Managing large amounts of devices across multiple locations while ensuring security and user experience is no easy task. It requires expertise, processes, solutions and significant resource investments. The managed mobility services market is projected to grow at a double digit CAGR in the coming years.
The growth can be attributed to the increasing adoption of mobile devices in enterprises and the rising need for efficient mobile device management solutions. As organizations continue to embrace digital transformation, the need for managing managed services to handle mobile assets effectively has skyrocketed. Companies are increasingly recognizing the importance of securing and managing these devices to ensure seamless business operations, data security and compliance with regulatory standards. This demand for efficient and secure management solutions is expected to spur the growth of the MMS market significantly over the coming years. We have built comprehensive services and solutions based on our expertise, best practices and combined with the software and hardware we represent, so we can fully manage and operate our customers’ mobile estate or complement our customers’ own capabilities.
These solutions allow IT to shift their focus from device management to actively driving business innovation and digital transformation. With the great foundation we have in place with our market leading solutions and services, we are focusing on the ability to scale our business into new segments, new geographical markets with existing and new customers of our partners as well increasing our share of wallet with the customers we currently serve and when attracting new logos to increase value for our customers, but also increase stickiness and margins for us. We have two main categories of partners: product partners, tightly integrating our software and capabilities into their core offerings and sales partners, who resell our software and services to their customer base. We see very good traction in both channels, getting access to new market segments regionally and globally, and I will get back to some exciting partnerships and opportunities we’re currently working. Cross and upsell to existing and new customers as well as serving all their different user groups from office workers to field workers will also increase our penetration across software, hardware and services that will create stickiness of our offerings long term.
The result of these priorities will be strong growth in recurring revenue year over year through our as a service approach. And a great example and strong proof point to this focus is the LKAB case we announced last month, where we have moved into a strategic position managing their entire mobile estate, currently 6,250 devices, with comprehensive managed mobility services consisting of software, consultancy, proactive services and support, with the majority delivered through our as a service model. We are currently in several positions to expand and onboard other similar opportunities to our managed mobility services in Sweden and Norway. As Ellen mentioned, our fastest growing software category in Q1, but also with significant growth during 2024, is our TechStep Essentials mobile device management solutions. This software enables organizations to monitor, manage and secure their employees’ devices in an efficient way.
This emerging trend is caused by several reasons, like the geopolitical situation around us, increased need to access and process company data while on the move, inclusion of more field and frontline users with mobile devices as well as regulatory requirements we need to adhere to. And our solution meet all these requirements and much more. Essentials MDM has had a strong market position for many years, and we have large enterprises and public sector customers across Europe. We serve our customers through a strong and fast growing ecosystem of resellers and distributors, many of these resellers being well known telecom operators. We are actively recruiting new partners in several new and strategically interesting markets across Europe to strengthen our reach and local presence.
Our solution offers a lot of flexibility to our customers, combined with market leading capabilities, ease of use, automation, security and powerful integrations. The next step for many existing customers is to enhance the security of the devices to detect and prevent all kinds of threats, and we are now expanding the offer to span both device management and device security, everything delivered as a managed concept operated by TextEp. TextEp’s managed service offering for MDM and MTD delivers secure, scalable and compliant mobile operations for enterprise customers, a critical need in today’s hybrid and mobile first workplace. We see great momentum across several countries with strong support from different partners and distributors. Currently, the largest opportunities lie in Spain, Hungary, Poland, with increased momentum in other countries as well.
But we’ve also seen growing interest and won large agreements in our Nordic direct market. Our current pipeline represents more devices than we currently operate. Only in Spain, the addressable market we’re now targeting represents more than 5,000,000 devices. And the first larger public customer is now being deployed and onboarded together with our distributor, MS4B and Vodafone Spain as the partner. To sum up, the first quarter showed strong development with improving profitability, and we have built a solid pipeline of opportunities for the coming quarters.
Our recurring revenue is record high, and market momentum is strong. We have signed new customers, extensions, upsell to existing customers, and the strategic agreements are progressing well. We also signed two new letter of intents we have high expectations to later this year. All in all, we see great momentum across both indirect channels and our direct channels. The project with Sikus partner and Health Region Southeast is now live and moved from pilot to production, and we are scaling up in terms of deliveries and resources and preparing for large rollouts in coming quarters.
We are rigged and ready for scaling both our indirect business across Europe and our direct business by acquiring new customers and penetrating existing ones with our comprehensive end to end services across software, services and devices. The expectation is a continued acceleration throughout 2025, with further acceleration and continuation into 2026 and beyond. These type of partnership and long term managed services contracts will grow and drive exponential profitability in years to come. Looking at our guidance for 2025. We expect continued growth in both recurring revenue and profitability, both growing double digit and with an acceleration through the year.
As we’re still in a transition, moving from transactional to as a service and with large transformational deals like product partnerships and complete mobile outsourcing, the impact to our guiding could be quite significant, as you can read in the ranges we have provided. We stand by our ambition to become the leading mobile and circular tech company in Europe, with steady execution and continued focus on our profitability. We aim to provide you with further guidance and an outlook into 2026 in our Q2 presentation in August. That concludes today’s presentation. Thank you for listening.
We’ll now move directly over to a Q and A session, so please stand by if you have any questions. We will see if there are any questions posted so far.
Ellen, CFO, Techstep: Okay. There’s one question coming in here. I think you can answer that, Martin. Your success with the Essentials product is very exciting, but could you elaborate on the potential here?
Morten, CEO, Techstep: Yes. It’s very exciting to start there. We have seen great momentum for several consecutive quarters with our Essentials business growing double digit. And going back to 2024, we had high growth quarter over quarter, up to fifty seven percent second half of last year. And we see the momentum building up across several countries in Europe, as said, based on the geopolitical situation around us, but also our capabilities and strong partner ecosystem that we have been building for many, many years.
So we are working close with large telecom operators across Europe, both in the Eastern Europe, but also now more in the Southern Part Of Europe. I have mentioned Hungary, Poland, Spain as areas that we particularly see huge interest. And one of the reasons are that many of these public sector organizations are now moving from a fully cloud operated MDM solution to a more private cloud and on prem solution, which we also still supports. We have both on prem and cloud, and we see huge interest in both ways of delivering our mobile device management solution. So it’s very exciting and a lot of potential going forward.
There seem to be no further question at the moment. So again, thank you for attending and listening, and wish you a very nice weekend.
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