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Techstep ASA, with a market capitalization of $8.58 billion, reported a mixed performance in its Q2 2025 earnings call, with total revenues declining by 7% year-over-year to NOK 88 million, while net gross profit increased by 5% to NOK 88 million. According to InvestingPro data, the company maintains a healthy gross profit margin of 66.5%, though it hasn’t achieved profitability over the last twelve months. The company’s EBITDA adjusted grew significantly by 64% to NOK 4.3 million. Despite the revenue decline, Techstep’s focus on cost optimization and growth in recurring revenue streams showed positive results. The company’s stock remained stable, with no significant movement post-announcement.
Key Takeaways
- Revenue fell 7% YoY to NOK 88 million.
- Net gross profit rose 5% YoY, with margins improving from 32% to 36%.
- EBITDA adjusted increased by 64% YoY to NOK 4.3 million.
- Recurring revenue grew 4%, driven by a 6% rise in own software sales.
- The company reported a net loss of NOK 15 million.
Company Performance
Techstep’s Q2 2025 performance was marked by a decline in overall revenues, primarily due to a 14% drop in the Norwegian market. However, the company saw growth in other regions, with Sweden and Denmark reporting an 8% increase in revenues, and the Polish market showing a robust 20% growth. This regional performance contributes to the company’s overall revenue growth of 5.23% in the last twelve months, with total revenue reaching $1.22 billion. This regional disparity highlights the challenges and opportunities Techstep faces in different markets.
Financial Highlights
- Revenue: NOK 88 million, down 7% YoY
- Net gross profit: NOK 88 million, up 5% YoY
- Net gross profit margin: 36%, up from 32%
- EBITDA adjusted: NOK 4.3 million, up 64% YoY
- Net loss: NOK 15 million
Outlook & Guidance
Techstep is optimistic about its future, expecting continued profitability growth in 2025 and targeting double-digit EBITDA growth in 2026. The company’s current EBITDA stands at $233 million. InvestingPro analysis reveals several additional growth metrics and valuation insights available to subscribers, along with a comprehensive Pro Research Report that provides deep-dive analysis of the company’s prospects. The company aims to enhance its recurring software and services revenue and become a leading mobile and circular tech provider in Europe. The expansion of its partner network and focus on end-to-end device lifecycle management are central to its strategy.
Executive Commentary
CEO Martin emphasized the company’s strategic focus: "We are focusing on the ability to scale our business into new segments and new geographical markets through strong partnerships." CFO Ellen highlighted the company’s commitment to innovation: "We are both investing in our business support systems as well as investigating the use of AI."
Risks and Challenges
- Market Saturation: Declining revenues in the Norwegian market indicate potential saturation.
- Economic Conditions: Economic fluctuations in Europe could impact consumer spending and business investment.
- Competition: As a recognized mobility provider, Techstep faces intense competition from both established and emerging players.
- Technological Changes: Rapid advancements in technology require continuous innovation and adaptation.
- Regulatory Risks: Compliance with varying regulations across different markets poses a challenge.
Q&A
During the earnings call, analysts inquired about the timeline for financial effects from new partner agreements. The company is working to reduce the time from signing to monetization, with plans for exciting partner service launches in fall 2024.
Full transcript - Techstep ASA (TECH) Q2 2025:
Martin, CEO/Presenter, TechStep: Good morning, everyone, and welcome to our Q2 presentation followed by a Q and A session. I’m here with our CFO, Ellen, and we are ready to share our Q2 results today and talk about the progress, improvements, priorities and achievements from last quarter and the strong commercial momentum we see across to accelerate our profitability and transition into a more scalable and relevant business enabler for our customers and partners across Nordics and globally. We continue to develop and optimize our organization as well as tuning our strategic direction with a clear focus on creating more value for our customers and partners by having the best mobile tech expertise and building the solutions and services the market needs. Our consistent positive performance underscores the strength of our offerings and the value they deliver to our clients. We remain dedicated to our mission of becoming Europe’s leading mobile and circular tech provider.
Our team’s dedication and competence, combined with the customer and partner first mindset, positions us well to achieve our goal. As a mobile and circular tech provider, we are enabling organizations to increase their efficiency with more flexible, innovative and productive ways of working. We are highlighted by Gartner in their latest market guide as a recognized managed mobility provider, managing more than 3,000,000 devices across Europe. We have two distinct business models with a direct model serving our customers across The Nordics with the best mobile tech solutions to all kinds of mobile users, and the indirect model, empowering partners to deliver and integrate our highly scalable solutions and services into their core business models. We are very proud of our existing customer base across The Nordics with strong foothold across private and public sectors in both Sweden and Norway, and we continue to build a strong ecosystem of partners regionally and internationally.
We focus on transitioning our business models from transactional endpoint solutions to recurring and end to end services, becoming a strategic partner helping clients transform and drive innovation with secure and sustainable mobile tech solutions. Let me take you through some of the key achievements from the second quarter. Profitability is increasing as we are tuning the commercial model. Net gross profit margin was 36% in the second quarter, driven by increased share of own software and advisory and services revenues as well as increasing margins on devices. For the eleventh consecutive quarter, we delivered positive EBITDA adjusted with solid 64% growth year over year.
Recurring revenue grew 4% year over year. And again, our own software is growing the fastest at 6%, slightly below the double digit growth we have seen in the previous quarters. We continued to generate positive cash flow from operations last quarter with a SEK 24,000,000 strong improvement year over year. Another solid commercial quarter with great momentum across business areas and our different markets with several new signings with key partners and customers. We are live and in operations with management of clinical devices within Health Region Southeast, and we prolonged the agreement with Sikus Insche until July 27.
We also signed a strategic partner agreement with Telia Norway in June, opening new opportunities for creating higher value to our joint customers. We’re all also finalizing of the Fonua partnership in Ireland and UK with a planned onboarding later this year. Our TechStep Essentials mobile device management software received security certification from the Spanish National Security Agency, CCN, as the only certified MDM solution for public sector in Spain. At the June, we signed a new agreement with the municipality of Oslo for the third consecutive time, and we went live with this agreement on July 1. We also won two new municipalities in Sweden this summer with Buros and Nordschoping as new customers.
Finally, we secured strategic agreements with both Securitas and LKAB last quarter, taking greater responsibility to manage, secure and support their entire mobile estates. We continue to see strong commercial momentum, both directly and indirectly. I’ll come back to more details at the end of the presentation, but let me first hand over to Ellen, who will take you through our financial results for the quarter.
Ellen, CFO, TechStep: Thank you, and good morning. I will take you through financials, starting with the second quarter results. The total revenues in the second quarter was million, which was a decline of 7% year over year, but with a 5% increase in net gross profit compared to second quarter last year. The decline in overall revenues is driven by a 12% reduction in revenues from devices, which is entirely due to the expiration of a low margin public sector frame agreement in Norway, as device sales have been stable year over year if we exclude the effects from this one agreement. The revenues from our own software continue to grow, up 13% year over year in the second quarter, following 11% growth in the first quarter this year.
The revenues from our Essentials MDM products sold from our Poland office drive the growth, but we also have positive effects on the life cycle revenues from the SQS partner agreement, which went fully operational in the second quarter. Advisory and services revenues are stable year over year, but there are changes in the product mix where transactional revenues from consulting have somewhat declined, but were compensated with higher revenues from third party software. The total net gross profit in the quarter was 88,000,000, resulting in a margin of 36% of total revenues versus 32% last year. This change is driven by the continuously growing share of revenues from high margin owned software as well as increasing margins on device revenues, including revenues from device as a service, in line with our strategy of moving towards value adding higher margin services and software. EBITDA adjusted in the quarter was 4,300,000.0, constituting 64% growth from second quarter last year.
In the second quarter, we had a modest increase in total operating costs compared to last year. This was despite a lower number of FTEs as salary adjustments, inflation and investments in business support systems offset the benefits of our ongoing cost optimization initiatives. These efficiency driven investments are expected to generate significant savings in the years ahead, with tangible effects anticipated already in 2026. Net loss in the quarter was NOK 15,000,000 after amortization of intangible assets of NOK 17,000,000. Out of the total amortization, 7,400,000.0 is amortization of purchased technology and customer contracts from previous M and As.
These assets will be nearly fully amortized this year, leaving only a few million for the 2026, which will reduce quarterly amortization to about NOK 10,000,000 to 12,000,000 next year. The net gross profit in the second quarter increased by 5% year over year to 88,000,000, driven by 20% growth in profits from our own software, which is primarily driven by the growth in the Essentials MDM software as well as the increasing contribution from the Sikus partner agreements in the quarter. Net gross profits from advisory and services declined with 9% year over year, but this is driven by the variability in transactional type of revenues, such as third party software and consulting fees, and not by recurring revenue contracts, as you will see later in the slide showing the development of recurring revenues. Third party software sales usually generate lower margins and are largely transactional, with volumes that can be expected to fluctuate over time. In this last quarter, the share of these revenues were higher than last year, while consulting revenues with high margins were respectively lower.
As our focus is shifting toward contracts that strengthen customer relationships and support recurring revenue growth, this may temporarily affect our transactional sales but positions us for stronger long term performance. Net gross profits from devices increased by 10% in the quarter, driven both by improved margins on transactional sales and by higher gains from end of life device as a service contracts. Looking at the market development in the second quarter. The Norwegian market showed a decline of 14% in revenues. This is again due to the expiration of the large public frame agreement with low margins in Q4 last year.
At the same time, the revenue growth arriving from the agreement with Sikus Partner is contributing positively, resulting in only 1,000,000 or 3% decline in net gross profit. In Sweden Denmark, there was an 8% revenue growth in the second quarter year over year, driven by 12% growth in device revenues. Although there was also an increase in the margins on devices, driven by high gains from device as a service in the quarter, the net gross profit grew with 4% as the product mix within advisory and services changed in the quarter versus last year to a higher share of lower margin products, as I mentioned in the previous slide. The Polish European market consists primarily of the Essentials mobile device management software sold through partners and is continuing the momentum from last year with 20 growth in revenues and 36% growth in net gross profit. At the end of second quarter this year, we had a total of $324,000,000 in recurring revenues annualized.
This is an increase of 4% year over year and with growth in all our revenue streams, in particular, own software contracts, where we see a growth of 6%. However, compared to the first quarter this year, we see a decline of 2%. This is caused by customer churn on some of our legacy IT systems and older contracts for maintenance and services, a development not entirely unforeseen. There will naturally be changes in the customer base with some quarter to quarter volatility and churn in recurring revenue contracts as we shift our commercial strategy by refocusing our product offering and expanding the number of product partners. The strategic foundation for broadening our partner base is not only to increase overall revenue, but also to broaden the revenue base and reduce dependency on a few larger customers.
Throughout this transition, we can expect some volatility as the changes take effect. Going forward, we have strong faith in the partner channel growth and the new opportunities Martin will present later, as well as the expansion of the Essentials mobile device management software in Europe, expecting these to make a substantial contribution to accelerate growth in the coming years. The slight change in the device as a service contracts is caused by what we believe is a current trend, where we see customers extending the life of the devices for up to one additional year. So when device as a service contracts expire, many now choose to extend the contract at lower prices or buy out the devices for extended use. This is a trend we have seen for a while, but we anticipate that this effect will level out over a few periods.
At the end of the second quarter, the LTM net gross profit was NOK $350,000,000, with LTM EBITDA adjusted of NOK 42,000,000, a growth of 52 since last year. This also represents a conversion of 12% from net gross profit to EBITDA adjusted. At the end of the second quarter last year, this KPI was 8%, proving we are growing profitably despite the ongoing transition towards a business model focused on recurring revenues and, at the same time, spending considerable efforts in organizational changes, streamlining operations and optimizing the cost base. Since the 2022, Textap has continuously been driving cost cutting programs, efforts that are continuing into 2025. But this year is also about investing to be able to gain further efficiencies and lower the future cost base.
We are both investing in our business support systems as well as investigating the use of AI in development and operations. And in the current quarter, our total cost increased with 3% despite the effects of reduced personnel costs. The expectation is that year over year costs will increase slightly in the coming quarters until we start to see the benefits of these investments in 2026. Cash flow in the second quarter was very strong, with cash flow from operations improving by NOK24 million year over year to NOK 54,000,000 before Device as a Service investments. After Device as a Service investments, cash flow from operations amounted to NOK 39,000,000 compared to NOK 15,000,000 in the same quarter last year.
The improvement was largely driven by positive working capital effects, supported by a few significant contracts during the quarter as well as our continued strategic focus on liquidity and cash management, which is enhancing cash generation across the business. Cash spent on investments was NOK 8,000,000 in the second quarter, up from NOK 7,000,000 year over year and consists primarily of development costs for adjusting our portfolio to the partner agreements. We expect this level to continue as long as we add on additional partner agreements, although there are a large extent of reuse of developed functionality for each added agreement. Additionally, to be relevant, meet and be ahead of competition, we will naturally need to continuously invest to improve our offerings. Net cash flow spent on financing activities in the quarter was 22,000,000 and includes net repayment of long term loans and short term credit facilities of NOK 15,000,000, in addition to payment of interest and leasing of NOK 7,000,000.
In the second quarter last year, net repayment of debt was NOK 4,000,000. Net cash flow in the quarter was NOK 10,000,000, resulting in a cash position at the end of the quarter of NOK 22,000,000. In addition, we had undrawn credit facilities available in the amount of NOK 35,000,000. Then over to our financial position at the end of the second quarter this year. We had total assets of NOK 1,100,000,000.0, whereof NOK $959,000,000 was noncurrent assets.
Within noncurrent assets, goodwill was NOK $639,000,000. Internally generated assets was NOK 93,000,000, and purchased assets through M and As were NOK 14,000,000. These purchased assets will be fully amortized in the beginning of next year. We had a total equity of $548,000,000, equaling an equity ratio of 48%. Our total interest bearing borrowings was CHF 142,000,000, consisting of CHF 122,000,000 in long term loans, whereof NOK 15,000,000 will be repaid in the next twelve months and are classified as short term.
The remaining short term debt of NOK 20,000,000 is drawdown on the group RCF. The net interest bearing debt was NOK 120,000,000, which is an improvement of NOK 31,000,000 year over year, but slightly up with about NOK 12,000,000 since the end of last year as seasonality in our business drives higher cash generation in the second half of the year than in the first half. Items in our balance sheet related to Device as a Service was 162,000,000 in assets, which are capitalized values of the devices leased out and liabilities of NOK156 million, representing prepaid revenues and buyback obligations. The trade and other liabilities of million consists of ordinary trade payables of NOK145 million in addition to public duties payable, accrued expenses and prepaid revenues. Then Morten will take over the presentation for the business update and the outlook.
Martin, CEO/Presenter, TechStep: Thank you, Alan. As mentioned before, we see an increased need and interest from both customers and partners to simplify and streamline operations to drive efficiency and increase value for all kind of mobile work scenarios. We offer an end to end device lifecycle management solution, taking care of every step from flexible and policy based procurement with automated deployment and enrollment through asset control, endpoint management and security to repair, reuse, return and recycle services. These unique capabilities help reduce cost, enhance security, and accelerate sustainability. And we can deliver everything as a service from the device itself, the software needed, as well as the services and competency we represent.
The product partner market channel is an important growth initiative for our highly scalable solutions, such as own software and managed services. We experience a growing interest in our device life cycle management platform, including endpoint management and security services as IT service providers and operators are looking for more sustainable and cost efficient ways to manage their customers’ mobile estate. In April, we entered a new LOI with Telia Norway with the intention of adding our services and capabilities into their customer offerings. And in June, the strategic cooperation agreement was signed. This partnership represents access to new customer segments and expansion of existing customers to deliver and operate some of our highly scalable solutions and services.
This partnership also strengthens and adds customer value to joint trade broker customers as both Telia Norway and Textep are selected vendors within respective areas. In Q1, Textep announced that it has entered a letter of intent with Vonuva, a leading IT vendor with strong presence in Ireland and now entering The UK market. The current agreed time line indicates initial onboarding and rollout of services within Q4 twenty twenty five and an accelerated growth into 2026 and beyond. With this new partnership, Funuga will adopt TechSteps Lifecycle Platform as their standard solution for device lifecycle management, enhancing operational efficiency and customer experience experiences. The previously announced partner agreements with DeviceNow and ICE are progressing well, and momentum is picking up.
But in first half, we have seen slower pace than anticipated. The technical development of the partnership continues, and the growth expectations are unchanged, although the time line is slightly shifted. Our fastest growing software category in the is the TechStep Essentials mobile device management solution. This software enables organizations to monitor, manage, and secure their employees’ devices in an efficient way. Demand for MDM is driven by multiple factors, like the current geopolitical climate, the rising need to access and process company data on the move, the growing inclusion of field and frontline workers equipped with mobile devices and tightening regulatory requirements.
We are actively recruiting new partners in several new and strategically interesting markets across Europe to strengthen the reach and local presence. Currently, the largest opportunities lie in Spain, Hungary and Poland, with increased momentum in other countries as well. The current pipeline represents more devices than is currently operated. In Spain alone, the addressable market represents close to 1,000,000 devices, and TextStep has recently, as the only MDM provider, received security certification by CCM, the Spanish National Security Agency, a certification required to deliver to the Spanish public sector. In April, we announced that we have entered into an extensive agreement with LKABE, one of Sweden’s most historically industrial companies.
Under the agreement, currently covering about 6,000 devices, we will deliver comprehensive managed mobility services consisting of software consultancy, proactive services, and support, and with the majority delivered through our as a service model. In June, we signed an agreement with Securitas for another delivery of managed mobility. The contract entails that Techstep delivers software management and support services to operate their entire mobile estate. The foothold in the public sector in Sweden has further been strengthened through newly awarded agreements with Buros and Nordschoping municipalities. These two agreements cover the delivery of mobile devices, accessories and services with an estimated value of up to million a year and with respective four and three years agreements.
We have also seen strong commercial momentum in Norway with key customers and strategic agreements taking a larger responsibility to deliver, manage and operate complex mobile environments. Equinor is a great example, a strong reference for managed mobility, covering their global mobile state consisting of almost 40,000 devices, where we deliver software management consulting at twenty four seven support. This agreement went live on July 1. We have continued to see good traction with the trade broker agreement we entered last fall and among their 87 member organizations. We continue to acquire new customers, and we are expanding and growing existing customers.
We have added new customers every quarter since the exclusive agreement was signed. During Q2, we prolonged the exclusive umbrella agreement with Sykos in Europe until July 27, and we signed a new agreement with Sykos partner covering the delivery and management of devices to hospitals in the Southeast Region from second quarter. This new agreement is now operational and covers several thousand devices and the financial implications for TechStep will be increased software and services revenues in the coming quarters. The final service contract covering deliveries from 2026 and onward is expected to be signed at the 2025. With this agreement, TextEp will deliver services to SQS partner and all the hospitals in the region as a complete outsourcing service with an ambition to operate around 50,000 clinical devices within the region.
Next step has, for several years, had a strong presence in the public sector in Norway. And last day of June, we further anchored and strengthened this position as we were awarded the new and exclusive frame agreement with the municipality of Oslo. Techstep will deliver mobile devices, accessories and services, along with services for repair, collection, reuse and recycle to support the municipality’s sustainability ambitions. The new agreement also includes the municipalities of Oskar and Lernskog as well as Spurvein and some other entities. The total contract value has a potential of up to NOK 500,000,000 over a four year period with a current turnover at about NOK 300,000,000 per four year period.
With the great foundation we have in place with our market leading solutions and services, we’re focusing on the ability to scale our business into new segments and new geographical markets through strong partnerships and our indirect business model. In addition, our focus is to help customers create more value and efficiency from their mobile workforce by taking stronger responsibility to deliver, operate and support their mobile estate in a secure and sustainable way. This will continue to increase our relevancy, stickiness and margins going forward, building stone by stone on our recurring revenue. To sum up, the second quarter showed strong development with improving profitability, and we have built a solid pipeline and foundation for coming quarters. Market momentum is strong.
We have signed new agreements, up sell to existing customers, and the strategic agreements are progressing well. So we see solid potential across both indirect and direct market channels going forward. Our partner agreements are built to scale, and we are already observing this with our first partnerships. These partnerships aren’t just individual wins. They set the foundation for long term growth and expansion.
We are very pleased that the contract with Zekus partner is live and in production. This is a major milestone, opening substantial growth prospects in software, services and devices and strengthening our position in a critical sector. Further, we also see strong traction across Europe with our TechStep Essentials MDM. Our pipeline with key partners is stronger than ever, giving us improved visibility and confidence in future growth. These type of partnerships and long term software and services contracts will grow and drive exponential profitability in years to come.
Our 25% guiding indicates the uncertainty for when some of these agreements will be monetized and the expected ramp up. And with the slightly shifted time line mentioned for some key projects, we’re most likely in the lower part of the ranges provided. Looking ahead, we expect continued profitability growth at the end of the year and further acceleration into 2026 and beyond. Our ambition is to continue to see solid double digit growth in our EBITDA adjusted results throughout 2026, with the majority coming from our recurring software and services. We stand by our ambition to become the leading mobile and circular tech provider in Europe with steady execution and continued focus on our strategy.
That concludes today’s presentation. Thank you for listening. We will now move directly over to our Q and A session. So please stand by if you have any questions. We will see if there are any questions posted so far.
And you can always submit your questions to us by using the investor relation email address or by using the chat function in this presentation. We have at least one question here. You mentioned several new partner signings. When do you expect to see financial effects from these very good and a bit tricky question to to answer? But we have, as I said, a strong focus on building a strong partner ecosystem ecosystem and making sure we can expand into new geographical markets and to partners with existing customer bases like IT service providers and operators.
We we we are working hard to reduce the time from signings to onboarding to make sure we can build more flexible API and and tighter integration with those kind of partners. We have a broad range of different partners from the fully embedded product partner offerings that takes our capabilities and deeply embedded into their core offerings. And we have more traditional partners where we deliver more value added services on top of their existing services. So that’s a clear focus for us to see how we can reduce the time from signings to monetizing and accelerate the ramp up of these agreements. But we are planning for some exciting launches with some of these partners in the coming weeks.
So look up, we will share some more news and launch services in in the fall with some of these new partners mentioned. See if there are any other questions coming. If not, we will close the call for now. Thank you again for listening. Hope to see you back in three months from now.
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