Techstep ASA
OSE:TECH
Techstep ASA
Techstep ASA engages in the provision of smart mobile data for mobile network operators, mobile virtual network operators, and original equipment manufacturers. The company is headquartered in Oslo, Oslo. The company went IPO on 2002-06-12. Since the divestment of its subsidiary Birdstep Technology Oy, engaged in Secure Mobility, the Company operates only in one segment, Smart Mobile Data, offering solutions for Mobile Network Operators, Cable Network Operators and device manufacturers. The Smart Mobile Data segment portfolio comprises: EasyConnect, a connection manager and service management solution; EasySmart, which provides offload of data traffic to wireless fidelity (Wi-Fi); and EasyFlash, which enables the operator to standardize the installed base of Connection Managers. The firm operates as a parent of Birdstep Technology San Francisco Inc.
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In the first quarter, Techstep's total revenue decreased 3% to NOK 249 million, yet net gross profit remained stable at NOK 86 million. Device revenues fell 5%, but margins increased due to strategic shifts away from low-margin contracts. Recurring revenues rose 7% year-over-year, now totaling NOK 331 million, primarily driven by a robust 11% growth in owned software. EBITDA adjusted improved to NOK 2.3 million, up from NOK 1.5 million. Future guidance indicates continued double-digit growth in both recurring revenue and profitability through 2025, indicating a positive shift towards a recurring revenue model that is expected to drive long-term profitability.
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Good morning, everyone, and welcome to our Q1 presentation today, followed by a Q&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, Ellen, 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 15 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 2025, which also marks the first full year for me as CEO, I'm pleased to report that Techstep 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 10th consecutive quarter, we delivered positive EBITDA adjusted in what is the weakest seasonal quarter for Techstep. 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 devicenow and ISS continues. Furthermore, 2 new strategic partner letter with have been signed, one with a new IT vendor in Ireland and the U.K. 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 Sykehus partner under the exclusive agreement umbrella with Sykehusinnkjøp, which also has been prolonged for 2 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 million 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 field work 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, NOK 21 million higher than 12 months ago. And again, our own software is growing the fastest with double-digit growth at 11% in recurring revenue.
We have improvements in EBITDA and margins, and we continued to generate positive cash flow from operations last quarter with NOK 2.2 million, 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 Sykehusinnkjøp until July 27. And we've started to deliver, provision, manage and support clinical devices based on the new agreement in place with Sykehus 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 2 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.
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 NOK 249 million. However, the net gross profit was stable at NOK 86 million, 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 for delivery of iPads. This agreement represented very low margins, and we made the 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 & 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 devicenow and ISS, 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 2.3 million in Q1, representing a slight growth compared to last year EBITA adjusted of NOK 1.5 million. 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 2 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 NOK 16.4 million after amortization of intangible assets of NOK 16.9 million. Out of the total amortization, NOK 7.2 million is amortization of purchased technology and customer contracts from previous M&As. These assets will be fully amortized in the first half of 2026 and total amortization in the income statement will be reduced with approximately this amount per quarter from there on.
Techstep works across 3 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%, 27% 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 a 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 2 percentage point margin decline on the device revenues. Offsetting this effect is increased profitability in the Advisory & 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 NOK 86 million and the mix between low-margin device profits of NOK 26 million and higher-margin software and services of NOK 60 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 & Services was NOK 34 million in the quarter versus NOK 36 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 2023, the share of recurring contracts in Advisory & 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 product 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 profit 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 NOK 331 million, driven by 11% growth in owned software contracts as well as an 8% increase in Advisory & Services contracts. The newly implemented contract with LKAB is driving the growth in the Advisory & 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 Sykehus 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 Morten will talk more about shortly. Our LTM net 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 deliver capabilities step-by-step while also driving cost efficiencies. A key KPI for this cost efficiency is our conversion of net gross profit to EBITA adjusted. Going from minus 3% 2 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, Techstep produced positive cash flow from operations before investments in Device as a Service in the first quarter of NOK 2.2 million. Cash flow after investments in Device as a Service was negative NOK 19 million, which is an improvement of NOK 17 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 million consists primarily of development costs for adjusting our portfolio to the partner agreements, work that began in the last half of 2024 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 NOK 11 million in the quarter and includes NOK 21 million in drawdown of short-term credit facilities, offset by a payment of debt of NOK 4 million and interest and leasing payments of NOK 6 million.
Net cash flow in the quarter was negative NOK 18 million, resulting in a cash position at the end of the quarter of NOK 12 million. In addition, we have undrawn credit facilities available in the amount of NOK 25 million. Looking at our balance sheet, we had at the end of the quarter, total noncurrent assets of NOK 970 million, of which NOK 636 million is goodwill.
We have a total of NOK 117 million in capitalized investments in technology and customer relations, of which NOK 21 million is related to M&As, which I mentioned will be fully amortized next year. Total borrowings was NOK 156 million, which includes both long-term loans of NOK 127 million and NOK 30 million drawn on the RCF. Over the last 5 quarters, we have repaid NOK 23 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 NOK 145 million at the end of the first quarter versus NOK 109 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 NOK 160 million and consists of prepaid revenues and buyback obligations of NOK 38 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.
Thanks a lot, Ellen. 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 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 2 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-sell upsell to existing and new customers as well as serving all the 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 Techstep. Techstep'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 are now targeting represents more than 0.5 million 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 2 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 Sykehus 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 will now move directly over to a Q&A session. So please stand by if you have any questions. We will see if there are any questions posted so far.
Okay. There's one question coming in here. I think you can answer that, Morten. Your success with the Essentials product is very exciting, but could you elaborate on the potential here?
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 57% 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 support. 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 seems to be no further questions at the moment. So again, thank you for attending and listening and wish you a very nice weekend.