Techstep ASA

OSE:TECH

Earnings Call Transcript

[Erik Haugen, Chief Transformation Officer]

Good morning, ladies and gentlemen, and welcome to this Q&A session for Techstep's Q3 financial results released earlier today. My name is Erik Haugen, and I'll be moderating this session.Answering your questions today will be our CEO, Borge Astrup; and CFO, Marius Drefvelin. This session will be recorded and later posted on our investor website. I encourage you to submit your questions using the chat function in Teams or send it to us by e-mail on [email protected]. We kick it off right away.

[Erik Haugen, Chief Transformation Officer]

And the first question goes to you, Borge, submitted in advance here. What do you believe are the most important improvement areas for Techstep short to medium term?

[Borge Astrup, Chief Executive Officer]

Thank you, Erik. The most important element for us now is to ensure that we are able to increase the momentum and commercialize the business throughout the organization. We also need to ensure that it's clear to the market what we deliver and how we can support our customers so that they can get the highest customer value. I think we also need to have a strong focus of the customers in everything we do, always put the customer first.

[Erik Haugen, Chief Transformation Officer]

Thank you. Borge, another one here for you. Can you describe the difference or added value from the new product offering you announced today?

[Borge Astrup, Chief Executive Officer]

Yes. So Techstep has, over the last year, had a focus on developing our product offering and also acquired businesses for missing features and functions. And now with our new product areas, we have categorized it into 3 areas, and we have done that to ensure and try to make it easier for customers and the market to understand what we can help them with to and how we can solve their challenges in a more easy way. It's also important that customers see and understand the value that we bring and what and how we can help them to solve an easier work life. It's also important that we help customers to rethink how they can work with mobile technology in a smarter way moving forward.

[Erik Haugen, Chief Transformation Officer]

Thank you. Over to the financials. Marius, you introduced a new recurring revenue definition. What is the difference from ARR and recurring revenue on Techstep portfolio?

[Marius Drefvelin]

So up until now, we have reported the ARR on software-only. And this quarter, we also started to report on the full recurring revenue portfolio, which not only includes our own software, but also advisory services and the Hardware-as-a-Service portfolio. The contract length is mainly 24 months or more, and it's calculated based on the recognized revenue for the quarter annualized.

[Erik Haugen, Chief Transformation Officer]

Thank you. Marius, again, what is the churn rate on ARR from own software?

[Marius Drefvelin]

It's low between 0% and 5% because our business software is sticky. And coming back to the previous question, this doesn't only relate to the software, but also the entire recurring revenue portfolio. And when our customers are onboarded on the Hardware-as-a-Service model, we will deliver the devices during the 2-year period and not everything at once. And at the end of the period, many of these devices have just been delivered and will have to be managed. And because of this, in turn, this creates a stickiness to us as a supplier.

[Erik Haugen, Chief Transformation Officer]

Okay. Going back to Borge. What do you think is the reason Techstep has had a slow period in terms of sales?

[Borge Astrup, Chief Executive Officer]

As mentioned, it's highly important that we commercialize the business throughout the full organization. We, again, need to think and put the customer first in everything we do so that we are certain that we add value to the customers. We have now also hired Gunnar Aasen as Chief Revenue Officer, and he has a solid track record in building efficient sales organizations with a growth mindset. We have also now, after the summer, seen an increased momentum in our sales. So we will have a strong focus on sales moving forward and pushing and helping to solve customer challenges.

[Erik Haugen, Chief Transformation Officer]

Thank you. One other question here. Could you -- I guess, this will be addressed to you, Marius. Could you please elaborate a bit on the contracted MMS revenue split on software, hardware and advisory services?

[Marius Drefvelin]

So we don't report on this as such. But what we could say given that this is -- revenue is it's mainly Hardware-as-a-Service because it's revenue and not gross profit. However, it definitely also includes advisory services. And as far as the own software is concerned, it includes what we call Origo, which is a component of the own software and TrueMobile, which is the software part from Optidev. So we don't have a split, but it includes all the aspects of our managed mobility services portfolio.

[Erik Haugen, Chief Transformation Officer]

One other question, Borge, I will address this to you. How is the quarterly seasonality in signings of new MMS contracts and renewals, et cetera?

[Borge Astrup, Chief Executive Officer]

So what we have seen is that after the summer, we have picked up the momentum, and we have gotten increased attention with customers, meaning that we are positive towards having higher traction moving forward. We usually see the fall to be more activity in the market, so a better season for us, and likewise also early of the year as well. When we start to move towards the summer, people are starting to think more of the summer vacation as then we see a lower or slower period as well.

[Erik Haugen, Chief Transformation Officer]

All right. That concludes the questions that have been submitted. I see no further questions either in the chat or in the mailbox. So I think with that, we will conclude today's Q&A sessions. Should you have questions after this, please again use our e-mail address [email protected]. So with that, on behalf of us, team here at Techstep, we wish you all a great day. Thank you, and goodbye.