Techstep (TECH) Q2 2024 earnings summary

Executive summary

• Achieved positive adjusted EBITDA/EBITA for the seventh consecutive quarter, driven by cost optimization and recurring revenue growth.

• Recurring revenue annualized grew 4% year-over-year, with strengthened sales channels and new strategic partnerships.

• Revenue declined 5% year-over-year in Q2, mainly due to challenging Swedish market conditions, while Norway and Poland saw growth.

• Upgraded to Gold in EcoVadis sustainability rating (top 5% globally) and achieved ISO 27001 certification for information security.

• Secured new and renewed public sector contracts and strategic partnerships, including DeviceNow, Sykehuspartner, Consafe Logistics, and a Nordic mobile operator.

Financial highlights

• Q2 2024 revenue: NOK 266.3 million, down 5% year-over-year; H1 2024 revenue: NOK 522.4 million, down 7%.

• Net gross profit in Q2: NOK 84.0 million (margin 31.5%), down 12% year-over-year.

• Adjusted EBITDA Q2: NOK 31.0 million (margin 11.6%); adjusted EBITA Q2: NOK 2.6 million (margin 1.0%).

• Net loss Q2: NOK 15.0 million, mainly due to non-cash amortization, improved from NOK 17.6 million loss in Q2 2023.

• Cash and cash equivalents at period end: NOK 15.4 million; equity ratio 48%; net interest-bearing debt NOK 151 million.

Outlook and guidance

• 2024 ambition: recurring revenues annualized to grow 20%-30% year-over-year, net gross profit by 0%-5%, and adjusted EBITDA/EBITA conversion of 12%-16%.

• 2025 outlook: recurring revenues annualized to grow above 30%, net gross profit by 30%-40%, and adjusted EBITDA/EBITA conversion above 25%.

• Growth expected to accelerate in H2 2024 and into 2025, driven by upselling value-added services, scalable partner channels, and public sector agreements.