Techstep Q2 2025 slides: Profitability rises 64% despite revenue dip

Techstep ASA reported Q2 2025 results indicating a 7% revenue decline to NOK 247.23 million, yet demonstrated significant profitability improvements with adjusted EBITA surging 64% to NOK 4.30 million and net gross profit increasing 5%, driven by a strategic pivot towards higher-margin software and recurring revenue streams. The company secured key agreements, including a NOK 500 million contract with Oslo Municipality and certified its MDM solution in Spain, supporting its optimistic 2025 guidance for 15-25% recurring revenue growth and enhanced profitability. This performance highlights successful execution of its strategic transformation, positioning Techstep for accelerated growth despite current top-line challenges.

Analysis

Techstep ASA's (OB:TECH) Q2 2025 results demonstrate a successful strategic pivot toward profitability, despite a 7% year-over-year revenue decline to NOK 247.23 million. The company's focus on higher-margin offerings is evident in the 64% surge in adjusted EBITA to NOK 4.30 million and the expansion of its net gross profit margin by 4 percentage points to 36%. This was driven by a 13% growth in Own Software revenue, which offset the 12% decline in lower-margin Mobile Devices sales. The company's forward momentum is supported by significant commercial wins, including a potential NOK 500 million, four-year agreement with Oslo Municipality and the certification of its MDM solution for government use in Spain, opening an addressable market of up to one million devices. While annualized recurring revenue grew 4% year-over-year, a 2% sequential decline highlights a churn risk that management aims to reverse. The company issued highly optimistic 2025 guidance, projecting 15-25% growth in recurring revenue and 12-18% growth in net gross profit, a significant acceleration that hinges on converting its strong deal pipeline and new partnerships into sustained growth.

Key Decisions for Investors

• Investors should closely monitor the company's execution against its ambitious 2025 guidance, as achieving the projected 15-25% recurring revenue growth is the primary validation of its strategic pivot away from top-line hardware sales.
• Pay close attention to the revenue mix and recurring revenue trends, as continued growth in high-margin software and a reversal of the recent quarterly churn are more critical indicators of future value than the headline revenue figure.
• The significant contract win with Oslo Municipality and the MDM software certification in Spain represent material, long-term growth catalysts that may not be fully reflected in the current valuation, warranting consideration as potential sources of upside.