Techstep Q3 2025 slides: Revenue dips 6% while recurring revenue hits record high

Techstep reported Q3 2025 revenue of NOK 222.4m, down 6% year-over-year, with adjusted EBITA of NOK 11.0m (down 22%) and a net loss of NOK 8.5m; gross profit margin reached a record 37% (+2pp) while recurring revenue rose 4% to NOK 340m. The company ended the quarter with NOK 13.1m cash and negative operating cash flow of NOK 20.3m, but announced a carve-out sale of its business-critical mobility segment (under 20% of revenue) to Lexit to close before Christmas and multiple partnerships to support European expansion. Management flagged near-term execution delays (clinical device rollouts into H1 2026) but emphasized a focus on higher‑margin services and improving profitability via the strategic refocus.

Analysis

Market structure: Techstep (OB:TECH) is shifting value from low-margin device distribution (Q3 device revenue -13%) into recurring Managed Mobility and services (recurring revenue NOK 340m, +4% YoY). Winners: European UEM/MTD partners (Pradeo, telcos like Telia) and software-heavy MSPs who gain pricing power and stickier revenues; losers: device resellers/OEM-dependent distributors facing margin squeeze. Cross-asset: weaker NOK exposure and potential equity volatility could slightly widen domestic credit spreads for small Norwegian tech issuers; expect elevated equity options IV around transaction dates.

Risk assessment: Immediate liquidity is the key tail risk — cash NOK 13.1m vs. operating cash burn NOK 20.3m/quarter implies <1-quarter runway before relying on facilities or sale proceeds; failed carve-out to Lexit (segment <20% revenue) or delayed closing within 30–60 days could trigger covenant/dilution risk. Short-term (days–months) catalysts are deal completion and partner-rollout progress; long-term (2026+) depends on execution of indirect sales and ERP efficiency gains to restore adjusted EBITA above NOK 14–20m levels.

Trade implications: Favor controlled asymmetric exposure — small outright longs and option structures rather than undiversified equity bets. Prefer buying 6–12 month call spreads or LEAPS on TECH sized to 1–3% of portfolio conditional on timely deal close, and hedge with short-dated puts if cash falls <NOK 10m. Rotate 3–5% from hardware/distributor names into European cybersecurity/MSP equities and stable telco services (see TELIA.ST) to capture margin-rotation.

Contrarian angles: Consensus focuses on revenue decline but underprices margin improvement and recurring revenue durability; if the Lexit sale closes and no equity raise occurs, re-rating could be 30–60% as adjusted margins normalize. Conversely, markets may be underestimating operational execution risk (ERP, partner ramp delays) — an adverse timeline could compress value further. Historical parallels: carve-outs that remove loss-making public-sector frames have led to sharp short-term rebounds if liquidity is resolved (30–90 days) but require 2–4 quarters to prove margin sustainability.

Key Decisions for Investors

• Conditional long TECH (OB:TECH) 2–3% position: initiate only if Lexit sale announced closed or contract signed within 30 days and no equity issuance disclosed; set stop-loss 20% and target +40–60% over 6–12 months predicated on margin recovery and recurring revenue monetization.
• If deal pending, buy a limited-cost asymmetric option: purchase 6–9 month TECH call spread (buy 1.0x ATM/near-OTM, sell 1.5–2.0x OTM) sized to 1% portfolio to play upside around transaction while capping premium loss; alternatively buy 3-month ATM puts sized 0.5–1% if cash falls below NOK 10m or sale delayed >45 days.
• Reduce exposure to device OEM/distributor equities by 3–5% and redeploy into cybersecurity/MSP and stable telco service names: establish 2–3% position in Telia Company (TELIA.ST) for partner-led revenue capture and 1–2% in high-growth cybersecurity (e.g., CRWD) to play secular MTD/MDM demand.
• Event triggers to act: if TECH reports cash <NOK 10m or sale not closed within 60 days, move to a short stance via 3-month ATM puts (size 1–2%) given high dilution/covenant risk; if sale closes and no equity raise, add to TECH up to 4–6% position within 2 weeks.