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Techstep ASA Interim / Quarterly Report 2023
3770_rns_2023-08-18_d978f274-34a3-449b-a3e3-170fb6aa88b8.pdf
Interim / Quarterly Report
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Interim report Q2 and H1 2023
Highlights Q2 2023
Profitability improving, third consecutive quarter with positive EBITA adj. of NOK 2.3 million
- 7% net gross profit growth y/y to NOK 95 million in a declining HW market
- Net gross profit margin up from 28% to 33% y/y due to growth in higher margin software business and Advisory & Services business
- 11% y/y decline in operating costs and personnel expenses
Increasing recurring revenue base with 15% growth y/y and 3% growth sequentially
- Recurring revenue annualised continues to grow, reaching NOK 318 million, up from NOK 276 million in Q2 last year
- ARR from Own Software at NOK 110 million, growing by 15% y/y1
Positive commercial momentum, growing interest for Advisory & Services and Own Software
- Signed a frame agreement with Oslo Municipality worth NOK 480 million, a potential doubling of previous contract value
- Increased sales activity towards the end of the quarter, with financial effect from H2 2023
Subsequent events
Refinancing secures increased financial flexibility
- Signed term sheet with a new bank relation for the refinancing of the company's term loans and credit facilities
- Converted all remaining sellers' credits to shares
"The ongoing transformation is starting to yield results. Profitability is improving, with growth in net gross profit and positive EBITA adj. for the third consecutive quarter. We see a positive commercial development and growth in recurring revenue. We expect the increased sales activity to materialise from the second half this year," says CEO Børge Astrup.
About Techstep
Techstep is a complete mobile technology enabler, making positive changes to the world of work; freeing people to work more effectively, securely and sustainably. We help customers who want to work smarter, while also delivering on their ESG commitments. With around 300 employees based in Norway, Sweden, Denmark and Poland, we serve more than 2 000 enterprise customers in Europe. Techstep had NOK 1.3 billion in full year 2022 revenues, and is listed on the Oslo Stock Exchange under the ticker TECH. To learn more, please visit www.techstep.io/investor.
1 ARR for Q2 2022-Q1 2023 has been restated, due to a re-classification of revenue contracts and product register
Key Figures
| (Amounts in NOK 1 000) | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | 2022 |
|---|---|---|---|---|---|
| Revenues | 291 544 | 317 199 | 583 323 | 663 425 | 1 323 126 |
| Annual Recurring Revenue (ARR) - Own | |||||
| Software 1) | 110 150 | 96 060 | 110 150 | 96 060 | 106 100 |
| Net gross profit 2) | 95 378 | 88 953 | 185 544 | 181 618 | 367 279 |
| Net gross profit margin 3) | 32.7 % | 28.0 % | 31.8 % | 27 % | 28 % |
| EBITDA adjusted 4) | 29 196 | 12 182 | 61 861 | 26 273 | 85 466 |
| EBITA adjusted 4) | 2 348 | (15 567) | 6 404 | (25 365) | (23 756) |
| EBIT | (14 185) | (31 106) | (25 077) | (16 087) | (52 205) |
| Net profit (loss) for the period | (17 605) | (31 467) | (34 914) | (18 983) | (68 614) |
| EBITDA adj. margin (%) | 10.0 % | 3.8 % | 10.6 % | 4.0 % | 6.5 % |
| EBITA adj. margin (%) | 0.8 % | (4.9 %) | 1.1 % | (3.8 %) | (1.8 %) |
| EBIT margin (%) | (4.9 %) | (9.8 %) | (4.3 %) | (2.4 %) | (3.9 %) |
| Net profit (loss) for the period (%) | (6.0 %) | (9.9 %) | (6.0 %) | (2.9 %) | (5.2 %) |
| Cash flow from operating activities | 29 420 | 7 540 | 26 709 | 1 573 | 123 741 |
| Cash flow from investment activities | (47 671) | (48 491) | (74 528) | (97 828) | (180 376) |
| Cash flow from financing activities | (4 578) | 31 580 | (4 089) | 75 879 | 67 594 |
| Cash | 11 576 | 29 922 | 11 576 | 29 922 | 61 119 |
| Net interest-bearing debt | 178 963 | 237 054 | 178 963 | 237 054 | 112 868 |
| Capex 5) | (8 186) | (16 702) | (18 894) | (35 609) | (52 250) |
| Employees | 275 | 338 | 275 | 338 | 315 |
1) ARR for Q1 2022-Q1 2023 has been restated, due to a re-classification of revenue contracts and product register.
2) Net gross profit is defined as total revenue less cost of goods sold and depreciation from Hardware-as-a-Service.
5) Capex excludes investment in Hardware-as-a-Service portfolio, shown as a separate line item under investing activities in the consolidated statement of cash flow.
3) Net gross profit margin is net gross profit of revenues.4) EBITDA adj. and EBITA adj. in Q2 2023 exclude non-recurring items related to reversal of restructuring cost of NOK 0.1 million. In Q2 2022 non-recurring items consisted of M&A related cost of NOK 1.1 million and structural gains from sale of business of NOK 40.5 million.
Business overview
Background
Built on a decade of telecoms and mobile technology expertise, Techstep was established in 2016. Through several acquisitions, Techstep has consolidated and expanded into the Nordics and later European markets, adding IP, own software and security expertise to the benefit of our customers. The goal is to be the leading European mobile technology enabler for customers that want to work smarter and more sustainably.
The market opportunity
Mobile technology is one of the fastest growing technologies in the world, as people expect easy access to tools and services across devices, both at home and at work. Techstep is well positioned in the Managed Mobility Services (MMS) market, which is defined by Gartner as a concept in which hardware, software and services are merged together and delivered as a single service 2 . Research shows strong supporting trends with an expected CAGR of +20% in the MMS market over the coming years (Modor Intelligence).
There are many key drivers of the MMS market, which for Techstep can be divided into two main areas: enterprises and mobile technology for frontline workers.
Techstep has identified three main challenges that the majority of organisations have with mobile technology:
-
- Cost-efficiency and lifecycle management of devices from procurement to end of life that meets their ESG requirements.
-
- Lack of knowledge on how to manage, secure and control the mobile technology fleet in organisations.
-
Increasing the quality, efficiency and security for frontline workers
Techstep is recognised as a global challenger by Gartner in the MMS market 3 , due to its strategic position and the combined software and hardware offering built over the past seven years via M&A and market consolidation. With more than 2 200 research and advisory experts doing rigorous analysis for clients in nearly 90 countries worldwide, Gartner is an established and highly trusted authority in the IT sector. The recognition reflects Techstep's ongoing progress of changing the world of work and is a continued validation towards the Nordic market.
Business activities and strategy
Techstep's business strategy is to act as a mobile technology company that helps customers utilise software and hardware to strengthen performance – and manage the increasing complexity of their mobile device environment.
Techstep has solutions for office workers and for frontline workers. With some of the very best consultants in the field of mobile technology, Techstep is the only mobile technology player in the Nordics that can deliver managed mobility including software, advisory and hardware.1
Product offering
Techstep's product offering is designed to solve customers' challenges, and can be categorised into three different portfolios:
«SmartDevice» combines Hardware and Own Software to help enterprises integrate and manage their mobile devices fleet from procurement to end of life. The solutions give employees flexibility while enterprises increase
2 Gartner's annual report on Managed Mobility Services (MMS)
3 Gartner 2022 and 2023 Magic Quadrant for MMS
cost efficiency, insight and control over their mobile fleet. SmartDevice also supports companies' increasing focus on sustainability by applying circular economy principles to reduce e-waste and extend devices lifetime.
"SmartControl" is a Managed Service, where Techstep's experts combine best practice software, advisory and services for managing and securing enterprises' entire mobile ecosystem. This ensures that the customer's devices and apps are always compliant, secure and up-to-date.
"SmartWorks" combines Hardware, Own Software and Advisory & Services, helping organisations to increase quality and efficiency through industry solutions for their frontline workers.
Revenue segments
Techstep is transforming its business model from transactional revenue to a recurring revenue model. This will enhance financial predictability for Techstep, while at the same time ensuring better value for customers by providing them with continuous service rather than one-off transactions.
Today, Techstep's three main revenue streams are as follows:
"Hardware and Other"
This includes revenue from the sale of mobile devices and accessories, including related discounts from suppliers and partners. Sales generate low profit margins but are often the entry point for selling additional products and solutions. The devices may be sold as transactional sale (one-time sales) or "as-aservice" with recurring revenues committed for 24 months or more.
"Advisory & Services"
This is revenue from specialised advisory and support and maintenance services within Mobile Technology. Sold as one-time projects based on fixed hourly rates or "as-a-service" with a minimum 12-month recurring revenue commitment. The gross margin contribution is medium to high (~70-85%). Revenue from sale of third-party software licences including related commission is also included here.
"Own Software"
High margin revenue (~90%) from Owndeveloped software products sold as recurring contracts with a minimum of a 12-month commitment. Current portfolio consists of four software products; Lifecycle is closely tied to hardware sales but can also be sold standalone across Europe; Expense is related to Telecom operator partnerships; Essentials MDM can be sold standalone to enterprises in Europe; SmartWorks is a standalone, customised software product.
Sustainability
Techstep's mission is to make positive changes to the world of work; freeing people to work more effectively, securely and sustainably. The company's sustainability agenda is an essential part of the company's mission.
Over the past years, Techstep has strengthened its focus on environmental, social and governance (ESG), risk and compliance, with clearer priorities and a dedicated and stronger team in place. The organisation has implemented management practices based on the ISO standard, leading to ISO 9001 (quality) and 14001 (environment) certifications in Q1 2023. Techstep has further improved its EcoVadis sustainability rating performance to silver, placing Techstep among the top 9% of more than 90 000 companies evaluated globally.
More information can be found in Techstep's latest Sustainability Report, published in April 2023 as part of Techstep's Annual Report, available from www.techstep.io.
Operational review
Main developments
Techstep continued its positive development in the second quarter of 2023, despite challenges due to the macroeconomic environment. The downturn in the global smartphone market 4 affected Techstep's transactional Hardware sales negatively compared to last year, while at the same time Techstep increased net gross profit year over year. The focus on transferring customers to a recurring revenue business model and high margin products and services is yielding results, and although the revenue development was flat from the previous quarter, net gross profit was up 7%.
In 2023, focus is on streamlining business operations and optimising Techstep's cost base in order to turn the company profitable. At the same time, the company is rolling out its new simplified product portfolio to existing and new customers.
The high tender activity continued into the second quarter. One of the key wins in the quarter was the re-award of a frame agreement with Oslo Municipality for the delivery of mobile technology solutions for another 2+1+1 years. The contract represents a substantial increase from the current sales volumes, with a potential of up to NOK 480 million over a four-year period. NOK 240 million of this relates to mobile phones and accessories, while the remaining potential relates to software and advisory services. The agreement is in effect from Q3 2023.
Techstep further experienced growing interest from customers, especially within Advisory & Services and Own Software. The conversion to sales is taking longer than anticipated, however a positive upturn came through at the end of the quarter. Implementation and financial effect can be expected from the second half of 2023.
Revenue segments
Techstep continues to focus on upselling and converting existing customers from transactional sales to recurring sales, with the goal of increasing customer value through the software platform in addition to offering managed services to add further efficiency and security to customers.
The share of high margin revenues from Advisory & Services and Own Software increased from 24% in Q2 2022 to 31% of total revenues in Q2 this year.
Net gross profit in the quarter was NOK 95 million, vs. NOK 89 million last year, constituting a margin of 32.7% vs. 28.0% last year.
Net gross profit per revenue segment LTM5
Hardware and Other
The global smartphone market faced a continued decline in the first half of 2023, as challenging economic conditions drove lower consumer demand and extended purchasing cycles3 . However, the steep decline seen at the end of 2022 and into the first quarter of 2023 slowed down in the second quarter.
4 According to Canalys.com
5 ARR for Q2 2022-Q1 2023 has been restated, due to a reclassification of revenue contracts and product register
Techstep's total Hardware revenue in Q2 was NOK 202 million, a decline of 16% y/y and 6% from the previous quarter. The net gross profit margin was 16%, an increase of 2 percentage points from the previous quarter and the corresponding quarter last year. The increase relates to improved margins on transactional revenues, as well as an increased share of recurring revenues from Hardware-as-a-Service.
Advisory & Services
Revenue from Advisory & Services continued the positive development from previous quarters, with growth in the quarter driven by the newly implemented contracts with Widerøe Ground Handling and a large energy sector customer.
Total revenue was NOK 62 million in Q2 with a margin of 62%, compared to NOK 52 million with the same margin last year. Included in Advisory & Services are 3rd party software, and q/q revenues and margins will naturally fluctuate, as revenues consists of both transactional and recurring revenue items.
Own Software
Revenue from Own Software continue a positive development with an increase of 17% y/y and 7% sequentially to NOK 28 million in the quarter.
The growth was primarily connected to Own Software within Mobile Device Management (MDM), as more enterprises recognise the need for managing their mobile ecosystem to mitigate current security threats.
Recurring revenue
Total recurring revenue consists of contractually recurring revenue within the revenue segments Own Software, Advisory & Services and Hardware-as-a-Service.
6 ARR for Q2'22-Q1'23 has been restated due to a reclassification of revenue contracts and product register Reported recurring revenue represents future contractual annual revenues. Recurring revenue from Hardware-as-a-Service is measured as contracts with a duration of 24 months or more, with monthly incurred revenue annualised. Annual recurring revenue from Advisory & Services is calculated as contractual monthly revenue from contracts with duration of 12 months or more, annualised. Annual recurring revenue from Own Software is calculated as contractual monthly revenue annualised. Techstep includes only contracts where invoicing to customers has commenced.
In Q2 2023, a revision of contracts, product classification and contract reporting from subsidiaries was conducted. Based on new information and classification, Techstep has restated previously quarterly reported ARR from Own Software in order to show comparable amounts to current reporting. ARR has been reduced by approximately NOK 5 million from Q1 2022, with consequential impact in the subsequent quarters.
At the end of Q2, annualised revenues amounted to NOK 318 million, up from NOK 312 million in the previous quarter, and an increase of 15% since Q2 last year.
Recurring revenue - annualised6
Financial review
The interim financial information has not been subject to audit. Figures in brackets refer to the corresponding quarter in 2022 for profit and loss items, and year end 2022 figures for balance sheet items.
Profit and loss second quarter
Techstep had total revenue of NOK 291.5 million in the second quarter of 2023, a decrease of 8% from the corresponding quarter last year. The decline relates to the reduced sales volumes of transactional Hardware, partly offset by increase in the other revenue segments.
In Q2, Techstep generated positive results from operations, and adjusted EBITA increased by NOK 17.9 million from the corresponding period last year to NOK 2.3 million. Total expenses excluding depreciation and amortisation decreased by 11% due to the cost optimisation effects. The positive results from the cost savings are partly offset by cost increases and salary adjustments related to the effects from the current high inflation rate. Additionally, the development in technical infrastructure continues, but compared to last year, the capitalisation rate has decreased as investments are increasing in SaaS solutions vs. own developed software, which is not eligible for capitalisation under IFRS. As such, a higher rate of the expenditure in IT development is expensed rather than capitalised in the balance sheet.
Net financial items were negative at NOK 4.8 million (NOK -2.9 million) in Q2. Financial items include interest expenses, and negative effects from the depreciation of NOK versus EUR of NOK 1.3 million for the quarter.
Net loss in the period was NOK 17.6 million (NOK -31.5 million).
Profit and loss first half of 2023
Total revenue for the first half of 2023 came to NOK 583.3 million, a decrease of 12% y/y caused by the reduced sales volumes in transactional Hardware. Results from operations turned positive compared to the same period last year, and adjusted EBITA increased by NOK 31.8 million to NOK 6.4 million.
Total expenses excluding depreciation and amortisation decreased by 14% for the first half year due to the cost optimisation effects. The cost savings were partly offset by the current high inflation rate, impacting general price levels and salary adjustments.
First half year in 2022 included gains from sale of the Voice and contact centre business of NOK 40 million, which is excluded from the adjusted EBITA for last year. For more details, see the section for "Alternative Performance Measures" section of this report.
Depreciation and amortisation increased by 7% in the first half year due to the increase in depreciation related to the Hardware-as-a-Service business which is accounted for according to IFRS 16.
Net financial items were negative at NOK 13.2 million (NOK -5.3 million) for the first half year. Financial items include interest expenses, which have increased during the year. Negative effects from revaluation of currency in 2023 impacted financial items by NOK 6 million in the first half year compared to last year.
Net loss for the first half year was NOK 34.9 million (NOK -19.0 million).
Financial position
As at 30 June 2023, total assets were NOK 1 232 million, compared to NOK 1 323 million as at 31 December 2022.
Intangible assets include deferred tax assets, goodwill and customer relations and technology, and accounted for NOK 805.6 million (NOK 789.8 million). The increase from last year is due to currency translation effects on goodwill, which constitute NOK 621.1 million of total intangible assets.
Total tangible assets were NOK 195.7 million (NOK 198.1 million) including NOK 163.2 million (NOK 160.7 million) in Hardware-as-a-Service to customers and NOK 24.7 million (NOK 29.7 million) in right-of-use assets such as premises and other.
Total inventories and receivables were NOK 218.5 million (NOK 271.0 million) at the end of Q2 2023. The decrease was due to accounts receivables declining about NOK 50 million from the end of last year due to a larger third-party software transaction at the end of December 2022.
Total equity at the end of the first half year was NOK 569.1 million (NOK 571.5 million), corresponding to an equity ratio of 46% (43%). The decrease in total equity from the end of last year was due to the net loss for the period, partly offset by a gain from currency translation effects of foreign subsidiaries.
Total non-current liabilities were NOK 52.9 million at the end of the second quarter, vs. NOK 148.8 million at the end of last year. The reduction of NOK 95.8 million relates to a reclassification of non-current borrowings to current borrowings, as the total bank debt will be refinanced in Q3 2023.
At the end of June, Techstep ASA signed a term sheet to refinance all of its long-term loans and credit facilities, with effect from Q3, ensuring an increase in long-term borrowings of NOK 50 million with improved repayment terms, and restructuring the short-term credit facilities. Total loans and available credit facilities will increase by NOK 25 million. In addition, all remaining seller credits of NOK 14.7 million related to the purchase of Optidev in 2020 were converted to equity in July. These two transactions will give Techstep a solid and flexible financial position going forward.
Total interest-bearing borrowings were NOK 190.5 million at 30 June 2023, an increase of NOK 16.5 million since the end of 2022.
Other non-current debt of NOK 32.5 million (NOK 37.6 million) mostly relates to leasing commitments and a buy-back obligation for Hardware-as-a-Service.
Total current liabilities were NOK 610.3 million (NOK 603.0 million). The increase of NOK 105 million in current interest-bearing borrowings relates to the reclassification of non-current borrowings as mentioned above, offset by a decrease in other current liabilities and trade payables. Account payables were NOK 146.4 million at the end of Q2, a decrease of NOK 60 million since year end due to lower sales volumes from transactional Hardware and a larger third-party software transaction at the end of December 2022. Other current liabilities of NOK 256.9 million (NOK 269.5 million) includes deferred revenue and a buy-back obligation related to the Hardware-as-a-Service business of NOK 177.8 million (NOK 168.1 million).
Cash flow second quarter 2023
Net cash flow from operating activities was NOK 29.4 million in the quarter (NOK 7.5 million). Year to date cash flow was NOK 26.7 million (NOK 1.6 million). Change in net working capital was positive NOK 5.4 million in the second quarter of 2023, vs. negative NOK 3.6 million in 2022, and NOK -26.5 million year to date in 2023 vs. NOK - 21.6 million in 2022. The improved cash flow from operations is due to improved EBITDA in 2023.
Net cash flow outflow from investment activities in Q2 was NOK 47.7 million (NOK 48.5 million) and consists of capital expenditures for equipment related to Hardware-as-a-Service of NOK 42.9 million (NOK 34.7 million) and Own Software and IT of NOK 8.2 million (NOK 16.7 million). The investment pace in own IT and Software has been reduced since last year, as the Group has been through an extensive investment programme in line with the transformation to One Techstep, and the level of investments is expected to flatten out during the remainder of the year.
Net cash flow from financing activities was negative NOK 4.6 million (NOK 31.6 million) in the quarter, and consists primarily of interest and lease repayments. Cash flow from financing activities last year relates primarily to high utilisation of bank facilities.
Cash and cash equivalents decreased by NOK 22.8 million in the quarter, from NOK 34.2 million in the previous quarter to NOK 11.6 million at the end of the quarter. The negative cash development relates to seasonal fluctuations and is expected to improve in the second half of 2023 with new contracts being implemented. Techstep also has additional liquidity available through bank facilities, which will be strengthened through the refinancing in Q3.
Cash flow first half year 2023
Net cash flow from operating activities year to date was NOK 26.7 million (NOK 1.6 million). Change in net working capital was negative NOK 26.5 million for the first half of 2023 compared to negative NOK 21.6 million in the same period 2022. The improved cash flow from operations are due to improved adjusted EBITDA in 2023.
Net cash flow outflow from investment activities in the period was NOK 74.5 million (NOK 97.5 million) and consists of capital expenditures for equipment related to Hardware-as-a-Service of NOK 63.4 million (NOK 64.9 million) and Own Software and IT of NOK 18.9 million (NOK 35.6 million). The investment pace in own IT and Software has been reduced since last year, as the Group has been through an extensive investment programme in line with the transformation to One Techstep, and the level of investments are expected to flatten during the remainder of the year.
Net cash flow from financing activities was NOK -4.1 million (NOK 75.6 million) year to date. Net cash flow in 2023 consists primarily of interest and lease repayments, while higher cash flow from financing activities last year was primarily due to high utilisation of bank facilities. Net cash outflow from financing activities in first half year 2022 also included the acquisition of the last 20% of shares in Techstep Finance AS for NOK 9.0 million.
Cash and cash equivalents decreased by NOK 49.5 million in the period, from NOK 61.2 million at year end 2022 to NOK 11.6 million at the end of the first half year.
Related parties
There were no material transactions with related parties during the first half of 2023.
Corporate actions
At the annual general meeting on 23 May, all five board members were re-elected for a period of two years. The current board consists of Michael Jacobs (Chair), Harald Arnet, Ingrid Elvira Leisner, Melissa Ann Mulholland and Jens Rugseth.
Following a resolution by the annual general meeting, Techstep has completed a reverse share split of 10:1 and reduced the nominal value of the share capital accordingly. The new share capital was registered in the Norwegian Register of Business Enterprises on 12 July 2023.
Risk and uncertainties
Techstep's business activities entail exposure to changes in market conditions, operational and financial development. Techstep strives to take an active approach to risk management through monitoring and mitigation initiatives of identified risks, based on the ISO principles. Below is a summary of the main risks identified for Techstep in the next three to six months.
The global economic situation has faced continually increasing challenges in 2023, with slowing growth and higher inflation in Techstep's key markets. Techstep has a large base of public sector and large corporate customers, which are less vulnerable to volatile market conditions.
The global component shortage, combined with production, logistics and transportation challenges in the supply chain, may result in Techstep experiencing delays in hardware deliveries. At the time of this report, there are no such indications. Techstep continues to maintain close cooperation with key suppliers to ensure timely deliveries.
Techstep's operations, revenues and profits are dependent on its ability to generate sales through existing and new customers. Techstep operates in a competitive market segment, and the Group's success depends on its ability to meet changing customer preferences, to anticipate and respond to market and technological changes, and develop effective and collaborative relationships with its customers and partners. Techstep continues to focus on improving its product offering, reducing customer implementation time, and becoming a software-led growth business, yielding higher cash flow and profit from operations, and transforming into a recurring revenue business model. The operational risk mainly relates to the ongoing transformation process, including standardisation of the product portfolio and keeping key personnel and necessary competence.
Techstep's liquidity risk is related to a mismatch between cash flows from operations and financial commitments. Techstep is transforming itself from a transactional business model to a software-led recurring revenue model, which leads to postponed cash inflows, negatively affecting the liquidity of the Group. Investments in simplification and standardisation of the company's product portfolio and solutions, new organisational capabilities and acquisitions and integration, have furthermore increased the company's debt over time. The Group's liquidity is closely monitored by management and the Board of Directors. The refinancing of loans and credit facilities will give Techstep a more solid and flexible financial situation going forward. If the need arises, the Group has access to multiple funding sources during the transformation process.
For more information on Techstep's risk factors and risk management, reference is made to the Board of Directors report in the Annual Report for 2022 and the prospectus from 29 December 2022, both available from www.techstep.io/investor.
Outlook
Techstep serves more than 2 000 customers across industries in both the private and public sector in Europe, and is yet again recognised by Gartner as the only challenger in the Magic Quadrant for Managed Mobility Services. The goal is to become the leading European mobile technology enabler for customers that want to work smarter and more sustainably.
Techstep believes that the market for managed mobility services will continue to increase due to growing complexity and the rapidly evolving security threat landscape. At the same time, the smartphone market is expecting its decline to reverse towards the end of 2023. The company considers itself well positioned as enterprises and public sector organisations need help to manage their mobile device portfolio and keep their mobile ecosystem up to date.
Techstep signed two of the largest frame agreements in the company's history in the first half of the year, and several contracts were concluded at the end of the second quarter. These contracts are expected to materialise from the second half of this year, but exact timing remains uncertain, especially as frame agreements might take time.
Over the last years, Techstep has optimised its organisation and cost base to align with a more
simplified portfolio and extract synergies from acquired companies. At the same time, the rising price inflation impacts operating costs, which have increased by 5-10% from when the cost reduction plan was initiated in the fourth quarter last year.
In view of the restatement of ARR on Own Software in Q2 2023 and uncertainties relating to timing and ramp-up of deliveries under the new major contracts awarded this year, Techstep has revised its outlook for 2023. The updated ambition for 2023 are an ARR of NOK 125-135 million, net gross profit to NOK 380-390 million and EBITA adj. of NOK 40-50 million. Techstep's long-term outlook remains unchanged, and by 2025 Techstep aims for an ARR on Own Software above NOK 200 million, net gross profit above NOK 540 million and EBITA adj. of NOK 150 million.
Moving forward, growth will be driven by the new product portfolio, the refocused sales strategy, and converting existing customers to MMS contracts. This is expected to have a positive tailwind on Advisory & Services as well as Hardware revenues.
Responsibility statement
Oslo, 17 August 2023
From the Board of Directors and CEO of Techstep ASA
We confirm, to the best of our knowledge, that the condensed set of financial statements for the period 1 January to 30 June 2023 has been prepared in accordance with IAS 34 – Interim Financial Reporting and gives a true and fair view of the group's assets, liabilities, financial position and profit or loss as a whole. We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related party transactions.
| Michael Jacobs | Ingrid Leisner |
|---|---|
| Chairman | Board Member |
| Harald Arnet | Melissa Mulholland |
| Board Member | Board Member |
| Jens Rugseth | Børge Astrup |
| Board Member | CEO |
Consolidated Income statement
| (Amounts in NOK 1000) | Note | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | FY 2022 |
|---|---|---|---|---|---|---|
| Revenue | 2, 3 | 291 310 316 318 |
583 069 | 663 106 | 1 323 126 | |
| Other revenue | 234 | 881 | 255 | 319 | 0 | |
| Total revenues | 291 544 | 317 199 | 583 323 | 663 425 | 1 323 126 | |
| Cost of goods sold | (173 543) | (205 262) | (350 934) | (437 923) | (863 007) | |
| Salaries and personnel costs | (58 991) | (71 000) | (118 171) | (143 201) | (265 027) | |
| Other operational costs | (29 814) | (28 756) | (52 358) | (56 028) | (109 626) | |
| Depreciation | 5 | (26 848) | (27 749) | (55 457) | (51 638) | (109 222) |
| Amortisation | (16 651) | (15 534) | (31 736) | (30 083) | (58 492) | |
| Other income | 119 | 377 | 255 | 40 444 | 40 058 | |
| Other expenses | (0) | (382) | (1) | (1 082) | (10 015) | |
| Operating profit (loss) | (14 185) | (31 106) | (25 077) | (16 087) | (52 205) | |
| Financial income | 3 505 | 318 | 6 235 | 1 564 | 5 601 | |
| Financial expense | (8 306) | (3 233) | (19 462) | (6 851) | (17 565) | |
| Profit before taxes | (18 986) | (34 021) | (38 304) | (21 374) | (64 170) | |
| Income taxes | 1 380 | 2 554 | 3 390 | 2 390 | (4 445) | |
| Net profit (loss) for the period | (17 605) | (31 467) | (34 914) | (18 983) | (68 614) | |
| Net income attributable to | ||||||
| Non-controlling interests | - | - | - | 312 | 312 | |
| Shareholders of Techstep ASA | (17 605) | (31 467) | (34 914) | (19 295) | (68 926) | |
| Earnings per share in NOK: | ||||||
| Basic | (0.06) | (0.15) | (0.11) | (0.09) | (0.25) | |
Consolidated statement of comprehensive income
| (Amounts in NOK 1000) | Note | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | FY 2022 |
|---|---|---|---|---|---|---|
| Net profit (loss) for the period | (17 605) | (31 467) | (34 914) | (18 983) | (68 614) | |
| Items that may be reclassified to profit and loss | ||||||
| Exchange differences on translating foreign operations |
4 047 | 304 | 30 601 | (12 990) | (25 598) | |
| Income tax related to these items | (509) | (192) | - | |||
| Other comprehensive income | 4 047 | (205) | 30 601 | (13 182) | (25 598) | |
| Total comprehensive income | (13 558) | (31 672) | (4 313) | (32 477) | (94 212) | |
| Total comprehensive income attributable to | ||||||
| Non-controlling interests | - | 312 | 312 | |||
| Shareholders of Techstep ASA | (13 558) | (31 672) | (4 313) | (32 789) | (94 524) |
Consolidated statement of financial position
| (Amounts in NOK 1000) | ||||
|---|---|---|---|---|
| ASSETS | Note | Q2 2023 | Q2 2022 | 2022 |
| Non-current assets | ||||
| Deferred tax asset | 5 581 | 11 179 | 6 470 | |
| Goodwill | 621 123 | 603 811 | 601 083 | |
| Customer relations and technology | 178 874 | 190 510 | 182 296 | |
| Sum intangible assets | 805 578 | 805 500 | 789 849 | |
| Right of use assets | 24 667 | 24 342 | 29 738 | |
| Property, plant and equipment | 5 | 171 006 | 163 264 | 168 325 |
| Sum tangible assets | 195 674 | 187 606 | 198 064 | |
| Shares and investments | 706 | 598 | 608 | |
| Other non-current assets | 214 | 2 035 | 2 655 | |
| Sum financial assets | 921 | 2 633 | 3 264 | |
| Total non-current assets | 1 002 173 | 995 739 | 991 176 | |
| Inventories | 17 338 | 18 680 | 23 431 | |
| Accounts receivable | 163 143 | 192 796 | 213 773 | |
| Other receivables | 38 051 | 40 659 | 33 801 | |
| Total inventories and receivables | 218 532 | 252 135 | 271 005 | |
| Cash and cash equivalents | 6 | 11 576 | 29 922 | 61 119 |
| Assets classified as held for sale | - | - | - | |
| Total current assets | 230 108 | 282 057 | 332 124 | |
| Total assets | 1 232 281 | 1 277 796 | 1 323 300 | |
| EQUITY AND LIABILITIES | Note | Q2 2023 | Q2 2022 | 2022 |
| Share capital | 4 | 305 131 | 211 983 | 305 131 |
| Other equity | 263 958 | 318 501 | 266 389 | |
| Total equity attributable to the owners of Techstep ASA | 569 089 | 530 483 | 571 520 | |
| Non-controlling interests | - | - | - | |
| Total equity | 569 089 | 530 483 | 571 520 | |
| Deferred tax | 18 450 | 21 875 | 20 536 | |
| Non-current interest-bearing borrowings | 1 941 | 97 016 | 90 665 | |
| Other non-current debt | 32 508 | 36 053 | 37 555 | |
| Total non-current liabilities | 52 899 | 154 943 | 148 756 | |
| Current interest-bearing borrowings | 188 599 | 169 961 | 83 322 | |
| Accounts payable | 146 339 | 168 332 | 205 797 | |
| Tax payable | (1 594) | 2 247 | 3 315 | |
| Public duties | 20 012 | 28 838 | 41 100 | |
| Other current liabilities | 256 937 | 222 991 | 269 490 | |
| Total current liabilities | 610 293 | 592 370 | 603 024 | |
| Total liabilities | 663 192 | 747 313 | 751 780 | |
| Total equity and liabilities | 1 232 281 | 1 277 796 | 1 323 300 |
Consolidated statement of changes in equity
| Other | Total | ||||||
|---|---|---|---|---|---|---|---|
| Share | paid-in | Other | Reval. | Minority | equity | ||
| (Amounts in NOK 1000) | capital | capital | equity | Reserve | Total | interest | capital |
| Equity as at start of 2022 | 209 630 | 678 767 | (327 417) | (6 667) | 554 312 | 1 274 | 555 586 |
| Profit for the period | - | - | (68 926) | - | (68 926) | 312 | (68 614) |
| Other comprehensive income | - | - | - | (25 598) | (25 598) | - | (25 598) |
| Total comprehensive income for | |||||||
| the period | - | - | (68 926) | (25 598) | (94 523) | 312 | (94 212) |
| Transactions with owners in | |||||||
| their capacity as owners: | |||||||
| Transactions with non-controlling | |||||||
| interests | - | (1 585) | (1 585) | ||||
| Issue of ordinary shares as | |||||||
| consideration for a business | |||||||
| combination, net of transaction | 2 014 | 3 442 | - | - | 5 456 | - | 5 456 |
| costs and tax | |||||||
| Proceeds from issuance of | |||||||
| shares net of transaction costs | 93 487 | 8 698 | - | - | 102 185 | - | 102 185 |
| Share-based payments | - | - | 4 091 | - | 4 091 | - | 4 091 |
| Equity as at end of 2022 | 305 131 | 690 906 | (392 252) | (32 265) | 571 520 | - | 571 521 |
| Equity as at start of 2023 | 305 131 | 690 906 | (392 252) | (32 265) | 571 520 | 571 520 | |
| Profit for the period | - | - | (34 914) | - | (34 914) | (34 914) | |
| Other comprehensive income | - | - | - | 30 601 | 30 601 | - | 30 601 |
| Total comprehensive income for | |||||||
| the period | - | - | (34 914) | 30 601 | (4 313) | - | (4 313) |
| Transactions with owners in | |||||||
| their capacity as owners: | |||||||
| Share-based payments | - | - | 1 882 | - | 1 882 | - | 1 882 |
| Equity as at end of Q2 2023 | 305 131 | 690 906 | (425 284) | (1 664) | 569 089 | 569 089 |
Consolidated statement of cash flow
| (Amounts in NOK 1000) | Note | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | FY 2022 |
|---|---|---|---|---|---|---|
| Profit before tax | (18 986) | (34 021) | (38 304) | (21 374) | (64 170) | |
| Depreciation equipment and other fixed assets |
5 | 23 146 | 23 768 | 48 024 | 45 768 | 95 459 |
| Depreciation right-of-use assets | 5 | 3 701 | 3 981 | 7 433 | 5 870 | 13 763 |
| Amortisation | 16 651 | 15 534 | 31 736 | 30 083 | 58 492 | |
| Share-based payments | 984 | - | 1 884 | - | 4 091 | |
| Dividend and other reclassified to | (39) | - | (40) | - | - | |
| investment activities | ||||||
| Gain from sale of business units | - | (113) | - | (40 162) | (40 119) | |
| Gain from sale of PPE reclassified to | 5 | (2 588) | - | (5 717) | - | (2 523) |
| investment activities | ||||||
| Net exchange differences | (678) | - | 5 253 | - | - | |
| Taxes paid | (1 810) | (856) | (3 869) | (1 980) | (996) | |
| Interest expense (revenue) reclassified to investing/financing activities |
3 587 | 2 881 | 6 861 | 4 950 | 12 807 | |
| Changes in net operating working capital | 5 450 | (3 633) | (26 552) | (21 582) | 46 937 | |
| Net cash flow from operational activities | 29 420 | 7 540 | 26 709 | 1 573 | 123 741 | |
| Payment for acquisition of subsidiaries | - | 294 | - | 294 | 294 | |
| net of cash acquired | ||||||
| Payment for equipment and other fixed | 5 | (42 897) | (34 702) | (63 435) | (64 891) | (132 450) |
| assets | ||||||
| Payment for intangible assets | (8 186) | (16 702) | (18 894) | (35 609) | (52 250) | |
| Proceeds from sale of property, plant and equipment |
3 182 | 2 585 | 7 506 | 2 585 | 3 499 | |
| Proceeds from sale of business | - | - | - | - | - | |
| Interest received | 230 | 33 | 296 | 87 | 531 | |
| Net cash used on investment activities | (47 671) | (48 491) | (74 528) | (97 534) | (180 376) | |
| Changes in ownership in Subsidiary | - | - | - | (9 000) | (9 000) | |
| Proceeds from issuance of shares | (0) | 2 004 | (0) | 2 004 | 76 969 | |
| Proceeds from borrowings | 9 588 | 43 015 | 37 583 | 106 340 | 55 768 | |
| Repayment of borrowings | (6 785) | (10 830) | (27 412) | (12 337) | (29 019) | |
| Lease repayments | (4 127) | (4 881) | (8 253) | (6 672) | (15 423) | |
| Interest paid | (3 255) | 2 273 | (6 007) | (4 751) | (11 701) | |
| Net cash flow from financing activities | (4 578) | 31 580 | (4 089) | 75 584 | 67 594 | |
| Net change in cash and cash equivalents | (22 830) | (9 370) | (51 908) | (20 377) | 10 959 | |
| Cash and cash equivalents at beginning of | 34 210 | 38 591 | 61 119 | 50 350 | 50 350 | |
| period | ||||||
| Effects of exchange rate changes on cash and cash equivalents |
196 | 703 | 2 365 | (51) | (191) | |
| Cash and cash equivalents at end of | 6 | 11 576 | 29 922 | 11 576 | 29 922 | 61 119 |
| period |
Notes to the consolidated financial statements
Note 1. Accounting principles
Techstep (the Group) consists of Techstep ASA (the Company) and its subsidiaries. Techstep ASA is a limited liability company, incorporated in Norway. The consolidated interim financial statements consist of the Group. As a result of rounding differences, numbers or percentages may not add up to the total.
1. ACCOUNTING PRINCIPLES
The interim consolidated financial statements are prepared under International Financial Reporting Standards (IFRS) for the periods presented. The interim financial report is presented in accordance with IAS 34 Interim Financial Reporting. The interim consolidated financial statements do not include all the information and disclosures required in the Annual Financial Statements and should be read in conjunction with the Group's Annual Financial Statements for 2022. The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's Annual Financial Statements for the year ended 31 December 2022. This report has not been audited.
Note 2. Segments
The three Segments of Techstep are represented by the geographic locations where the Group's entities are incorporated. The entities are controlled and owned by the Techstep Group. Eliminations represent intersegment sales. Transactions between operating segments are conducted on normal commercial terms.
1) Norway
The segment provides Techstep's full stack of solutions including Hardware, Advisory & Services, and Own Software.
2) Sweden / Denmark
The segment provides Techstep's full stack of solutions including Hardware, Advisory & Services, and Own Software.
3) Poland
The segment provides a portfolio of Own Software solutions for Mobile Device Management (MDM).
4) Headquarters (HQ)
Relates to the parent company Techstep ASA.
| Sweden/ | ||||||
|---|---|---|---|---|---|---|
| Q2 2023 | Norway | Denmark | Poland | HQ | Eliminations | Total |
| Operating revenues from external | ||||||
| customers | 176 680 | 108 049 | 8 715 | - | (1 900) | 291 544 |
| Operating revenues from other | ||||||
| segments | 0 | 2 588 | - | 16 587 | (19 175) | - |
| Operating revenues | 176 680 | 110 638 | 8 715 | 16 587 | (21 076) | 291 544 |
| Cost of goods sold | (111 808) | (64 883) | (1 591) | - | 4 740 | (173 543) |
| Salaries and personnel costs | (24 220) | (25 864) | (1 860) | (7 047) | - | (58 991) |
| Other operational costs | (16 801) | (13 640) | (3 506) | (12 486) | 16 618 | (29 814) |
| Depreciation | (15 625) | (9 816) | (232) | (1 174) | - | (26 848) |
| Other income | - | - | 119 | - | - | 119 |
| Other expenses | - | - | (0) | - | - | (0) |
| EBITA | 8 226 | (3 565) | 1 644 | (4 121) | 283 | 2 467 |
| Employees 30 June 2023 | 96 | 125 | 48 | 6 | - | 275 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| Q2 2022 | Norway | Denmark | Poland | HQ | inations | Total |
| Operating revenues from external | ||||||
| customers | 188 357 | 122 448 | 6 394 | - | - | 317 199 |
| Operating revenues from other | ||||||
| segments | 8 171 | 8 745 | 2 | 17 054 | (33 972) | - |
| Operating revenues | 196 528 | 131 193 | 6 396 | 17 054 | (33 972) | 317 199 |
| Cost of goods sold | (130 816) | (79 697) | (1 643) | - | 6 894 | (205 262) |
| Salaries and personnel costs | (22 830) | (29 482) | (3 709) | (16 661) | 1 682 | (71 000) |
| Other operational costs | (24 806) | (16 321) | (376) | (11 837) | 24 585 | (28 756) |
| Depreciation | (17 363) | (10 230) | (156) | - | - | (27 749) |
| Other income | - | 113 | 18 | 246 | - | 377 |
| Other expenses | - | - | (1) | (381) | - | (382) |
| EBITA | 713 | (4 423) | 529 | (11 579) | (812) | (15 571) |
| Employees 30 June 2022 | 124 | 150 | 43 | 7 | - | 324 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| H1 2023 | Norway | Denmark | Poland | HQ | inations | Total |
| Operating revenues from external | ||||||
| customers | 356 584 | 212 859 | 15 780 | - | (1 900) | 583 323 |
| Operating revenues from other | - | 4 567 | - | 33 173 | (37 740) | |
| segments | - | |||||
| Operating revenues | 356 584 | 217 426 | 15 780 | 33 173 | (39 640) | 583 323 |
| Cost of goods sold | (230 735) | (124 026) | (2 896) | - | 6 723 | (350 934) |
| Salaries and personnel costs | (51 806) | (51 119) | (4 042) | (11 205) | - | (118 171) |
| Other operational costs | (31 842) | (26 580) | (6 068) | (20 786) | 32 917 | (52 358) |
| Depreciation | (31 647) | (21 020) | (442) | (2 348) | - | (55 457) |
| Other income | - | - | 255 | - | - | 255 |
| Other expenses | - | - | (1) | - | - | (1) |
| EBITA | 10 555 | (5 318) | 2 587 | (1 166) | - | 6 658 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| H1 2022 | Norway | Denmark | Poland | HQ | inations | Total |
| Operating revenues from external | ||||||
| customers | 408 960 | 241 752 | 12 713 | - | - | 663 425 |
| Operating revenues from other | ||||||
| segments | 16 875 | 15 331 | 898 | 36 551 | (69 655) | - |
| Operating revenues | 425 835 | 257 083 | 13 611 | 36 551 | (69 655) | 663 425 |
| Cost of goods sold | (286 978) | (160 499) | (3 788) | - | 13 342 | (437 923) |
| Salaries and personnel costs | (47 490) | (59 162) | (7 597) | (32 291) | 3 339 | (143 201) |
| Other operational costs | (10 458) | (30 276) | (2 905) | (25 184) | 12 794 | (56 028) |
| Depreciation | (32 127) | (19 160) | (350) | (1) | - | (51 638) |
| Other income | 19 600 | 20 562 | 3 5 | 246 | - | 40 444 |
| Other expenses | (500) | - | (1) | (582) | - | (1 082) |
| EBITA | 67 882 | 8 547 | (993) | (21 260) | (40 179) | 13 997 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| FY 2022 | Norway | Denmark | Poland | HQ | inations | Total |
| Operating revenues from external | ||||||
| customers | 787 272 | 511 376 | 24 478 | - | - | 1 323 126 |
| Operating revenues from other | ||||||
| segments | 32 881 | 19 577 | 3 448 | 67 555 | (123 462) | - |
| Operating revenues | 820 153 | 530 953 | 27 926 | 67 555 | (123 462) | 1 323 126 |
| Cost of goods sold | (539 551) | (330 069) | (7 779) | - | 14 392 | (863 007) |
| Salaries and personnel costs | (89 565) | (113 388) | (7 831) | (60 936) | 6 693 | (265 027) |
| Other operational costs | (97 750) | (56 851) | (7 878) | (46 277) | 99 130 | (109 626) |
| Depreciation | (60 761) | (43 308) | (766) | (4 387) | - | (109 222) |
| Other income | 19 600 | 20 047 | 165 | 246 | - | 40 058 |
| Other expenses | (4 900) | (2 435) | (388) | (2 292) | - | (10 015) |
| EBITA | 47 226 | 4 949 | 3 449 | (46 089) | (3 247) | 6 287 |
| Employees 31 December 2022 | 119 | 147 | 43 | 5 | - | 315 |
Note 3. Disaggregation of revenues
In the following tables, Total revenue is disaggregated by major revenue streams divided into the reportable segments as shown in note 2:
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| Q2 2023 | Norway | Denmark | Poland | HQ | inations | Group |
| Hardware | 143 269 | 61 979 | - | (3 384) | 201 864 | |
| Advisory & Services* | 20 772 | 41 532 | 209 | (906) | 61 607 | |
| Own Software | 12 408 | 7 104 | 8 506 | (180) | 27 839 | |
| Other revenues | 231 | 23 | - | 16 587 | (16 606) | 234 |
| Total revenues | 176 680 | 110 638 | 8 715 | 16 587 | (21 076) | 291 544 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| Q2 2022 | Norway | Denmark | Poland | HQ | inations | Group |
| Hardware | 158 218 | 86 571 | 321 | (4 975) | 240 135 | |
| Advisory & Services* | 18 601 | 35 646 | 491 | (2 263) | 52 475 | |
| Own Software | 11 390 | 7 286 | 5 584 | (552) | 23 708 | |
| Other revenues | 8 319 | 1 690 | - | 17 054 | (26 182) | 881 |
| Total revenues | 196 528 | 131 193 | 6 396 | 17 054 | (33 972) | 317 199 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| H1 2023 | Norway | Denmark | Poland | HQ | inations | Group |
| Hardware | 292 926 | 128 047 | - | (4 293) | 416 680 | |
| Advisory & Services* | 38 791 | 75 164 | 246 | (1 770) | 112 431 | |
| Own Software | 24 762 | 14 041 | 15 534 | (379) | 53 958 | |
| Other revenues | 105 | 174 | - | 33 173 | (33 198) | 255 |
| Total revenues | 356 584 | 217 425 | 15 780 | 33 173 | (39 639) | 583 323 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| H1 2022 | Norway | Denmark | Poland | HQ | inations | Group |
| Hardware | 347 786 | 172 546 | 321 | (9 312) | 511 340 | |
| Advisory & Services* | 39 976 | 70 125 | 782 | (3 541) | 107 341 | |
| Own Software | 21 386 | 12 522 | 12 508 | (1 991) | 44 425 | |
| Other revenues | 16 687 | 1 890 | - | 36 551 | (54 810) | 319 |
| Total revenues | 425 835 | 257 083 | 13 611 | 36 551 | (69 655) | 663 425 |
| Sweden/ | Elim | |||||
|---|---|---|---|---|---|---|
| FY 2022 | Norway | Denmark | Poland | HQ | inations | Group |
| Hardware | 661 629 | 323 626 | 477 | (8 088) | 977 643 | |
| Advisory & Services* | 82 950 | 176 875 | 306 | (6 251) | 253 879 | |
| Own Software | 44 164 | 24 454 | 27 143 | (4 169) | 91 593 | |
| Other revenues | 31 411 | 5 998 | - | 67 555 | (104 953) | 11 |
| Total revenues | 820 153 | 530 953 | 27 926 | 67 555 | (123 462) | 1 323 126 |
*Commission is included in Advisory & Services
Note 4. Share capital and shareholders
The company's share capital as at 30 June 2023 was NOK 305 131 070 divided into 30 513 107 ordinary shares with a par value of NOK 10.00.7
Each share gives the right to one vote at the company's annual general meeting. At the time of this report, Techstep holds 192 treasury shares.
Techstep's 20 largest shareholders at 30 June 2023 were as follows:
| Shareholder | # of shares | Ownership % |
|---|---|---|
| DATUM AS | 5 835 198 | 19.12 % |
| KARBON INVEST AS1) | 4 371 619 | 14.33 % |
| Swedbank AB | 3 347 897 | 10.97 % |
| DNB Markets Aksjehandel/-analyse | 1 477 000 | 4.84 % |
| STEENCO AS | 869 566 | 2.85 % |
| AS CLIPPER | 869 566 | 2.85 % |
| MIDDELBORG INVEST AS | 696 615 | 2.28 % |
| VERDIPAPIRFONDET DNB SMB | 680 902 | 2.23 % |
| CIPRIANO AS | 599 916 | 1.97 % |
| Saxo Bank A/S | 580 064 | 1.90 % |
| TIGERSTADEN AS | 475 000 | 1.56 % |
| CAMIKO AS | 436 793 | 1.43 % |
| SPECTER INVEST AS | 305 430 | 1.00 % |
| TVENGE | 300 000 | 0.98 % |
| GIMLE INVEST AS | 261 513 | 0.86 % |
| TIGERSTADEN MARINE AS | 250 000 | 0.82 % |
| NORDHOLMEN AS | 244 756 | 0.80 % |
| PIKA HOLDING AS | 214 346 | 0.70 % |
| ADRIAN AS | 203 886 | 0.67 % |
| UNIFIED AS | 196 927 | 0.65 % |
| Total number owned by top 20 | 22 216 994 | 72.81 % |
| Total number of shares | 30 513 107 | 100.00 % |
1) Karbon Invest AS is owned by the Board member Jens Rugseth
Duo Jag AS, which is partly owned by Board member Ingrid Leisner, owns 60,157 shares in Techstep ASA.
7 At the annual general meeting on 23 May 2023, it was approved to resolve a 10:1 share split, followed by a share capital decrease by reducing the nominal value of the company's shares from NOK 10 to NOK 1. The ex-date for the reverse share split was on 30 May 2023, while the share capital decrease was registered with the Norwegian Register of Business Enterprises on 12 July 2023. Following such registration, the Techstep ASA's new share capital is NOK 30,513,107 divided into 30,513,107 shares, each with a nominal value of NOK 1.
Share option grant
In accordance with the authorisation granted by the annual general meeting on 23 May 2023, the Board of Directors of Techstep ASA resolved on 14 June 2023 to grant share options pursuant to the 2023 incentive programme. The granted options vest 1/3 each year from 14 June 2023, and are fully vested on 14 June 2026. The options must be exercised within 5 years. The exercise price is NOK 18.70. The exercise price will be adjusted for any dividends paid or accrued before exercise. The exercise of share options can be settled in cash and/or with new existing treasury shares.
In addition, to maintain the purpose of the share options incentive programme, it was resolved a repricing of options previously issued with vesting in 2024, 2025 and 2026. The reprising of options vesting in 2024, 2025 and 2026 is NOK 21.70, NOK 25.60 and NOK 29.50, respectively.
At 30 June 2023, the total number of outstanding share options was 1 488 723.
For information on the share option programme for previous years please see the Annual Report 2022 which is available from the website www.techstep.io/investor.
Overview of shares and share options held by members of the management group as at 30 June 2023:
| Name | Position | Shares | Share options |
|---|---|---|---|
| Børge Astrup | CEO | 145 537 | 500 000 |
| Ellen Solum | CFO | - | 150 000 |
| Ellen Skaarnæs | Chief People Officer | 5 422 | 84 065 |
| Sheena Lim | Chief Marketing Officer | 2 134 | 84 065 |
| Mads Vårdal | Chief Product Officer | 502 | 199 738 |
| David Landerborn | Chief Operations Officer | 29 417 | 82 965 |
| Bartosz Leoszewski | Chief Technology Officer | 39 796 | 84 065 |
Note 5. Property, plant and equipment
| Right-of-use | Equipment 1 ) | Other fixed | ||
|---|---|---|---|---|
| (Amounts in NOK 1000) | assets | assets | Total | |
| Accumulated cost as at 1 January 2022 | 63 881 | 292 234 | 31 090 | 387 205 |
| Additions | 12 500 | 126 507 | 5 943 | 144 950 |
| Additions arising from business combinations | - | - | 83 | 83 |
| Disposals | (2 673) | (76 928) | (15 641) | (95 242) |
| Translation differences | (103) | (4 236) | (11) | (4 350) |
| Accumulated cost 31 December 2022 | 73 605 | 337 577 | 21 464 | 432 646 |
| Accumulated cost as at 1 January 2023 | 73 605 | 337 577 | 21 464 | 432 646 |
| Additions | 1 561 | 61 068 | 2 366 | 64 996 |
| Disposals | (9 631) | (88 869) | (3 624) | (102 123) |
| Translation differences | 2 155 | 7 099 | 995 | 10 249 |
| Accumulated cost 30 June 2023 | 67 691 | 316 875 | 21 202 | 405 768 |
| - | ||||
| Accumulated depreciation as at 1 January 2022 | (33 613) | (149 468) | (25 081) | (208 163) |
| Current year depreciation | (13 763) | (92 840) | (2 620) | (109 222) |
| Disposals | 2 673 | 64 004 | 14 082 | 80 759 |
| Translation differences | 837 | 1 429 | (223) | 2 043 |
| Accumulated depreciation 31 December 2022 | (43 866) | (176 874) | (13 842) | (234 584) |
| Accumulated depreciation as at 1 January 2023 | (43 868) | (176 874) | (13 842) | (234 584) |
| Current year depreciation | (7 433) | (46 845) | (1 178) | (55 457) |
| Disposals | 9 373 | 74 844 | 2 266 | 86 483 |
| Translation differences | (1 096) | (4 825) | (616) | (6 538) |
| Accumulated depreciation 30 June 2023 | (43 023) | (153 701) | (13 370) | (210 095) |
| Book value of assets 31 December 2022 | 29 738 | 160 703 | 7 622 | 198 064 |
| Book value of assets 30 June 2023 | 24 667 | 163 174 | 7 832 | 195 674 |
Note 6. Cash and cash equivalent
(Amounts in NOK 1 000)
| Current assets | Q2 2023 | Q2 2022 | 2022 |
|---|---|---|---|
| Cash at bank and in hand, not included in cash pool | 11 576 | 29 922 | 61 119 |
| Of which is restricted | 3 214 | 6 233 | 5 196 |
The Group has a credit facility of NOK 92 million. As at 30 June 2023 NOK 73.9 million of the facility has been utilised.
Note 7. Changes in Group structure and business combinations
2022
Acquisition of Crypho AS
On 1 June 2022 Techstep acquired 100% of the shares in Crypho AS. Chrypho AS has an end-to-end encrypted enterprise software as a service (SaaS) messaging and file-sharing application. The transaction was partly settled in 368 902 consideration shares in Techstep ASA. At the time of completion, this corresponded to NOK 1.1 million. The earnout (refer to table below) is to be settled in Techstep shares.
The tables below summarise the consideration transferred, and the amounts recognised for assets acquired and liabilities assumed after the business combinations:
| Consideration and amount recognised | Chrypho | Total |
|---|---|---|
| Settlement of shareholder loans* | 3 673 | 3 673 |
| Consideration shares | 1 059 | 1 059 |
| Seller credit | 1 818 | 1 818 |
| Total | 6 550 | 6 550 |
| Consideration to be allocated | Chrypho | Total |
| Consideration shares | 1 059 | 1 059 |
| Seller credit | 1 818 | 1 818 |
| Total | 2 877 | 2 877 |
| Net assets | Chrypho | Total |
| Intangible assets | 3 566 | 3 566 |
| Property plant and equipment | 83 | 83 |
| Trade and other receivables | 28 | 28 |
| Cash and cash equivalents | 294 | 294 |
| Other non-current liabilities | (5 983) | (5 983) |
| Current liabilities | (142) | (142) |
| Net assets | (2 153) | (2 153) |
| Excess value | 5 030 | 5 030 |
| Purchase price allocation | Chrypho | Total |
| Goodwill | 4 844 | 4 844 |
| Long-term debt | 186 | 186 |
| Total | 5 030 | 5 030 |
*Settlement of shareholder loans:
Crypho had shareholder loans of NOK 3.7 million. In conjunction with the closing of the transaction, Techstep assumed the position as debtor. The shareholder loans were subsequently settled with 1 129 118 shares in Techstep ASA.
Divestment of Voice and Contact centre business unit
On 3 January 2022, the divestment of the Voice and contact centre business unit was completed for a total consideration of NOK 65.5 million. The settlement was received in December 2021. The gain of NOK 40.1 million has been recognised in the income statement on the line item other income in Q1 2022. NOK 24.5 million has been derecognised from the statement of financial position's line item assets held for sale.
Acquisition of last 20% of shares in Techstep Finance AS
On 14 February 2022, the company acquired the remaining 20% of the shares in Techstep Finance AS for NOK 9 million. The amount was settled in cash. Following the transaction Techstep owns 100% of the shares in Techstep Finance AS.
Note 8. Subsequent events
Share capital decrease
The share capital decrease related to the 10:1 reverse share split was registered in the Norwegian Register of Business Enterprises on 12 July.
Refinancing and new bank relation
Techstep has signed a term sheet with a new bank relation for the refinancing of the company's term loans and credit facilities. The refinancing package increases total available liquidity by NOK 25 million and restructures the interest-bearing debt, increasing long-term debt by NOK 50 million compared to current long term debt with a 50/50 five-year amortisation and five-year bullet, in addition to flexible short-term credit facilities.
Conversion of seller's credit to shares
On 5 July Techstep entered into an agreement with Stobor Invest AS for the conversion of all remaining seller's credit to shares. The outstanding seller's credit amounted to NOK 14 427 855, which was converted from SEK 14 553 011 by using a NOK/SEK exchange rate equal to 0.9914. The subscription price per new share in the conversion equaled NOK 13.70 and the total number of new shares issued to Stobor was 1 053 128. The agreed subscription price reflected the market price per share in Techstep minus a discount due to the new shares being subject to certain lock-up restrictions in the 12-month period following conversion. After this transaction, Techstep has no outstanding seller's credit from previous acquisitions. The share capital increase was registered with the Norwegian Register of Business Enterprises on 13 July 2023. Following that registration, Techstep's new share capital is NOK 31 566 235 divided into 31 566 235 shares, each with a nominal value of NOK 1.
Alternative performance measures
Techstep Group's financial information is prepared in accordance with international financial reporting standards (IFRS). In addition, it is management's intention to provide alternative performance measures that are regularly reviewed by management to enhance the understanding of Techstep's performance, but not instead of the financial statements prepared in accordance with IFRS. The alternative performance measures presented may be determined or calculated differently by other companies. The principles for measuring the alternative performance measures are in accordance with the principles used both for segment reporting in Note 2 and internal reporting to Group Executive Management (chief operating decision makers) and are consistent with financial information used for assessing performance and allocating resources.
Gross profit
Gross profit is defined as Total revenue less Cost of goods sold.
Net gross profit
Net gross profit is defined as Total revenue less Cost of goods sold and depreciation from Hardwareas-a-Service.
Gross margin
Gross margin is defined as Total revenue less Cost of goods sold and depreciation from Hardwareas-a-Service, divided by Total revenue.
EBITDA
Earnings before interest, tax, depreciation (excluding depreciation from Hardware-as-a-Service), amortisation and impairment (EBITDA) is a key financial parameter for Techstep. This measure is useful to users of Techstep's financial information in evaluating operating profitability on a more variable cost basis as it excludes depreciation and amortisation expense related primarily to leases, capital expenditures and acquisitions that occurred in the past. The EBITDA margin presented is defined as EBITDA divided by Total revenue.
EBITDA adjusted
Adjusted earnings before interest, tax, depreciation (excluding depreciation from Hardware-as-a-Service), amortisation and impairment (EBITDA) are based on EBITDA but adjusted for transactions of a non-recurring nature. Such non-recurring transactions include, but are not limited to restructuring costs, gains or losses related to the sale of subsidiaries, acquisition-related costs and other nonrecurring income and expenses.
EBITA
Earnings before interest, tax and amortisation (EBITA) is a key financial parameter for Techstep. This measure is useful to users of Techstep's financial information in evaluating operating profitability on a more variable cost basis as it excludes depreciation related primarily to leases and capital expenditures and acquisitions that occurred in the past. The EBITA margin presented is defined as EBITA divided by Total revenue.
EBITA adjusted
Adjusted earnings before interest, tax, amortisation and impairment (EBITA) are based on EBITA but adjusted for transactions of a non-recurring nature. Such non-recurring transactions include, but are not limited to restructuring costs, gains or losses related to sales of subsidiaries, acquisition-related costs and other non-recurring income and expenses.
EBIT
Earnings before interest and tax (EBIT) is useful to users with regard to Techstep's financial information in evaluating operating profitability on the cost basis as well as the historic cost related to past business combinations and capex. The EBIT margin presented is defined as EBIT divided by Total revenue.
Hardware revenue
Hardware revenue is defined as revenue from sales of tangible goods and related discounts from suppliers and partners.
Hardware's share of revenue is the Hardware revenue divided by Total revenue.
Advisory & Services revenue
Revenue from Advisory & Services includes revenue from advisory, support and maintenance services, and sales of third party software licenses including related commission.
Advisory & Services share of revenue is the revenue from Advisory & Services divided by Total revenue.
Own Software revenue
Revenue from Own Software includes revenue from the right to access and use software developed by Techstep (Own Software).
Own Software share of revenue is the revenue from Own Software divided by Total revenue.
Net interest-bearing debt (NIBD)
Net interest-bearing debt is non-current interest-bearing debt plus current interest-bearing liabilities less cash and cash equivalents.
Equity ratio
Equity ratio is defined as Total equity divided by Total equity and liabilities.
Capital expenditure (Capex)
Capital expenditure is the same as payment for property, plant and equipment and intangible assets.
Annual Recurring Revenue (ARR)
ARR is defined as Annual Recurring Revenue from Techstep's Own Software portfolio and is calculated by multiplying the contractual monthly revenue from existing contracts at the end of a reporting period, with twelve. Contracts where invoicing to customers has not commenced at the reporting date, are not included in the calculation.
| APM's in the income statement | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | 2022 |
|---|---|---|---|---|---|
| Total revenue | 291 544 | 317 199 | 583 323 | 663 425 | 1 323 126 |
| Cost of goods sold | (173 543) | (205 262) | (350 934) | (437 923) | (863 007) |
| Gross profit | 118 001 | 111 937 | 232 390 | 225 502 | 460 119 |
| Gross margin | 40.5 % | 35.3 % | 39.8 % | 34.0 % | 34.8 % |
| Salaries and personnel costs | (58 991) | (71 000) | (118 171) | (143 201) | (265 027) |
| Other operational costs | (29 814) | (28 756) | (52 358) | (56 028) | (109 626) |
| Other income | 119 | 377 | 255 | 40 444 | 40 058 |
| Other expenses | (0) | (382) | (1) | (1 082) | (10 015) |
| EBITDA | 29 314 | 12 177 | 62 115 | 65 634 | 115 509 |
| Depreciation | (26 848) | (27 749) | (55 457) | (51 638) | (109 222) |
| EBITA | 2 467 | (15 572) | 6 658 | 13 997 | 6 287 |
| Amortisation | (16 651) | (15 534) | (31 736) | (30 083) | (58 492) |
| EBIT | (14 185) | (31 106) | (25 077) | (16 087) | (52 205) |
| Net gross profit | |||||
| Gross profit Depr. Hardware-as-a-service |
118 001 (22 623) |
111 937 (22 984) |
232 390 (46 845) |
225 502 (43 884) |
460 119 (92 840) |
| Net gross profit | 95 378 | 88 953 | 185 544 | 181 618 | 367 279 |
| Net gross margin | 32.7 % | 28.0 % | 31.8 % | 27.4 % | 27.8 % |
| EBITDA adjusted | |||||
| EBITDA | 29 314 | 12 177 | 62 115 | 65 634 | 115 509 |
| Other income | (119) | (377) | (255) | (40 444) | (40 058) |
| Other expense | 0 | 382 | 1 | 1 082 | 10 015 |
| Adjusted EBITDA | 29 196 | 12 182 | 61 861 | 26 273 | 85 466 |
| EBITA adjusted | |||||
| EBITA | 2 467 | (15 572) | 6 658 | 13 997 | 6 287 |
| Other income | (119) | (377) | (255) | (40 444) | (40 058) |
| Other expense | 0 | 382 | 1 | 1 082 | 10 015 |
| EBITA adjusted | 2 348 | (15 567) | 6 404 | (25 365) | (23 756) |
| Revenue splits | |||||
| Revenue Hardware |
291 544 201 864 |
317 199 240 135 |
583 323 416 680 |
663 425 511 340 |
1 323 126 977 643 |
| Advisory, Services and Own Software | 89 680 | 77 065 | 166 643 | 152 085 | 345 483 |
| Hardware share of revenue | 69.2 % | 75.7 % | 71.4 % | 77.1 % | 73.9 % |
| Advisory, services and own software | |||||
| share of revenue | 30.8 % | 24.3 % | 28.6 % | 22.9 % | 26.1 % |
| APM's in the Statement of financial position | H1 2023 | H1 2022 | 2022 | ||
| NIBD | |||||
| Cash and cash equivalents | 11 576 | 29 922 | 61 119 | ||
| Non-current interest-bearing borrowings | 1 941 | 97 016 | 90 665 | ||
| Current interest-bearing borrowings | 188 599 | 169 961 | 83 322 | ||
| NIBD | 178 963 | 237 054 | 112 868 | ||
| Equity ratio | |||||
| Total equity | 569 089 | 530 483 | 571 520 | ||
| Total equity and liabilities | 1 232 281 | 1 277 796 | 1 323 300 | ||
| Equity ratio | 46.2 % | 41.5 % | 43.2 % |
Interim report Q2 and H1 2023
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