Welcome to Lemonsoft Q1 2026 results webcast. We will start by presentation from CEO Alpo Luostarinen , followed by an Q&A session. Alpo, please go ahead.
Welcome from my part as well to Lemonsoft's Q1 presentation. I will be going through our recent updates on our strategic development as well as our financials at the end. My name is Alpo Luostarinen , and I act as the CEO of Lemonsoft. During Q1 2026, I'll go through quickly our financials. Our net sales declined 1.1%, although our SaaS revenue grew 7% during the quarter. The decline in net sales was mainly due to the lower consulting and transaction-based revenue. At the end of the quarter, we also made an acquisition of Jakamo, which was during March already in our financials, but not in January and February.
Organic growth was slightly negative in -3.5%. This is especially due to the consulting and transaction revenue, especially in one of our subsidiaries. The organic growth of recurring revenue was still positive. As I mentioned, SaaS income grew by 7%, supported both by the Jakamo acquisition as well as price increases executed at the beginning of the year. Our recurring revenue has been on the increasing side for a while now, and the overall level has now increased close to 90%, ending at 88.5% at the end of the first quarter. Both SaaS growth and the lower growth of consulting revenue have been affecting the increasing share.
The share of SaaS income, which is the majority of the recurring revenue, has been increasing even faster, ending at close to 80% at the end of the first quarter, we expect that number to increase while the Jakamo figures will be fully reflected in our financials from Q2 onwards. Our gross margin, when you compare that to the comparison period a year ago, decreased so-slightly to 85.3%, although we managed to turn the direction of platform costs downwards, the gross margin was significantly higher than at the end of 2025 in Q4, growing from 82.6% to 85.3%. Our profitability as a whole was substantially better than last year, 23.1% last year 25.8% this year.
We've been increasing that trend each quarter, and we expect that trend to slightly continue improving in the next quarters. We ended up at 208 employees at the end of the first quarter, and that number includes roughly 17 people from Jakamo. We are still significantly lower with the personnel figure compared to last year. I'll quickly go through our strategic developments and what we've been focusing on in Q1. As we mentioned in our strategy update at the end of November, we have four main strategic focus areas, each of which we've done measures to improve our position in that space. The first and most important is being the market leader in our focus segments.
We're focusing on manufacturing and wholesale industries, and we've seen now during the Q1, slight increase in the value of new ERP deals in those segments. We've had a slight increase in each of the... each month in the beginning of the year, and we've been focusing a lot on improving our sales efficiency. With our new Chief Sales Officer who started in December, we've been ramping up operations and increasing resources also in our sales department and focusing on working with our customers and increasing our marketing efforts as well in the next few quarters. We've also focused on improving our customer experience, which has slightly suffered in the last few years with our major changes in platform and our organization.
We've been now arranging customer events, working with customer success teams to focus on getting our customers' processes and the software development as easy as possible, and utilizing AI tools to help those workflows getting better and better. We've also implemented an agent-based product development model at the end of Q1, and we expect to see the results of that accelerating in a few months from now. We are focusing especially. The second part of our strategy is the focus area in category-defining solutions. The main driver there is Lemon Online ERP solutions, which we are building as the operating system for industrial SMEs.
We've been executing a lot of product development initiatives to develop the product as the next generation product. We've been bringing features that have still been in our legacy solution. We've been bringing those to the Lemon Online online version. We've been developing AI workflows. We've been developing new enhanced integrations and also new modules. We've been bringing products and solutions that have been acquired to Lemonsoft. We've been integrating those as well to Lemonsoft. In each of these areas, we want to be the main player in each category. Lemon Online ERP is a wider category, and then we have a lot of different smaller niche areas where we want to be the category-leading solution. The third part is our organizational excellence.
We've focused a lot on developing our customer success functions. We've been recruiting a few individuals in both our customer support teams as well as implementation teams and also to the sales functions. We also complemented our management team in February 2026 with our Chief Operating Officer joining the company and strengthening the management of our subsidiaries. We are now building the culture towards focusing on customers, focusing on customer satisfaction, improving the understanding and competence within our customers' domain of operations, and focusing on getting the team, the product to function as well as possible to support our customers' operations. Finally, the fourth piece is value-driven M&A, as well as capital efficiency as a whole. We acquired Jakamo in March.
I know I will be talking more about the company in a few moments. As a whole, Jakamo brings a major improvement in our manufacturing positioning and improves increases the number of manufacturing companies that we have within our sphere of influence and also increases the effect on how deep we can understand our customers and their customers. We've also announced that Rite Ventures, our largest shareholder, has published their mandatory public tender offer, which is ongoing at the moment, and we are now holding back on share buybacks for now until the mandatory public tender offer is finalized in May. Jakamo is really a crucial part of our future development in the manufacturing space.
Jakamo has been called in previous years the Facebook of manufacturing companies. They've been building a platform for supplier co-collaboration, working with roughly 50 buyers at the moment, the larger manufacturing companies in Finland, Sweden, Denmark, and then they have a wide space of suppliers, roughly 4,000 companies that have been using Jakamo as supplier to these companies. As the platform and the number of companies using the platform grows, it's easier and easier for the buyers to take the system into use and invite their suppliers into the platform. Also for the suppliers, it's easier and easier for them to work with several different customers, the buyers, as well as their own suppliers, containing all of the data inside one platform.
How we see Lemonsoft in this space is that Lemonsoft provides one ERP solution where you can manage your whole business operations. All of the data is in one place, and we can provide AI features on top of that extensive data, and also real-time monitoring of your operations as well as financials and HR and everything. We provide a whole operating system which is designed for SME companies, especially in these fields. Jakamo, on the other hand, provides a wider supply chain management suite of solutions. They provide one platform for both the customers and the suppliers, or the buyers and the suppliers to work together with their whole supply chain. They connect the larger enterprises with the SME customers that Lemonsoft is especially working with.
One point, last point in Jakamo is that Jakamo is basically replacing point-to-point integrations and providing a platform where the companies and their different customers and suppliers can work in. Let's dive into our financials. Next, I'll go through our revenue development, our cost development, and personnel. In Q1, our SaaS growth continued. Our net sales reached 7.1% with a slight decline in overall revenue. Jakamo complemented our revenue in March 2026 and will be fully reflected in our financials in Q2. SaaS income grew by 7%. We had Jakamo for one month in the financials and then price increases executed at the beginning of the year supported those figures.
The organic growth for the quarter was -3.5%. We expect those figures, the organic growth for the next few quarters to remain slightly and or actually increase a bit towards the end of the year due to the fact that the comparative financials will be weaker last year and we and our growth continues to support the organic growth figures better at the end of the year. Especially, consulting and transactions in Finvoicer have been declining in a few quarters and we expect that trend to stabilize at the end of the year. That should support our organic growth as well. Looking at our annual recurring revenue bridge during Q1, we started from EUR 22.3 million in revenue at the end of last year.
New sales was 1% increase. That's been roughly the same or a bit lower in previous quarters. That number we expect it to increase gradually during the year. Net down sell, upsell was 4% growth during the quarter. Churn was 1.9%. Churn is roughly the same or a bit lower than that previous quarters. We expect that figure to actually remain quite the same during the year. M&A has been knownly due to Jakamo. That has brought 9.1% increase in our ARR figures in Q1. That is fully reflected since these are calculated on a monthly basis or at the end of the quarter. Revenue split has grown in the SaaS and transactions, especially in the SaaS space.
SaaS share of overall revenue has increased to 79.9% and will continue to increase when the Jakamo figures will be fully reflected there. Transactions have actually decreased a bit, consulting has decreased even more. Those figures will continue to decrease compared to comparison period last year for the end of the year, at least Q2, Q3, in Q4 we expect that to stabilize more. Overall cost base has been, we've done a lot of measures in stabilizing our cost base and actually reducing the employer personnel costs and then material and services have been on the increase after the platform transition in Q3, Q4.
In Q1 we were able to reduce platform costs and sort of turn the direction downwards and we expect that trend to continue in Q2, in a smaller scale and then Q3, Q4 remains to be seen, how well the or how much, for example, AI investments, continue to affect, our figures. At the moment we see that we've been able to reduce and stabilize the platform costs which is affecting positively on our gross margins. Cash flow from our operating activities was EUR 1.6 million has been stable and positive in recent quarters. Our personnel as a whole increased from 193 people to 208 people in Q1, that is mainly due to Jakamo's 17 employees.
We've also done recruitments and strengthen our resourcing across the customer-facing functions, as I mentioned, including customer support implementations and sales. We'll continue to strengthen those functions, especially in Q2. COO Reeti Saarinen joined the management team during Q1, and he's focusing on developing the management and operating model of the subsidiaries and also the shared operating model across the group. He's been able to now dive into some of our subsidiaries and is focusing on managing one by one each of those and taking care of all the seven subsidiaries that we now have and focusing on developing their operating model as well, as well as succession models.
At some point in some of those companies, we continue to integrate those into Lemonsoft and merge those into Lemonsoft in some cases. R&D is roughly half of our employees and customer functions, provides a large part of the remaining piece, and then other functions is only 20 people at the moment. Looking forward on our reporting, we have our half-year report from January to June in August 14th, and then we have our Q3 interim report in November. Thank you very much from my part. If we have some questions, I'm happy to answer those.
Thank you, Alpo. Ladies and gentlemen, I'd like to remind you that you can post your questions in the chat window. At the moment, we don't have any active questions, but let's wait a few seconds and see if they pop up. It seems that we don't have any questions for the moment, so back to you, Alpo, for closing comments.
All right. Thanks a lot. As I mentioned, we'll be diving deeper into our Q2 reports in August. Thank you from my part for the Q1 report.