Good morning, everyone, and welcome to our quarterly presentation for Q1 2024. My name is Morten Meier, and I will, together with our CFO Ellen Solum, give you an update of our financial results as well as our direction and outlook going forward. For those who did not attend the last quarterly earnings call, I took on the CEO role of Techstep during Q1, and I've spent my entire career in the technology industry, mainly with three large corporations: Microsoft, IBM, and Hewlett Packard. I have a strong belief in mobile tech being a cornerstone of the digital transformation and acceleration we see around us every day. With improved connectivity, AI-powered endpoints, generations set expectations to mobility and flexibility, the need to increase productivity, and how mobile applications foster new business models, I see Techstep perfectly positioned to make mobile technology work and create value in this exciting mobile-first era.
As we entered 2024, we continue our journey as a mobile tech enabler and accelerator, serving large enterprise customers and the public sector in our defined home market, and entering the European and global arena through our indirect partner model. We see great momentum in both channels to help customers and partners become more efficient, secure, and sustainable by leveraging best-in-class mobile technology services and solutions. We combine our own software, our expertise and best practices, professional services, and managed capabilities with the broad range of different hardware technologies we represent to better equip our customers and their office and frontline users. Our home market is Scandinavia, with our dedicated sales, delivery, operations, and support teams. The global market, we serve through strong partners and alliances, and this market channel has been strengthened and prioritized since the beginning of this year, representing our highly scalable solutions and services.
We continue to grow our recurring revenue, delivering more as-a-service solutions, and taking stronger responsibilities to operate, support, and create value for our customers and to equip their workers with the best mobile technology in the market. Let me take you through some of the highlights from the first quarter. The profitability keeps moving in the right direction, and for the sixth consecutive quarter, we delivered a positive EBITDA adjusted with an improvement of NOK 37 million last 12 months. We are satisfied with the progression, considering the transformation we have done and still are in. Our net gross profit margin improved from 32%-34% year-over-year, and we continue to deliver on the cost optimization program introduced in 2022. On the commercial side, Q1 started slow but accelerated through the quarter.
We had strong uptick on device orders in March. However, most of the shipments slipped into April due to Easter break at the end of March. Recurring revenue had a flat development year-over-year, where the decline in device sales was partly offset by growth in high-margin owned software and advisory services. In addition, as mentioned at the Q4 presentation, we have launched a revised commercial strategy with increased focus on partner sales as a channel for highly scalable solutions as owned software and managed services. So far this year, we have signed more strategic partnership agreements than we did throughout 2023, and we have built a strong pipeline of future potential partners as well. We have also an increased backlog of projects to deliver, mainly for our own software but also with managed services components and third-party solutions.
In the quarter, we signed a strategic partnership with DeviceNow for Lifecycle Portal, which marks an exciting opportunity for advancing Techstep towards its goal of becoming the leading mobile tech company in Europe. We are finalizing the joint go-to-market strategy and co-selling as we speak and preparing to start onboarding customers during this quarter. We're also looking to offer more value-added services within the managed services space. We also signed an agreement with Consafe Logistics in April, with effect from May 1st, to transfer their existing customers and service agreements to Techstep and being their exclusive partner for hardware, software, and services related to their logistics solutions. We welcome all the customers, mainly across Northern Europe, to Techstep, as well as the employees being a part of this transition.
Last but not least, we signed an exciting deal with a Nordic mobile operator covering owned software as well as our managed services. Kickoff happened this month, and we are now in the planning phase on how to commercialize offerings and services through this new channel, entering a new market segment for us. We will come back with more information on this at a later stage. With that, I will hand over to Ellen, who will take you through more details of our financial results for the quarter.
Thank you, Morten, and good morning, everyone. I'll take you through the highlights of our financials for the first quarter. First, we are pleased that we have delivered a positive EBITDA adjustment for the sixth consecutive quarter, showing that we are on the right track. That said, we are still not satisfied with the results this quarter as we experienced a challenging market for device sales in the first part of the quarter. Total revenues came in at NOK 256 million in the quarter, which is a 9% decrease from last year. This is entirely due to a 15% decline in device sales year-over-year. We see that it is Sweden where we have been hit the most with a 27% decline.
Towards the end of the quarter, the order backlog picked up considerably, but due to Easter at the end of the quarter, most orders were delayed for delivery until April. Our proprietary software performed well in the quarter with a 5% increase year-over-year. It is particularly our Essentials MDM product, delivered through partners across Europe, that has been showing very positive growth. Advisory and services, which include both consulting revenues as well as revenues from managed services and third-party software, grew with 10% year-over-year. All our products and services within this revenue stream performed well during the quarter, but this quarter particularly had positive effects from consulting fees from developing our new partner agreements. Net gross profit was NOK 86 million in the first quarter, a decline of 4% year-over-year.
But as the share of high-margin revenues continued to increase, we improved the net gross profit margin with 2 percentage points to 34%. EBITDA adjustment ended at NOK 1.6 million versus NOK 4 million last year, and the net loss in the period was NOK 12.5 million versus NOK 17 million last year. Our last 12 months' net gross profit was NOK 350 million in the first quarter this year, a decrease from NOK 363 million or 3% versus first quarter last year. As we have seen previous quarters, this downward trend stems from reduced profits in the devices area. However, we observe a consistent improvement in profits from advisory and services as well as our own software. Year-over-year, advisory and services, inclusive of managed services, experienced a 3% increase, while profits from our proprietary software improved with 7%.
Although the reduction in device sales in quarter was a bit more than we anticipated, the development is both in line with the market development and should also be expected given where we are in our transition. As we turn the company increasingly into a comprehensive managed mobility partner, the focus is on expanding our offering beyond driving transactional device sales in a highly competitive device market. Our future profitability will rely on offering our entire portfolio of products and services across both the direct and indirect channels, including converting customers to high-margin services and products, as well as building strong commercial partnerships. At the end of the quarter, our total recurring revenues annualized grew by 1% year-over-year to NOK 310 million, where the managed services improved with 9% and our own software with 4%.
Transitioning the company to a comprehensive mobility partner includes transforming our revenues to a recurring model. As I mentioned, we need to both attract new clients while also transforming and expanding our existing clients to other services and products. However, this takes time as we see that this market has been very immature. We have over 2,000 customers, but at the time being, most of these are transactional device customers. Their maturity in the area of security, managed services, and strategic utilization of mobile capabilities is low. In that sense, Techstep has been a pioneer in our value proposition to the market. However, we observe ongoing shifts as market understanding and sentiment align, leading to an increasing number of customers recognizing the value of managing this domain and the necessity for our products and services.
Through our strategic alliance with DeviceNow and other partners, there lies a very good potential for exponentially growing our recurring revenue, given that these partnerships will significantly expand our outreach. Our proprietary software and managed services are both highly scalable, so at this point, we are very well positioned to elevate our recurring revenues in the coming years. First quarter ARR from owned software grew with 4% year-over-year. While the growth is less than appreciated, our primary focus in the first half of the year is to concentrate on developing integrations with our strategic partners with whom we have agreements. These agreements have, as I mentioned, the potential to exponentially grow our own software ARR. At the moment, we need to focus on delivering on this potential.
It is expected that this work will be completed towards summer, and we can start to see the first results materialize sometime in 2024 and into 2025 as we start to onboard customers. One of our key KPIs is the EBITDA conversion rate, which we measure as EBITDA as a percentage of net gross profit. Although we're delivering positive EBITDA adjustment for the sixth consecutive quarter, EBITDA conversion rate decreased to 2% in the first quarter this year from 4% in the same quarter last year due to the decline in the net gross profit. Measuring over the last 12 months, we are stable at 8%, a substantial improvement from -3% first quarter last year, showing that we are on the right track. For nearly two years now, Techstep has navigated through a challenging and complex exercise of simultaneous acceleration and deceleration.
Accelerating in terms of investing, streamlining, and refining our product offering, fine-tuning our commercial strategies, and ensuring we have the right capabilities and technology for the future. We have secured major agreements that have the potential to step change our future. At the same time, we have been reducing our cost base considerably, reducing the number of employees and general operating costs, as well as tightening our overall expenditures. The exercise has been vital in order to move towards profitability. Today, we have a leaner, more agile organization getting ready to deliver on what we believe will be the winning strategy. We are still committed to strict cost focus, but the primary target going forward will be to grow our gross profit. Our liquidity position at the end of the quarter was NOK 20 million in cash in addition to undrawn credit reserves.
This is a reduction in cash of NOK 58 million since the end of last year. The cost of the reduction is primarily a weakening of the working capital during the quarter. Cash flow from operations was -NOK 36 million this quarter compared to -NOK 19 million in the first quarter last year. The difference is partly due to higher investments in Device as a Service during this quarter compared to last year, but primarily the change is due to the change in working capital, which was -NOK 42 million this year versus -NOK 32 million last year. Due to the seasonality in our business, device sales are usually at a much lower level in the first quarter than in the fourth quarter. As the volatility in device sales is driving a large part of the working capital, the first quarter changes in working capital are normally negative.
In addition, this year, we had some negative effects from the Easter holiday occurring at the quarter end, as well as increasing device backlog to be delivered in April instead of March. While the working capital status will improve throughout the year driven by seasonal fluctuations, our attention is naturally directed towards improving collaboration with our key vendors and optimizing our customer relationships. Net cash used on investments, including Device as a Service, was reduced with NOK 3 million this quarter to NOK 7 million as a continued cost optimization measure.
We spent NOK 15 million for down payments on bank loans, interest, and lease commitments in the quarter versus a net plus of NOK 0.5 million last year, as last year included a drawdown on credit facilities of NOK 27 million. Moving into the second quarter, cash is improving, and we have sufficient credit lines secured if we should need it.
At the end of the quarter, we have an equity ratio of 48%, up 3% since 2023. The reduction in total current assets is due to the seasonal effects of the first quarter, although the reduction in trade receivables included in the current assets was far less than anticipated due to the Easter vacation or banking holiday during the last days of the quarter. Although the total borrowings decreased with NOK 8 million from the end of 2023 to NOK 171 million at the end of the quarter, the net interest bearing debt increased with NOK 50 million to NOK 152 million as the cash position was reduced at the end of the quarter. As a consequence, Techstep was in breach with the bank loan covenants at the end of Q1.
Due to the IFRS classification rules, the entire outstanding bank loans were classified to short-term at quarter end, although the majority is long-term and the covenant breach was waived by the bank in April. We have also secured a new covenant level with the retrospective effect from first quarter this year and going forward based on EBITDA measure instead of EBITDA. This will ensure that the covenant measure is less sensitive to the volatility in cash position at the exact quarter-end dates.
The long-term part of the loans will be classified as long-term again in the second quarter reporting. Our balance sheets also include items related to Device as a Service of NOK 154 million in assets and NOK 179 million in liabilities. And note that these items do not have any future cash effect other than the net difference of NOK 25 million, which represents the future profits related to the end of life of the leased devices. Then I'll hand the word back to Morten, who will take you through a business update and the outlook.
Thank you, Ellen. Let's make a short recap on our market position and the journey ahead. The world is experiencing rapid technological advancements, and digitalization is at the forefront of this transformation, reshaping industries and work processes. AI, no-code, low-code development, and reliable high-speed connections are driving this change. AI is transforming how we work by automating tasks, improving decision-making, and enhancing productivity, also on AI-powered endpoints. No-code, low-code platforms empower non-technical users to create applications and drive digital initiatives. Mobile technologies are central to these digitalization initiatives.
Billions of connected devices will generate vast amounts of data. Mobile-first strategies are essential for success, and mobility now spans wearables, accessories, tablets, Macs, and laptops. Every device will be connected. At the same time, this will require better control and proper management, ensure security, and optimize the mobile experiences, and of course, comply with regulations and support ESG initiatives from procurement and onboarding to offboarding and recycling. We believe that an increased mobile estate should not mean more administration, complexity, and support. Our device lifecycle management gives you control in a sustainable way. With one integrated self-service platform, you can procure your mobile devices from leading brands like Apple, Samsung, Google, Zebra, and others. Through automated processes, you can manage your entire device lifecycle for your employees, onboarding, usage, and offboarding, including replace, repair, and recycle of their devices.
Our mobility experts leverage best practices and a proactive approach to ensure that your mobile fleet is always updated and secured, enabling your mobile workforce to be always on wherever they are. Techstep empowers businesses by providing an all-inclusive mobile ecosystem as a service. We have what you need to scale your office, hybrid, and frontline mobile workforce in an efficient, secure, and sustainable way, available as a total solution or as standalone services complementing your existing setup. The uniqueness of mobility is still connectivity, trust, and ease of use for both work and private. In fact, the most powerful digital tool in the day-to-day life. These tools are the engine for further development and innovation. We strongly believe Techstep is perfectly equipped and uniquely positioned to help customers and partners in this new era by combining devices, software, and services we represent.
Last quarter, we introduced the two distinct routes to the market as defined in our go-to-market plan. First, our direct route in our home market, serving both public and enterprise customers, and leveraging our broad portfolio of solutions and services, both covering running capabilities, our fully standardized offerings, and transformational capabilities, also covering our customized offerings for selected industries. Secondly, the indirect channel with an increased focus on mobile operators and complementary partners in addition to more traditional IT partners. Finding new strategic partners in selected geographical markets constitutes our revised partner strategy and significantly increases our total addressable markets. The key components of our offerings in the indirect channel and through strategic partnerships are our highly scalable software and managed services. These offerings can be delivered as standardized add-on solutions or embedded into our partners' offerings and business models.
The combination of our direct channel as a mobile technology specialist with in-depth managed mobility expertise, being close to our customers with dedicated resources, and the indirect channel, enabling partners with our unique capabilities, scaling our own software and services to a significantly larger addressable market with less owned resources, and at the same time, gain access to existing customer bases in new geographic markets and to new customer segments, make up our total addressable market and create synergies to reap across the various market channels. Our as-a-service concepts fit very well to the existing business models for most of these partners in combination with their existing subscription services. We've seen great progress and signed strategic agreements as proof points to our distinct routes to the market, and we have a strong pipeline of potential partners across all categories. Let's zoom in on some of the recently signed agreements.
As mentioned earlier, we signed a strategic partner agreement with Consafe Logistics to assume control over their hardware division specialized in rugged devices. The collaboration allows us to broaden our mobile device solutions and services while extending our reach into new and existing markets. Consafe Logistics is a leading supply chain technology company designing warehouse management systems and warehouse control systems to more than 250 customers across various industries. Headquartered in Sweden, the company has a footprint in more than 30 countries, including Scandinavia, Poland, and the Benelux region. Consafe Logistics has decided to wind down its hardware sales business, including related support services, to focus solely on supply chain software design. Under the agreement, we assume responsibility for servicing approximately 130 existing customers and facilitating new device sales previously managed by Consafe Logistics. This includes 10,000 active devices and service agreements for 2,200 devices.
The hardware and services business represents an average yearly revenue of between NOK 45 million-NOK 55 million the last three years, with the potential to deliver more capabilities and services from the Techstep portfolio. The transition of services and customers to Techstep is free of charge, while Consafe Logistics retains the right to a commission from hardware sales for a limited time. The transition of services and customers from Consafe Logistics was effective from May 1st this year. In a fast-moving device software and security market, Consafe Logistics was looking for a strategic partner that could help serve their customers with their increasing requirements and expectations. Managing rugged mobility devices that often is shared between workers and becomes mission-critical tools for an organization can be very complex and time-consuming, as well as you need to secure a high level of availability and security of such tools.
A robust mobile foundation, including logistics services for staging, kitting, and replacement handling, along with proper management for shift-based devices, is a must for efficient work out in the field, in the retail store, or at the warehouse. Consafe Logistics recognized this and decided to give more focus to the warehouse management software and team up with us at Techstep for more extensive capabilities related to sourcing and management of rugged mobile devices and accessories. With this partnership, I see a win-win-win where Consafe Logistics and Techstep can focus more on their core businesses, and our now mutual customers will receive higher-quality services, making their business leaner and more efficient. Another great contract signed this quarter is together with ISS, serving Stockholm's public transport system, SL. Techstep and ISS have since 2014 delivered ticket inspections for Stockholm's public transport operator, SL.
Now we have won the contract for the third time and another term of four years, plus an option for additional four years, and with an increased number of users, management, and our own platform handling ticketing as the foundation. ISS delivers the ticket inspectors, and Techstep delivers our own ticketing software along with rugged devices, body-worn cameras for safety, logistics services, and device management, basically everything the ticket inspectors need to perform over a million inspections annually. I see this as proof of a high-quality delivery and a good example of our partner strategy where we, together with ISS in this case, create a combined offering to meet a specific customer need, which for SL is to decrease ticketless traveling. To cope with our growth and acceleration strategy, we also need to seek new ways to scale and increase productivity, customer satisfaction, innovation, and delivery.
As a company with a strong technology foundation and expertise, Techstep is able to reap huge benefits from using AI across all of our operations. AI will play an increasingly important role, enabling Techstep to reach our goals going forward. Generative AI technologies are already enhancing our people, releasing their time spent on mundane, repeatable tasks. We are using GitHub's Copilot to enable our software developers to streamline and optimize their work. We're also using Microsoft Copilot to increase our productivity. Techstep has always been proud of our customer satisfaction, and we have initiated efforts last years to build a knowledge-based approach. The next step in providing superb customer satisfaction is introducing generative AI into our support channels, allowing for streamlined support, faster resolution time, and freeing up resources to focus on the most complex interactions.
Most interestingly, though, we are working on product innovation based on generative AI, and we are currently investigating and piloting several exciting enhancements for our own software portfolio and how we can utilize AI to assist in our service deliveries. Techstep will realize its AI strategy with regulatory and reputational risk in mind. We will ensure GDPR compliance, adherence to responsible AI standards, as well as global and local laws to leverage AI in a safe and secure manner. Well into 2024, our key focus remains to turn Techstep profitable. Although Q1 was affected by slow device sales, the second quarter already sees an uptick from previous months. We see great potential through our indirect business model and increasing growth in our direct sale channel, but we also realize that the value creation will take somewhat longer than anticipated.
We expect an increased acceleration, especially through the second half of this year. Moving forward, we will continue to further optimize the organization and the customer journey for faster execution and value realization on existing and upcoming contracts. Growth will be driven by leveraging the broad solution portfolio and refocused commercial strategy through upselling more value-added products and services, as well as increasing sales of scalable products through new and existing partner channels. For 2024, Techstep aims at growing recurring revenues analyzed year-over-year by 30%+, a net gross profit by 10%-15%, and increasing an EBITDA conversion to 12%-16%. That concludes today's presentation. Thank you for your attention. We will now move over to a Q&A session. So please stand by if you have any questions.
We will be back in about one minute to see if there are any questions posted so far. You can always submit your questions by using the investor relations email address or by using the chat function in this presentation. Hello again. We have got a first question here about our gross margin that increased significantly both compared to Q1 2023 and sequentially, Ellen. So could you please elaborate a little about which factors that drive this improvement and whether this is sustainable level?
Yes, sure. Yeah, like I said, the gross profit margin for Q1 is 34% and has previously been on 32%. So it's a good improvement in this quarter. This quarter is the product mix or the services mix in the total revenues.
So of course, when device goes down as a share of total revenue, the high-margin products will contribute more to the net gross profit. But we see that the mix will vary from quarter to quarter depending on both seasonality and the type of customers we have and the products. So yes, it's sustainable over time, but it will vary with a few percentage up and down every quarter going forward as well.
Great. Let's see if there are any other questions coming our way. Nope. Then we hope it was clear to everyone. Thank you for your participation and hope to see you next quarter as well.