Good morning, and welcome to this Q&A session following the publication of Techstep's Financial Results for the First Quarter of 2022. My name is Erik Haugen, and I will moderate this session. Answering your questions today will be CEO Børge Astrup and CFO Anita Huun. This session will be recorded and published on our website, techstep.io, later today. We will open up for questions after a short summary of Q1 2022 by CEO Børge Astrup. Børge?
Good morning, all. The Techstep transformation journey is progressing, and while the quarterly results are not where we want them to be, I'm happy to see that the underlying factors are pointing in the right direction, and our focus on recurring revenue continues. A recurring commitment is important both for our customers and us, meaning that we strive to deliver high customer value every day through our services and products. This will also result in a stronger gross profit going forward for Techstep. Focusing on the underlying factors are a key success criteria when building a recurring business. The underlying factors gives us clear indications on how our performance and our financial results will be going forward.
We see a continued increased commercial momentum, with closing contracts for a total value of NOK 11 million in annualized recurring revenue and 17 new Managed Mobility Services contracts with 9,500 managed devices in Q1 2022, versus eight contracts and 3,200 managed devices in Q1 2021. When customers buy our software, we see a positive tag-along effect on the hardware, resulting in increased volume of mobile devices sold to our customers, both in the traditional transactional way and as a service. The volume we saw grew with 20% compared to last year. The pace of implementation were not where we wanted to be in Q1. We have picked up the speed in Q2, but the slow pace in Q1 is affecting the results.
The gross profit last twelve months is steady on NOK 459 million, as well as the adjusted EBITDA of NOK 70 million. We are undergoing ongoing restructuring and transformation, where we are building a base of recurring revenue in the coming years. Our annualized recurring revenue in the first quarter increased to NOK 270 million. This includes our own software, advisory and services, and hardware as a service. Growth in recurring revenue will continue to be our key focus moving forward. We have also announced acquisition of Crypho, adding additional software capabilities to our platform. Crypho is an award-winning end-to-end encrypted mobile messaging and information sharing software for businesses, just like WhatsApp is for consumers. The acquisition of Crypho is part of our buy and build strategy to increase our recurring revenue and software offering to deliver increased value to our customers and other stakeholders.
In Q1, we also launched the new Techstep brand. The rebranding will reinforce our position as a leading European enabler of smart mobile technology. Thank you, Erik.
Thank you, Børge. We will commence with the questions. I encourage you to use our investor relations email, ir@techstep.no. We have some questions that have come in previous to this session. The first one is addressed to you, Børge. You say that you are transforming to a recurring revenue model, and you report new MMS sales every quarter, but your recurring revenues are not up. Why is that?
What you need to understand is how we work with customers. First, we do a sales booking. When the sales booking then is completed, we implement the services for the customer, and then we invoice and get the revenue coming in. We see good traction in sales bookings. It's an all-time high for Techstep. We see that we had longer lead implementation times than expected. One of the reasons for this is due to integrations with the customer's internal systems. This is a demand for enterprise customers. And also when we sell the SmartWorks solutions, there are custom elements that needs development and/or configuration that also takes time. This is reflected in our financial result for Q1 and one of our definite key focus moving forward.
Thank you. We'll continue in the financial track. Anita, this one is for you. Why is the gross margin down in the quarter?
Yes. Thanks. In Q1, we reported a four percentage point decline in our gross margins. It's important to understand that the gross margin can vary quite a bit from quarter to quarter, depending on the product mix within the quarter. In Q1, we had a very strong growth from our hardware portfolio, both from transactional and from hardware as a service, and the total, it increased the share of revenue coming from hardware. And that is what basically lowered the margin in Q1. We also have a customer mix skewed towards more large customers in Q1, and that also takes the margin slightly down on the hardware side.
I will continue with a financial question again for you, Anita. Cash flow in the quarter looks low. Can you elaborate, please?
Yes. Q1, we had quite a cash intensive quarter, and it's mainly driven by three things. We had our working capital increased with NOK 18 million in Q1. It's a slight inventory build, but more importantly, we do quite a bit of prepayments in the first quarter, or at least we did this quarter. It's typically for IT-related costs and licenses, which we then again invoice our customers going forward, so it's part of our product offering. We also had quite a CapEx intensive quarter. We've guided CapEx for the year of NOK 40-45 million, but we had almost NOK 19 million in Q1.
It's skewed quite a lot towards this quarter, our CapEx, and that's because we have finished some of our larger IT projects, among them our ERP rollout, and that has intensified this quarter's CapEx. This is not the rate we're gonna see going forward. On top of that, we also acquired the remaining 20% of Techstep Finance, which has an outflow of NOK 9 million in the quarter.
Thank you. Børge, you highlight your delivery to PostNord in the Q1 presentation. Is this an example of a typical Techstep customer going forward?
SmartWorks is a very important part of our product portfolio. When customers buy our SmartWorks solutions, we also see a very positive tag-along effect, both for SmartDevice and for SmartControl. Because when they have bought the SmartWorks solution, they need very often a device and be able to handle the life cycle. That's what we then can deliver to them with the SmartDevice offering to it. They also need to manage the devices, secure them, and also distribute the apps more effectively, and that then is delivered through SmartControl. PostNord is a good example of how we can reuse, rebuild parts of our offering to a larger and demanding customer and deliver high quality and high value back to them.
Acquisitions within SmartWorks area is also very interesting for us going forward because then we also can deliver more and better value toward our customers. This is a key step toward our transformation journey. Yes, I would say that PostNord and the SmartWorks customers are a typical focus area for us moving forward.
Thank you. Moving over to acquisitions, a question here. What made Crypho an interesting acquisition for Techstep? Where in your offering does Crypho fit in, and are you targeting future acquisitions?
Smart, in the Smart portfolio, Crypho fits perfectly in SmartControl, and we will also reuse part of the capabilities in SmartWorks. The reason why we found this very interesting is that customers has requested similar capabilities that Crypho offers. A lot of the similar services are built mainly for the consumers, exactly like WhatsApp, but these are not built for businesses. Crypho is built for businesses. The solution is GDPR compliant with easy administration of users and user groups. The data is securely stored in Norway on Norwegian data centers, where the more consumer-built solutions are storing their data outside of Europe. ESG is also a very important area. Sustainability is a key for us and for our customers, and with the Crypho solution, customers can reduce their carbon footprint on data storage through the file-sharing capabilities of the platform.
Often, customers are then sharing email or files via email, and then if you share a large file with multiple of people, then that's stored on all those devices rather than having it stored one place in Crypho. Of course, then the file is secured and encrypted as well. Yes, we will continue with our buy and build strategy moving forward as well.
Thank you. I'm checking to see whether there are any last questions coming on IR, and it is not. With that, we will conclude today's Q&A session. This will be recorded, as I said earlier, and posted on techstep.io to be heard at a later stage. We thank you for your attention and wish you all a very good day.