Hi all, welcome to the Q&A session for the first quarter. Before we start answering some questions from you, let me summarize the first quarter of 2023. Q1 was public tender intensive, and showed positive development in Techstep online business, with growth in recurring revenue and improving profitability. Techstep's financial results are still not in line with our ambitions, but we're moving in the right direction. As we are working hard on the final phase of the transformation and the cost optimization. The recurring revenue continues to grow, both year-over-year and quarter-over-quarter, while the net gross profit in Q1 is stable. Total recurring revenue is growing in Q1, with growth in all three areas: 24% growth in own software, 15% growth in advisory and services, and 14% growth in Hardware as a Service.
Approximately one-sixth of our customer has a recurring service from us, there is still a significant upsell potential. The ARR from own software grew to NOK 113 million, in line with the strategic objective to lead with software and scale with recurring revenue. For the second consecutive quarter, we delivered a positive Adjusted EBITDA of NOK 4.1 million, as the cost optimization is filtering through, with a 18% decline in operating cost and salaries. We see a growing interest in Techstep's products, both from the private and the public sector, conversion to actual sales has been slower than anticipated in the quarter. We are addressing this with a stronger focus on sales execution, upcoming product launches, and continuous improvement of our processes and go-to-market approach.
With winning the Sykehusinnkjøp tender, a frame agreement over 4 years with the total potential value of NOK 650 million in revenue, both from software, advisory and service, and hardware. This shows that we have a significant traction in the public sector with our offering. Let us answer some questions that has come.
Okay. first question, Berge, is for you. I can see that your margin has increased to 31% in Q1 2023, from 27% in Q1 2022, and 28% for full year 2022. Why is this, and can we expect the same development through 2023?
The reason for increase is due to the transformation, where we are changing the mix of what we're selling in the market, where we are having a strong focus on selling software and advisory as a recurring services with higher margins and also a sticker offering. We expect these gross margin % to develop positively through 2023.
Next question. You presented that the revenue was lower in Q1 2023 compared to Q1 2022 due to lower hardware revenue. Why is this?
We have seen that the global smartphone market has declined with 18% in Q1 2023 compared to same period last year. This is also affecting Techstep, and also in Q1 2022, we had some positive effects from the backlog that, of hardware that was not delivered end of Q4 2021. In Q1 2023, we did not have any backlog with us at all.
Next question, Berge. You said that there had been high tender activity in Q1. What does that mean?
That means that I'm very happy to see that the public sector really has started to get a very solid focus on both sustainability, also on how they're gonna digitize their workforce. The public now, or the public sector are now asking for the Lifecycle Solution on how they can manage the full Lifecycle Solution, but also how they can manage the whole mobile ecosystem. Now they have started to add this into tenders, and the tenders are not just solely on price anymore. There have been quite a lot of tenders coming out, so we have used a lot of resources to answer these tenders so that we have the best possibility to win these tenders, because this is very important for us going forward.
I think it's quite cool that the public sector now is moving faster than the private sector. I haven't seen that before, so that's very interesting to see. Let's see if we have got any other questions. No. This was not too many question coming in to us today, probably meaning that the reporting was clear. With that-
I think that's a good sign.
Yes.
Yes.
With that, we conduct today's Q&A session. Thank you all for listening in.