Hi, all, welcome to the Q&A session. If you have any questions, please feel free to either post them in the chat or send them to the IR mail. We are still on the journey of turning Techstep profitable, and we have gone through a good transformation, and we are now exiting the final phase of the transformation. We see that we have a growth in our net gross profit of 7%. Our recurring revenue is growing 15%, and our ARR from own software is also growing 15%. We still see in Q2 a market decline for the hardware business, but it was lower than in Q1, and the market expect the decline to slow down and start to recover during second half of 2023.
We signed a very significant contract with Oslo Kommune of NOK 480 million. Together with signing the Sykehusinnkjøp HF, the Helse agreement earlier this year, we have in total signed NOK 1.1 billion in frame agreements. This is a record for Techstep, all-time high. We have also done refinancing to get more financial flexibility for Techstep after end of the quarter. Now with growth and the cost optimization, we see now a positive EBITDA adjusted for the third quarter in a row, and also for the last 12 months, we have NOK 8 million in EBITDA adjusted. Let us see what kind of questions we have gotten in, and I will see here and start off. All right, starting off with a question, Ellen.
Okay.
You have shown a strong development in adjusted EBITDA from last year in the third quarter in a row with a positive EBITDA. I can see that the adjusted EBITDA for Q2 was lower than Q1, and that you now have NOK 8 million in adjusted EBITDA year to date. Despite the revised outlook, is it still a way to go to NOK 40 million-NOK 50 million? Will you make it?
Well, first half year is always historically the slowest half part of the year. In our business, IT business, IT sector, the second half of the year is very often generate the majority of your EBITDA for the year. We have shown in the first half that we have been able to grow our net gross profits and also our margins, and with all the agreements that came in in the first half and what we see are now in the pipeline, we really expect a exponential growth for the second half. I think that will be fine.
Good. That's gonna be great to follow and be part of. Let's see if we have gotten any more questions popping in here. See.
Okay, one for you, Børge.
Yeah.
You presented that the revenue was lower in second quarter 2023 compared to second quarter 2022 due to decline in hardware sales. How does this affect the next half year?
Our main focus is to drive our net gross profit up. That is where our goal is, and we do not focus that much on the total revenue. Because the net gross profit is where we are earning the money, and since we are also turning towards higher margin revenue, that will not be that affected on the net gross profit, but that has. With the hardware, when we're selling hardware, that's a higher revenue contribution but lower margin. The global market, as I mentioned in the introduction and also in the presentation, we have seen that the global market declined in Q1, 18% for the smartphone market and 11% in Q2, so it's going in the right direction. The experts and the analysts, they expect that this will start to recover.
All in all, I think that we will and hope that we will see a improvement in second half, that we usually do that. That's the expectations. We have an external question here as well, popping in, Ellen. How does the liquidity for the company look for the next six months? Will you need a capital raise, or will you manage with the revenue that's coming in?
Okay, yeah, I guess that's many people wonder about that. What we announced now in, in July was that we have managed to refinance our loans, and the structure of the refinancing is very well adapted and fitted to how we look at the future with an increase in our long-term debt, a better repayment profile, and also availability of short-term credit facilities. Of course, the liquidity situation, I commented on that on the, in the, the presentation, is that the first half year, and also in particular, the second quarter, is very cash intensive and it's difficult with the working capital changes in the second quarter. We expect that the liquidity situation to improve substantially during the second half when our EBITDA is improving and with the refinancing.
I think, the way we look at things now, this should be, yeah, create a good, financial stability for us going forward.
Yeah, and usually, Q2 is a stronger-
... Second half is a stronger.
Yeah, second half is a stronger-
Is a much stronger than the first half year.
Yes.
With the refinancing, I think we are good.
Yeah.
That is our plan, the way we see the future now.
I've just got another question coming in here, and the OpEx is up NOK 2 million quarter-over-quarter. Is this phasing effects, given that you reiterate your OpEx target, or how should we think about this?
I think I don't, I don't think the OpEx is up quarter-over-quarter. What we saw in the second quarter is that, you know, we do have decreased our OpEx costs. We have effectuated on on on our cost optimization plan, and we are where we should be. As we see, you know, we are also affected by inflation, price inflation, and it's very unstable at the moment, and we don't know how that's gonna be looking forward. What we have said and what we can show is that we have effectuated on our plans.
We have decreased our headcount, our OpEx is down, our CapEx is down, and also I commented on that in the second quarter, we did have a little bit of one-off effects on our OpEx, so it's not really representatives of the development going forward.
Thank you.
Yep. New one, Børge?
Yep.
You said that you see a significant growth in tenders from the public sector, both in Norway and Sweden, but you have only communicated agreements in Norway. How is the tender activity in Sweden, and how is Techstep positioned in this market?
We see an increase in tender activity, yeah, both in Norway and in Sweden, as mentioned. Usually in Sweden, the tenders are asking for a pure hardware offer. This gives us actually a very good position because the message that when we say to the customers that we can save 20%-25% of your cost for your total mobile device fleet, that message is very, very strong. We also are part of an agreement with Kammarkollegiet, and Kammarkollegiet is where you are able to sell your services and products to the public part of Sweden. Kammarkollegiet has now said that they will come out with a new tender for mobile technology that will come out, based on our estimate, end of this year, beginning of next year. That's even more tailored towards what we will deliver.
Based on that, and based on that, we have a very strong track record with signing, of course, of Sykehusinnkjøp and also Oslo Kommune. We have a very strong position. Then here is a new one for you as well. "Employees are down another 4% quarter-over-quarter and are now at a level that seems lower than the original plan. Should we expect more OpEx reduction ahead, or is this offset by inflation?
Yes, number of employees are, are down, like I said, we have effectuated on our plan. It's not really lower than our original plan, but it's always a moving target on the exact date of the end of the quarter. In terms of OpEx reductions, like I said, we are now at where we should be and where our plan is to be. We are always looking at ways to optimize and cut costs and be more efficient, so in the longer term, you know, we will look at efficiency gains. How can we get that? Where can we cut? It's just a mindset, and of course, we are not entirely finished with our transformation and reorganization, so there might be possibilities going forward, where if we see it, we'll take it.
In the current plan, we're at where we should be at the moment.
We will continue also to have a strict cost focus in the business and optimize that going forward. How good would you say that the visibility for 2023 outlook is now? You imply a significant acceleration for the growth in H2.
Well, like we said previously, we have signed, the biggest contracts ever in the first half-
Yeah
... In Techstep's history. I think it's a contract for NOK 1.1 billion in total with Oslo Kommune and Sykehuspartner We also see that the pipeline and the sales activities now at the end of the quarter, the first second quarter, is substantially picking up compared to what we have seen previously this year. In first quarter, we also commented on it was tender-heavy. It was, the things took longer time to sell. We see a lot more optimism now than we have previously. Yes, we believe in this growth. We really do, yes. Think it's possible. At the same time, we also comment that, you know, the timing, we adjusted our targets from a 50 EBITDA to 40-50 EBITDA, and that's because we are uncertain of the timing.
When will it be possible to take out the profitability from these contracts that we are expecting? That's not entirely up to us at the time. These are big institutions, it's up to the customer when we are able to implement.
Yeah, the customer needs to be ready to make this into-
Yes
A success-
Yes
... For the implementation as well.
Yeah. Okay, Børge.
Yeah.
What are the most important improvement areas for Techstep, short to medium term?
Our main focus is to make Techstep profitable, that will be on top of our mind every single day going to work. We also need to have a strong focus on continue to increase the sales momentum. We need to ensure that we increase activities. We need to ensure that we continue to win tenders. Yeah, well, we can short term or to summarize that, it's all about continuing to increase the momentum-
Mm
as we go along. We will have the cost focus.
Yeah.
That will continue in the journey.
Yes.
All right, that was the last question coming in.
Okay.
Thank you all for joining the Q&A session today, and today, and we will then conduct this, Q&A as done. Thank you all-
Thank you.
and see you all soon again.