Techstep Q2 Revenue up 12% Amid Sharp Margin Decline

Techstep ASA (OSL:TECH) recorded second-quarter 2026 revenue of NOK228.8 million, a 12% increase year-on-year, driven primarily by device deliveries including to Helse Midt-Norge. Despite this top-line expansion, the Oslo-listed technology firm saw its net gross profit drop 25% to NOK52 million, with the margin contracting to 22.7% from 33.8% in the same period last year.

The decline in profitability resulted in adjusted EBITA turning negative at NOK12.9 million, a NOK13.3 million deterioration compared to the prior year. The company posted a net loss of NOK30.5 million for the quarter, while operating cash flow remained negative at NOK16.1 million, reflecting working capital outflows and weaker earnings quality.

Margin Compression Driven by Mix Shift

CFO Havard Haukdal attributed the sharp decline in gross profit to a higher share of lower-margin device sales and reduced contributions from Device as a Service and end-of-lease activities. The termination of a legacy telecom expense contract, which had a negative impact of nearly NOK6 million, further pressured results, while delays in healthcare rollouts restrained growth in managed services.

Own software revenues fell 35% year-on-year to NOK15.7 million, primarily due to the loss of the legacy contract and some customer churn. Core own software revenue declined 6%, indicating underlying weakness in the proprietary software segment as the company navigates structural changes in its product mix.

Cost Reduction Program Targets Efficiency

Techstep is executing a cost reduction program aimed at an annualized cost base of NOK218 million by the end of 2026, down from NOK312 million in 2025. This includes the reduction of 25 full-time equivalent employees and organizational simplification following the repositioning in Sweden.

Savings from these measures are expected to phase in over the coming quarters, with close to full run-rate effect anticipated by April 2027. The company is also standardizing its operating platform with digital commerce, AI, and automation to improve operating leverage and scalability.

Capital Raise Supports Financial Flexibility

To strengthen its balance sheet, Techstep secured a NOK40 million bridge facility and a fully underwritten rights issue of at least NOK83.3 million. These moves are intended to provide financial flexibility and support the execution of the company’s strategic initiatives.

Commercial momentum includes first deliveries in Spain through Vodafone and other operators, with potential for up to 80,000 devices by 2027. Adjusted annualized recurring revenue stood at NOK244 million, up 1% year-on-year, though it declined from levels in the second half of 2025 due to churn and healthcare delays. According to GN markets/earnings (en-US), the company faces ongoing challenges in converting operational improvements into positive cash flow.