Tecnotree Q1'25 preview: Positive cash flow trend should continue this year

Translation: Original published in Finnish on 4/23/2025 at 7:00 am EEST.

Tecnotree will publish its Q1 report on Tuesday, April 29, at around 9.00 am EEST. We expect the company's revenue to have turned to moderate growth after negative quarters. We expect a significant improvement in earnings compared to the same period last year as a result of the efficiency measures implemented by the company. However, the main focus is again on free cash flow, which should be well into the black this year. On the outlook, we are particularly looking for clarity on how the trade war and the uncertainty it creates will impact Tecnotree's growth ambitions in the US.

Return to moderate growth expected

We expect Tecnotree's Q1 revenue to increase by 2% to 16.6 MEUR, which would represent a break in the downward trend of the last three quarters. Last year's top-line development was particularly impacted by the transition to the ARR model, with revenue initially accumulating more slowly as one-off license revenue declined. We expect this shift to continue to limit growth, even though a significant portion of the order book is already ARR. Thus, there should be a little more consistency in the quarter-on-quarter revenue trends. We also expect growth to continue to be impacted by a slowdown in market demand as operators become more cautious about major technology changes in the current business environment. Tecnotree's order book at the end of the year was 79.6 MEUR (2023: 80.2 MEUR), which would not support strong growth for the beginning of the year. Regarding Tecnotree's figures, it should be noted that exchange rates cause considerable uncertainty in the forecasts, as the reported and comparable figures sometimes differ significantly.

Cash flow trend should remain positive

We estimate Tecnotree’s Q1 EBIT to be 5.9 MEUR (Q1’24: 4.4 MEUR). The improvement compared to the previous year would therefore be significant, and the efficiency measures taken by the company play a significant role in this. We already saw signs of this in the fourth quarter, although the result was partly supported by non-recurring items. However, given the poor quality of the company's earnings, the focus is yet again on cash flow. Tecnotree has guided its free cash flow for 2025 to be above 4 MEUR. Naturally, the quarterly timing of cash flows is subject to significant uncertainty due to, among other things, changes in working capital. In any case, the recent positive trend in cash flow should continue.

Trade war impact on North American growth outlook under scrutiny

Tecnotree has guided its 2025 revenue to grow at a low to mid-single digit percentage rate at constant exchange rates. The company expects the EBIT margin to improve by at least 2 percentage points. We expect Tecnotree's revenue to grow by just under 4% to 74.1 MEUR this year. We expect EBIT to improve to 26.5 MEUR, which would correspond to a reported EBIT margin of 35.7% (2024: 33.3%). As regards the market outlook, it will be interesting to follow the company's situation in North America in particular. The company has reached a significant milestone in the early part of the year, and growth in the market is one of the company's focus areas at the moment, but the ongoing trade war is creating uncertainty about the outlook. However, we estimate that the company's other market areas, such as the Middle East and Africa, are to some extent living at their own pace. However, growth in developed markets would be important in the long term for the development of the company's cash flow profile.