Translation: Original published in Finnish on 07/30/2025 at 07:35 am EEST

Source: Inderes

Tecnotree will publish its Q2 report on Tuesday at around 9.00 am EEST. We expect the company's growth rate to have accelerated and earnings improved significantly from the comparison period. The company has recently had strong sales momentum, but we expect these deals to translate into clearer growth later this year and next year. This is also supported by the company having kept its guidance unchanged. However, we consider an upgraded guidance possible, especially for growth, and potentially cash flow, if the company receives significant advance payments already this year.

We expect growth to have picked up

We expect Tecnotree’s reported Q2 revenue to have grown by some 6% to 19.8 MEUR, which would mean a pick-up from the pace of Q1 (+4%). Tecnotree’s sales momentum has been strong in Q2 (comment here). The company's South African deal should provide some support to revenue already in Q2. The implementation with Tata Communicationstarted already in Q1. We estimate that the deals made in Q2 will, however, only be more clearly reflected in revenue in the latter part of the year and next year. Otherwise, Tecnotree's order backlog has shown some softness recently, with the order backlog at the end of Q1'25 being 70.3 MEUR (Q1’24: 74.8 MEUR, 2024: 70.3 MEUR). The otherwise subdued order book development is thus, in our opinion, partly weighing on Q2 revenue development. However, the order backlog should now show clear growth, provided that the deals made are immediately recorded in the order backlog. Regarding Tecnotree's figures, it should be noted that exchange rates cause uncertainty in the forecasts, as the reported and comparable figures sometimes differ significantly. However, the company's exposure to emerging market currencies has decreased recently. The weakening of the dollar should negatively affect the development of the company’s reported revenue.

Earnings growth expected

We expect Tecnotree's Q2 EBIT to be 8.2 MEUR (Q2'24: EBIT: 6.4 MEUR). The year-on-year improvement would thus be significant, supported not only by revenue growth but also by the efficiency measures implemented by the company last year, which, based on the company's previous comments, should further ease the cost structure towards the end of the year. However, given the poor quality of the earnings, the focus is yet again on cash flow. Tecnotree has guided its free cash flow for 2025 to be above 4 MEUR. In Q1, free cash flow was 1.0 MEUR (excluding the -0.55 MEUR translation effects from currencies), i.e. in line with the guidance. Naturally, the quarterly timing of cash flows is subject to significant uncertainty due to, among other things, changes in working capital. To our knowledge, the company's recently announced deals include the right to some degree of advance payments, which could support cash flow, but the exact timing of these is unknown.

Guidance upgrade is possible this year

In addition to cash flow guidance, 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. Despite several deals announced by Tecnotree, the company has maintained its guidance unchanged. However, we consider it possible that the company would upgrade its guidance, especially in terms of revenue. Our current forecasts expect Tecnotree's revenue to grow by 6.5% to 76.2 MEUR and EBIT to 27.5 MEUR (36.1% of revenue, 2024: 33.3%). We also believe it is possible that the cash flow guidance could be raised if the company receives significant advance payments from the announced deals. Otherwise, we estimate that the major contracts will initially tie up working capital. In any case, our focus in the report is primarily on the larger deals announced by the company and their impact on the growth and cash flow outlook.