Translation: Original published in Finnish on 4/30/2026 at 8:00 am EEST.

We reiterate our Buy recommendation and EUR 6.5 target price for Lemonsoft. The company's Q1 earnings exceeded our expectations, and we have revised our estimates slightly upwards. The completion of the technology platform migration, coupled with a brightening market outlook for industrial manufacturing customers, creates a solid foundation for enhanced earnings growth in the years ahead. Given this, we believe the current share valuation (2026e EV/EBIT 10x) is very attractive.

Revenue in line with our expectations

Lemonsoft's Q1 revenue decreased by 1% to 7.5 MEUR, which was fully in line with our expectations. The Jakamo acquisition in February already provided some support for the development in the early part of the year (2.4 pp). Organic growth (-3.5%) was slightly negative, in line with our expectations (-3%). SaaS revenue, which is most important for strategy and value creation (Q1’26: 6.0 MEUR), grew by 7%, reflecting the impact of Jakamo to a slight degree. Organically, recurring revenue development (+1%) was slightly positive. According to the company, customer churn has been lower and net revenue retention (NRR) higher, compared to the previous year.

Result exceeded our expectations

Adjusted EBIT was 1.9 MEUR in Q1 (Q1'25: 1.8 MEUR) and exceeded our forecast (1.6 MEUR). The adjusted EBIT margin (25.8%) improved from the comparison period (23.1%), contrary to our expectations. This showed a milder weakening of the gross margin than we expected (Q1’26: 85.3% vs. Q1'25: 87%), as the technology platform migration no longer weighed particularly heavily on the margin. Overall, Lemonsoft's current cost structure provides a good foundation for earnings growth in the coming years, provided that sales efforts are successful.

Outlook unchanged

Lemonsoft is guiding for revenue growth of 5-13% for this year, and for adjusted EBIT to be 23-29% of revenue. We estimate that the Jakamo acquisition will contribute around 6 pp of inorganic growth this year, so organic growth remains cautious. According to Lemonsoft, the market situation remains uncertain, though there are already signs of improvement in industrial sectors. After last year's major changes, the company's organization is now ready to accelerate growth, and we believe that improved sales and reduced customer churn later in the year lay the groundwork for improved performance this year. Following the technology platform transition, the company can now accelerate the pace of product development and focus on developing features that add value for customers. We also expect the gross margin to gradually increase in the coming years as more normal daily routines are restored with the new platform. This trend was already clearly visible early in the year, and we have raised our gross margin growth projections for the next few years. Our growth expectations remain largely unchanged. Overall, our earnings forecasts for the next few years rose by about 2-4%. 

Valuation is low relative to earnings potential

Based on our forecasts, Lemonsoft's EV/EBIT ratio, adjusted for PPA amortization from acquisitions, is 10x in 2026. We believe the valuation has fallen to a low level, and Lemonsoft's share no longer prices in significant growth expectations. If the market starts to pick up and the earnings growth that we forecast materializes, the valuation looks very low for the coming years (2027e-2028e EV/EBIT 9x-8x). A key challenge for Lemonsoft's valuation increase in the short term is the generally weak sentiment for SaaS stocks. If the company can deliver its targeted earnings growth in the coming years, we estimate that investors' concerns will eventually dissipate, and the valuation will return to a higher level than at present.