Talenom Q2'25: Setbacks test patience

Translation: Original published in Finnish on 7/21/2025 at 8:00 am EEST.

We lower Talenom's recommendation to Accumulate (was Buy) and the target price to EUR 4.2 (was EUR 4.6). Q2 result was a disappointment as profitability in Finland weakened, but Sweden and Spain exceeded our low expectations. Forecasts for the coming years were under pressure as the software business progressed apparently slower than we had anticipated. Due to the earnings setback, there is also a profit warning risk for 2025. Following the downward revision of estimates, the valuation is also slightly higher, but without international losses, the share would still be cheap.

Setback in Finland's profitability, but progress elsewhere

Talenom's revenue in Q2 was 34.9 MEUR, as expected, growing 3.1% year-on-year. In Finland, revenue grew by 4.6% thanks to strong new sales, as the decline in transaction volumes has halted. In Sweden, revenue decreased by 9.5% due to previous customer churn, and in Spain, revenue grew a commendable 18% thanks to strong organic growth and an acquisition. International development (excl. Italy) was better than we anticipated, whereas revenue in Finland fell slightly short of our expectations. Due to this, as well as partly increased costs and depreciations, Finland's profitability in Q2 clearly fell short of our expectations and weakened from the comparison period. Talenom's comparable EBIT was 3.6 MEUR (Q2’24: 3.9 MEUR), which means a weak 10.3% margin for the company. Abroad, slight progress was seen, with strong development in Sweden and Spain, but Italy's transformation process weakens the overall picture. Although Talenom was not concerned about Finland's profitability and reported some small one-off costs in Q2, setbacks in earnings development do not inspire confidence. The key figures for the software business were also weaker in Q2 than earlier in the year. The launch of Easor may increase costs, but we believe revenue should only trend upwards, even if growth is slow. Due to weak cash flow, interest-bearing net debt remained on the rise, and the net gearing ratio is already uncomfortably high at 167%.

Near-term forecasts revised downwards

Talenom reiterated its guidance, in which it estimates 2025 revenue to be around 130-140 MEUR and EBITDA to be around 36-42 MEUR. Our estimates for both are close to the lower end of the ranges, and following the Q2 earnings disappointment, we also see a profit warning risk for the company. There is no longer any margin for error, nor is it always easy to assess the earnings development of international operations. Our 2025 earnings estimates were lowered following the Q2 earnings disappointment, and we also lowered our 2026 earnings estimates by some 10%. The greatest potential in the coming years lies in converting the software business's non-paying and service-only customers, where success would enable the current annual recurring revenue (ARR) of over 20 MEUR to grow by around 50%. In addition, especially in Spain, the conditions are favorable for organic sales, as the e-invoicing directive mandates the acquisition of software. Although customer numbers are growing, based on the company's comments, the increase in invoicing will take longer than we anticipated, and we lowered our growth and earnings estimates. Nevertheless, Talenom's profit growth outlook is very strong for the coming years, considering the potential of the software and Spain and Sweden gradually turning positive. 

Patience is tested

Talenom is still very attractively valued relative to its potential, but it cannot afford setbacks. Risks are now heightened by a potential profit warning and indebtedness, which already limits the company's flexibility. Following the downward revision of estimates, the 2025 multiples (P/E 26x and EV/EBIT 21x) are high, but by excluding international operating losses, the multiples would be approximately 16x and 15x, which could be justified by Finland's earnings growth outlook from the current recessionary level. Sum-of-the-parts (EUR 4.5/share) and the discounted cash flow model (EUR 5.3) would support a higher target price, but for now, we remain on the sidelines awaiting clear progress.