Translation: Original published in Finnish on 4/25/2025 at 9:21 am EEST.

Digital Workforce, the software robotics automation pioneer, published a weaker-than-expected Q1 business review this morning. Revenue decreased and fell short of our expectations. Driven by the decline in revenue, the result was below zero and below our estimates. However, the company took corrective actions and received new orders, which should support progress already in Q2. The company reiterated its guidance and expects revenue and adjusted EBITDA to grow in 2025.

Q1 revenue misses expectations, but comments point to improvement

Digital Workforce’s revenue decreased by 4% to 6.5 MEUR in Q1 and was relatively clearly below our expectations. By business lines, the revenue of Continuous Services increased by 12% to 4.5 MEUR (forecast: 4.8 MEUR), while Professional Services decreased by 27% to 2.0 MEUR (forecast: 2.7 MEUR) during Q1. As a result, both business segments fell short of the forecast, with the more valuable Continuous Services falling short to a lesser extent. The number of employees decreased further by 4 to 171 in the quarter. The company announced this morning a major large multi-year contract, an outsourcing of sorts, that will support its growth. With the agreement, the company will take on 6 employees and hire 4 more, so the customer is expected to be relatively significant. In addition, the company has several major delivery projects underway, particularly in the healthcare sector. The slower progress of deliveries and the timing of invoicing affected revenue and profitability. Furthermore, several major new sales projects were delayed during Q1 due to changes in customer schedules. The company also made important gains at the end of Q1.

Geographically, the company commented that the rapid change in the operating environment in North America influenced the decision to proceed with a degree of caution in the market, which in our view is natural. However, the company seems to have its hands full, especially in Finland.

Result fell short of expectations and efficiency gains were made in response

Digital Workforce's adjusted EBITDA was -0.3 MEUR, which was lower than our estimate of 0.5 MEUR. Adjusted EBITDA included one-off charges of 0.9 MEUR related to restructuring. The reported EBITDA was therefore -1.2 MEUR. Adjusted EBITDA-% was -5%, lower than in the previous quarters and below our forecasts. However, the company responded to the weak performance by significantly reforming and simplifying the organization to sustain its investments in the fast-growing healthcare business and AI agent solutions. In addition, the company implemented significant cost-saving measures that will start to impact operations in Q2.  Other non-operating expense lines did not appear to have any surprises (the company only reported a condensed income statement in Q1).

Company reiterated guidance and expects revenue and adjusted EBITDA to grow in 2025

Digital Workforce expects higher revenue and improved adjusted EBITDA year-on-year in 2025. In our view, the guidance should be easily achievable. Ahead of the Q1 business review, we forecasted the company's revenue to grow by 14% and adjusted EBITDA to increase to 2.3 MEUR year-on-year, or to 7% of revenue in 2025 (2024: 1.0 MEUR).