Sitowise Q1’25 flash comment: Revenue in line but earnings below expectations

Sitowise reported weaker-than-expected Q1 results. The company’s revenue was in line with our expectations, but earnings fell well below our forecast due to weak market conditions, a tight pricing environment, and a low utilization rate. Given the continued high uncertainty in the market, Sitowise did not provide any guidance for 2025 this quarter either, which we view negatively. In our opinion, Sitowise needs market momentum to restore an upward trajectory of revenue and profitability. However, this is unlikely to occur before next year.

Weak market situation reflected in lower revenue, as expected

Sitowise's Q1 revenue decreased by 6.6% to 48.1 MEUR, in line with our estimates. The Swedish business saw a particularly soft development (7.0 MEUR, -39%). It's worth noting, however, that Infracontrol’s operations, which include digital solutions for infrastructure maintenance planning, reporting, and support for municipalities in Sweden primarily, were reported under the Sweden business area until Q4'24, making the comparison figures somewhat unclear. However, even when adjusting the comparison figures for this, the development remained weak (-28% y/y). The weak development was mainly due to a very weak construction market, as expected. The Buildings business area’s revenue (14.2 MEUR, -12%) was roughly in line with our expectations, with the downturn in the construction market continuing to impact the Buildings business through overcapacity and intense price competition. The Infra business (17.6 MEUR, 3.9%) performed significantly better, supported by green transition projects. Digital Solutions (9.3 MEUR, 6.7%) performed better than our expectations, influenced by the growth of the product business. The order book (Q1'25: 157 MEUR) decreased by 3%, reflecting in particular the challenging market for the Buildings business. Compared to the previous quarter, however, the order book grew by 4%.

Earnings down with revenue

Sitowise's adjusted EBITA declined to 2.4 MEUR in Q1 (Q1’24: 3.4 MEUR) and was below our estimate of 3.1 MEUR. The adjusted EBITA margin (5.1% vs. 6.6%) was, as predicted, under pressure from the combined impact of lower revenue, a tight pricing environment, and a low utilization rate. Reported earnings figures were also below our predictions due to higher one-off items and amortization of intangible assets. Cash flow from operating activities (0.5 MEUR) was weak at the beginning of the year, due to the clearly weaker result. With the weakening earnings trend, the net debt/EBITDA ratio rose to 6.0x at the end of Q1, which is a very high level.

Uncertainty and lack of direction persist

In addition to the weak earnings, Sitowise chose not to provide guidance in this quarter either, as expected. According to Sitowise, the timing of the construction market recovery is uncertain, making it impossible to reliably estimate revenue. In terms of outlook, the situation is weak for Buildings and Sweden, but stable for Digital Solutions and Infra. Overall, the first half of 2025 is still expected to be challenging, and the construction market recovery is expected to be slow and materialize gradually in the second half of 2025.