Teqnion's Q3 2025 results showed a sales increase to SEK 455.6 million and an EBITA of SEK 67.8 million.
EBITA margin for the quarter was 14.9% compared to 11.6% average year to date. So margins may be improving.
Is this green shoots of recovery?
For the quarter it reported a net loss of SEK 22.5 million (compared to a net income of SEK 27.5 million in Q3 2024).
For the nine-month period (YTD), the company's sales were SEK 1,336.3 million (up from SEK 1,163.3 million YoY), but net income was SEK 52.6 million (down from SEK 83.1 million in the same period last year).
For me, as explained in the analysis, there are fundamental structural problems with this business that would deter me from investing. The operating model is not quite right.
The other issue that I didn't call out in the analysis is the high turnover of CFOs. Why? This is always a red flag for me. CFOs usually stand down for good reason - perhaps they see something that they don't want to be associated with. They may be preserving their good name by walking away. There may a plausible explanation for losing a single CFO, but when a company struggles to hold down consecutive CFOs it raises legitimate questions.
Teqnion's goodwill allocations are aggressive. While Constellation Software allocates <20% of acquisition costs to goodwill, and LIFCO is closer to 60%, Teqnion has in the past been closer to 100%. Why? Well goodwill is not subject to depreciation - so it's a great way to juice earnings numbers. That's just me speculating about their motives, but it may be something that a CFO doesn't like.
The problem with aggressive goodwill allocations is that they leave the company susceptible to earnings shocks if goodwill subsequently needs to be impaired when the acquisition doesn't live up to expectations.
It's just too messy for me. It's in the too difficult pile. On an opportunity cost basis, I would prefer to allocate my investment capital elsewhere.
While the company reported a Net Loss of SEK 22.5 million for the period, this was primarily due to the widely anticipated and previously communicated, non-cash goodwill write-down of SEK 73 million related to Reward Catering (and there is legal action now taken by Teqnion for a larger amount). Excluding the 73 MSEK impairment, Teqnion would have reported a profit after tax of 50.5 MSEK and Earnings Per Share of 2.94 SEK.
Focusing on core operational metrics, Net Sales grew strongly, rising 19% to SEK 455.6 million, though only 1% of this growth was organic. Crucially, the company demonstrated strong operational leverage, with EBITA surging 37% year-over-year to 67.8 MSEK, resulting in a substantial expansion of the EBITA margin, which increased to 14.9% (up from 10.9% in Q3 2024).
More critically, Free Cash Flow (FCF) showed a significant improvement, reaching SEK 59.8 million for the quarter, confirming the success of the company's operational turnaround efforts and robust underlying financial health. This FCF figure marked a 238% increase year-over-year and a 160% increase year-to-date.
Having said that, like you I also have my concerns with the company, too many CFO changes is one of them, and hence sized my allocation accordingly.
"Non-cash goodwill write-down" - this is exactly what I was warning about
"Sales grew strongly, rising 19%, though only 1% was organic" - anyone can buy sales, that's the easy part
Free cash flow looks encouraging, but if you look back at the FCF and FCF margins of the company over the past 5 years, its been up and down like a yo-yo.
A good number in one quarter says nothing about what comes next with this company. A good number in one quarter is more likely to be a favourable working capital dynamic.
Risk adjusted returns here are not favourable from what I see.
The 25% pop in share price since the Q3 numbers were released seems to be an over reaction - or at least wild optimism.
I wasn't inclined to buy at 140 SEK. I am certainly not buying at 185 SEK.
If I were long at lower levels, I would be tempted to use the pop in price to take some chips off the table.
Have you seen my analysis of Topicus?
Comparing these two programmatic acquirers is like comparing a Ferrari to a Ford station wagon in my opinion.
I hear you. My costs basis is much lower here with Teqnion and happy with my small position, and of course will keep monitoring all developments.
I have indeed read your excellent write up on Topicus and agree with the Ferrari vs Ford analogy. My Topicus, Lumine and Sygnity positions are much much larger than my Teqnion’s.
Sygnity is ~73% owned by Topicus. You seem to be doubled up there. Out of curiosity, what is your thinking in relation to having exposure both directly and indirectly?
You clearly like the Constellation Group of businesses. I know why that's the case. It's about quality of management and a superior process that is almost impossible to replicate.
Charlie Munger once asked, “Why would you want to invest in your 20th favorite company instead of your top one or two? If you have three wonderful ideas, you can make a lot of money. If you have a hundred mediocre ones, you won’t.”
On that basis, help me understand your small allocation to Teqnion if you do not have strong conviction relative to the other companies mentioned?
Owning Sygnity directly is both to further increase exposure to Poland and Eastern Europe and also a matter of valuation when I bought it compared to Topicus at the time.
As for the allocation, if I was as smart as Charlie Munger then I would have indeed bought 3 companies and be happy with that. Given that I am not him, I am more diversified at the moment (circa 25 positions) and plan to reduce that to 10-15 holdings over time.
Good article, have a look at their latest earning from Saturday, it seems like their turnaround is finally starting to show results...
Teqnion's Q3 2025 results showed a sales increase to SEK 455.6 million and an EBITA of SEK 67.8 million.
EBITA margin for the quarter was 14.9% compared to 11.6% average year to date. So margins may be improving.
Is this green shoots of recovery?
For the quarter it reported a net loss of SEK 22.5 million (compared to a net income of SEK 27.5 million in Q3 2024).
For the nine-month period (YTD), the company's sales were SEK 1,336.3 million (up from SEK 1,163.3 million YoY), but net income was SEK 52.6 million (down from SEK 83.1 million in the same period last year).
For me, as explained in the analysis, there are fundamental structural problems with this business that would deter me from investing. The operating model is not quite right.
The other issue that I didn't call out in the analysis is the high turnover of CFOs. Why? This is always a red flag for me. CFOs usually stand down for good reason - perhaps they see something that they don't want to be associated with. They may be preserving their good name by walking away. There may a plausible explanation for losing a single CFO, but when a company struggles to hold down consecutive CFOs it raises legitimate questions.
Teqnion's goodwill allocations are aggressive. While Constellation Software allocates <20% of acquisition costs to goodwill, and LIFCO is closer to 60%, Teqnion has in the past been closer to 100%. Why? Well goodwill is not subject to depreciation - so it's a great way to juice earnings numbers. That's just me speculating about their motives, but it may be something that a CFO doesn't like.
The problem with aggressive goodwill allocations is that they leave the company susceptible to earnings shocks if goodwill subsequently needs to be impaired when the acquisition doesn't live up to expectations.
It's just too messy for me. It's in the too difficult pile. On an opportunity cost basis, I would prefer to allocate my investment capital elsewhere.
While the company reported a Net Loss of SEK 22.5 million for the period, this was primarily due to the widely anticipated and previously communicated, non-cash goodwill write-down of SEK 73 million related to Reward Catering (and there is legal action now taken by Teqnion for a larger amount). Excluding the 73 MSEK impairment, Teqnion would have reported a profit after tax of 50.5 MSEK and Earnings Per Share of 2.94 SEK.
Focusing on core operational metrics, Net Sales grew strongly, rising 19% to SEK 455.6 million, though only 1% of this growth was organic. Crucially, the company demonstrated strong operational leverage, with EBITA surging 37% year-over-year to 67.8 MSEK, resulting in a substantial expansion of the EBITA margin, which increased to 14.9% (up from 10.9% in Q3 2024).
More critically, Free Cash Flow (FCF) showed a significant improvement, reaching SEK 59.8 million for the quarter, confirming the success of the company's operational turnaround efforts and robust underlying financial health. This FCF figure marked a 238% increase year-over-year and a 160% increase year-to-date.
Having said that, like you I also have my concerns with the company, too many CFO changes is one of them, and hence sized my allocation accordingly.
"Non-cash goodwill write-down" - this is exactly what I was warning about
"Sales grew strongly, rising 19%, though only 1% was organic" - anyone can buy sales, that's the easy part
Free cash flow looks encouraging, but if you look back at the FCF and FCF margins of the company over the past 5 years, its been up and down like a yo-yo.
A good number in one quarter says nothing about what comes next with this company. A good number in one quarter is more likely to be a favourable working capital dynamic.
Risk adjusted returns here are not favourable from what I see.
The 25% pop in share price since the Q3 numbers were released seems to be an over reaction - or at least wild optimism.
I wasn't inclined to buy at 140 SEK. I am certainly not buying at 185 SEK.
If I were long at lower levels, I would be tempted to use the pop in price to take some chips off the table.
Have you seen my analysis of Topicus?
Comparing these two programmatic acquirers is like comparing a Ferrari to a Ford station wagon in my opinion.
Food for thought.
I hear you. My costs basis is much lower here with Teqnion and happy with my small position, and of course will keep monitoring all developments.
I have indeed read your excellent write up on Topicus and agree with the Ferrari vs Ford analogy. My Topicus, Lumine and Sygnity positions are much much larger than my Teqnion’s.
Sygnity is ~73% owned by Topicus. You seem to be doubled up there. Out of curiosity, what is your thinking in relation to having exposure both directly and indirectly?
You clearly like the Constellation Group of businesses. I know why that's the case. It's about quality of management and a superior process that is almost impossible to replicate.
Charlie Munger once asked, “Why would you want to invest in your 20th favorite company instead of your top one or two? If you have three wonderful ideas, you can make a lot of money. If you have a hundred mediocre ones, you won’t.”
On that basis, help me understand your small allocation to Teqnion if you do not have strong conviction relative to the other companies mentioned?
Great set of questions :)
Owning Sygnity directly is both to further increase exposure to Poland and Eastern Europe and also a matter of valuation when I bought it compared to Topicus at the time.
As for the allocation, if I was as smart as Charlie Munger then I would have indeed bought 3 companies and be happy with that. Given that I am not him, I am more diversified at the moment (circa 25 positions) and plan to reduce that to 10-15 holdings over time.