Tecnotree has announced a new contract for BSS systems. The deal was announced via a press release, which gives an indication of the potential size of the transaction.

Tecnotree's Q3 results were well below our forecasts, with a sharp decline in revenue and earnings. Cash flow improved as expected in the first half, but further evidence of an improvement in the sustainable cash flow profile remains to be seen.

Tecnotree held an investor event on Friday in an attempt to provide background information on the Pericius deal. However, we did not get answers to all the worrying details. The company also issued cash flow guidance for next year and published a dividend policy, according to which free cash flow (and profit distribution) are set to remain slim and below our expectations. Given the weak cash flow and the ongoing uncertainties regarding corporate governance, we recommend that investors remain on the sidelines, at least for the time being, due to the elevated risk profile.

Tecnotree's Q2 key figures missed our forecasts. Cash flow improved as expected from the beginning of the year and the company provided cash flow guidance for the rest of the year. However, free cash flow is expected to remain tight again this year, which means that we do not see the stock's risk/reward as particularly attractive.

Through the collaboration, the companies aim to launch new solutions that leverage HCLTech's AI expertise and Tecnotree's BSS know-how.

The incentive program, which will run from 2024 to 2027, aims to promote the commitment of participating employees to Tecnotree's growth strategy.

Tecnotree has continued to grow strongly in recent years, but the company has been unable to convert its EBIT into cash flow due to working capital tie-ups, foreign exchange losses and large investments in product development. The company's internal focus is currently on improving cash flow, but there is no evidence of this yet.