Qt Group Oyj

Hello everybody and welcome to QT Group's Q2 2024 results presentation. My name is Hertta Närvinen and I'm here today with our CEO Juha Varelius and our CFO Jouni Lintunen, who will be sharing the results. After the results presentation, we will have time for questions, first starting from the room, and if time permits, then from the conference line. Without further ado, please Juha, the stage is yours.

Thank you. Good morning, everyone, and welcome. Pretty much the same format as usual. We'll have the highlights, then financials, and then I'll talk about the guidance outlook, and then there's plenty of time for questions and answers. So, business highlights. Our net sales grew 23%, So 53 million, Crotone 23% on comparable currencies and EBITDA marching at 35. So scalability works very well. We're very happy on these results and they were better than Q1. Of course, like I've said many, many times before, the quarters are not equal and there are chances, but we do see a positive trend going forward. And this was pretty much what we were expecting. So we were pretty close to what we were expecting ourselves. If we look on the different revenue streams, our license sales was very good. And we're very happy about that. In general, if we look, USA is doing good and APAC is doing good and more. how would I say, more friction or more sluggish it is in Europe, which is probably no surprise to anyone. If we look on industries, well, we all know that automotive is not doing as well as the previous year. And there comes into play that we do have 70 different industries and we're not affected on one particular industry. But of course, when there are On our major segments, there are slowness. We see that ourselves as well. What I'm really happy about is the fact that our QA business has been progressing well. I'm also happy that the license sales is progressing well. On the other hand, has always been the case. Even in COVID, when basically everything stopped, we were able to, you know, the license sales were still going forward. It was the runtime and consulting that was slowing down at that point. And that's what we see also now, that the license sales, even though there is a bit of slowness in the market globally, the license sales is doing well, which actually... makes us, you know, we're pretty confident about the future that at some point the global economy starts growing again and Europe starts growing again. And so this market environment will get better eventually. But all in all, we're very happy about the Q2 and it went pretty much as we were thinking. If I look large deals, the large deals are actually something that they do affect on our quarters. And we know that they are coming because on a large deal, when you negotiate a lot and there are lawyers involved and whatnot, they usually don't fall apart. Customers have decided that they're gonna go on with the projects and they're gonna go with their plans, but the timing on what quarter they're gonna hit That always varies a bit. And that's where we do get a bit of a fluctuation. But if I look large deals, monetary-wise last year and this first half this year, we've done roughly the same. So on a quarterly basis, they do fluctuate. But this first half, if I look, we're pretty much on the same ballpark that we were on a previous year. I'll talk more about the future outlook on a later segment. But, of course, we think that this – this level of activity will continue and even increase going forward into the latter part of the year. We had 837 employees, 31 increased and continue to focus on investing in sales and other key strategic areas. Well, that's been our message all along. I mean, we We do have a plan, like, for three years and five years. And the three-year plan we are basically executing all the time, like, you know, we've been thinking of. So we don't change that plan very easily. And, of course, if we look now, where do we have – more focus on investments is obviously on the quality assurance, so on a testing area. We are investing on R&D. We're investing on... sales and marketing product basically in all functions. It's kind of our self-evident because we acquired relatively small companies that we want to build big companies. And so, therefore, that's where the maturity of the investments goes as of today. But, of course, also on Qt and keeping Qt active. product itself competitive because the cornerstone of our success is the fact that Qt is one of the best products in the market as we speak and we're going to continue keeping it like that. So Jodi is going to go through the financial, say a bit more, I talk more about the future and then we can have questions.

All right, thank you Juha and welcome from my behalf as well to the Q2 presentation. I will continue a little bit in more detail what you have started from. So in Q2, our net sales grew by 22.7%. There was only limited impact from FX 0.1 million this time. We've seen US euro fluctuation being kind of more limited during past three, four, five quarters than it used to be some years back. So the comparable currencies growth was at 22.3%. The growth was driven by the license sales and consulting and equally strong from QA side, testing side and Q2 license side. We are seeing still year-on-year decline in maintenance revenues. However, sequentially, it's already going up slightly, and that will start going up then more according to the revenue development of license sales. And that is the outcome of the subscription license model that we have implemented. And as we saw in Q2, there was a large deal, and we keep on seeing this fluctuation from quarter to quarter going forward as well. It's about when we get the license sales booked and when the distribution license sales come in. We are at 18% growth rate year-on-year after first half year, so slightly behind the target of minimum 20%. However, we see that we have a good pipeline to continue from here. We have increased our headcount by roughly 30 in the second quarter, and year on year, during the past 12 months, we have 108 new employees, or 15% increase in headcount, which is in line with the personal expense development as well. We are seeing, again, a slight decline in materials and services, which we use for the consulting projects, and this is the way we balance our load to our customer projects. We do more in-house and then use less external partners. No changes in depreciation, primarily, and other operating expenses it's been flat as well for two, three quarters as well, and we are now in kind of a good level of investments into strategic initiatives, and also we have done some kind of insourcing, doing something more in-house, for example, some R&D effort, and then as well what comes to HR. So it gives us room then to spend the consulting or services to something else uh in q2 our ebita was 18.5 million or 34.7 percent up by six points and for for the first half year it's 30 percent ebita margin up by 5.7 points our uh Intangibles amortization, the depreciation from the acquisitions, it's 2 million a quarter, no change in that. And this leads us to EBIT of 16.5, up by 6 million then from previous year. EBIT margin is 31. And for the first half year, we see EBIT of 25.5 or 26%. Now, when the FX fluctuation is limited, we also see very limited impact from the financial items. And then also the income taxes accrued is negative 3.2, which is 19-20% effective tax rate. Net profit for the period is 13.3%. And for the first half year, 21 million even. And this leads us to EPS of 53 in Q2 and 83 for the first half year. Some words of the balance sheet then. Well, first of all, the operating cash flow, as stated earlier as well, has been pretty good in the first half year. We have plenty of receivables always at the end of quarter and specifically at the end of half year. So operative cash flow is 28 million. Our ending cash is up by 6 million from end last year, despite the fact that we had repaid the loan that we had taken for the exibion. There's a slight increase in other receivables coming from withholding tax receivables and VAT receivables. All in all, contract assets are going down by 2.4 million. And this shows specifically in the non-current part. In the Liability side, there's limited movement. The other short-term receivables is up because of the deferred revenue and income tax liabilities and also the interest-bearing liabilities are down by 16 million from last year due to the repayment of the loan. That's the main topics from the balance sheet. And now I head it back to Juha to go through the outlook and guidance for 24.