Qt Group Oyj

Groups Q4 and full year 2024 results presentation. My name is Hertta Närmanen. I'm the communications lead at QT Group and I'm here today with our CEO Juha Varelius and our CFO Jooni Lintunen who will be sharing the results. After the presentation we have some time for questions. First starting from the room and if time permits then from the conference line. But let's dive right into it. Juha, please go ahead.

Thank you, thank you, and good day to everyone. My name is Juha Aurelius, and I'm going to go through the business highlights and then the only financials, and then I'm going to talk about the outlook and guidance for 2025. So our net sales on Q4 grew 15.5% and reached the 68.5 million, and our growth was the 14.2% on comparable currencies. EBITDA margin was 45.8 and 31.4 million, which is an increase of 21%. So this obviously highlights the fact that our business is very scalable and it is a very profitable business. Although, of course, we are not very happy about the growth rate, we would have liked to have a faster growth for the Q4 and for the whole year. Well, what we actually can see for the whole year is that our revenue was mostly impacted on the distribution license sales. Our distribution license sales grew only... about 2% on the overall year. A year ago when I was here, I said that the distribution license revenue is going to be growing not as fast as the year before. The 2023 growth was a very fast growth. We had clients launching big projects, so the comparable figure was big, but yet we were expecting for the whole year a faster growth on distribution licenses. Also, we saw that our consultancy revenue was pretty much stable salty uh... we have uh... We had quite a large chunk of revenue that was basically flat during the year, and that, of course, impacted our overall growth. So if I look on the developer licenses, developer licenses were doing significantly better, of course, because the whole company was doing 16% on a whole year. And if I look at the QA business, it was growing on a healthy rate. So I've said before that the QA business is like QT 2.0 and that it basically is, if we look on the... If we look on the state where it is, the rate it's growing and its EBITDA contribution, obviously, that's the area where we're investing the most at the moment. Our profitability was on a very high level. We had, well, close to 900 people December 31st, increase of 11 people on the Q4. And we are going to continue on the – on our investment plan. So we're not slowing down on our recruitment this year either. And they are mainly going to go, there are more going on the QA side that they are going into QT side. So the overall was 209 million. 15.7 comparable currencies and EBITDA was 34%. And like I said, the distribution license and consultancy sales was where we had struggles. Now you can see from the financials that represents like one-third of the revenue. Obviously, that slows down the overall revenue. overall performance of a company. And whereas that means that the developer license sales has been doing favorably. If I look on the regions, APAC is doing good, and Europe was pretty much flat, and US is also on a slow side. If I look on the distribution license sales, where we see the biggest challenges in our customers. That's basically on the consumer electronics side. And then we see automotive fluctuations in certain regions, and certain regions are doing pretty well. And, well, that's kind of self-evident that we can see where that is coming. If I look at the – well, I'm going to talk about the future outlook after Jouni goes through the – goes through the financials. We continue our growth investments. We actually, we haven't, we have a longer term plan where we're going, what we're going to be investing and we are executing on that. So the, of course, QA, like I said, it's like a Q2.0. So in its 30 something million revenue, We're still heavily investing on R&D and product and so on and so forth. Well, QA portfolio development, we are adding more products all the time. Question about M&A, we're looking actively to do M&A. We didn't do last year. We just weren't able to finalize anything, but that lookout still continues. So we're looking for new products to add in our portfolio. And then we've done some launches on AI, information security, and so on. The strengthening our ecosystem, well, we have a great... Partnership with Infineon, that's the latest one where we cooperate on sales on a global space. That's basically, that concentrates around the MCU. We've been very happy about it and we see that it'll strengthen our sales efforts going forward. And we've seen great developments, for example, in APAC on that. Then there is Qualcomm LG. LG is a long-time customer of ours and strategic partner. We are expanding our educational license base. So for us, it's not only revenue, it's also growing the ecosystem. We have quite a lot of activities on that and we're trying to... We're not trying, we're working very hard to get the community growing and having it bigger. And then strong growth in Qt Academy users, which is our effort to... educate people how to use Qt. So that all goes into the fact that we are also growing the Qt ecosystem. So overall, if we look where Qt is today on embedded market, we see us that on the segment where we are, we have a very solid and robust environment. So if I look in the Earlier days, when we started on Qt, we had quite a lot of smaller competition. And if I look where we are now and where they are today, we have a really solid foundation in embedded space where we operate. And now we are expanding that space using QA into a testing market. So overall, if I think the last year... Well, of course, it's fair to say we're not happy about it, right? We were expecting a higher growth. If I look on a big scheme on a yearly level where we were behind our targets, that's pretty much mainly on the distribution license sales. So that is the segment where we are. thought that we would be doing better. So people are still investing, our customers are still investing, they are buying developer licenses and they are continuing their projects. I'm going to talk a bit more about the future outlook after the financials, obviously the situation. We think that the 2024 was not that great, and now we have 2025. Well, I don't think that the market has gone a whole lot better just because the calendar year changed, but more about that in a while. So over to you, Joni.

Thank you, Juha, and welcome from my behalf as well to the acute results presentation. You have pretty well covered already the net sales part. Just a couple of words of repetition, though. We grew by 15.5% in Q4 in net sales. And the FX impact, namely USD, was positive 0.7 million this time. And coming from the fact that last year in 23, USD was devaluating at the same time, and this year we saw strengthening. Well, no news that the licensed sales and consulting was the driver of the growth, and specifically the licensed sales because there is an ongoing softness because of the market in the consulting side. For the full year, there was no impact from FX pretty much, and the net sales grew by 15.7%. And same kind of story continues that it's coming from the developer licenses, where we saw the kind of consistent development. In distribution licenses, we saw 1.9% increase in net sales, and that's reflecting or mirroring the kind of uncertainty at the customer markets. We do see maintenance revenue increase. going up after a couple of years of decline and that reflects the kind of conclusion of the subscription license conversions and then it will be trending with the kind of line with the license sales. We expect to see going forward as well Big impact from the FX. More than 50% of our sales are in USD. And also timing of the large deals. Even though the overall volume has gone up, the timing of large deals still makes differences between the quarters and even calendar years. What comes to the P&L? We see the first line there in the spend side, the material services, it's reflecting and mirroring the consulting softness. And that's one way as well to kind of compensate or mitigate the risks from consulting volume changes. So we level our resources by using external consultants when need be. Our personal expenses went up on annual level 12%, which reflects the overall headcount increase in Q4. Our headcount went up by pretty much the same ratio, 12%. However, the personal expenses were up by 8%, which is a sign that there were some reversals of bonus accruals then done in Q4. No major changes in depreciation. It's not any capital extensive business we are at. So roughly 3.5 million annual level also expected going forward. And the slight increase in other operating expenses is coming from customer facing activities and like putting efforts into new market entries as well at the same time. Q4 EBITDA was up by 21% to 31.4 million and the full year EBITDA is 34.1% compared to 30.6% last year. And the amortization of intangible assets coming from the acquisitions, its run rate is 8 million a year, and that leads us to full year EBIT operating profit of 63.2 million or 30.2%. Our financial items are positive. There was a reduction of the earn-out liability from Axivion. of 6.7 million roughly. And that is coming from the fact that that acquisition in a way in short run didn't meet the set targets that was kind of agreed on at the time of the acquisition. And then the effective tax rate is roughly 19%. And we expect that to be at 20% around that level going forward as well. Fully a net profit, 57.3 million or 27%. And the EPS for the year is at 2.26 euros. What comes to the balance sheet side, there's no major fluctuation over there. First of all, the operating cash flow was pretty good actually in 24, 54 million. And then if you look at the assets in more detail, you see that the ending cash was up by like 31 million to 65 million, despite the fact that we repaid the 16 million loan as well earlier in Q1. Our receivables is up roughly 7 million, 6, 7 million, and that's very much in line with the volume development of the last quarter of the year. And as a positive note there as well, there's a 3.2 million reduction in the contract assets bucket as well year on year. Liabilities are down somewhat driven by the repayment of the loan and also the reduction of the earn out liability that we booked now in second half of the 2024. That's probably the main topics from the numbers. So I will hand it over back to Juha, who will talk about the outlook and guidance for the year.