Qt Group Oyj

Good afternoon and welcome to the QD Group's first quarter 2025 results presentation. My name is Heli Jensa, IR Lead, and with me today are CEO Juha Varelius and CFO Jouni Lintunen to present the results. After the presentations, we will first have questions in the room, and if time allows, then we'll continue with questions on the lines. But please go ahead, Juha. The floor is yours.

Thank you. Good. Good day, everyone. My name is Juha Aurelius. And like I said, I'm going to go first the business highlights, then on financials, and then the outlook for the rest of the year. So if we look our quarter, our net sales grew only 4.8%. And of course, that was a disappointment. We were expecting quite a bit more. But the challenge was... The environment was very challenging for us. Our EBITDA margin was 17.9. And, well, we're not – our EBITDA, Joni will talk about it more, but, of course, our EBITDA goes very well hand-in-hand with our revenue because we're in a product business. So given on that – We are not. It's always a question that are we going to be reducing our investments for the future? And the answer is no, we don't do such decisions based on on one quarter. So What we saw during the quarter, if I look on the overall perspective, we had softness more in Europe and the US and less so in Asia Pacific. So in APAC, we were doing better and the market was not that soft over there. Overall, if I look on the renewals and how people were renewing, they were renewing pretty much on the same ratio as they've traditionally have done. So people that have one-year licenses renew one year and three-year licenses three years. So we didn't see any big impact over there or change. However, we did see people being – customers being cautious. They were very cautious. cautiously looking at how many licenses they need, how many they want to renew. And on new sales, we saw a lot of uncertainty. We are on R&D, and R&D-based projects are usually that the Those you have a bit of a timeline that when to invest and when not to invest. Whereas if you have a project that's already in production, then it's going. But on R&D where you start new projects, there is always a bit wiggle room. So in some sense, we saw a lot of uncertainty. And we saw that in pretty much on all our revenue streams. If I look on acute market, we did see a, of course, industries like defense and medical. They're doing a lot better in our automotive market. The market is very challenging in the Western markets, whereas in China, not so much. And on consumer electronics and industrial automation, there were cautiousness as well on decision making. So we do have some industries that are doing globally well, and then we have a whole bunch of industries where this uncertainty is affecting. Then if we look on our testing market which is the we talk about QA market testing software testing that was going on pretty much as planned and kind of makes sense because that goes more into the production. So that is when there is already a software and it needs to be tested. So that's the that we didn't see that much effect on this market uncertainty over there. So basically, people on some industries are waiting or pushing a bit forward, and the decision-making is slower on starting bigger projects on specific industries. On some industries, like I said, on defense, there are no delays whatsoever. If I look and compare this into COVID, I kind of see the COVID times. Then we saw an immediate stop. I mean, we saw factories closing down and whatnot. So this is not something like that. But we see a bit of the same behavior and same sort of the cautiousness over there. And so I think that if this... continue, say, a bit longer this situation, we kind of think that we may see similar type of the environment where when the demand starts picking up again, that then there is a shortage of some parts and the supply chain disturbances, because the supply chains are very long at the moment, as we know. So to build a product, the parts are coming globally here and there, and now the investments are slowing down and people don't know what's happening. We think that the first effect we're going to be seeing is the problems in the supply chains in that respect. How long do we think that this is going to last? Well, now we know that all the tariffs are on a 90-day pause, sort of say that the 1st of July should be the end game. I think that the uncertainty will start clearing out once we start seeing that where we're heading, then things will clear out. But definitely we're expecting that our first half is going to be in that sense. The situation will continue. We don't expect this to continue forever. Well, that's more of a future outlook when I talk after Jooni, but we don't expect this to last more than a few months, because at the end of the day, All the products and services our customers are building, eventually they need to build them. It's a matter of when do they start and on what volume they will be doing it. So like I said already in the beginning, we will continue our long-term investments. So we have the same plan that we've had, and we're looking like three years ahead of what we're going to be doing. If I now look currently, obviously, we are on a percentage-wise investing more on the quality assurance because it's a smaller business for us. We acquire two products and we're putting there more efforts on R&D. And the sales, product management, marketing and so forth. But we continue our investments on Q technology as well. So in that sense, we don't see any changes on a longer term growth. We haven't seen... If I look at the overall market, we haven't seen any increase on our churn rates. Our churn rates are pretty much the same than they traditionally have been over the 10 years. We haven't seen any new competitors or competing technologies or such. So in that sense, we don't see in the market, we don't see any changes on demand nor on our competitive situation at the moment. So basically all the disturbance we have is the market turmoil around us, which is a bit different in different regions. We had personnel end of March 888, and that's going to increase again during this year, and I think we're going to be close to 1,000 when the year ends, or around 1,000, give or take. With these words, I'll give over to Joni, and I'll continue with the future outlook after him.

All right. Thank you. My name is Joudi Lintunen, CFO for Qt. And welcome from my behalf as well to the earnings call. I'll dig into a little bit deeper in the numbers by going through the income statement and then some words about the balance sheet. And as we saw, the net sales was growing by 4.8%. We get a little bit of tailwind from FX by 0.6 million. And at the same time, we have been... You remember, we've been transitioning from the perpetual license mode into subscription during... past four or five years time and now from now on we are going to be seeing the maintenance bucket growing pretty much aligned with the licensed revenue growth going forward. Obviously there will be some quarterly fluctuations as well on that. Our materials and services, we see a growth of 0.4 million, and that's driven by some consulting projects for which we used more external resources than compared to like a current, like general run rate. And there's no kind of a major... In some projects, we level our resources by using external resources consultants and that's kind of one way of mitigating the margin for us when the volumes fluctuate. We grew, as you have said, by roughly 20 people, employees in Q1 by 82 year-on-year in 12 months time, which is pretty much the run rate we've been seeing for two, three, four years as well. And this is very much aligned with the Headcount increase or personal expenses increase as well what we see in our P&L. And we are putting selective investments in place specifically into quality assurance testing business, primarily into R&D marketing and sales. And then we are, well, one of our targets is a new customer acquisition. And then as well, we have increased some headcount in our ventures team for kind of new opportunities. depreciation, slight increase and that's because of some extensions of the rent agreements and the expansion of the space, no major difference in that and there's a little bit of offset in the other operating expenses on that. And then other operating expenses, pretty much proceeding or developing as planned. Plenty of efforts into marketing, into R&D, third-party project execution, and so on. Also, we have recruited quite a few employees as well at the same time, which shows here if we use any external consultants. So this leads us to EBITDA margin of 17.9, down by close to five points from around 5% from last year's. No change obviously in amortization, which is coming from the FrogLogic and Axivion acquisitions, which then brings us to 6.5 million EBIT earnings before interest and taxes result. There was a slight negative item in financial expenses, and that's driven pretty much because of the negative USD development in our terms. Our effective tax rate was somewhere around 20.5%, which with the current setup is where it's supposed to be. And the net profit for the period is 10.5 and EPS 0.20. Similarly, quite limited changes all in all. as well in the balance sheet side. Well, we are collecting the funds from last quarter bookings from last year's, which shows in operative cash flow, which is pretty much the same magnitude as last year's 17 million for the first quarter. And then the other kind of asset buckets, we do see overall the... Pretty consistent development on trade receivables and contract assets, which both are kind of accounts receivable buckets towards our customers. Trade receivables obviously down because of the first quarter revenues being lower than last year. At the same time, we saw a reduction in the contract assets as well by 1.3 million in Q1. Very little changes in equity and liabilities side. I guess worth mentioning probably 0.8 million interest bearing liabilities going up. That's because of these liabilities we have increased now and there's an offset on the asset side then at the same time. But I think that's the most topical items from the financials. So I will hand it over back to Juha to go through the outlook and guidance for the year. Well,