Qt Group Oyj

Welcome to QD Group's second quarter 2025 results presentation. My name is Helja Jämsa, IR Lead, and with me today are our CEO Juha Varelius and CFO Jooni Lintunen to present the results. After the presentations, we will have Q&A, and considering the number of analysts here with us in the studio, we might not have time for questions from the lines. Without further ado, please Juha, the floor is yours.

Thank you. Good day everyone, my name is Juha Varelius, I'm the CEO of Qt Company, and let's get to the agenda, which is the pretty usual business highlights. Then Jooni will talk financials and I will finish up on the outlook and guidance for 2025. If we go into our Q2, it was, well, it was not good. You may call it soft or not good, I call it not good. We were of course expecting a bit better quarterly sales, although we must say that the comparable quarter was very difficult. Last year we had a one very big one-off deal, and so the comparable revenue this year was a tough to beat, but yet we were expecting a bit better result. Our revenue decreased .9% and on comparable currencies 0.5%. Of course, that is a fairly big difference, and we all know that that comes from the dollar exchange rate. A large part of our sales is in dollars, so that's affecting. Our EB-DAO margin was also 22.7%, which is a bit less than we usually get, and that comes together with the sales. So what all affected on this, we said already on a Q1 that the global economic situation and these trade tensions, they are affecting our customers in a way that if we think Qt, it always goes into a project which is an investment. This uncertainty in the market has caused that many of our customers are considering their investments not on a way that should they do it or not, but maybe more on a size and on a timing perspective. We can see this particularly in automotive, pretty much everywhere else apart from China. Where automotive is doing fine, but on the Western markets, we see that the automotive industry has been slow. Basically, in our terms, it means that there are a lot of budget freezes and hiring freezes and such. So the decisions are being delayed. And then we see on the defense and medical sectors that we don't see that much of that kind of hesitations. Defense specifically is investing pretty strongly at the moment. So the purchasing behavior of our customers are currently somewhat cautious. We saw this particularly in America and Europe. It was affecting both the new customer acquisition and customer expansion. Whereas the distribution license revenue went as planned and grew pretty much as we were expecting. And that's kind of the theme of the day that the new projects customers are thinking and maybe delaying the decision making and are very cautious. We see that on developer license sales, whereas the distribution obviously is something that the decision has been made long before this date. And the products are rolling into the market. We have personnel now 915 as of June 30th year, an increase of 78. And this is of course for future outlook, but we're not changing our long term investments plan in any particular way. So we see that this softness is more or less what is happening at this point. Well, this was already announced in World Summit that we have started developing any bridging technology. Not going into more detail into it, it basically means that we are expanding the Qt user ecosystem. And when this ecosystem is growing, obviously it gives us potentially, it gives potential opportunities to sell the commercial licenses as well. When you think of this, the financial impacts will start coming in slowly and then they gradually grow. So I'm already taking the first question away, which is probably one of the questions that's probably is going to be coming that what is the financial impact? I would say that next year I wouldn't put a whole other financial impact on this at all. World Summit once again was a big, big success in Europe. We had 800 participants and the customer presentations, industry leaders, Metz, Sohamen, Siemens, Rode & Swartz, Warwick and so on. So just to demonstrate that the community is very healthy, we get a there is a lot of excitement and there are a lot of big companies using Qt. But that of course has always been the case. Feedback from the customers on the product is very positive actually on all of our product portfolio, not only Qt, but also the QA products. And we don't see any changes on the competitive environment in that sense. So the only headwind we are experiencing at the moment comes from the market. We also announced that a few weeks ago that we're going to make a public cash offer on IAR Systems Group, which is a Swedish company based in Uppsala. And this goes into our Qt growth strategy that we've been communicating that we're looking for products that will add into our current portfolio. If you think IAR products, if I simplify quite substantially, they go into when people are starting a project, they are choosing the hardware. That's when IAR products are coming into play. Once that happens, then the next phase is that, well, what kind of software are we going to be building with what tools and then comes a Qt offering. The obvious cross-sell right in the beginning is particularly Oxyvion in that hardware selection. So QA products go there right away. So this means that our customers can buy more from one shop. We can offer an expansion in that sense. And it also means that this is earlier on on the project decision making kind of gives a lead generation to Qt, if you like. And also gives the cross-sell opportunity and large in our addressable market. So this is conditional offer among other things, 90% of the IAR shares. And we'll see the, I think that the in October timeframe will have, will be visor to see that what is our current situation and where this deal is going. But the not before that. So the offer is still out there and let's see how it goes. The board of directors of IAR are supporting it. We have some major shareholders that are supporting it. So we're hopeful that we'll be able to conclude this deal during this fall. But at this point of time, it's a public offer. But we see that this combined company will benefit. We would be stronger together and this would add to our portfolio. One particular thing, if you've looked from the IAR websites there, one point on their strategy has been that they are now on a perpetual licensees. And their target is to go into subscription licensees. But they haven't, they've started it, but it's on a very early phase. That's of course something that Qt has already done. So we think that with our know-how and IAR's management execution, we can combine this and accelerate maybe even the shift from perpetual to subscription licensees. That of course would then affect the top line of IAR. So that's very briefly what happened on Qt 2. Joani is going to talk about the financials a bit and then I'll talk about how the rest of the year is looking like.

All right, thank you Juha. And welcome from my behalf as well to the earnings call of Qt Group. Juha, quite well described already the environment and the net sales development as discussed. We were suffering from negatively from the development of USD and also to some extent Japanese yen, not only in second quarter but also the whole H1. We reported net sales development of negative development of 3.9%. It was flat on constant currencies negative .5% revenue growth. For the full first half year, we are reporting flat revenue and there in constant currencies we were growing .4% over last year. You see there 0.5 million other operating income bucket. I mean this is coming from namely from the tickets sold to Qt World Summit that we had in May in Germany and so this is kind of an income from that event. You see as well that the materials and services market is higher now for two consecutive quarters. This is because we are having some single projects where we are using more external services for our customer consulting projects than the run rate is. However, that wouldn't make any difference on the project profitability point of view for consulting projects. It's just another bucket of expenses. Our personal expenses are up by 7% in Q2, .4% for the first half year and this is aligned with personal headcount development. We are up by 78 employees for the last 12 months time. We are up by 27 in Q2 isolated and we are continuing the investment into growth areas. We are having more employees into R&D namely in the quality assurance side and also to the customer facing organizations. Other operating expenses you see as well an increase by roughly 4 million for the first half year and this is driven by not only the Qt World Summit in marketing side. It's a big event and adds costs and last time that event was held was back in 2023 in Q4. So that's kind of up. There's a different comparison period then. On top of that we are having more professional services expenses for our R&D projects and also business development. We are having some increase in the recruiting costs in HR side and also there are project costs relating to the IAR acquisition proposal that we had booked already for second quarter. So this all adds up to the EBITDA margin of .7% or 11.6 million for the second quarter. And for the first half year EBITDA margin is 20.4 down by 10 points from last year's driven by not good revenue development. Amortization remains unchanged and this is coming from the amortization from the acquisitions of back in 21 and 22. So no change in that and this leads to EBITDA margin over 19% for the second quarter and 9.6 million. The negative or unfavorable development of exchange rates, it does not show up only in the revenue line but also it shows in the financial items where we have intercompany balances and that impact now on the negative kind of impact of that is roughly 1.5 million now for the second quarter. And our effective tax rate is a level of 19% which has been the run rate during past few quarters already and not expected to change significantly going forward. Net profit for the period is 6.7 million or .2% and EPS is 27 cents down from 53 last year. We have increased our cash position from 12 months ago from 6 months ago quite significantly and ending cash balance is 91.5 million. We have been able to reduce the accounts receivable somewhat and that's 41.4 million and that's pretty much aligned on the revenue and invoicing development for the quarter. There's also a reduction of the contract assets by 4.1 million from end of 24 and this all leads to positive cash, operative cash flow which is 29 million this year somewhat up from last year despite the softness in the revenue top line and also specifically the profitability side. There are not too many changes in the equity and liabilities. Interest bearing liabilities are somewhat up from end last year and that's coming primarily from the agreement bookings that we have now in the balance sheet and the other short-term liabilities are down by 4 million from end last year driven primarily by a reduction in tax liabilities. This is in short what I wanted to say talk about the financials and now I hand over back to Juha to go through the outlook and guidance for the year.