Qt Group Oyj

Good afternoon and welcome to the QD Group's third quarter 2025 results presentation. My name is Heli Jansson, I am your lead and with me today are CEO Juha Varelius and CFO Jouni Lintunen to present the results. After the presentations we will have Q&A first in the room and if we have time left we will move on to questions from the lines. Without further ado, please Juha, the floor is yours.

Thank you. Good afternoon everyone. My name is Juha Varelius, CEO of the company and As Heli was already saying, I'm going to go through the business performance on Q3 first. Well, our quarterly sales was, say, 40.7 million, and the decrease on 3.4 or comparable currencies, it was flat, basically. And year-to-date, we've been growing – on 1% on comparable currencies and our EBITDA margin on Q3 was 10 and a half. What has actually led into this and why are we below on our expectation is the fact that the market has been softer longer than we've been anticipating. So if we looked at what we've been missing is basically larger deals. The number of the deals we've been making this year and on a Q3 has been pretty steady and growing. And so we've been doing more deals than we've been doing before, and we've not been losing any customers. So the turn rate, per se, is at the same level that it has traditionally been, but the average deal size has been lower. So what we are experiencing on a few segments particularly, Where our customers are suffering, we are doing smaller deals. Our customers are reviewing the number of licenses they require, and they try to go forward with their, let's say, kind of with their minimum investment. So there is still life in the market. We see the activity in the market. We don't see any competing technologies. So we're dealing with the same customers. We're getting new customers, but the deal sizes are lower. We've also experienced some shift from three-year deal to one-year deals. We were expecting that on the second half this market condition would get better. Well, it hasn't. And we gave a profit warning because we anticipate that basically this same development will continue on the fourth quarter as well. So we were looking for that the market demand would be stronger. Now we don't anticipate that anymore. Of course, we could have been waiting. and see that the uh what's going to happen on a big deals on a q4 i'm going to talk about that in the future outlook more but the uh as as we uh concluded that the uh we had a bit of same thing on the second quarter and now on a third quarter that we saw the bigger deals moving forward and the uh and the overall deal size being smaller uh we think that the uh this um outlook that we've now given is more on a realistic size. The distribution license revenue on third quarter was on a previous year level. Overall this year, the distribution license revenue has been developing favorably and that's been on our expectations. But on our license sales, we've been suffering both on a QA and acute side. Personal-wise, we had 922 people on September 30th, and year-on-year increase is 64. We are, of course, cautious on the cost side, but on a long-term, we are still continuing our investment as planned because we don't see on a long-term vision any changes in that sense. We did complete the IAR. acquisition couple weeks ago and the like we've said before where do we see IAR is that the we do have a more comprehensive product portfolio we see our strategy as that when we look the development process of our customers we want to be on the whole process and with IAR we are now with their compiler it's in the very beginning of this development process, so to say, so that when customers are starting a new project, the first thing they will do is that they will choose the hardware, and then they start looking for a compiler, and after that comes actually how to develop software and and so on so it will give us a benefit of course to be aware of customer projects on an earlier phase it also gives us a benefit that we can be yet even a one more one-stop shop for our customers they don't have to go and shop various things from various places. And specifically on our QA, our testing offering, it's a complimentary or we can do cross-sell. So when people buy the IAR product, also that needs to be tested. So we have a cross-sell opportunity over there. IAR is well positioned in safety critical systems which is also an area where acute works. So we do have safety critical, you can see in the automotive, for example, quite a lot, and on medical. So they are typically the same segments where we work. We do have coincidentally also offices pretty much on the same locations throughout the world. So we are operating in the same segment and this strengthens our position in embedded world quite a lot. So we are becoming a Nordic powerhouse going global. IAR is selling perpetual licenses. They have started the subscription change on licensing model, which we did a couple of years back. We are now reviewing that we're doing a bit different scenarios that on what scale and on what speed we're going to be doing the transition going into next year. As of now, I don't have a – I don't have an info to give that what that's going to look like, but the, of course, more aggressive you're going to be, the effect on the revenue is going to be greater on a short term and then on later it'll grow faster. But what is the kind of a speed of change, we haven't yet decided, and we are doing that study as we speak as well as we're doing the excess budgeting and so on and so forth. We do look that the IAR is going to be a very complimentary product for our portfolio, and we've started the integration work now. When we made a public offer, it was done on a due diligence, on a light due diligence. Now we are going through the processes. We've started the integration work. And like I said, we started the planning for next year budget. We started the planning for the subscription change. And once we have those ready, then we're going to share more on that information to you on the later stage. And with these words, I hand it over to Joni.

All right. Thank you, Juha. And welcome from my behalf as well to the Learning School of Q3. I will dig into little bit more details on pnl income statement and balance sheet as well you have already discussed quite in detail already about the top line net sales we reported negative 3.4 net sales growth and we see that happening driven by the customers kind of cautiousness for most parts We are seeing the headwind from the FX, specific from the US, and the magnitude of that was negative 1.4 in the Q3. So in other words, comparable currencies, the net sales were flat year-on-year. For the first nine months, we are reporting negative 1% reported net sales growth. With the constant currencies, we are around 1%. So flat all in all. We did some flattening on the material services part. There's still an increase of roughly 100,000. That's the resources, external resources that we are using for our customer consulting projects. So kind of insignificant in any means though. Our headcount as you have described was up by 64 year-on-year. And we have been adding resources into R&D, product management, and also customer-facing organization during this period. And these are specifically the growth areas we seem to be contributing going forward. This headcount increase, it reflects very much line in line to personal expenses growth, 10%. in Q3 or 9% for the first three quarters. Some increase in depreciation. We have extended the premises in some of the locations of ours in our locations and also in Finland during this year. So this shows a slight increase in that line. The other operating expenses, dispense side, it's up roughly by two million. That's for most parts driven by the IAR-related acquisition costs. And that impact is 1.7 million now in Q3, or roughly four points in the EBITDA margin, if you will. So run rate EBITDA margin excluding the one-off would be somewhere 15% level. close to 10% or 9% down from last year's. The amortization specifically from FrogLogic and Axivion acquisitions back in 21 and 22 remains unchanged, 2 million a quarter, 6 million for year to date. And this leads us to the EBIT of 2.3 million. or 5.6% down by 13% points from last year's. And the year-to-date EBIT percent is 13.2. The financial items did not play that big a role now in Q3. There was not that much fluctuation in the exchange rates. We are suffering from the headwind from the first half year from USD 1. specifically by 1.8 million. Our income tax was for third quarter 650,000 for first three quarters 3.4 million which equals to roughly 21% effective tax rate which is our run rate and a good scenario going forward as well. And then this leads us to net profit of 1.4 million for the period, for the quarter, or 13 million for the year to date numbers. On the balance sheet side, we see a significant increase in cash balance. I mean that's the reason of the seasonality of the business and that shows us as well in the accounts receivable trade receivables pocket which went down by roughly 16 million from end of last year and this is driven by the seasonality of the business we execute. I mean fourth quarter is always the busiest one with highest number of invoicing and then the cash will be collected in in the first half year time and then again fourth quarter will be the busiest one we also see a reduction in the contract assets by 3.9 million which is a reflection that we have not been booking any major significant deals recently with multi-year deals with extended payment terms so this is kind of contributing to uh which is 32.4 million for year to date. What comes to the equity and liabilities, there's very little movement on that in accounts payable or any other items. And I mean, this balance sheet obviously will be subject to change now quite significantly because of the acquisition of IAR. and then that will be taken into account into Q4 finances then in February. With these words, I will hand it back to Juha to go through the outlook and guidance for this year.