Earnings call transcript: Qt Group Oyj Q2 2025 results disappoint, stock tumbles

Qt Group Oyj reported its Q2 2025 earnings, revealing a notable decline in both revenue and earnings per share compared to the previous year. The company’s earnings per share (EPS) dropped to €0.27 from €0.53, missing the forecast of €0.4571. Revenue also fell short of expectations, contributing to an 18.63% drop in the company’s stock price, which closed at €57.05, down €10.63 from the previous session. According to InvestingPro data, the stock is now trading near its 52-week low, with a significant -28.33% return over the past six months. The market reacted negatively to these results, reflecting investor concerns about the company’s short-term prospects.

Key Takeaways

• Qt Group’s Q2 revenue decreased by 3.9%, with a 0.5% decline on comparable currencies.
• EPS fell to €0.27, missing the forecast of €0.4571.
• The company’s stock price plummeted 18.63% following the earnings announcement.
• Automotive and consumer electronics sectors showed significant slowdowns.
• The company maintains a growth guidance of 10-20% on comparable exchange rates.

Company Performance

Qt Group’s overall performance in Q2 2025 was hampered by a slowdown in key markets, particularly in the automotive and consumer electronics sectors. Despite these challenges, the company continues to see strong performance in the defense and medical sectors. InvestingPro analysis shows the company maintains robust financial health with a GREAT overall score of 3.18, supported by strong profitability metrics and cash flow generation. The APAC market, especially China, showed more stability compared to Western markets, which are experiencing investment hesitation. InvestingPro subscribers have access to 12 additional key insights about Qt Group’s financial position and market performance.

Financial Highlights

• Revenue: Decreased by 3.9% year-over-year.
• Earnings per share: €0.27, down from €0.53 last year.
• Net Profit: €6.7 million, representing a 13.2% margin.
• EBITDA Margin: 22.7%, a decline from previous periods.
• Cash Position: €91.5 million with a positive operating cash flow of €29 million.

Earnings vs. Forecast

Qt Group’s EPS of €0.27 fell short of the forecasted €0.4571, representing a significant miss. This deviation from expectations marks a departure from the company’s historical trend of meeting or slightly exceeding forecasts in previous quarters.

Market Reaction

Following the earnings release, Qt Group’s stock experienced a sharp decline of 18.63%, closing at €57.05. This drop places the stock closer to its 52-week low of €45.6, reflecting investor disappointment and concerns over the company’s future growth prospects.

Outlook & Guidance

Despite the challenging quarter, Qt Group maintains its growth guidance of 10-20% on comparable exchange rates. The company expects the second half of the year to be stronger, with potential growth from the anticipated acquisition of IAR Systems and continued investment in R&D and customer-facing organizations.

Executive Commentary

CEO Johav Aurelius acknowledged the disappointing sales, stating, "We were of course expecting a bit better quarterly sales." He expressed confidence in the company’s long-term growth potential, saying, "If we take a few-year view from now, we’re going to be increasing our revenue substantially, no doubt about that."

Risks and Challenges

• Economic Uncertainty: Customers delaying decisions due to economic conditions.
• Automotive Sector: Impacted by trade tensions and market slowdowns.
• Investment Hesitation: Particularly in Western markets, affecting growth prospects.
• Competitive Pressure: Despite no significant threats, alternatives like Flutter and Unity remain a consideration.
• Currency Fluctuations: Could impact revenue and profit margins.

Q&A

During the earnings call, analysts focused on the company’s strategies to address the slowdown in the automotive sector and the impact of economic uncertainties on customer decision-making. Executives highlighted their confidence in long-term growth and the potential benefits of the IAR Systems acquisition.

Full transcript - Qt Group Oyj (QTCOM) Q2 2025:

Heliumsa, IR Lead, QD Group: Welcome to QD Group’s Second Quarter twenty twenty five Results Presentation. My name is Heliumsa, IR Lead, and with me today are our CEO, Johav Aurelius and CFO, Joni Lindtunen, to present the results. After the presentations, we will have Q and A. And considering the number of analysts analysts here with us in the studio, we might not have time for questions from the lines. Without further ado, please, Johav, the floor is yours.

Johav Aurelius, CEO, Acute Company/QD Group: Thank you. Good day, everyone. My name is Johav Aurelius. I’m the CEO of Acute Company. And let’s get to the agenda, which is the pretty usual business highlights.

Then Ioanni 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 there was a the comparable quarter was very difficult. Last year, we had a one very big one off deal and the so the comparable revenue this year was a tough to beat, but yet we were expecting a bit better result.

Our revenue decreased 3.9% and on comparable currencies 0.5%. Of course, that is a fairly big difference and we all know that comes from the dollar exchange rate. A large part of our sales is in dollars, so that’s affecting. Our EBITDA 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 Q1 that the global economic situation and these trade tensions, they are affecting our customers in a way that if we think cute, it always goes into a project, which is an investment. And this uncertainty in the market has caused that the many of our customers are considering their investments not on a way that should they do it or not, but the maybe more on a size and on a timing perspective. We can see this particularly on the 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, 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 there we don’t see that much of that kind of a hesitation. Defense specifically is investing pretty strongly at the moment. So the purchasing behavior of our customers are currently somewhat cautious. The we saw this particularly in Americas and Europe and it was affecting both 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 today that the new projects customers are thinking and maybe delaying the decision making 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 nine fifteen as of June 30 year, an increase of 78. And the well, this is of course for future outlook, but we don’t 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 a new bridging technology. Not going into more detail into it, it basically means that the 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 probably or one of the questions that 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, Metso Harman, Siemens, Schroeder, Schwartz, Warburg 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 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 the also the QA products. And we don’t see any changes on the competitive environment in that sense that the so the only headwind we are experiencing at the moment comes from the market. We also announced that the in 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 growth strategy that we’ve been communicating that we’re looking for products that will add into our current portfolio. If you think IAR’s products, the 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 we’re going to be building with what tools and then comes the acute offering. The obvious cross sell right in the beginning is particularly OXEVON 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 our offering expands in that sense. And it also means that the this is earlier on the project decision making kind of gives a lead generation to Qt, if you like, and also gives the cross sell opportunity and largeens our the 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 time frame we’ll have will be wiser to see that what is our current situation and where this deal is going, but 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 are 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 would 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 perpetual licenses and their target is to go into subscription licenses, but they haven’t they’ve started it, but it’s on a very early phase. And that’s of course something that Qt has already done. So we think that the with our know how and IAR’s management execution, we can combine this and accelerate maybe even the shift from perpetual to subscription licenses. And that, of course, would then affect the top line of IAR. So that’s very briefly what happened on Q2.

Jorni is going to talk about the financials a bit, and then I’ll talk about the how the rest of the year is looking like.

Joni Lindtunen, CFO, QD Group: All right. Thank you, Juha, and welcome from my behalf as well to the earnings call of Gyut 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 0.5% revenue growth. For the full half first half year, we are reporting flat revenue. And there, in constant currencies, we were growing 1.4% over last year’s. You see there €500,000 other operating income bucket. I mean this is coming from namely from the tickets sold to Q3 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 product project profitability point of view for consulting projects. It’s just another bucket of expenses.

Our personnel expenses are up by 7% in Q2, 8.4% for the first half year, and this is aligned with the personnel headcount development. We are up by 78 employees for the last twelve months’ time. We are up by 27 in Q2 isolated, and we are continuing the investments into growth areas. We are having more employees into R and D, namely in the Qualitosurna side and also to the customer facing organizations. Other operating expenses, you see as well an increase by roughly €4,000,000 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 ’twenty three 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 and 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 EBITA margin of 22.7% or 11,600,000 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 Akcevion and Forklogic back in ’twenty one and ’twenty two, so no change in that. And this leads to EBIT margin over 19% for the second quarter and €9,600,000 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 or the negative kind of impact of that is roughly €1,500,000 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 €6,700,000 or 13.2%, and EPS is €0.27 down from €0.53 last year. We have increased our cash position from twelve months ago from six months ago quite significantly, and ending cash balance is €91,500,000 We have been able to reduce the accounts receivable somewhat, and that’s €41,400,000 and that’s pretty much aligned on the revenue on invoicing development for the quarter. There’s also a reduction of the contract assets by €4,100,000 from ’4.

And this all leads to positive cash operating cash flow, which is €29,000,000 this year, somewhat up from last year despite the softness in the revenue top line and also specifically the profitability side. Not 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 lease agreement bookings that we have now in the balance sheet. And the other short term liabilities are down by €4,000,000 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.

Johav Aurelius, CEO, Acute Company/QD Group: Yes. So the well, Q2 obviously was a disappointment. And we had the first half of the year, we’ve been having this uncertainty. I think that the what it looks now, we see that the development at the moment that the second half will not be as gloomy as the first half. So there are the questions around tariffs and the deal making and whatnot.

So we do expect that the environment will be getting better. The well, on a long term, we don’t see any changes actually. Pretty much everything that we use and see will have a some sort of a graphical user interface and a touchscreen and whatnot, and the amount of software is increasing. So the demand for our product is still there, and our products are best in the market. So the I don’t think that the that will change.

We don’t see any development over there. Some of the like in the early days, we were talking HTML5s and Flutters and whatnot. So they kind of are common, they go. But they never come to challenge us in a very big real terms in that sense. But the economic situation, like we already said in the early of the year, we think that the well, it’s slowly getting better.

But the it’s definitely going to be a challenge so far, specifically in automotive and a couple other industries. There’s really been a slowdown. Automotive will probably continue its recovery even to the next year, but the it is getting better. So we keep our guidance same, so the growth between 1020% year on year on comparable exchange rates. And then, of course, comes your next question that the how can we do that when the first half has been so slow.

Well, basically, like you all know, the our sales cycle meeting a new customer and closing a deal, that’s like a six month period of time. So if we give a guidance like this, we pretty much have to have the pipeline already in place for the second half of the year, because the if we wouldn’t, we wouldn’t have time to do the sale and close the deals on time. So this guidance that we see now is roughly the pipeline we already have in place. So if we close the pipeline in the same ratios we’ve been historically been doing that should be the end game over there. And the same applies that the busiest quarter is, of course, going to be the fourth quarter.

That’s what it always is. And if we hit those numbers on the revenue, then the profit margin is going to be between 3040%, probably more on the lower end, of course, now given the first half of the year. But the that’s where we see it going. And our EBITDA is well, it’s very heavily driven by the revenue of course, because we are on a licensing business. So that’s basically the guidance we have or the basis for the guidance we have.

In general, if we take away the big deals on a longer in some period of time and we look how the business been performing, that’s also the bit over 10% growth. So in that sense, we do believe that we can reach those numbers. On top of that, like I said, I think that the uncertainty in our customer base is slowly decreasing. It’s not more increasing as it has been when the tariff has been going from zero to 50 and whatnot. But now that uncertainty is going away.

The biggest challenges we have had like I said in Europe and in Americas, whereas the APAC has been more stable and that’s largely because China has been China has actually been performing pretty well on the markets where we are concentrating, for example, the automotive in that sense. So that’s been more stable and more investments over there apart from the what we’ve been seeing in Europe. So that’s overall the big scheme of things. We, of course, do always continue the looking for increasing our operational efficiency. And I believe that we can get we can become even better on that as well.

So at the moment, we feel that the we can meet those target numbers, although very challenging year so far and I think it’s going to continue a very challenging year. So this definitely not the not been an easy year in any respect. On the IRA side, we’ll hope that we’re going to be able to close the deal during this year, but like I said, it’s still a public offer. But if we can do that, we think that the we can add value quite substantially when it adds to our product portfolio. We can do cross selling and we can do subscription change.

So we think that going forward for the next couple of years together with IRA would be a very good addition. But let’s see how it goes and hope that the it closes this year. Well, there you can see the old slide, but a lot of nice brands we have as customers. And I bet Mato Rekonen is going to have his first question.

Matt Rekonen, Analyst, DNB Carnegie: Good morning. It’s Matt Rekonen, DNB Carnegie. A couple of questions. What kind of changes are you seeing in your customer behavior right now? You said that Asia customers have been doing relatively okay, Western customers far from okay.

What are the changes that the customers, what do they say to you? So has it been that they are just postponing things until we get some clarity of the tariffs? Or have they said that, no, we will not start any new projects this year or next, so we won’t be needing any software in the near future and everything between those? So what kind of feedback are you getting from your customers? And what makes you so confident that the actual pipeline would be closed by the end of the year, even though the first half has been so particularly weak?

Johav Aurelius, CEO, Acute Company/QD Group: Yes. Well, I think that in APAC, as we slow down, they are putting more gas. So they are clearly they are investing. And the it’s not only there is a lot of activity over there. And whereas we’ve seen in the Western market customers hesitating, there’s been a budget freeze that, hey, let’s not hire anybody for a moment.

Let’s postpone these projects and let’s see where it goes. I would say that the will there be cancellations of projects? Well, not likely because our software goes into new products. And if our customers start stop launching new products, then that’s kind of end of the story. But what our customers are, of course, thinking is that what might be the production volume they need to be doing.

Are they going to be have a market in Northern America or not? Are they going to be having a market in China and on what volumes? And while there is a lot of uncertainty, then the projects are postponed and pushed forward. And that’s possible in our business because the on QD is usually going into new projects that have not yet been started, right? So starting us delaying an investment on new product development, that’s always possible.

Delaying a production that is already going is very, very difficult and very seldom happens. So will these projects go on? And will the world go on? And will there be a software development on Western world? Yes, they will.

Of course, they will. They it can’t be stopped basically because that would mean that there would not be new product releases, facelifts and whatnot. So that’s in that sense, I’m pretty confident on that. On what volume it will go forward? So in many ways, this it’s been like the second quarter has been a bit like COVID type of a thing that the things are kind of are halted for a while, but the I’m certain it will go forward because life goes on.

And these companies, our customers, they are building products. They can’t stop that basically, but they can delay projects and they can make them smaller and whatnot. So that’s kind of the situation. And our companies, our customers, as you can see over there, there is LG, BOSS, Hyundai, ABB, Ford and so on and so what, huge companies. So the they will exist also next year and five years from now, at least most of them.

And so they need to be developing things further. That’s a very good question that the that it’s one thing to have the pipeline, then it’s another thing to close it as you’re saying on so we do have the pipeline now. We need to close it basically. That’s what it takes to make the rest of the year. Can we do that?

Well, I think we can. And of course, we go through each and every deal and it’s distributed on the each and every at the end of the day to each and every sales guy who are making their own predictions and it’s built from bottom to up and they make their own estimations. And then we have the historical data that we looked at on the how do we close the pipeline. And if all that points to the fact that this is going to be the end game, I mean, don’t have any very good reason or compelling justification to say otherwise than that. So that’s what it’s based on.

But of course, that’s the risk basically that it moves forward.

Matt Rekonen, Analyst, DNB Carnegie: Then regarding the European customers who were facing quite harsh tariffs or that was the initial plan. Now we seem to be getting some kind of truce with The U. S. What are your European customers telling you about their incentives to start investing again? Is that now more positive or is it the same as before?

Johav Aurelius, CEO, Acute Company/QD Group: It’s more positive, but everybody when uncertainty happens, usually how companies behave is that they start delaying decisions that they can delay and they can start they start preserving cash. So they start saving cash for the rainy day. And that’s what we see that the that people are very cautious on their spending and that’s what we’ve been seeing. So the they calculate very carefully when they do renewals. They calculate very carefully that how many licenses they need.

They are cautious on that, that how can they be most effective that in every way. So they are cash cautious at the moment. And that’s, by the way, the same thing that have it on COVID that the decision everything that was possible to delay started delaying, and then the company started saving cash. Well, at the end of the day, the companies that want to be successful on the long term, they do have a strategy. And based on that strategy, they make investments because that’s the only way to grow.

If you preserve cash and you don’t make investments, you’re out of business. Then the question is that is that going to be a year or ten years or whatnot. But all the companies that want to be successful on long term, they need to have a strategy and they need to make investments because otherwise saving cash is it’s not a sustainable strategy. And so all our customers are actually in a business where they do make investment decisions and they do make investments. So on a long term on a longer term, that’s where they’re going to get.

But the now in the first half, that’s been slow. I mean they’ve been delaying. They’ve been very cash cautious, but that’s not sustainable long term strategy for them. And they know it, of course, it’s very natural.

Matt Rekonen, Analyst, DNB Carnegie: All right. Then finally, what will you do with your costs if you see that the top line growth that you are now expecting doesn’t materialize in Q3, Q4? So you have earlier been fairly skilled with keeping costs down when your top line doesn’t increase by that much. So do you see that that is still possible? And at which part of the second half would you start considering to kind of radically taking costs down?

Johav Aurelius, CEO, Acute Company/QD Group: I don’t even think about it because the top line will go up. Well, of course, I mean, I run a business, right? So, if my top line doesn’t grow, then I’m going to secure the bottom line. But on the longer term, I have no doubts that we will be growing. So if I look the few years down the line, how we’re going to double our revenue, we’re going to double our revenue, no doubt on that.

So would the that make sense that on a weak first half, kind of start changing and saving that would be like going up and down. And we’re on an embedded business where development processes are long. The development cycles are long, so it doesn’t make any sense in our type of a business to start acting on based on a quarterly or first half weaker than expected performance in that sense. Having said that, I mean, rest assured that the if we would hit a situation that we would not grow at all, right, we would see that the revenue is going to be flat or growing 5%, then of course, we would adjust our costs in a way that we would still have a very good profitability And with very good, I mean, where we are as of today. But the on if we take like a few year view from now, we’re going to be increasing our revenue substantially, no doubt about that.

So in that sense, the I’m not and we’re definitely going to be adjusting our costs on a quarterly basis, because that would be kind of we’re making decisions delaying, making decisions delaying and in our type of a business doesn’t make any sense at all. So the our own product development cycles are fairly long. Our customer product development cycles are very long. So the on these kind of small hiccups, we need to look beyond. Having said that this is no medical business, where on medical business they look beyond few year recessions, because their development cycles are like ten years, right?

But the we’re somewhere in between. But we’re not definitely a web type of a business where the on a monthly basis, we adjust costs. I know I didn’t quite answer your question, but I don’t think that I need to start slashing costs on the second half, let’s put it that way.

Matt Rekonen, Analyst, DNB Carnegie: Right. Fair enough. Thank you.

Walter Rossi, Analyst, Danske Bank: Walter Rossi from Danske Bank. Do you think that your business has been so heavily impacted by the short term macro environment, even though the development projects should be more immune to that? And do you think that it’s more related to the tariff uncertainty or actually longer term uncertainty in the automotive industry?

Johav Aurelius, CEO, Acute Company/QD Group: Well, yes, I guess we got most slammed in or the worst slam we got was from the automotive obviously. And I think that the biggest over there is tariffs. That’s for sure. On some manufacturers, it, of course, affects the fact that the for some Western companies, at the same time, is tariffs. They’ve been facing the fact that there is fierce competition in China.

So they’ve many Western companies had a big, big market share in China and now they’ve been losing that quite heavily. I think I said a few years back that the development continues like this. We’re all going to be driving Chinese cars And that’s what it definitely looks like. So it’s both. Can I quantify that what is what?

Hard to say, but of course, know that there have been Western car manufacturers that they’ve done write offs worth of billions of dollars on only on their Chinese operations. So the clearly, are affected on both. Now we are in a situation that there is overproduction in so China is producing more cars that they can consume domestically. And now the question is that where are those cars going to be landing, right? So at the same time, there is oversupply of the product and then there is tariffs in The U.

S. And the tariffs are kind of twofold, but they are also affecting The U. S. Manufacturers because they manufacture so much subcontracting in Mexico and Canada. So it’s kind of hitting the whole industry pretty hard.

And then it comes down to Tier 1s, and Tier 1s are also our customers, right? So we have customers, Tier one customers that are suppliers to automotive industry. So we that’s probably the worst industry we have. And then on consumer electronics being a bit of a headwind as well. And then some other industries like the defense been doing fine, but it can’t overcome the whole portfolio.

So I mean, if you want to have a silver lining on all this, one of the silver lining is that, thank God, we are in 70 different industries because if we would be automotive only, I mean, this then this would look really bad.

Walter Rossi, Analyst, Danske Bank: And how much do you think that automotive is going to be of your sales this year roughly? And how much is China from that figure?

Johav Aurelius, CEO, Acute Company/QD Group: Well, we don’t publicly say those. I think that the automotive have always been between 1520%, now probably going to be on the lower end, obviously. China figures, we haven’t released publicly, but the growing fast started small, but now growing fast. And there comes the next obvious thing that is that good or bad on a long term.

Walter Rossi, Analyst, Danske Bank: But long term, you think that you can compensate the decline in Western automotive sales?

Johav Aurelius, CEO, Acute Company/QD Group: Yes, yes, yes. Of course, yes, yes, yes. And the Western automotive sales, I mean, they are now delaying things because they don’t know that the I can understand that if you’re in that kind of a situation and you think that you’re thinking that what would be my production volume, right? What’s my volume for Europe? What’s my volume for U.

S. A? And what’s my volume for China in this particular situation? It’s very hard to decide. But once you’ve decided that, then that’s the volume you’re going to produce, right?

So it’s a very difficult environment to make decisions, because they need to estimate that what’s going to beat the end user volumes. And in this current situation, it’s tough. I mean, worst case for the European car manufacturers, of course, is that instead of being global, they are manufacturing cars only for European market. That would be a pretty big change. I don’t think it goes into that, but the so the decision making environment for them has been very, very difficult during the first half, so much uncertainty.

And yet, you have to make decisions that you have to live with like five years going forward. So if I could delay if I would be in that position, I could delay, I would delay my decision making for sure.

Walter Rossi, Analyst, Danske Bank: Still a few follow ups on the automotive. Have you so have you seen there any changes in the competitive situation? Or have you lost any customers? Or are there some large customers specifically that are leaking right now?

Johav Aurelius, CEO, Acute Company/QD Group: Yes. And of course, I’m not going to say that. But the no, we haven’t lost any no losses or whatnot. I think that the if you study the industry more in-depth, you’ll know that who are in trouble and in what kind of trouble. But they are our customers, so I’m not going to start this discussion on that front.

Walter Rossi, Analyst, Danske Bank: And what about the competitive situation? Sorry, against Android or Chinese competitors?

Johav Aurelius, CEO, Acute Company/QD Group: No, that hasn’t changed. And I mean, we’re doing very well in China. I mean, QD is not only on automotive, but QD is being used more and more in China on also on desktop as a matter of fact. So the product our product is competitive. And we see these newcomers kind of are coming.

We saw the well, in the early days, HTML5, then there were like right where gun seat, then we there was Flutter. Flutter, I haven’t heard of. The last I heard from Flutter is that they are actually not developing it anymore. They’ve slashed all the development personnel. They are only upkeeping it as of now.

Unity made a big announcement that they’re going to do big inroads in the automotive. And yes, they are somewhere, but I haven’t I don’t see them making any inroads whatsoever. So it’s a complicated environment. The requirements for the products are very, very high. It’s it takes a lot to be competitive in, for example, in the automotive.

So we haven’t seen any changes on that front nor have we seen any that there’d be a new product that there is price competition or any of that. So that’s not the case at all.

Walter Rossi, Analyst, Danske Bank: All right. Thanks. And one last question regarding the license developer license maturity. So the three year licenses, how much of those developer license sales do you think three year licenses will be this year? How much were they last year?

And has there been actually a significant decline in that, also partly explaining the decline in sales?

Johav Aurelius, CEO, Acute Company/QD Group: That’s a very detailed question. I don’t have those numbers out of my head, unfortunately. But the on a general level, I haven’t seen a substantial change over there.

Walter Rossi, Analyst, Danske Bank: So that’s not one main reason?

Johav Aurelius, CEO, Acute Company/QD Group: No, no, no. I wouldn’t call that a main reason, not at all. But I don’t have exact figures to give you.

Antti Lauro, Analyst, Inderes: Antti Lauro from Inderes. A quick question about the guidance. I assume that’s fully organic, not assuming any revenue from IAR?

Johav Aurelius, CEO, Acute Company/QD Group: Yes, yes, yes, yes, for sure. Yes.

Antti Lauro, Analyst, Inderes: Good to hear. Then on the IAR deal, and maybe just contrasting a little bit how they do sales versus how QD does sales. I know you both have global sales networks. Is there any difference in terms of who you sell to, Tier one, two suppliers versus the OEM? And if so, are there any opportunities to build sort of deeper relationships by combining your networks of sales, assuming deal goes through, yes?

Johav Aurelius, CEO, Acute Company/QD Group: Assuming deal goes through. Yes, they do have their it was actually funny enough, their offices are pretty much on the same locations where we have offices. So the that seems to be the case. What is exactly that? How do they what’s their sales process?

I don’t have enough visibility on that. But the looking how they’re organized, how they operate, it seems to me that the it’s pretty much direct sales like Qt does. It’s direct sales to end user customers. They do have very strong partnerships with the chip vendors, NXP’s and whatnot. And they work very closely with the hardware manufacturers.

I think that there the relationship is stronger than Qt has. So in that sense, I think the sales model is pretty much the alike as Qt, whereas the expertise that they have for that particular sales to sell directly to the customers, of course, it’s unique that we don’t have. So in that sense, the I don’t see benefit on that. But of course, I do see that we can sell the our QA products over there, so they can start using their sales guys can start their sales force can start selling our QA products and well, of course, pretty much also queued to all of their customers. So that cross sell is their right imminent.

Antti Lauro, Analyst, Inderes: And then in terms of the market slowdown and that easing up in the future, obviously, EU and USA trade deal is one of the factors there. And I guess, USA and China deal is another one. But are you looking at any other sort of factors that could be the stepping stones towards a more sort of calmer market?

Johav Aurelius, CEO, Acute Company/QD Group: Calmer market. Well, in Europe, obviously, is that the world’s two crises in Europe or close by. So the Gaza conflict will end and the Ukraine war will end. That all, of course, will boost the economy in Europe. And then I think that the and this tariff uncertainty.

The uncertainty, I think, from my point of view in this manufacturing industry is the it’s even worse than the tariff itself. Of course, the 15% tariff will have impact on the end user demand, but the it’s going to be a lot less than this uncertainty. So do things will have an effect? Well, you guys know more on the overall economy than I do, but the one would think that maybe someday there would be even small crowd in Europe. I don’t know if it’s possible anymore in my lifetime, but I would think that at some date that there is this possibility.

U. S. Will definitely find a way to grow and APAC will definitely find a way to grow. So I mean in a worst case scenario, we will have two regions that the where the economy is growing fast and that is inevitable. And then we have Europe, which might turn into zero growth retirement home for all or it might find a way to grow a little.

So let’s hope for the latter.

Antti Lauro, Analyst, Inderes: Jurgen. That’s all from me.

Felix Hendriksson, Analyst, Nordea: Felix Hendriksson, Nordea. A few questions left from me. Quality Assurance, we haven’t discussed that yet. How are the quality assurance sales in Q2 compared to your own expectations? And I think you mentioned in the report that you expect a pickup in the quality assurance sales also in the second half of the year.

So what’s driving that?

Johav Aurelius, CEO, Acute Company/QD Group: Well, the overall on quality assurance, the one of the when I’ve said the it’s like Q2.0, so when we started early on selling Q2, many of our customers had developed software development tools of their own. And then we sold them queued and told them that you can be so much more effective if you put your engineers developing something and let us take care of the software development tools and frameworks and whatnot. So that was the case. On QA, it’s a bit of a same story that why would you do manual testing when you can automate all that. So that’s kind of the shift people are doing and they get more efficiencies from there.

The other big driver is that the is AI, because if you have human doing code, there might be mistakes. But if AI is doing good, there might be mistakes because AI decided to be funny or decided to make a you never know what the AI is going to be doing. So if you have code done with AI, you basically have to test it all, right? So those are the two factors that are driving the testing market. So your first question was that was it did we do as we expected?

No, we did not. So it was slow as well. We’ll because of course those are also the on our QA sales, it’s usually the it’s the kind of a rip and replace type of a situation that you already have a competitive product and you need to replace it with our product or you’re doing manual testing and you decide to continue doing the manual testing or you’re not testing at all and you continue not testing at all. I mean, not all software is always tested. You probably you know, you have your own experiences that you’ve bought something then it doesn’t work.

So not everything is tested all the time. So and so companies may decide that, well, we need to save money. Let’s go as we’ve been doing before. So that’s kind of the decision making criteria over there. But the on the longer term, will this trend continue that more and more software needs to be tested, all AI software needs to be tested, there is more software, it doesn’t make any sense to do manually.

So people customers will need to automate their testing and get these type of tools. Then it’s the competitive environment that is our tool good or not. Well, if you take Squizz, it’s the far out the best tool to test Qt software, right? So there is I mean, if you’ve developed something with Qt either commercial or open source, I mean, it doesn’t make any sense and take the squeeze basically. If you think on AxiVi or on static code testing, you have different possibilities.

If you go on the architecture verification and static code, that’s pretty much the only product on the market, right? So there is no alternative to that. If you’re looking only static code testing is actually even better than something else, then well debatable. And then do you want to change it or whatnot? So that’s kind of the situation on that.

Well, architecture verification, we’re getting kind of very in the detail. Do I have to do it now? Well, no, you can always postpone it. The downside is that your platform and your software gets so complicated that when you want to do a change on your software, takes forever because your architecture is so twisted, which many cases might be possible. So it could be that you don’t want to take the architecture verification because you’ve built been building your software ten years and you know that it’s not good, but you don’t want to kind of you don’t want to know how bad it is.

So it’s kind of a it’s and yes, I mean, has happened. So the it’s kind of a decision that you can postpone. Higher up you go in the organization, it’s very evident that, hey, this is something that we really need. On that architecture verification and the static code combination, Axiavion is far out the best product in the market. If you look our customers over here, they are pretty much hardware manufacturers who are getting into software development.

Some are more advanced and some are less advanced, but on many of our customers, the hardware manufacturing has been the core DNA. Well, of course, I’m biased, but the I would recommend architecture verification for them all, just in case. So that’s kind of the long term view. So they’re all going to get it. It’s just a matter of timing, right?

And then we know that the well, and then there are all kinds of combinations. So that’s kind of at the QA. So if I look then on a QA, you can in this our business, what is the addressable market? Difficult to say, because QD is on 70 industries and whatnot. But roughly I mean roughly, we can say that our QA products have to double the size of addressable market than QD.

So over time, QD should become bigger than QD.

Felix Hendriksson, Analyst, Nordea: Sure. And then just a couple of questions on IAR. You’ve talked about the sources of synergies, but are you planning to quantify these to us at any point upon the closing of the transaction?

Johav Aurelius, CEO, Acute Company/QD Group: No.

Felix Hendriksson, Analyst, Nordea: Why not?

Johav Aurelius, CEO, Acute Company/QD Group: Well, I mean, yes, joking. The it’s too early. I mean, we have a public offer. Obviously, it’s a public company the amount of due diligence we’ve done. I’ve we let’s say that first of all we get to close this deal.

Let’s say that the how can we work together. On the we’ve not looked this from the synergy saving points at all. So that’s not been the driver for us thinking about this acquisition. So we see that the their product, their R and D is definitely very specific to the what IRA is doing. And there is we can see synergies over there working together, but the rather probably accelerating the investment on that front.

If we look on the sales side, we think that their sales has been it’s very specific sales to that matter. They have great expertise on that. I think that the we’d probably be looking how to accelerate their growth through further investments than the looking synergies. So the synergies would probably come somehow well, of course, there were going to be savings when there is only one public company instead of two public companies and these, but I think that they are the minor thing in all of this at the end of the day. So if you looked at what’s been behind the success of Cure is that the we have a great product and then we did a investment on building our own global footprint on sales.

We’ve been investing on sales, investing on commercializing cute product. That’s what we’ve been very good at. And I think that the we can together accelerate that development in IRA case. So I think that the together with our know how and investing even more on that, we can accelerate the IAR’s growth and expansion in global markets more than they would have been able to do it alone. But the and that’s the main driver.

And so have we calculated that we’re going to be doing some cost savings? No. And I don’t think they’re going to be any major impacting force, whereas I think that the where the profitability on IARs will come that we’re going to be able to increase the top line with their existing personnel. And if we can increase the top line like 30% with existing personnel, the profitability will follow. And that’s more our scenario that we’ve been doing.

Felix Hendriksson, Analyst, Nordea: Got it. Thank you.

Jakob Torbenen, Analyst, SEB: One more question. Jakob Torbenen from SEB. This should be a rather quick one. Regarding the expected deals for the second half, how much of the expected growth that you are now seeing there is based on kind of foreseeable license renewals? And how much you are relying on new license sales growth, meaning growth in volumes in the second half?

Johav Aurelius, CEO, Acute Company/QD Group: About half and half.

Jakob Torbenen, Analyst, SEB: You

Johav Aurelius, CEO, Acute Company/QD Group: can ask another one if it’s as quick.

Jakob Torbenen, Analyst, SEB: It should be. It should. Let’s continue. On your visibility regarding the distribution license revenue, You’ve seen growth in this line in the first half. But regarding the existing trade tensions, Are you seeing headwinds in distribution license revenue, especially in the Western world?

And are you able to compensate that with the Chinese production?

Johav Aurelius, CEO, Acute Company/QD Group: That wasn’t a short one or quick one. Yes, we can partly we can, of course, compensate. And I think that the headwind on distribution license because of this turbulence now this year, you’re going to see it more next year, right? Because this year production was already decided like last year. And when it’s done and dusted, it’s going to happen.

But this year, hesitations, you’re going to see some slowdown next year on growth pattern. That would be kind of our expectations because now the decision is being delayed, right? The manufacturer is being delayed. It’s probably cautious and smaller. So that’s going to we’re going to see that in the coming months, but yes, that’s going to be more a next year issue than this year issue.

So this year, run time distribution license decisions been made already before, so that’s why it’s not affected. So that’s kind of the time sequence how it goes. Thank you very much. Thank you. We’ve one minute over, so I think that was definitely the last question.

Thank you all.

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