Qt Group Oyj

Welcome to QT Group's Second Quarter 2025 Results Presentation. My name is Heli Jamsa, IR lead.

And with me today are our CEO, Juha Varelius; and CFO, Jouni Lintunen, to present the results. After the presentations, we will have a 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. 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 Jouni will talk about financials, and I will finish up on the outlook and guidance for 2025.

If we go into our Q2, 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 very big one-off deal. And so the comparable revenue this year was tough to beat, 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 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 in Q1 that the global economic situation and these trade tensions, they are affecting our customers in a way that if we think about Qt, it always goes into a project which is an investment. And this uncertainty in the market has caused the many of our customers are consider their investments, not on a way that they should do it or not, but maybe more on a size and 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 there, we don't see that much of that kind of hesitation. Defense specifically is investing pretty strongly at the moment.

So the purchasing behavior of our customers is currently somewhat cautious. We saw this particularly in Americas and Europe, and 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 today, 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 30 year, an increase of 78. And, well, this is, of course, for future outlook, but we're not changing our long-term investment 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 at the World Summit that we have started developing an e-bridging technology.

Not going into more detail on it. It basically means that we are expanding the Qt user ecosystem.

And when this ecosystem is growing, obviously, 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, 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 lot of 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, Metsohaman, Siemens, Gardenswartz, Woo, and so on.

So, just to demonstrate that the community is very healthy. 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 in the competitive environment in that sense, so the only headwind we are experiencing at the moment comes from the market.

We also announced 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, which we've been communicating that we are looking for products that will add to our current portfolio.

If you think about IAR's 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 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 Axivion in that hardware selection.

So QA products go there right away. So this means that our customers can buy more from one shop, our offering expands 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 enlarges the addressable market. So this is a conditional offer, among other things, 90% of the IAR shares, and we'll see, I think that in the October time frame, we 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 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 the perpetual licenses and their target is to go into subscription licenses, but 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 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.

Jouni 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 to the earnings call of Qt Group.

Juha quite well described already the environment and the net sales development as discussed, we were suffering 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 negative net sales development of 3.9%.

It was flat on constant currencies, negative 0.5% revenue growth. For the 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 is a EUR 0.5 million other operating income bucket.

I mean, this is coming mainly from the tickets sold to the 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 bucket is higher now for 2 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 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 12 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&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 EUR 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 cost. And last time that event was held was back in '23 in Q4.

So 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 22.7% or EUR 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, driven by not good revenue development.

Amortization remains unchanged, and this is coming from the amortization of the acquisitions of Axivion and Froglogic back in '21 and '22. So no change in that.

And this leads to an EBIT margin of 19% for the second quarter and EUR 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 or the negative kind of impact of that is roughly EUR 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 the past few quarters already and is not expected to change significantly going forward. Net profit for the period is EUR 6.7 million or 13.2% and EPS is EUR 0.27, down from EUR 0.53 last year.

We have increased our cash position from 12 months ago from 6 months ago, quite significantly, and the ending cash balance is EUR 91.5 million. We have been able to reduce the accounts receivable somewhat, and that's EUR 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 EUR 4.1 million from the end of '24. And this all leads to positive operating cash flow, which is EUR 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 lease agreement bookings that we have now in the balance sheet.

And the other short-term liabilities are down by EUR 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.

Yes. So, well, Q2 obviously was a disappointment, and we had the first half of the year, we've been having this uncertainty.

I think that what it looks like now, we see that the development at the moment is that the second half will not be as gloomy as the first half. So there are the questions around tariffs and the dealmaking and whatnot.

So we do expect that the environment will be getting better. Well, in the long term, we don't see any changes.

Actually, pretty much everything that we use and see will have 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 I don't think that that will change. We don't see any development over there.

Like in the early days, we were talking HTML5s and flutters and whatnot. So they kind of come and 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, well, it's slowly getting better. But it's definitely going to be a challenge so far, specifically in automotive and a couple of other industries.

There's really been a slowdown. Automotive will probably continue its recovery even to the next year, but it is getting better.

So we keep our guidance the same. So the growth is between 10% and 20% year-on-year on comparable exchange rates.

And then, of course, comes the next question that how can we do that when the first half has been so slow? Well, basically, like you all know, our sales cycle is meeting a new customer and closing a deal, that's like a 6-month period of time.

So if we give guidance like this, we pretty much have to have the pipeline already in place for the second half of the year, because if we don'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 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 30% and 40%, probably more on the lower end, of course, now given the first half of the year.

But that's where we see it going. And our EBITDA always, well, it's very heavily driven by the revenue, of course, because we are in 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 in some period of time and we look at how the business has been performing, that's also a 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 increasing as it has been when the tariffs have been going from 0 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 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 what we've been seeing in Europe.

So that's overall the big scheme of things. We, of course, always continue looking to increase our operational efficiency.

And I believe that we can become even better on that as well. So at the moment, we feel that we can meet those target numbers, although very challenging year so far, and I think it's going to continue to be a very challenging year.

So this definitely 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 we can add value quite substantially when it adds to our product portfolio.

We can do cross-selling, and we can do the 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 it closes this year. Well, there you can see the old slide, but we have a lot of nice brands as customers.

And I bet Matti Rikkonen is going to have his first question.

It's Matti Rikonen, 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?

Yes. Well, I think that in APAC, as we slow down, they are putting more gas.

So they are investing and 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, will there be cancellations of projects?

Well, not likely because our software goes into new products. And if our customers stop launching new products, then that's kind of the end of the story.

But what our customers are, of course, thinking is what might be production volume they need to be doing? Are they going to be having a market in North 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 Qt is usually going into new projects that have not yet been started. So starting 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 software development on Western world? Yes, they will.

Of course, they will. It can't be stopped basically because that would mean that there would not be new product releases, facelifts and whatnot.

So in that sense, I'm pretty confident on that. On what volume it will go forward.

So in many ways, the second quarter has been a bit like COVID type of a thing that the things are kind of halted for a while, but 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 customers, as you can see over there, there is LG, Bosch, Hyundai, ABB, Ford, and so on and so what, huge companies.

So they will also exist next year and 5 years from now, at least most of them. And so they need to be developing things further.

That's a very good question. It's one thing to have the pipeline, then it's another thing to close it, as you're saying.

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 at the end of the day to each and every sales guy who is 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 how to close the pipeline. And if all those points to the fact that this is going to be the end game, I mean, I 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.

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 truth 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?

It's more positive, but the when uncertainty happens, usually how companies behave is that they start delaying decisions that they can delay, and they start preserving cash. So they start saving cash for the rainy day.

And that's what we see that people are very cautious with their spending, and that's what we've been seeing. So 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 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 10 years or whatnot.

But all the companies that want to be successful in the long term, they need to have a strategy and they need to make investments because otherwise, saving cash 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 in a longer term, that's where they're going to get. But they are now on the first half, that's been slow.

I mean, they've been delaying. They've been very cash cautious, but that's not a sustainable long-term strategy for them.

And they know it, of course, it's very natural.

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 radically taking costs down?

I don't even think about it because the top line will go up. Well, of course, I mean, I run a business.

So if my top line doesn't grow, then I'm going to secure the bottom line. But on a longer term, I have no doubts that we will be growing.

So if I look few years down the line, we're going to double our revenue, we're going to double our revenue, no doubt on that. So, would that make sense that on a weak first half, I start changing and saving, that would be like going up and down.

And we are in an embedded business where development processes are long. The development cycles are long.

So it doesn't make any sense in our type of 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 if we were to hit a situation where we would not grow at all, 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 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, and we're definitely going to be adjusting our costs on a quarterly basis because that would be kind of making decisions delaying, making decisions delaying, and in our type of business doesn't make any sense at all. So our own product development cycles are fairly long.

Our customer product development cycles are very long. So on these kinds of small hiccups, we need to look beyond.

Having said that, this is no medical business where in the medical business, they look beyond few year recessions because their development cycles are like 10 years. But we're somewhere in between, but we're not definitely a web-type of business where, 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 in the second half, let's put it that way.

Waltteri Rossi from Danske Bank. Why 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?

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 one over there is tariffs.

That's for sure. On some manufacturers, it, of course, affects the fact that for some Western companies, at the same time, there are tariffs.

They've been facing the fact that there is fierce competition in China. So they've been many Western companies have 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 if 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 what is what? Hard to say.

But of course, you know that there have been Western car manufacturers that they've done write-offs worth billions of dollars only on their Chinese operations. So clearly, they are affected by both.

Now we are in a situation where there is overproduction. So China is producing more cars than it can consume domestically.

And now the question is that where are those cars going to be landing? So at the same time, there is an oversupply of the product, and then there are tariffs in the U.S.

And the tariffs are kind of twofold as 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 high. And then it comes down to Tier 1s, and Tier 1s are also our customers?

So we have Tier 1 customers that are suppliers to the automotive industry. So that's probably the worst industry we have.

And then on consumer electronics, been a bit of a headwind as well. And then some other industries, like the defense has 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, then this would look really bad.

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?

Well, we don't publicly say those. I think that the automotive industry has always been between 15% and 20%, now probably going to be on the lower end, obviously.

China figures, we haven't released publicly, but growing fast, started small, but now growing fast. And there comes the next obvious thing that is that good or bad on the long term.

But long term, you think that you can compensate the declining Western automotive sales with.

Yes, yes, yes. Of course.

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.

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. So it's a very difficult environment to make decisions because they need to estimate that what's going to be the end user volumes.

And in this current situation, it's tough. I mean the 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.

So the decision-making environment for them has been very, very difficult during the first half, with so much uncertainty. And yet you have to make decisions that you have to live with like 5 years going forward.

So if I would be in that position, I could delay, I would delay my decision-making for sure.

Still a few follow-ups on the automotive. So, have you seen any changes in the competitive situation?

Or have you lost any customers? Or are there some large customers specifically that are leaking right now?

Yes. And of course, I'm not going to say that.

No, we haven't lost any, no losses or whatnot. I think that if you study the industry more in debt, 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 a discussion on that front.

And what about the competitive situation? Sorry, against Android or Chinese competitors?

No, that hasn't changed. And I mean, we're doing very well in China.

I mean, Qt is not only on automotive, but Qt is being used more and more in China also on the desktop as a matter of fact. So our product is competitive.

And we see this newcomers kind of coming. We saw the -- well, in the early days, HTML 5, then there were like rightware gun seat, then 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 don't see them making any inroads whatsoever. So it's a complicated environment.

The requirements for the products are very, very high. 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 that there'd be a new product that there is price competition or any of that. So that's not the case at all.

And one last question regarding the developer license maturity. So the 3-year licenses, how much of those developer license sales do you think 3-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?

That's a very detailed question. I don't have those numbers out of my head, unfortunately.

But on a general level, I haven't seen a substantial change over there.

So that's not one main reason. \

No, no, no, I wouldn't call that a main reason, not at all. I don't have exact figures to give you.

Antti Luiro from Inderes. A quick question about the guidance.

I assume that's fully organic, not assuming any revenue from IR.

Yes, for sure.

Yes. Good to hear.

Then on the IR deal and maybe just contrasting a little bit how they do sales versus how Qt does sales. I know you both have global sales networks.

Is there any difference in terms of who you sell to, like Tier 1, 2 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.

Assuming deal goes through, yes, they do have. It was actually funny enough, their offices are pretty much in the same locations where we have offices.

So that seems to be the case. What's their sales process?

I don't have enough visibility on that. But looking at how they're organized, how they operate, it seems to me that 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, NXPs 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 like 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, I don't see the benefit in that. But of course, I do see that we can sell our QA products over there, so their sales force can start selling our QA products, and well, of course, pretty much also Qt to all of their customers.

So that cross-sell is there right imminent.

And then in terms of the market slowdown and that easing up in the future, obviously, EU and U.S.A. trade deal is one of the factors there.

And I guess U.S.A. 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?

Calmer market. Well, in Europe, obviously, is that the 2 crises in Europe or close by.

So the Gaza conflict will end and the Ukraine war will end, that will, of course, will boost the economy in Europe. And then the uncertainty, I think, from my point of view in this manufacturing industry, is that it's even worse than the tariff itself.

Of course, the 15% tariff will have impact on the end user demand, but it's going to be a lot less than this uncertainty. So 2 things will have an effect.

Well, you guys know more on the overall economy than I do, but one would think that maybe someday, there would be even small growth in Europe. I don't know if it's possible anymore in my lifetime, but I would think that at someday 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 2 regions where the economy is growing fast and that is inevitable. And then we have Europe, which might turn into 0 growth retirement home for all or it might find a way to grow a little.

So let's hope for the latter.

Felix Henriksson, 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?

Well, overall on quality assurance, it's like Q 2.0. So when we started early on selling Qt, many of our customers had developed software development tools of their own.

And then we sold them Qt and told them that you can be so much more effective if you put your engineers on 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 the 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 AI because if you have humans 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 AI, you never know what the AI is going to be do. So if you have code done with AI, you basically have to test it all.

So those are the 2 factors driving the testing market. So your first question was that did we do as we expected?

No, we did not. So it was slow as well.

Because, of course, those are also on our QA sales, 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 have your own experiences where you've bought something, then it doesn't work. So not everything is tested all the time.

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 in 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 it manually.

So, customers will need to automate their testing and get these types of tools. Is 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. So, I mean, if you've developed something with Qt, either commercial or open source, I mean, it doesn't make any sense to take the squeeze basically.

If you think of Axivion 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.

So there is no alternative to that. If you're looking for only static code testing, is Axivion 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 into the details. Do I have to do it now?

Well, no, you can always postpone it. The downside is that your platform and your software get so complicated that when you want to make a change to your software, it takes forever because your architecture is so twisted, which in many cases might be possible.

So it could be that you don't want to take the architecture verification because you've been building your software for 10 years and you know that it's not good, but you don't want to know how bad it is. And yes, I mean, it has happened.

So it's kind of a decision that you can postpone. The 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, Axivion is far out the best product in the market. If you look at 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 for many of our customers, the hardware manufacturing has been the core DNA.

Well, of course, I'm biased, but 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.

And then we know that well, and then there are all kinds of combinations. So that's kind of the QA.

So if I look then on the QA, in our business, what is the addressable market, difficult to say because Qt is on 70 industries and whatnot. But roughly, I mean, roughly, we can say that our QA products have to double the size of the addressable market than Qt.

So, over time, QA should become bigger than Qt.

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?

No.

Why not?

Well, I mean, joking. It's too early.

I mean, we have a public offer. Obviously, it's a public company, and the amount of due diligence we've done.

Let's see that, first of all, we get to close this deal. Let's see how we can work together.

We've not looked at 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 their product, their R&D, is definitely very specific to what IRA is doing, and we can see synergies over there working together, but rather probably accelerating the investment on that front. If we look at the sales side, we think that sales have been very specific sales in that matter.

They have great expertise in that. I think that we'd probably be looking at how to accelerate their growth through further investments rather than looking for synergies.

So the synergies would probably come somehow well, of course, there are going to be savings when there is only one public company instead of 2 public companies and these. But I think that they are a minor thing in all of this, at the end of the day.

So, if you look at what's been behind the success of Qt is that we have a great product, and then we made an investment in building our own global footprint on sales. We've been investing in sales, investing in commercializing the Qt product.

That's what we've been very good at. And I think that we can together accelerate that development in the IRA case.

So I think that together with our know-how and investing even more in that, we can accelerate the IAR's growth and expansion in global markets more than they would have been able to do it alone. 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 where the profitability on IARs will come, we're going to be able to increase the top line with their existing personnel. And if we can increase the top line by 30% with existing personnel, the profitability will follow.

And that's more our scenario than we've been doing.

One more question. Jaakko 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?

About half and half. You can ask another one if it's as quick.

It should be. 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 for that with the Chinese production?

That wasn't a short one, a quick one. Yes, partly, we can, of course, compensate.

And I think that the headwind on the distribution license because of this turbulence now this year, you're going to see it more next year. 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 a growth pattern.

That would be our expectations because now the decision is being delayed. The manufacturing has been delayed.

It's probably cautious and smaller. So we're going to see that in the coming months, but that's going to be more of a next year issue than this year's issue.

So this year, the rim distribution license decisions have already been made 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 have 1 minute over.

So I think that was definitely the last question. Thank you all.