Stock Exchange Releases
Aug 9, 2018
Half-Year Report 1 January 2018-30 June 2018
Second quarter: Net sales increased exceptionally strongly 52.2 per cent
• Net sales increased by 52.2 per cent year-on-year to EUR 13,376 thousand (8,788)*. An exceptionally high number of significant licensing deals were concluded in the second quarter. At comparable exchange rates, net sales increased by 57.9 per cent.
• The operating result was EUR 1,321 thousand (-188).
• The operating margin (EBIT %) was 9.9 per cent (-2.1%).
• Earnings per share were EUR 0.05 (-0.01).
• Net sales increased by 36.0 per cent to EUR 23,704 thousand (17,434). At comparable exchange rates, net sales increased by 44.3 per cent.
• The operating result was EUR 375 thousand (-1,204).
• The operating margin (EBIT %) was 1.6 per cent (-6.9%).
• Earnings per share were EUR 0.01 (-0.06).
* the figures in brackets refer to the comparison period, i.e. the corresponding period in the previous year.
Juha Varelius, President and CEO:
Qt Group’s net sales in the second quarter amounted to EUR 13.4 million. Net sales growth was very strong at 52.2 per cent year-on-year. The Group recorded an exceptionally large number of significant licensing deals during the second quarter in all geographical areas and in several different industries. Growth was particularly attributable to customers in the technology and automotive industries in America and Asia. At comparable exchange rates, net sales growth was even higher at 57.9 per cent year-on-year.
Net sales for the first half of the year increased by 36.0 per cent year-on-year, or by 44.3 per cent at comparable exchange rates. Licence sales and consulting grew by 52.6 per cent and support and maintenance by 8.0 per cent.
The very strong growth of net sales in the second quarter meant that the operating result showed a profit for the second quarter and the entire first half of the year. Qt Group has continued to make investments in growth and recruited new personnel in line with its growth strategy, with a particular focus on growing the sales and consulting network. We have made long-term investments in our biggest market areas, which are the United States, Germany, Japan, South Korea and China, and the company’s newest target markets, France, the United Kingdom, Italy and India.
Devices connected to the internet and touch screens are becoming more common in consumer and professional use. As a software company, Qt enables the digitalisation of the world by offering the technology and tools to different industries for building user interfaces and solutions for various platforms. Qt technology is used by major global enterprises and developers in millions of devices and applications worldwide. Our business is based strongly on the creation of desktop applications and graphic user interfaces in all kinds of environments.
Our most important customer segments are the automation industry, the pharmaceutical industry and the automotive industry. Products programmed on Qt can be used during free time, at work, at home and in vehicles. Qt is used, for example, in airplane entertainment systems, as a platform for digital televisions, in-car entertainment systems, the user interfaces of medical devices and small household electronics.
During the first half of the year, we released new products and deepened our cooperation with many significant customers. In May, we released Qt Safe Renderer 1.0, a tool that significantly improves the software development process of road vehicles, medical devices, industrial automation and other safety-critical industries.
We also released Qt Design Studio, a tool that significantly reduces time spent on UI design by improving cooperation between designers and developers.
We released Qt version 5.11 and Qt for Python, a collection of tools that gives users of the Python programming language access to Qt technologies. During the first half of the year, we also released Qt Automotive Suite 2.0, a solution for creating new kinds of digital driving experiences. The product is a suite of tools that enables the creation of a consistent user experience across all in-vehicle displays. We also released Qt 3D Studio 2.0, a tool that makes it easy to utilise 3D graphics in applications.
The significance of software is growing in the automotive industry, and Qt technology meets the expectations of even the most demanding consumers. In May, Qt announced that the user interface for the in-vehicle infotainment systems of new Mercedes-Benz A-Class cars will be based on Qt technology and represent a next generation driving experience.
We see very promising growth prospects for the company’s business in the next few years. The company’s financial goals are to achieve, in 2021, annual net sales of EUR 100 million and an operating margin (EBIT %) of more than 15 per cent.
Following the exceptionally strong second quarter, the company is revising its previously published growth forecast of more than 15 per cent for the year 2018. The company expects that net sales growth in the second half of the year is expected to be more moderate than in the first half, but we nevertheless estimate that our net sales in 2018 will increase by more than 20 per cent year-on-year at comparable exchange rates. Due to investments in line with its growth strategy, the company’s operating result will show a loss also in 2018, as was expected based on prior forecasts.
Qt’s net sales for the second quarter amounted to EUR 13,376 thousand (EUR 8,788 thousand), up 52.2 per cent. License sales and consulting grew by 79.9 per cent and support and maintenance by 7.4 per cent. At comparable exchange rates, net sales increased by 57.9 per cent.
Qt’s net sales for the first half of the year amounted to EUR 23,704 thousand (EUR 17,434 thousand), up 36.0 per cent. License sales and consulting grew by 52.6 per cent and support and maintenance by 8.0 per cent. At comparable exchange rates, net sales increased by 44.3 per cent.
Qt’s operating result in the second quarter was EUR 1,321 thousand (EUR -188 thousand). The operating result for the first half of the year was EUR 375 thousand (EUR -1,204 thousand).
The other operating income includes tax-free research and development investment grants received by the company in Norway, totalling approximately EUR 436 thousand (EUR 389 thousand). The grants concern the applicable personnel expenses related to the research and development activities of Qt’s Norwegian company, and they will be paid to the company in the second half of 2018.
The Group’s operating expenses, including materials and services, personnel expenses, depreciation and other operating expenses, amounted to EUR 23,902 thousand (EUR 19,096 thousand) in the first half of the year, up 25.2 per cent year-on-year. Personnel expenses accounted for 70 per cent (66.6%) of operating expenses, or EUR 16,730 thousand (EUR 12,711 thousand).
Qt’s earnings before tax for the first half of the year totalled EUR 229 thousand (EUR -1,447 thousand) and the result was EUR 296 thousand (EUR -1,322 thousand). Taxes for the first half of the year amounted to EUR 67 thousand positive (EUR 125 thousand), which was due to deferred tax assets recognized for the anticipated losses for the financial year.
Earnings per share were EUR 0.01 in the first half of the year (EUR -0.06).
Financing and investments
Cash flow from operating activities was EUR 79 thousand (EUR –1,675 thousand) in the first half of the year due to the operating result and cash being tied up in working capital.
Qt’s cash and cash equivalents totalled EUR 11,481 thousand (EUR 13,362 thousand) at the end of the first half of the year.
Qt Group’s consolidated balance sheet total at the end of the first half of the year stood at EUR 41,141 thousand (EUR 38,010 thousand). Net cash flow from investments in the first half of the year was EUR -367 thousand
(EUR -123 thousand).
The equity ratio stood at 70.9 per cent (77.6%) and gearing was -51.6 per cent (-59.7%). Interest-bearing liabilities amounted to EUR 727 thousand (EUR 161 thousand), of which short-term loans accounted for EUR 391 thousand (EUR 108 thousand).
In the first half of the year, return on investment was 1.8 per cent (-6.6%) and return on equity was 1.4 per cent
The number of Qt’s personnel was 289 (240) on average during the first half of the year and 296 (256) at the end of the quarter. At the end of the review period, international personnel represented 68 per cent (67%) of the total.
Other events in the review period
Qt Group Plc's Annual General Meeting (AGM) held on 13 March 2018 adopted the company’s annual accounts, including the consolidated annual accounts for the accounting period 1 Januaryâ31 December 2017, and discharged the Members of the Board and the Chief Executive Officer from liability. The AGM resolved, in accordance with the Board’s proposal, that no dividend will be paid based on the balance sheet adopted for the accounting period that ended on 31 December 2017.
The AGM resolved on the remuneration of the company’s Board of Directors and auditors, decided that the number of members on the Board of Directors would be five (5) and elected the company’s Board of Directors. Robert Ingman, Leena Saarinen and Tommi Uhari were re-elected as members of Qt Group Plc’s Board of Directors and Jaakko Koppinen and Mikko Marsio were elected as new members. At its organising meeting held after the AGM, the Board of Directors elected Robert Ingman as its Chairman and Tommi Uhari as the Vice Chairman.
The Annual General Meeting granted the following authorisations to the Board of Directors of Qt Group Plc:
Authorising the Board of Directors to decide on repurchasing the company’s own shares and/or accepting them as collateral
The AGM authorised the Board of Directors to decide on the repurchase and/or acceptance as collateral of a maximum of 2,000,000 of the company’s own shares by using funds in the unrestricted equity.
According to the authorisation, the Board will decide on how these shares are to be purchased. The shares may be repurchased in a proportion other than that of the shares held by the current shareholders. The authorisation also includes the acquisition of shares through public trading organised by Nasdaq Helsinki Ltd in accordance with its and Euroclear Finland Ltd’s rules and instructions, or through offers made to shareholders.
Shares may be acquired in order to improve the company’s capital structure, to finance or carry out acquisitions or other arrangements, to implement share-based incentive schemes, to be transferred for other purposes, or to be cancelled.
The shares shall be repurchased for a price based on the fair value quoted in public trading. The authorisation is valid for 18 months from the issue date of the authorisation, i.e. until 13 September 2019, and it replaces any earlier authorisations on the repurchase and/or acceptance as collateral of the company's own shares.
The authorisation includes the Board of Directors’ right to decide on all terms relating to the share issue(s).
Authorising the Board of Directors to decide on a share issue and the granting of special rights entitling to shares
The AGM authorised the Board to decide on a share issue and the granting of special rights pursuant to Chapter 10, Section 1, of the Companies Act, subject to or free of charge, in one or several tranches on the following terms.
The maximum total number of shares to be issued by virtue of the authorisation is 2,000,000. The authorisation concerns both the issuance of new shares as well as the transfer of treasury shares. By virtue of the authorisation, the Board of Directors is entitled to decide on share issues and the granting of special rights waiving the pre-emptive subscription rights of the shareholders (directed issue).
The authorisation may be used in order to finance or carry out acquisitions or other arrangements, to carry out the company’s share-based incentive schemes and to improve the capital structure of the company, or for other purposes decided by the Board of Directors.
The authorisation includes the Board of Directors' right to decide on all terms relating to the share issue and granting of special rights including the subscription price, its payment and its entry into the company's balance sheet.
The authorisation is valid for 18 months from the issue date of the authorisation, i.e. until 13 September 2019, and it does not replace any earlier authorisations on share issues and the granting of special rights. The authorisation does not replace any earlier authorisations on share issues and the granting of special rights.
Events after the review period
The company had no other significant events deviating from normal business operations after the end of the review period.
Risks and uncertainties
The company’s short-term risks and uncertainties are related to potential significant changes in the company’s business operations as well as the retention and recruitment of the personnel required for business development.
Exchange rate fluctuations, particularly between the US dollar and euro, may have a large impact on the development of the company’s net sales. Another factor contributing to considerable fluctuation in quarterly net sales and profitability in particular is contract turnaround times which, in the major customer segment, are very long at up to 18 months.
The company’s business risks and preparations for them are also described on the company website at www.qt.io.
Operating environment and market outlook
The company estimates the growth prospects for its business in the next few years as very promising.
The Group’s business development efforts will particularly focus on embedded systems in the automotive sector, digital TV and industrial automation. Areas targeted in product development include value-added features and tools required for building embedded systems.
Sales growth associated with embedded systems will also reflect on the earnings logic. Volume-based licence revenue from these sales accumulates over the long term. Consequently, the company anticipates no major impact from embedded systems sales growth on consolidated net sales in 2018.
Following the exceptionally strong second quarter, the company is revising its previously published growth forecast of more than 15 per cent for the year 2018. The company expects that net sales growth in the second half of the year will be significantly more moderate than in the first half, but we nevertheless estimate that our net sales in 2018 will increase by more than 20 per cent year-on-year at comparable exchange rates.
The company will invest significantly in developing its operations and increasing its sales resources in line with its strategy. Due to investments in line with its growth strategy, the company’s operating result will show a loss also in 2018, as was expected based on prior forecasts.
Helsinki, 9 August 2018
Qt Group Plc
Board of Directors
Qt Group will hold a briefing on this half-year report for analysts on Thursday, 9 August 2018 at 11:00 am, in the Eino Leino cabinet of Hotel Kämp, Pohjoisesplanadi 29, 00100 Helsinki, Finland. Welcome!
The half-year report and CEO’s presentation will be available in the Investors section at www.qt.io from 11:00 am on 9 August 2018.
Juha Varelius, CEO, tel. +358 9 8861 8040