Oct 27, 2022
This release is a summary of Qt Group Plc’s Interim Statement for January-September 2022. The complete report is attached to this release as a PDF file, and it is also available on the company's website at www.qt.io/investors
Third quarter 2022: Revenue increased 31 percent despite the challenging operating environment
The figures in brackets refer to the comparison period, i.e., the corresponding period in the previous year. The percentage of change in net sales at comparable exchange rates is calculated by translating the net sales from the comparison period of 2021 with the actual exchange rates of the reporting period of 2022 and by comparing the reported net sales in 2022 with the calculated 2021 net sales at comparable exchange rates.
|EUR 1,000||7-9/2022||7-9/2021||Change, %||1-9/2022||1-9/2021||Change, %||1-12/2021|
|Operating profit (EBITA)||7,880||6,179||27.5%||23,438||22,511||4.1%||31,534|
|EBITA, %||22.3%||23.0%||22.5 %||26.7 %||26.0%|
|Operating profit (EBIT)||6,347||5,260||20.7%||20,067||20,706||-3.1%||28,812|
|EBIT, %||18.0%||19.6%||19.3 %||24.6%||23.8%|
|Return on equity, %||11.4%||11.8%||34.3 %||44.4%||55.0%|
|Return on investment, %||6.9%||10.7%||22.0 %||42.0%||57.0%|
|Cash and cash equivalents1||18,926||14,431||31.1%||18,926||14,431||31.1%||17,374|
|Net gearing, %1||34.9%||15.7%||34.9 %||15.7%||-0.7%|
|Equity ratio, %1||43.7%||50.6%||43.7 %||50.6%||51.1%|
|Earnings per share (EPS), EUR||0.28||0.18||54.5%||0.84||0.67||24.6%||0.91|
|Diluted earnings per share, EUR||0.27||0.17||56.5%||0.81||0.65||26.2%||0.88|
|Personnel, on average||626||466||34.5%||579||431||34.2%||445|
1 At the end of the period
In the third quarter of 2022, Qt Group's net sales increased 31 percent to EUR 35 million, which amounted to 20 percent growth at comparable exchange rates. EBITA amounted to EUR 8 million, and the EBITA margin was 22 percent. EBIT amounted to EUR 6 million, and the EBIT margin was 18 percent in the third quarter.
Qt Group's developer license sales and consulting business developed very well during the third quarter despite the increasing challenges in the global market environment. Especially sales of quality assurance tools from the acquisition of froglogic GmbH last year increased particularly well. Growth in distribution license sales was more moderate, and its revenue was below our targets. Although our customers are building more embedded devices, the volume of shipped devices is still below our customers' original manufacturing plans in several different industries. Increasing energy prices, high inflation, and the general economic slowdown impact our customers' product development decisions, which has dragged Qt Group's net sales growth this year. There continues to be good demand for our products, and we have succeeded well in new customer acquisition. The volume of sales prospects is at a very good level, and we expect the revenue growth rate to accelerate significantly in the last quarter of the year.
At the beginning of August 2022, we acquired the entire share capital of Axivion GmbH to strengthen the quality assurance product offering of Qt Group. Through the acquisition, we have expanded our solutions for those C/C++ developers who do not use the Qt software development framework. With static analysis and software architecture analysis tools, we are better equipped to meet companies' demands for detecting and managing software defects, vulnerabilities, and deviations. The consolidation of Axivion to Qt Group is progressing at a good speed, and their 41 employees are part of our global team of 651 professionals as of September 30.
During the third quarter, we released Qt 6.4, which has significant improvements and enhancements to Qt for WebAssembly technology compared to Qt 5. With Qt for WebAssembly, our customers can use their existing C++ developers and code to create an application for web browsers to run on the WebAssembly platform. Coco 6.0 brings test coverage analysis directly integrated into the development environment, which improves the user experience for software developers significantly. In addition, we published Qt Design Studio 3.7 and Qt for Android Automotive 6.3.2 releases.
Transforming into a multi-product company is essential to our long-term growth strategy. Starting a customer relationship with one product and expanding it with other solutions to improve productivity in the product development process creates a solid base for sustainable growth. Although the challenging operating environment has dragged our revenue growth rate this year, we do not see notable changes in our long-term growth opportunities. We continue our strategic investments in R&D, sales and new product innovations.
The company estimates the growth prospects for its business in the next few years as very promising. The Group’s business development efforts will focus on desktop applications as well as embedded systems in the automotive industry, consumer electronics, medical devices, and industrial automation sectors. Product development efforts will also focus on the value-added features and tools needed to create embedded systems. Sales growth associated with embedded devices will also reflect on the earnings logic. Volume-based distribution license revenue from these sales accumulates over the long term. Accordingly, it is typical of Qt as a company that quarterly net sales and growth may vary significantly between quarters. Should the increased uncertainty in the market environment continue or expand, it could result in even higher volatility between quarters. In addition to organic growth, the company actively pursues inorganic growth through acquisitions supporting its strategy.
Disruptions in global supply chains may create delays in the production processes of equipment manufacturers and reduce their production volume, which mainly affects net sales accrued from distribution licenses. Logistics problems in international trade and the global shortage of components are likely to affect many of Qt’s customers. The weakening macroeconomic situation could cause some of Qt Group’s customers to change their product development plans, for example, by postponing or executing them only partially, which could slow down the revenue growth in developer license sales and consulting. Russia’s armed attack on Ukraine, combined with the EU’s sanctions against Russia, adds to the general uncertainty in the operating environment. While the war has not significantly impacted Qt’s business operations so far, increasing energy prices and a general economic slowdown may reduce the demand for the products of Qt’s customers and consequently slow down the Qt Group’s business growth.
The COVID-19 pandemic continues to cause increased uncertainty for the company’s short-term outlook in APAC in particular. Recovery from the pandemic will be uneven between different industries and geographical regions, and it will likely be a long process. At the same time, the pandemic has created pent-up demand for many products. When this pent-up demand is released, it may lead to increased demand for Qt’s solutions. Despite the challenges and uncertainties in the operating environment, Qt estimates that its chances of success in executing the growth strategy that extends to 2025 remain good.
We expect that the net sales growth in the second half of 2022 will be significantly better than in the first half of 2022 and that our full-year net sales for 2022 will increase by 20–30 percent year-on-year at comparable exchange rates. The impact of foreign exchange rates on the full-year net sales will be substantially positive, assuming that the foreign exchange rates remain at the end of June 2022 level, which leads to the fact that the company’s reported net sales growth will be significantly higher than the growth at comparable exchange rates. We expect that our operating profit margin will be 20–30 percent in 2022.
Qt Group organizes a news conference on October 27, 2022, at 4:00-5:00 pm EEST in Sanomatalo, Helsinki, Finland, and a webcast stream at: https://qt.videosync.fi/2022-q3-results CEO Juha Varelius and CFO Jouni Lintunen will comment on the business development in the third quarter at the event. It is possible to participate in the event also via conference call, by registering at: https://call.vsy.io/access-9755
President and CEO Juha Varelius, tel. +358 9 8861 8040