Operator
Hello everybody and welcome to QT Group's Q2 2026 results presentation. My name is Hertta Narvanen and I'm the communications lead at QT Group and I'm here today with our CEO Juha Varelius and our CFO Anne Zetterberg who will be presenting the results. After the presentation we have time for questions first starting from the room and then if time permits then from the line But without any further ado, let's get going. Please go ahead, Juha.
Thank you. Excuse me. Thank you and good morning, everyone. And welcome to Q2 results. My name is Juha Parelius and I'm CEO of the company. Pretty much same old agenda, business highlights, market trends, financials by Anne. And then I'm going to talk about the outlook and guidance for 2026 later. So, if we go into the Q2, our net sales grew 19.6% and the quarterly net sales was 61 million, 61.3 million, an increase of 19.6, so comparable currencies 20.9, EBITDA margin 15.1 and 9.3 million. ARR increased to 160.4 and the so it was a a healthy growth on there. If we look the Q2 a bit more detailed I'm actually pretty happy about our performance since the distribution license sales year over year was a bit over six million less this year than it was a year before Last year, we had a 19 million on distribution revenue so that we were able to increase our revenues. Our developer license sales has been developing very well overall. If we look on the IAR, IAR has been performing very well on their subscription chains. Since we were expecting on an aggressive plan that we're going to have a 40% conversion, now we are on the over 60%, if I remember correctly, 68% conversion on the second quarter. Which means that the IAR revenue, obviously, compared to last year, is in a pressure since we have the already maturity of the sales in the subscriptions. That's a good news because in the beginning of the year, we, of course, didn't have an idea that how quickly can we do this transformation. And now it seems that we can do it even quicker than we were anticipating. So and quicker we do it, then we get on the on a healthy revenue growth on the IAR side as well. So, given those caveats, I think that we are pretty happy on the Q2 performance. On the profitability side, we've had the change management negotiations going on. We've done them in the USA and in Finland. They're still going on in some parts of Europe. And we do have one of costs of those in Q2. So given those one-off costs, we're pretty happy on the profitability as well. We're definitely going in the right direction and at the pace even quicker than we were hoping for. So I expect that the next year the profitability will be well in the old healthy good numbers that we were used to see. And at the change management negotiations where we're targeting 20 million cost savings are well on track. So I have no doubt that we're going to be able to reach those numbers. If we look on the license sales, well, we do have, it's kind of a mixed package in a way. that we do have different industries, medical and defense industries overall are doing globally very well. If we look automotive, we're obviously, our customers are having challenges in Europe, whereas in Asia Pacific, the automotive industry is doing relatively pretty well. So for us, we do have pockets in the automotive industry where we're doing okay. And then we have pockets where where our customers are suffering along with us and the, of course, the tier one as well. On regions, well, I would not read too much on the regions on a quarterly level, because there is, as you know, in this business, there is quite a lot of fluctuation. EMEA was good, America's stable, APAC was on this quarter more moderate. If I look overall on the longer term, let's say that the end of this year and next year, I'm expecting USA to need quite a substantial improvement still where we are. So that's where there is a room for improvement, definitely. Well, I already mentioned the IAR subscription licensing model. So no doubts about that, that can we drive through that change in IAR pricing models that will happen and that's been very well adopted. So that's well on track. Well, depending on these industries, it's always good to remember that we operate on three regions. So we are a very global company. We do have 70 different industries that we serve. Some of our industries are a bit under pressure, like the automotive. But then on the other hand, some industries are doing very well, like the medical and defense. We also do see overall economy kind of stabilizing. I think that the latest disruption and uncertainty came from the war in Iran. Well, let's see what's going to be the next big disruption, because there's been many of them. But if we now look at what our customers are saying and how people are looking for the future, I would say that the market has stabilized pretty much. On AIPAC, it's been more or less stable all along, but in Europe and in the U.S., we've seen some disturbances. I'm not going to talk about much on AI, but I think that, you know, if I looked, there was a lot of hype in February, March, April. and then there was a conclusion that the software industry is going to disappear and AI is going to take over everything. Now I think it's calmed down a little and I'm not saying that AI is not coming, AI is definitely coming. But is it coming so that the AI is going to take over everything? I have a bit of my doubts. here are the kind of the same phrases I said last time but what do we see in a market is that the companies are not really getting rid of developers because of AI we do see companies downsizing but they're downsizing because their business is not doing very well right and they're downsizing developers and they're downsizing uh in certain industries they're downsizing quite a quite a lot of other people as well so we know i mean you know you've read the news there are big automotive companies that have announced that they're going to downsize you know 100 000 employees the uh by the 2030 and so on and so forward but the uh do we see that companies are downsizing because of AI? We don't. Do we see that the developers are using AI as a tool to be more efficient? Yes, of course, that we do see. We also see that the AI adds kind of complexity in a way that the AI does software very quickly and quite a lot. And it's still in a phase that somebody needs to look into it. A human needs to look into it, that what was done, human needs to look into it, that does this actually make sense. AI, as you know, also has imagination of its own. It's like a good, AI is like a good co-worker that never says, I don't know, it always gives an answer. And, you know, I've actually encountered this in real life as well. But the AI can be very confident on giving that answer. And AI can do a lot of things. Also, what we see is that, you know, on Acute, what is a framework? Framework kind of gives an architecture to software. And it's like a plumbing of the software in a way. And even for AI, it makes sense to use this. so that's kind of where we are and what do I envision is going to happen is that the all those that are now watching and wondering that why I paused there were people coming in and I started looking that the should I say hello or not so that's why I paused and I didn't say hello but hello welcome so what do we see on ai is the fact that the uh it's um uh we need to find a way on our um on our monetizing model that it also takes into account that ai does do some coding and this means that we need to start uh monetizing and invoicing uh not only per seat but on the usage of the Qt technology. And when that shift is going to happen? Well, it's probably going to be something like the subscription chains that we're going to have a new version of our framework, and then we start implementing it. We are working on it, and we are now working on different models. We're monitoring how to implement it and whatnot. then you can expect that during next year we'll start moving into that direction once we figure out what is the best model for us and for our customers. So that we can take into account that there is a developer doing development and then there is also AI doing development. On IAR, that's kind of already taken care of because IAR is selling subscription and then IAR charges per simultaneous compilings already now. So it's based on the usage on that sense. And then on Squiz, we think that since everything that AI does needs to be tested and whatnot, we expect the software testing market to grow in the future. We of course use AI extensively internally, not only in our R&D and developers are using AI to understand that how it works and how can they be more efficient. We use it pretty much everywhere in the company nowadays. I think that the big thing for going forward is that as AI moves into consumption-based pricing models, we need to be careful that how much we absorb cost as a company when we are using AI. So I think that these business models will be evolving just because AI's business models will be evolving and how and where AI, you know, how much we need to pay for using AI. Because very easily on R&D, you know, we're using millions of tokens on one go. So what's going to be the cost of it? But so we do use it internally on many various things, starting from sales and marketing. Of course, for example, sales guys making a sales pitch nowadays, it's much more easier using AI because you can get all the info of the target customer and tailor make a tailored personalized presentation on each customer meeting you have and you can do that very quickly so of course it's giving a lot of efficiencies we're also looking for the opportunities as we go forward because as you know nowadays we're looking on the development process and we're looking that where can we offer services and solutions to our customers so that they can be more efficient on their development process but the as ai comes along that well the most obvious thing that comes to mind of course is a vertical integration because using ai and our tools on smaller customers we should be able to offer actually ready-made solutions more than and than we are doing today so we're looking into those opportunities that we have very particularly strong now is of course all the functional safety and safety critical things because there you need certifications and you need you can't use open source you need to be able to prove that your code meets the the criteria that are required for car breaks and and whatnot you know everything that is somehow how functional safety or safety critical. And we do have tools starting from the from IAR, our compilers are certified using a IAR compiler, you know, you can have a certification that the it's, it's done according to the specs, then you're going to use Qt and our testing. So, we have a very comprehensive offering in safety critical functional safety industries, and that's a very sweet spot for us in this current portfolio we are having. So, I think that the AI will be a topic for the future, but for the investors, I would say, I kind of see this as twofold. it that yes it's going to change very many business models but at the same time uh and it does give give us uh efficiencies internally but it the same at the same time of course it also opens up new opportunities for companies that are awake so i don't see ai only a threat i see that it will open up us a new opportunities as we go forward so there's going to be a whole service layer on top of that on these data centers we we see as of today and of course we're going to be on that wave as well. So in that sense you know on this AI I would conclude that we use it ourselves, we are looking for the pricing model change, we're adapting it and we're looking actively the new business opportunities it potentially will give us. And with that the financials.
Yes, thank you Juha. Well as Juha said this was quite a nice quarter for us. We had a very good growth. It's fine to repeat it, I think, since it was so nice. The growth was 19.6 percent in the quarter with a small exchange rate impact, so therefore at comparable currencies this was 20.9. And the year-to-date growth was also pretty decent, 15.8 with a larger exchange rate impact of 3.3, and thus it brought us up to 19.7, about the same level as in Q2 at the growth, at the comparable currency then. And if we look at the products we sell, as we illustrate them in the interim report, licenses and consulting, it grew 10.3% in Q2 and it grew by 5.3% year to date. But the maintenance revenue almost tripled like it did last quarter because of the IAR effect. IAR has a lot of maintenance revenue in sales. Historically, it's been about half of the revenue that's been those maintenance contracts. Now, it's a little less because of the transition into subscription. So we're selling less of support and update maintenance contracts in IAR. And instead, we're selling subscription. But the distribution licenses, those declined, that was totally anticipated. We knew we had a high distribution license level last year, so we knew those were going to decline. They declined in Q2 by 32.4 percent and year-to-date 17 percent, so totally anticipated. But that also, if you remove that from the development license and consulting parts, We actually had a growth there in Q2 with 38% on that and 18% year-to-date, which we are actually quite happy with, I must say. And looking at the ARR, also rolling 12, we ended up at 160.4, like you have said, and rolling 12, it grew 33.8%. Obviously, IAR was not there last year, so that is separate. And that is why the growth becomes this large for 12 months. At comparable currencies, this was 32.2. But for the quarter, it's still also a decent growth. I mean, 4.5% increase in IAR, like Juha also showed in his slide. And that is 2.4% growth at comparable currencies. IAR is growing in ARR as we're moving into subscription, removing perpetual revenue, and instead selling subscription, which is annual recurring revenue instead then. And then looking at the cost side, unfortunately though the revenue side was good, the cost side grew more. They grew by 31.2% in Q2 and year-to-date 21.7%. So we are, as you know, working on lowering those, doing those reconstructions, efficiency work, removing some employees here and there as a result of the acquisitions, of course, but also some cost adaption to various parts of the sales that needs to happen. So, but looking at the personnel that grew 38.2 in Q2 and 32.1 year to date, We have had 1,035 employees end of June and that is a year-on-year growth of 119 people. IAR has 200 people so you can already in that see the effect of the people that we have downsized in Finland, the US and partly in Norway. We have still got Germany, France to go And those are ongoing and those one-off costs will come in Q3, hopefully, instead. But in Q2, we have 3.7 one-off costs under employee costs and 0.6 costs under other costs that are one-off costs also. Part of it is relating to that business unit security in IAR, which we are removing over time, as it was more of a cost burden than any type of revenue, really. So that relates to the 1.6. But we are, of course, looking at other costs also as part of the integration. Offices, merging entities, and whatever we can do to be a more efficient and strong company for the future. But if we look at the EBITDA then, a 9.3 today is lower than what we had last year, 11.6, and the margin was 15.1. But if you remove the one-off costs, we are actually up to 22.2%, which is quite in level with what we had last year. So the Q2 is still in level with the profitability there if you adjust for that. And the year-to-date, that brings up the EBITDA level 12.6% up to 16.3% if you adjust for the one-off cost also. So still a fairly decent profitability there also with that adjustment, even though it is actually still then lower than last year. Balance sheet, not much happens in the balance sheet every quarter. A lot happened when we purchased IAR, but still it can be good to give it a quick run-through. Goodwill, 166.9, that is a constant. It doesn't change. We don't depreciate it. You never do that with Goodwill. And most of the Goodwill, as you can see, refers to IAR. The rest of it is pretty equally distributed on Fraudlogic and Exivion. Other intangible assets, 120. Those are the technology assets from the purchases of the acquisitions, and we depreciate those over 15 years. IAR also, as I told you before, capitalizes some development assets investments already still in the balance sheet. We have a couple of those, and those will be finalized in 2026. So the capitalization for Q2 was 0.4 million euros. That increases the results then by that, because we increase the technology in the balance sheet instead with that same number. So no large numbers, but it's good to understand that that is still happening in IAR. It will over time, as we harmonize the handling in Q2 with the handling in IAR, likely not happen much of this anymore. It's not our intention to do that. and the trade receivables are at a pretty good level they're around 20% of the rolling 12 sales a little higher now as we don't have IAR in the rolling 12 sales looking back but it will harmonize itself down to that over time and we still have a very healthy cash balance 42.4 even though that is of course lower than it was last year because we put a lot of money into the acquisition of IAR and looking at the interest-bearing debt That was 126 million euros, of which the bank loan is still 120 million euros, but we have paid off 30 million euros. It was 150 initially. So we have a good cash flow and a good position there in paying off the debt in a good time. Other receivables still have those 5.2 million under receivables and under debt. As you remember, the arbitration for us to purchase 100% of the shares is still ongoing in sweden we haven't bought 100 of the shares but we have booked 100 of the shares in the balance sheet and thus we have an interim booking on the asset side for those 5.2 and the debt to those shareholders on the debt side when we for when we pay the shares and those are still there it is moving along this arbitration but rather slowly i must say so i hope it we can make it move forward in a faster speed. The equity ratio is still decent 53.6 compared to 83 which of course is why because we expanded the balance sheet with the IAR acquisition and the debt so it's an it's a pretty solid balance sheet still looking at it and the operating cash flow was 20.6 compared to 28.9 last year. The main other cash flows, apart from the operating cash flow, was really the amortization of the debt which we amortized in Q2 with 15 million euros. So the total cash flow for the period was 2.3 compared to 27.3 last year, but of course it is lower because the profitability is also lower, which we are working on improving for the future. So with that, I guess I will hand over to Juha again to talk about the future. Yeah, sure.
Thank you. So, well, we haven't changed our full year guidance, so net sales 10 percent and operating profit at least 15 percent uh and the um as said last time those are the floors so at least uh and we're not giving a upper range on that so it's the that's the change usually we uh you know before we used to give a range now we uh give the um kind of the floor um well i'm you know the um Our plan was that we're going to transition the maturity of the IAR customers into subscription in the next three years. That's what it took roughly in Qt when we did that. And of course, not all the customers will change, but the maturity. We're well on track on that. I'm happy how the integration has gone. it's gone actually so well that we I see that we didn't even mention it on the slides anymore because we think that it's already kind of a done deal but of course the integration is still there but it's gone very smoothly and so we haven't had any big problems and I don't expect to have and it's going to continue as planned So an IAR integration doing well, the subscription change doing well and an IAR sales on bookings that's been doing really well. So I'm happy on the IAR performance and I expect that to continue. On Qt, on license sales, very happy. The distribution licenses, they do fluctuate from quarter to quarter and and they are of course a result of a deals done before so even though they were a lot less this quarter than they were year on year ago that's only natural they do fluctuate and it's based on the fact that how much our customers distribute so uh i'm uh i'm on the i'm not worried about that and and uh we're looking the overall number is is heading where we do estimate it's to be. On regions, I think that, well, there's always a room for improvement. I think that in the United States, we've had some execution issues in the past. So I think that we are in the right track, but in the United States, we can still improve our business quite substantially and other than that the things are looking pretty good on the macro in global environment of course we you know if a if a country overall is doing well usually our businesses are doing well because our customers are global customers they're very big customers building products for either b2b or b2c customers and if the economy is doing well then usually we're doing well so if I look now that the how does the rest of the year look if we're not gonna get any big disruptions over here I'm relatively positive that the you know our numbers will keep on improving and next year I'm definitely they're gonna be improving on profitability and the also on the top line so this is kind of a slow moving business so this web technologies are they move very quickly and the moves are very rapid on embedded businesses the trends are slower moving but the so if i look on the overall the rest of the year and next year i'm i'm pretty confident that we are or i am confident that we are going in the right direction the operational reorganization well they are always tough things to do. We said that we can have at least 20 million savings and I reiterate that we are definitely going to have at least 20 million savings. We still have some change negotiations in Europe ongoing. Once they're finalized then we're done. And like I said before, Finland is already done, USA is done, but in Europe we have few countries that we're still in that process. But I have no doubt that we'll be able to finalize them during the h2 well yeah challenges in the market environment continued course i think that the uh in a way i guess we should stop talking about the market because the uh it seems that the uh at least for the next two years we're going to have surprises every week so the uh i expect that there are going to be some disruptions coming I don't know where, but they will be. So the market will be volatile for the next two years. On AI, you know, it's going to come and it's going to be a big thing, but it's like internet at a time. It not only changes some business logic, but it also gives new opportunities. And I have no doubt whatsoever that Qt will be one of the companies finding also those opportunities and being able to utilize as the years come. Again, that's like a few year thing. It's not like what's going to happen in H2. Well, long term, I mean, nothing has changed. People do want to have products, they want to have displays, they want to have intelligent products going also in the future. all our customers if they want to be in a business they need to improve their products they need to have new product lines and whatnot so the overall prospect is not going anywhere I think that also in the future customers will realize that there is a need for developers there is need for a software testing and whatnot so even a lot of things are being automized the it's still you know it's humans are still needed there for a long long time and and we're not gonna let the machines run over so in that I thank you and some questions which there seem to be.
Hi, Walter Rossi from Danske Bank. Thank you for the presentation. Congrats on a good result. First question related to the US. You mentioned that you can improve there substantially. So what has gone wrong there? If you can go through that once more.
Well, in the United States, I think we had some management changes. We did have some operational, how would you describe, not so great operational efficiencies, some attrition over there, a combination of these things. So if I look at the operational efficiency in EMEA and APAC, just internally, we can do better in the U.S. And then if I look into if I look into region numbers that now US is improving, but if I look in the previous that the US was a weaker than the other markets, all our customers are pretty much global. If we're doing well in with our product portfolio and products in MAI and APAC, I don't see any reason why it should be.
So there have been some people changes, there have been um um attrition and whatnot and and those is um so just the operational efficiency numbers are not in the level that they are in the other markets so you know multiple internal things all right thanks uh second question related to the arr uh development uh growth there uh is is quite high and and and i guess it's partly explained by by uh iar um too too many three letters yeah exactly difficult um so so how how much is uh iar from arr yeah yeah yeah it's
we need to i mean i'm having the same trouble with the iar we need to change the name I don't think we've disclosed that number because we've not been disclosing the BU numbers. Sorry about that. So, and as a matter of fact, I don't have that figure in my mind now.
Okay. But is that one of the top kind of drivers behind the growth?
Well, of course. Yeah. And you also don't disclose organic growth? No, we haven't. I think that as we get a bit better, let's say, a discussion we need to have internally, that we start a BU reporting next year, because that would kind of give more highlight. Having the BU numbers myself, I can tell you that you're going to have more questions than you're probably going to get answers when you see them. And it's sometimes a bit difficult for us to estimate, but that's definitely a discussion we're having internally. that the that what would be our next year reporting and well I'm sure we definitely it's it's gonna change and one obvious way probably going forward would be the do the BU reporting and then well then you still have a whole lot of costs which are central costs and whatnot but you would say a bit more to business but then you have you know you have a lot of numbers that are going like this on every quarter on different directions so it's the uh yeah they all fluctuate really
randomly right thanks and one last one related to the pricing model change that you foresee also for for qt products uh starting from next year so so sometime next year not in the beginning yep okay um do you expect any any what kind of impacts do you expect that you have potentially for your business or sales uh well that's too early to say really and and that's why we need to be testing it so much so that the uh we need to be kind of simulating now that if
we do this kind of a pricing change how would that actually affect in a real life so that we don't we don't do a pricing change where we have our revenue right so we need to do it there is a quite a lot of uh we need to look it into very carefully if you go in a consumption-based uh usage and and you would think that the uh people start using ai uh extensively you would think that there is a lot more usage than there is as of today but the how do we actually do that pricing and would there be a different pricing for a developer consuming and ai consuming and and all of that so we need to simulate that and test quite a bit i mean our target is not to start charging more from our customers as we do today obviously but the how that will turn out that's too early to say so i wouldn't calculate any you know revenue increase on that because at the end of the day there is also competition right so and and and we are kind of a i would say that in a market um our products are really good i mean they are really really really good but they're not the cheapest either so I don't you know my gut feeling is that do we should we do a massive price hikes no I don't think so then we would be too expensive then we would be like on a very high-end usage like you know formula one very high price very small volume I think that where we are as of today that we have pretty high volumes and and and we're not definitely the cheapest so I don't see a whole other price increases in the future of course there always is there is inflation but you know not tens of percents then how do we price the AI usage because what AI does is that it does say a lot of gold very quickly and I mean you know it consumes a lot so the we don't have enough we need to do simulations on that so but I wouldn't But if you think from a revenue modeling perspective, I wouldn't put any price, you know, revenue increase based on that at this point. That I wouldn't do.
Yes. Felix Henriksson from Nordea. Continuing on the pricing change topic, is it sort of unfair to assume that this would change your developer license revenue recognition in a way that it moves the lumpiness stemming from the one and three year deals? But at the same time, could it even be that the revenue impact will be negative as you start that process?
Well, I don't see that, no. But yeah, the lumpiness will probably go away. Apart from the distribution licenses, of course.
Got it. And then on the quarter, can you sort of elaborate on the developer license mix in Q2 between the three and one year licenses? Was there any shifts there?
No, you know, when there is, say, a big shock, like the war starts and the oil prices go sky high, then everybody kind of are scared, right? And, I mean, this is sad to say, but people get used to the wars, right? I mean, there is a war in Ukraine going 50 years soon, and it's like a new normal, right? People tend to forget it, right? so when whenever there is say a big shock whatever it is then people tend to go you know it's the reserve cash flow and and then it's one year license but as as things kind of resettle and things settle nowadays very quickly as a matter of fact so I think that the many businesses are now kind of in normal mode they're looking forward they're thinking forward they're thinking their investment of course they are still cautious but the no big chances on that so about the same yeah yeah so no unusually large share of your license days no no no and no unusual large deals for that yeah got it so to me that implies that there's a bit of a positive trend in the developer license revenues oh yeah what's driving that what what are customers telling you differently well it's you know people are more confident about their future and maybe we've been a bit bitter a bit better in performance and and it's uh you know no no secret sauce in that in that sense small improvements here and there got it and then finally just a housekeeping question on the revenue split between the different end markets can you sort of provide an update on that because it seems like especially the defense and medical shares have sort of increased compared to past ah so you mean industries yeah ah okay so good now i uh was not prepared for that question but the uh let's um you know we said that uh well they're definitely increasing because at the same time the uh automotive's been going down so we said um i've said you know like europe two years back that automotive is roughly 20 percent or so now i would say that it's somewhere between 10 and 15 and at the same time you know medical well it kind of changes quarter on quarter but the medical is the biggest at the moment defense was actually very small and it's growing very rapidly so I expect that the defense will pass the automotive even if it hasn't already done so. So I expect the defense to be somewhere in a 15-20 bracket than the medical over there and medical closer to that 20 bracket.
Hi Jakko Turväinen from ACB. Trying to get a bit more understanding on the organic underlying trends uh in in the in the so-called old qt uh you said that you don't provide any any organic growth for cute like you did growth rate for cute like you did in last quarter is that correct i don't think we gave it last quarter either i recall you said cute was 11.5 percent up organically in the in ARR I mean oh ARR yeah well yeah okay ARR we talked about yeah but not the well there is uh you know obviously with this development you can you know you can make the assumptions that the uh
with such a heavy subscription change we're having on a iAR at the the uh the um we really need to change the name. On IAR, the impact on revenue is negative on short term. So that's what we're seeing. And of course, that puts pressure on the IAR profitability as well. If we look on the Qt, having a, you know, on Qt revenue on those numbers, six plus something, down drift on the uh on on the uh distribution revenue means that the uh you know the license sales has been on a you know very healthy growth on this quarter and uh squeeze is uh squeeze actually follows pretty much on cute because the uh you know if if you if you're using cute the only feasible test tool really is a squish right so I mean you know more Qt does bigger deals and whatnot squish goes there and then on top of that squish can be sold outside of the Qt ecosystem and the open source and whatnot so there it comes now keep in mind which I've always been saying that the quarters are you know they're not brothers or sisters together so there is always this quarterly fluctuation so the you know it's not like that the we have one quarter and then we can make a straight line that this is the future you know our business is like this so the but I mean you know if I look overall trends that how we're selling how we're selling licenses particularly DC licenses how we're performing on license sales and how we're performing on IAR I think the we are going in the better direction and now the question is that what's going to be the speed if i look our change negotiations that the we're going to cut that 20 million cost and where we have this business development as it goes we're gonna iar is going to turn into profitability because of this subscription change next year we're not going to have this one-off costs and the i can say that already now we you know we're seeing a 30 plus percent ebitda for next year good uh if i may be a arr you know sorry before yeah if i just look the arr number you know not dividing it anywhere you know i'm pretty happy i mean you know it's a it it's a sizable number
good a follow-up on that one let's put it this way you had organic arr growth of 2.4 percent Q on Q. How much of this was driven by IAR's subscription change and overall IAR growth and did Qt grew Q on Q basis?
Well Qt grew organically on the other questions. We don't have them. yeah yeah so yeah Qt is growing organically for sure but the on the ARR growth the for those other questions I don't have an answer for you sorry okay and then the you already touched it a bit but on the revenue on the PNL and then the volatility there did you see some significant multi-year deals uh impacting the strong development license sales growth no it's very you know in that sense very boring typical quarter okay good thanks yeah and you know as as you know the uh you know always in our business the uh you know the well the quarters do fluctuate uh then the other fact that we do have is the um that a large part of the quarter sales actually comes into last two weeks and then the fourth quarter is insane so the uh we do you know large part of the year result is actually done in the you know probably the three last weeks of december and so that's that's the uh and i don't know how why all this buying tends to go towards the end of the year and it's towards the end of the quarter but that's uh that's very uh typical for us but at the same time of course you know seeing what's happening sensing where we're moving and and all of that i say that the uh the underlying underlying performance underlying environment and whatnot it is getting better so the uh and i have no doubts that you know with this cost savings that the uh we're going to be on a very healthy EBITDA numbers next year even even with the very modest revenue growth so when i say the 30 i'm not expecting that there needs to be a huge top line growth and that of course as you know affects a lot because the more the top line basically drops directly into our bottom line so even with the very modest revenue
growth we're going to have a very healthy EBITDA next year and and if we're going to have a decent road that it's going to be even better yes hey you mentioned in the report that new product sales were going well in defense aviation and medical i guess that prompted from the two questions first one is that which products are kind of flying the best on the new product side in these segments and then the second one is you've kind of broadened your product portfolio quite a bit in the last years and iar did one step to that as well where are the different products you have in your portfolio in terms of their maturity i guess compared to the kind of not legacy cute but yeah the cute framework well um if we talk about defense and medical
and and whatnot they're kind of all regulated markets safety critical markets and our whole portfolio fits in there very well i mean you know iar and and the uh cute and so our whole portfolio fits into that particular segment when we are actually seeing some light in automotive as well and just to give you an idea that if we're successful closing some deals in automotive this year we're going to talk about that revenue in 28 right so if we are if we are successful closing those automotive deals now we're going to see the revenue uh uh starting accumulating in 28 so that you actually see them on on numbers so this is kind of a uh this is kind of the uh cycle uh we did invest in defense already many years ago but the uh then the sentiment was something that the you didn't want to put that on a website because it was kind of a it was not well received that somebody does defense work now you're seeing being a patriotic if you do that but the a few years back so our position in defense is a constant deliberate work that's been carried out for the past five years so into your question that are our all our products are in that sense pretty mature uh they uh and that's why um particularly on embedded we're so successful because if you think our customers that they start a project and and and they do whatever they do usually the lifespan of their product is like 10 years and they don't want to buy a product that they do get the updates every three weeks or whatnot that they have to do so if you look cute for example we do a couple major releases a year and we have a lot of people using the old versions of cute and that's one of the cornerstones on this embedded that people can trust that we are here we're going to be here in next 10 years and our products are mature that they can rely on them they can they can use our products for the whole life cycle of the product and the that's of our one of our competitive edges if you go on a web technologies it's a different story but on embedded that's it. I would say that we've had a kind of a new product and let's see how that works. We do have our design tooling and during this fall we're going to come out with the new versions of that design tooling. It's a mature product in a way that we've had it for a long time but now it's going to have ai functionalities and whatnot so it's kind of a revamped uh totally and and it's going to be a bit of a new product launch uh as a whole so the uh it's a mature product but it's going to be a new release but like said on embedded people actually our customers respect the fact that we've been around our products are very robots tested and we don't have to do updates very often to them and they can rely on them for a long time So that's a good portfolio, and that fits very well into the functional safety, safety critical segment. It really resonates over there. So how do we add our portfolio in the future? Remains to be seen. I think we're going to be doing acquisitions also in the future, adding products into our portfolio. AI, of course, is changing this scene in a way that the, I mean, you know, if AI improves a bit, if you think for an electric bike manufacturer, for example, you know, we do have lots of engineers in-house as well. We have all these tools if, you know, using AI, we might be able to offer a more vertically ready-made software than we are doing today. and we already do have these customers globally and and we are a definitely market leader in this so is our next acquisition going to be adding the portfolio in this development process or is it going to be is it going to be a product or service that the actually enables us to be more into vertically integrated the that remains to be seen maybe continuing on that and taking the angle of revenue potential in this different products um i guess we've been talking about quality assurance for quite a while and that could be kind of the next cute yeah and is that kind of do you see that product being passed it's kind of fastest growth phase already or is that still in the very kind of no it's still it's in the early phases yeah it's still it's in the early phases Yeah, so definitely if you, you know, not, this is, of course, you need to, you know, disclaimer that don't think about the timings, but if we think on a product lifecycle, the Qt obviously is the, you know, much further down the road on the growth. IAR is, well, IAR is basically going to grow quite a lot due to subscription change, is it, you know, is it, you know, it can almost double its revenue, basically, just due to subscription, that's, that's the likelihood. So, you know, if it was 40 something, the, just the subscription change will be 80 something when it's done. And of course, that's going to take three years. what how to get organic growth after that is a good question because it's very well integrated into functional safety safety critical but not used so much elsewhere else and and so i think that the uh during the next three years that's going to be the question that the what's going to be the strategy for iar to find organic growth and where uh on on uh on on testing market yeah definitely i mean you know we bought it in we bought 12 million revenue uh it's definitely a 100 million business on the course of the uh years how to grow beyond that it's the uh then a good question and and this is always a good to remember that the um you know i tell uh we um when when we when we started with cute we were probably in a 20 million region or something like that the people were saying that well if you can throw a tools business into 100 million that's you know you're like a wizard right because the you know 50 million more like it well then we got into 100 million and now we're in a 200 million and it's still growing right so when I say that the I see that the testing business can grow into 100 million you know it's it's the view I have now of course it will go beyond that and how and where and where are we going to position it So if you think on testing the Qt potential market, if I looked only the developers, it's probably one and a half billion if I look at the testing market, because it's not only the Qt technology, it's also other languages. So it's like the potential market is like a double, basically. So that's kind of the size I'm envisioning. So if you add all that together, you know, with the current portfolio, you should be able to build a 400-500 million business with a very, very profitable operations. And what's beyond that? Well, then that needs new markets. I mean, don't forget, we're not in South America. We're not in Africa. You know, there are a lot of markets where we're not at this point of time. And there are use cases evolving all the time and whatnot. technology is evolving so of course the opportunities will grow as we go forward but we are you know the uh we're looking for um we need to do this iar integration we need to pay a bit of her debt debt away and and then we're looking for new acquisitions so we definitely want to be a growth company also in the future hey time's up thank you very much for participating in this second quarter. We had a very good quarter and I'm happy with the results and I think that we're going into the right direction and really looking forward to seeing you again and really looking forward to building the business going forward in the second half of the year and next year. Thank you very much.
