Qt Group Plc: Financial Statements Bulletin January 1 December 31, 2021

Fourth quarter: Strong growth continued

Fiscal year 2021

• Net sales increased by 52.5 percent to EUR 121,139 thousand (79,455). At comparable exchange rates, net sales increased by 55.0 percent.
• Net sales of distribution licenses grew by 40.5 percent to EUR 21,431 thousand (15,255).
• Operating profit (EBITA) was EUR 31,534 (17,422) thousand, or 26.0 (21.9) percent of net sales.
• Operating profit (EBIT) was EUR 28,812 (17,017) thousand, or 23.8 (21.4) percent of net sales.
• Earnings per share were EUR 0.91 (0.53).

October–December 2021

• Net sales increased by 55.2 percent to EUR 36,960 thousand (23,819). At comparable exchange rates, net sales increased by 51.2 percent.
• Operating profit (EBITA) was EUR 9,022 (6,235) thousand, or 24.4 (26.2) percent of net sales.
• Operating profit (EBIT) was EUR 8,106 (6,134) thousand, or 21.9 (25.8) percent of net sales.
• Earnings per share were EUR 0.24 (0.19).

The figures in brackets refer to the comparison period, i.e. the corresponding period in the previous year. This financial statements bulletin was prepared in compliance with IAS 34 Interim Financial Reporting. The amounts from the financial statements presented in this bulletin are based on the company’s audited financial statements. The Auditor’s Report was issued on 16 February 2022.

BOARD OF DIRECTORS’ DIVIDEND PROPOSAL

The Board of Directors of Qt Group Plc proposes to the Annual General Meeting that no dividend be paid for the fiscal year that ended on December 31, 2021.

Business Report

Financial performance:

Qt’s net sales for the fourth quarter amounted to EUR 36,960 thousand (EUR 23,819 thousand), up 55.2 percent. License sales and consulting grew by 66.7 percent, while maintenance revenue increased by 11.2 percent. The effect of exchange rates on the comparison period’s net sales was EUR 619 thousand and at comparable exchange rates, net sales increased by 51.2 percent.

Full-year net sales for 2021 increased by 52.5 percent year-on-year and amounted to EUR 121,139 thousand (EUR 79,455 thousand). License sales and consulting grew by 68.7 percent, while maintenance revenue increased by 4.0 percent. As part of license sales and consulting, the net sales of distribution licenses grew by 40.5 percent to EUR 21,431 thousand (15,255). The effect of exchange rates on the comparison period’s net sales was EUR -1,321 thousand. At comparable exchange rates, net sales increased by 55.0 percent.

Qt’s operating profit (EBITA) for the fourth quarter was EUR 9,022 thousand (EUR 6,235 thousand). Qt’s operating profit (EBIT) for the fourth quarter was EUR 8,106 thousand (EUR 6,134 thousand). Operating profit (EBITA) for the fiscal year was EUR 31,534 thousand (EUR 17,422 thousand). Operating profit (EBIT) for the fiscal year was EUR 28,812 thousand (EUR 17,017 thousand). Compared to the corresponding period in the previous year, expenses for the fiscal year were particularly increased by an increase in wages and incentive bonuses caused by an increase in personnel, as well as subcontracting costs, which were allocated to consulting and product development, for example.

The Group had 496 employees at the end of 2021, compared to 366 a year earlier. The increase in the number of employees has been strongest in the sales and product development organizations.

Juha Varelius, President and CEO:

Qt had a year of record-breaking success in 2021. We were able to execute our growth strategy at an excellent level throughout the year, in spite of the global component shortage and Covid-19 pandemic. Our net sales in 2021 grew by 52 percent to EUR 121 million, while our operating result was EUR 29 million. At the same time, we exceeded by a clear margin the ambitious targets set in 2017 for net sales of EUR 100 million and an operating margin of more than 15 percent by 2021.

In the second half of 2020, we transitioned to a subscription license model in developer license sales. Transition to subscription license model has proceeded according to expectations and we expect most of our customers to adopt the new model by the end of 2023.

The continued Covid-19 pandemic, the global component shortage and logistics problems slowed down the growth of the embedded devices business, especially with regard to distribution license sales. Nevertheless, despite the challenging market conditions, we managed to increase our sales of distribution licenses to EUR 21 million in 2021, representing year-on-year growth of 40 percent.

The strong growth of net sales was reflected in our operating result despite the fact that we continued to drive growth by investing strongly in areas such as sales, marketing and product development. Our number of personnel grew substantially in 2021, from 366 employees to 496. Personnel expenses increased not only due to the increase in personnel but also at the end of the year by the sales bonuses and incentives recognized as expenses at the end of the year.  

The froglogic acquisition completed in spring 2021 expanded Qt’s product portfolio to include test automation tools and is a good example of the work done by the new Ventures business unit, established at the beginning of 2021, to develop new business opportunities. Our growing R&D investments are allocated to customer-focused product development projects as well as new features and products.

Examples of our product releases in 2021 include Qt 6.2 LTS, which is the first long-term supported version of Qt 6, and a significant update to Qt for MCUs 2.0, which is a design tool for embedded microcontrollers, with the update including new features to support text rendering in any language and the efficient translation of user interfaces. 

All in all, Qt is in a good position to further develop its offering, respond to growing demand and achieve continued strong growth in the coming years.

Future Outlook

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 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 in the creation of embedded systems. Sales growth associated with embedded systems 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. In addition to organic growth, the company also actively pursues in organic growth through acquisitions that support its strategy.

The Covid-19 pandemic continues to cause increased uncertainty for the company’s short-term outlook. 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. At the same time, however, the logistics problems in world trade and the global component shortage are expected to have an impact on at least some of the company’s customers in the form of project delays and reduced production volumes. These challenges in the operating environment may slow down the accumulation of net sales from distribution licenses, in particular. It is obvious that recovery from the pandemic will be uneven between different industries and geographical regions and the recovery may be a long process.  

Outlook for 2022

We expect the very strong growth of development license sales to continue in 2022. However, the challenges in the operating environment caused by the prolonged Covid-19 pandemic may still slow down the growth of distribution licenses to some degree. All in all, we estimate that our full-year net sales for 2022 will increase by 30-40 percent year-on-year at comparable exchange rates and our operating profit margin will be 20-30 percent. There may be significant quarterly variation in the development of net sales and the operating result. The figures for the second quarter, in particular, will be influenced by the exceptionally strong comparison figures for the previous year.

Financial reporting

Net sales and profit performance

Qt’s net sales for the fourth quarter amounted to EUR 36,960 thousand (EUR 23,819 thousand), up 55.2 percent. License sales and consulting grew by 66.7 percent, while maintenance revenue increased by 11.2 percent. The effect of exchange rates on the comparison period’s net sales was EUR 619 thousand and at comparable exchange rates, net sales increased by 51.2 percent.

Qt’s operating profit (EBITA) for the fourth quarter was EUR 9,022 thousand (EUR 6,235 thousand). Qt’s operating profit (EBIT) for the fourth quarter was EUR 8,106 thousand (EUR 6,134 thousand). The company’s operating expenses, including materials and services, personnel expenses, depreciation and other operating expenses, amounted to EUR 28,910 thousand (EUR 17,781 thousand) in the fourth quarter, up 62.6 percent year-on-year. Personnel expenses accounted for 64.9 percent (65.1%) of operating expenses, or EUR 18,777 thousand (EUR 11,572 thousand).

The company’s net financial expenses in the fourth quarter were EUR 340 thousand in the positive (EUR -442 thousand), due to exchange rate differences in currency-denominated internal receivables and debts related to the financing of international subsidiaries.

Qt’s earnings before tax for the fourth quarter totaled EUR 8,446 thousand (EUR 5,691 thousand) and the result was EUR 5,905 thousand (EUR 4,462 thousand). Taxes for the review period amounted to EUR 2,541 thousand (EUR 1,229 thousand).

Earnings per share amounted to EUR 0.24 for the fourth quarter (EUR 0.19).

Full-year net sales for 2021 increased by 52.5 percent year-on-year and amounted to EUR 121,139 thousand (EUR 79,455 thousand). License sales and consulting grew by 68.7 percent, while maintenance revenue increased by 4.0 percent. As part of license sales and consulting, the net sales of distribution licenses grew by 40.5 percent to EUR 21,431 thousand (15,255). The effect of exchange rates on the comparison period’s net sales was EUR -1,321 thousand. At comparable exchange rates, net sales increased by 55.0 percent.

Qt’s operating profit (EBITA) for 2021 was EUR 31,534 thousand (EUR 17,422 thousand) and the operating result (EBIT) for the fiscal year was EUR 28,812 thousand (EUR 17,017 thousand). The Group’s operating expenses, including materials and services, personnel expenses, depreciation and other operating expenses, amounted to EUR 92,751 thousand (EUR 62,901 thousand) in the fiscal year, up 47.5 percent year-on-year. Personnel expenses accounted for 65.3 percent (67.0%) of operating expenses, or EUR 60,595 thousand (EUR 42,140 thousand). Compared to the corresponding period in the previous year, expenses for the fiscal year were particularly increased by an increase in wages and incentive bonuses caused by an increase in personnel, as well as subcontracting costs, which were allocated to consulting and product development, for example.

The company’s net financial expenses in the fourth quarter were EUR 472 thousand in the positive (EUR -657 thousand), due to exchange rate differences in currency-denominated internal receivables and debts related to the financing of international subsidiaries.

Other operating income includes income from events held and tax-free research and development investment grants received by the company in Norway, totaling approximately EUR 316 thousand (EUR 222 thousand). The grants concern the applicable personnel expenses related to the research and development activities of Qt’s Norwegian company, and they were paid to the company in the second half of 2021.

Qt’s earnings before tax for the fiscal year totaled EUR 29,284 thousand (EUR 16,360 thousand) and the result was EUR 22,410 thousand (EUR 12,826 thousand). Taxes for the review period amounted to EUR 6,873 thousand (EUR 3,534 thousand).

Earnings per share for the fiscal year were EUR 0.91 (0.53).

Financing and investments

Cash flow from operating activities was EUR 16,035 thousand (EUR 12,745 thousand) in the fiscal year. Qt’s cash and cash equivalents totaled EUR 17,374 thousand (EUR 22,046 thousand) at the end of the fiscal year.

Qt Group’s consolidated balance sheet total at the end of the fiscal year stood at EUR 117,216 thousand (EUR 61,416 thousand). Net cash flow from investments in the fiscal year was EUR -25,000 thousand (EUR -630 thousand), mainly due to the acquisition in the second quarter.

The equity ratio was 51.1 percent (66.6%) and gearing was -0.7 percent (-64.9%). Interest-bearing liabilities amounted to EUR 17,028 thousand (EUR 2,655 thousand) of which short-term loans accounted for EUR 15,862 thousand (EUR 1,282 thousand).

During the fiscal year, return on investment was 57.0 percent (63.6%) and return on equity was 55.0 percent (54.8%).

Research and development

Product development expenses are included in the result for the fiscal year in their entirety and the company has no capitalized product development expenses on its balance sheet.

Product development expenses during the fiscal year totaled EUR 19,163 thousand (EUR 13,601 thousand), accounting for 15.8 percent (17.1%) of net sales. Product development expenses increased by 40.9 percent year-on-year.

There were, on average, 133 people working in product development during the financial year (117).

Personnel

The number of Group personnel was 486 (361) on average during the fourth quarter and 496 (366) at the end of the fiscal year. The Group’s personnel expenses during the quarter amounted to EUR 18,777 thousand (EUR 11,572 thousand), up 62.3 percent year-on-year. Personnel expenses totaled EUR 60,595 thousand for the fiscal year (EUR 42,140 thousand), up 43.8 percent.

At the end of the fiscal year, international personnel represented 71 percent (73%) of the total.

Other events during the review period

Governance

Qt Group Plc’s Annual General Meeting (AGM) held on 16 March 2021 adopted the company’s annual accounts, including the consolidated annual accounts for the accounting period 1 January‒31 December 2020, reviewed the remuneration report for the company’s governing bodies and discharged the members of the Board of Directors and the Chief Executive Officer from liability. The AGM resolved, in accordance with the Board’s proposal, that no dividend be paid based on the balance sheet adopted for the accounting period that ended on December 31, 2020.

The AGM confirmed 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, Jaakko Koppinen, Mikko Marsio, Leena Saarinen and Tommi Uhari were re-elected as members of Qt Group Plc’s Board of Directors. At its organizing meeting held after the general meeting, the Board of Directors elected Robert Ingman as its Chairman and Tommi Uhari as the Vice Chairman.

The general meeting granted the following authorizations to the Board of Directors of Qt Group Plc:

Authorizing the Board of Directors to decide on repurchasing the company’s own shares and/or accepting them as collateral

The general meeting authorized 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 authorization, 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 authorization also includes the acquisition of shares through public trading organized 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 authorization is valid for 18 months from the issue date of the authorization, i.e. until September 16, 2022, and it replaces any earlier authorizations on the repurchase and/or acceptance as collateral of the company's own shares.

Authorizing the Board of Directors to decide on a share issue and the granting of special rights entitling to shares

The general meeting authorized 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 authorization is 2,000,000.

The authorization concerns both the issuance of new shares and the transfer of shares held by the company. By virtue of the authorization, 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 authorization 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 authorization 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 authorization is valid for 18 months from the issue date of the authorization, i.e. until September 16, 2022, and it replaces any earlier authorizations on the granting of shares or special rights entitling to shares.

Events after the review period

On January 3, 2022, Qt Group issued a release to disclose that, during the period September 14–December 9, 2021, a total of 550 new shares in the company had been subscribed for with the company’s stock options 2016. For subscriptions made with the stock options 2016, the entire subscription price of EUR 2,662.00 will be entered in the reserve for invested unrestricted equity. After the new shares are entered in the Trade Register, the total amount of shares is 25,181,198. The shares subscribed for under the stock options were entered in the Trade Register on January 3, 2022. The shares are traded on Nasdaq Helsinki together with the old shares as of January 4, 2022.

The company had no other significant events deviating from normal business operations after the end of the review period.

Risks and uncertainties

The Qt Group’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. The potential extensive spread of the Covid-19 pandemic among the employees and any resulting sick leave absences could slow down the development of business operations. Furthermore, prolonged Covid-19 pandemic might slow down the growth of the business and affect the valuation of assets. The pandemic has not affected the valuation of assets thus far. The global component shortage and logistic issues in global trade are expected to lead to reductions in production volumes and delays in projects for at least part of the company’s customer base, which may slow down the accumulation of net sales from distribution licenses.

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 the 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

Espoo, February 17, 2022

Qt Group Plc

Board of Directors

Briefing

Qt will hold a briefing in English at 3:00-4:00 p.m. EET on February 17, 2022, where President and CEO Juha Varelius and CFO Jouni Lintunen will be presenting. The briefing will be available as a live webcast at www.qt.io/sijoittajat and via telephone conferencing:

United States: +1 323-701-0170

United Kingdom: +44 (0)33 033 69600

Finland: +358 (0)9 7479 0572

Participant ID: 876297

Further information

Juha Varelius, CEO, tel. +358 9 8861 8040

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