Qt Group Oyj - Financial Statement Release

QT GROUP PLC FINANCIAL STATEMENTS BULLETIN 1 JANUARY 2016–31 DECEMBER 2016

Qt Group Plc’s fourth quarter 2016

STRONG GROWTH IN THE GLOBAL MARKET CONTINUED
Financial year 2016:
- Net sales EUR 32,395 thousand (EUR 26,934 thousand): up 20.3 per cent
- Comparable operating profit was EUR 291 (1,922) thousand, comparable operating
margin (EBIT %) was 0.9 per cent (7.1).
- The comparable operating profit for 2015 included restructuring costs
totalling EUR 136 thousand, while the comparable operating profit for 2016
includes non-recurring costs totalling EUR 2,026 thousand arising from the write
-down of a loan receivable associated with the financing of the Qt Project
Hosting foundation, fees paid to external service providers in relation to the
demerger of Digia as well as costs associated with Digia’s share-based
remuneration system.
- The operating result was EUR -1,736 thousand (1,786), operating margin (EBIT
%) was -5.4 per cent (6.6).
- Earnings per share were EUR -0.08

October–December 2016:
- Net sales EUR 8,845 thousand (7,383): up 19.8 per cent
- Comparable operating profit was EUR -98 (146) thousand, comparable operating
margin (EBIT %) was -1.1 per cent (2.0).
- The comparable operating profit for 2015 included restructuring costs
totalling EUR 60 thousand, while the comparable operating profit for 2016
includes non-recurring costs totalling EUR 207 thousand arising from the write
-down of a loan receivable associated with the financing of the Qt Project
Hosting foundation and fees paid to external service providers in relation to
the demerger of Digia.
- The operating result was EUR -305 thousand (86), operating margin (EBIT %) was
-3.5 per cent (1.2).
- Earnings per share were EUR -0.01

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 15 February 2017.

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 31 December 2016.

KEY FIGURES (EUR thousand)

+------------+-------+-----------+-------+----------+----------+----------+
|            |10–12/2|  carve out|Change,| carve out| carve out|Change, % |
|            |   016 |10–12/2015 |     % |1–12/2016 |1–12/2015 |          |
|            |       |           |       |          |          |          |
+------------+-------+-----------+-------+----------+----------+----------+
|Net sales   | 8,845 |     7,383 | 19.8% |   32,395 |   26,934 |    20.3% |
+------------+-------+-----------+-------+----------+----------+----------+
|Operating   |  -305 |        86 |       |   -1,736 |    1,786 |          |
|result      |       |           |       |          |          |          |
+------------+-------+-----------+-------+----------+----------+----------+
|- % of net  | -3.5% |      1.2% |       |    -5.4% |     6.6% |          |
|sales       |       |           |       |          |          |          |
+------------+-------+-----------+-------+----------+----------+----------+
|Net profit  |  -153 |      -567 |       |   -1,747 |      981 |          |
+------------+-------+-----------+-------+----------+----------+----------+
|- % of net  | -1.7% |     -7.7% |       |    -5.4% |     3.6% |          |
|sales       |       |           |       |          |          |          |
+------------+-------+-----------+-------+----------+----------+----------+
|Earnings per| -0.01 |           |       |    -0.08 |          |          |
|share, EUR  |       |           |       |          |          |          |
+------------+-------+-----------+-------+----------+----------+----------+

BUSINESS

Qt is responsible for Qt development, productisation and licensing under
commercial and open source licenses. Qt technology is used globally by over one
million software developers. Qt is used for developing cross-platform
applications and graphic user interfaces for desktops, embedded systems and
mobile devices. Qt technology is used in over 70 different industries, in
millions of devices and applications – such as consumer electronics, vehicles,
airplanes and industrial automation applications. Qt has operating locations in
Finland, Norway, Germany, the United States, Russia, China, Japan and South
Korea.

Juha Varelius, President and CEO:

The year 2016 was a period of strong growth for Qt Group. Our full-year net
sales increased by more than 20 per cent year-on-year. Strong growth also
continued during the fourth quarter. We have made progress in line with the
company’s strategy and even exceeded our growth targets.

We are not dependent on any customer segment or geographical area, and during
the year we signed significant contracts in many different industries around the
world.

As expected, the Group’s operating result for 2016 showed a loss due to
investments necessary for growth and the setting up of independent Group
functions, which resulted in a heavier cost structure. The full-year operating
result included a total of EUR 2.0 million of non-recurring expenses which
affected comparability.

During the first half of the year, we released the new versions Qt 5.6 and Qt
5.7. With the release of Qt 5.7, we changed the open source licensing terms with
the aim of promoting the sale of licenses to commercial operators. The effects
of this change are expected to become apparent in the coming years. In the first
half of the year, we opened a new office in Japan to boost local sales. We have
also otherwise increased our sales resources, particularly in Asia. The Qt World
Summit 2016, held in the autumn in San Francisco, California, was attended by
more than 600 representatives of our customers and partners. The event saw the
launch of new products to facilitate the use of Qt technology in a growing range
of equipment, including smart watches.

Investments in business development have been particularly allocated to the
automotive segment. The excellent progress achieved on this front has seen the
automotive industry adopt Qt as one of its basic technologies for implementing
digital in-vehicle entertainment and control software. The company engages in
business and development activities with many of the world’s leading car
manufacturers.

Our quality management system received ISO9001:2008 certification during the
first half of the year.

We see very promising growth prospects for our business in the next few years.
We will invest significantly in developing our operations and increasing our
sales resources in line with our strategy. Our target is to achieve annual net
sales of EUR 100 million and operating profit of at least 15 per cent in 2021.

We estimate that our net sales in 2017 will increase by 15–20 per cent year-on
-year. Due to investments in growth, the company’s operating result will show a
substantial loss in 2017.

NET SALES

Qt’s net sales for 2016 amounted to EUR 32,395 thousand (26,934): up 20.3 per
cent.

Qt’s net sales for the fourth quarter amounted to EUR 8,845 thousand (EUR 7,383
thousand), up 19.8 per cent.

PROFIT PERFORMANCE

Qt’s operating result for October–December 2016 was EUR -305 thousand (EUR 86
thousand). The operating result for the financial year amounted to EUR -1,736
thousand (EUR 1,786 thousand).

The result for the financial year includes non-recurring costs totalling EUR
2,026 thousand, attributable to the write-down of a loan receivable associated
with the funding of the Qt Project Hosting foundation, fees paid to external
service providers in relation to the Digia demerger as well as costs arising
from Digia’s share-based remuneration system. The comparable operating profit
for the financial year was EUR 291 thousand (EUR 1,922 thousand) and comparable
operating margin (EBIT %) was 0.9 (7.1) per cent.

The company’s operating expenses, including materials and services, personnel
expenses, depreciation and other operating expenses, amounted to EUR 9,625
thousand (EUR 7,696 thousand) in the fourth quarter, up 25.1 per cent year-on
-year. Personnel expenses accounted for 60.1 per cent (50.7%) of operating
expenses, or EUR 5,787 thousand (EUR 3,902 thousand). Taking the items affecting
comparability, EUR 207 thousand (EUR 60 thousand), into account, fixed costs for
the review period increased by 23.4 per cent.

The company’s net financial expenses in the fourth quarter amounted to EUR 90
thousand (EUR 158 thousand) due to fees totalling EUR 112 thousand related to
the interest expenses of a loan of EUR 6.0 million granted by Ilmarinen Mutual
Pension Insurance Company.

Qt’s earnings before tax for the fourth quarter totalled EUR -395 thousand (EUR
-73 thousand) and the net result was EUR -153 thousand (EUR -567 thousand).
Taxes for the review period amounted to EUR 242 thousand positive (EUR -495
thousand), which was mainly due to deferred tax assets recognised for losses at
the closing date.

Earnings per share were EUR -0.01 for the fourth quarter.

FINANCING AND INVESTMENTS

Cash flow from operating activities was EUR – 1,385 thousand (EUR 1,165
thousand) in the financial year due to growth investments and subsequent
negative operating result.

Qt’s cash and cash equivalents totalled EUR 6,420 thousand (EUR 3,577 thousand)
at the end of the financial year. A loan of EUR 6.0 million, granted by
Ilmarinen Mutual Pension Insurance Company, was drawn down in two instalments in
May 2016. The loan will mature in its entirety in November 2017 and the Group
will pay interest on the loan semiannually.

The Qt Group’s consolidated balance sheet total at the end of the year stood at
EUR 29,443 thousand (EUR 23,869 thousand). Net cash flow from investments in the
financial year was EUR -374 thousand (EUR -233 thousand).

The equity ratio stood at 40.0 per cent (54.7%) and gearing was 0.7 per cent (
-24.8%). Interest-bearing liabilities amounted to EUR 6,207 thousand (EUR 1,365
thousand), of which short-term loans accounted for EUR 6,152 thousand (EUR 553
thousand).

In the financial year, return on investment was -12.0 per cent (25.0%) and
return on equity was -21.1 per cent (11.0%).

RESEARCH AND DEVELOPMENT

Product development expenses are included in the result for the financial year
in their entirety and Qt has no capitalised product development expenses in its
balance sheet.

Qt’s product development expenses totalled EUR 8,347 thousand (EUR 7,902
thousand), accounting for 25.8 per cent (29.3%) of net sales. Product
development expenses increased by 5.6 per cent year-on-year.

At the end of the review period, the company had 87 people (80) employed in
product development.

PERSONNEL

The number of Qt’s personnel was 218 (182) on average during the quarter and 220
(182) at the end of the financial year. The Group’s personnel expenses in the
fourth quarter amounted to EUR 5,787 thousand (EUR 3,902 thousand), up 48.3 per
cent year-on-year.

The geographical distribution of personnel:

+----------+-----------+-----------+----------+----------+----------+----------+
|Personnel |10–12/2016 |10–12/2015 |Change, % |1–12/2016 |1–12/2015 |Change, % |
|(on       |           |           |          |          |          |          |
|average)  |           |           |          |          |          |          |
+----------+-----------+-----------+----------+----------+----------+----------+
|          |           |           |          |          |          |          |
+----------+-----------+-----------+----------+----------+----------+----------+
|Finland   |        68 |        52 |      31% |       64 |       52 |      23% |
+----------+-----------+-----------+----------+----------+----------+----------+
|Europe &  |       122 |       106 |      15% |      118 |      106 |      12% |
|APAC      |           |           |          |          |          |          |
+----------+-----------+-----------+----------+----------+----------+----------+
|North     |        28 |        24 |      15% |       27 |       22 |      22% |
|America   |           |           |          |          |          |          |
+----------+-----------+-----------+----------+----------+----------+----------+
|          |           |           |          |          |          |          |
+----------+-----------+-----------+----------+----------+----------+----------+
|Group     |       218 |       182 |      20% |      209 |      180 |      16% |
|total     |           |           |          |          |          |          |
+----------+-----------+-----------+----------+----------+----------+----------+

At the end of the quarter, international personnel represented 68 per cent (71%)
of the total.

Juha Varelius has been Qt Group Plc’s President and CEO since 1 May 2016.

OTHER EVENTS IN THE REVIEW PERIOD

Governance

Qt Group Plc was established by a partial demerger decided on by Digia Plc’s
Annual General Meeting on 16 March 2016. The partial demerger was registered on
1 May 2016.

The Annual General Meeting that decided on the partial demerger of Digia Plc
approved the articles of association of Qt Group Plc and 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 and auditor.

Robert Ingman, Matti Rossi, Leena Saarinen, Tommi Uhari and Kai Öistämö were
elected as members of Qt Group Plc’s Board of Directors. The Board of Directors
of Digia Plc elected Robert Ingman as the Chairman of the Board of Qt Group Plc
and Tommi Uhari as Vice Chairman.

KPMG Oy Ab, Authorised Public Accountants, was elected as the auditor of the
Group, with Authorised Public Accountant Kim Järvi as the principal auditor.

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 Annual General Meeting authorised the Board of Directors of Qt Group Plc to
decide on the repurchase and/or acceptance as collateral of a maximum of
1,000,000 of the company’s own shares. This repurchase can only be executed by
means of the company’s unrestricted equity. The Board shall 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 acquisition of shares through public trading organised by NASDAQ
Helsinki Oy in accordance with the rules and instructions of NASDAQ Helsinki and
Euroclear Finland Ltd, 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 until 16 September 2017. The Board of
Directors of Qt Group Plc can take a decision based on this authorisation only
after the implementation of the demerger has been registered.

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

The Annual General Meeting authorised the Board of Directors of Qt Group Plc to
decide on a share issue and the granting of special rights prescribed in Chapter
10, Section 1 of the Companies Act, either subject to or free of charge, in one
or several instalments 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 and the transfer of
shares held by the company. 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 implement the company's share-based
incentive schemes and to improve the capital structure of the company, or to be
used 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 the granting of special rights, including the subscription
price, its payment not only by cash, but also entirely or partly by other assets
(property given as capital contribution) or setting the subscription price off
against a subscriber’s receivable, and the entry into the company's balance
sheet. The authorisation is valid until 16 September 2017. The Board of
Directors of Qt Group Plc can take a decision based on this authorisation only
after the implementation of the demerger has been registered.

By virtue of the authorisation granted to it by the Annual General Meeting, the
Board of Directors of Qt Group Plc decided at its meeting on 22 June 2016 to
issue stock options to the key persons of the company or its Group companies on
the following terms and conditions:

The maximum total number of stock options issued is 2,000,000, and they entitle
their holders to subscribe for a maximum total of 2,000,000 new shares in the
company. The stock options shall be marked with the symbol 2016. No stock option
certificates shall be issued for the stock options. The stock options shall be
issued gratuitously to the company’s key persons.

Each stock option entitles its holder to subscribe for one (1) new share in the
company or an existing share held by the company. The share subscription price
shall be credited to the company’s reserve for invested unrestricted equity.

The share subscription period for the stock options shall be 19 December 2019–31
December 2022. A precondition for the share subscription is that the value of
the company’s share based on the trade volume weighted average quotation on the
NASDAQ OMX Helsinki Ltd is at least five euros and eighty-five cents (EUR 5.85)
between 18 November 2019 and 13 December 2019.

The share subscription price for the stock options shall be the trade volume
weighted average quotation of the company’s share between 1 June 2016 and 30
June 2016 and the share subscription price shall, nevertheless, always amount to
at least the highest share price quoted on the closing day 22 June 2016 when the
stock options have been issued and assigned to the key persons added with one
euro cent (EUR 0.01). The subscription price was determined to be EUR 4.84 based
on the highest share price quoted on 22 June being EUR 4.83 and the trade volume
weighted average quotation between 1 June 2016 and 30 June 2016 being EUR
4.6102.

SHARE

Qt Group Plc has one series of shares. Each share confers one vote and equal
rights. The total number of shares is 20,818,273 and the share capital is EUR
500,000. Qt Group Plc did not hold any treasury shares during the reporting
period.

Trading in Qt Group Plc (trading code: QTCOM) shares began on the Nasdaq
Helsinki stock exchange on 2 May 2016. A total of 1,706,015 shares changed hands
between 2 May 2016 and 31 December 2016. This accounts for 8.2 per cent of the
total number of shares. The volume-weighted average price of the share was EUR
5.13, with the lowest price being EUR 3.89 (2 May 2016) and the highest price
EUR 6.68 (6 September 2016). The closing price at the end of December was EUR
5.62 per share, and Qt Group’s market capitalisation was EUR 117.0 million. The
company had a total of 4,031 shareholders at the end of December 2016.

The company did not receive any flagging notifications during the reporting
period.

RISKS AND UNCERTAINTIES

The company’s short-term risks and uncertainties are related to potential
significant changes in the company’s business operations, ensuring adequate
financing for operations as well as the retention and recruitment of the
personnel required for business development. In one of the company’s main market
area, the United States, the risk of legislative changes can be seen, and should
it materialise, it may negatively affect the company’s business operations in
the region.

Exchange rate fluctuations, particularly between the US dollar and euro, may
have a large impact on the development of Qt’s net sales. Another factor
contributing to considerable fluctuation in quarterly net sales and
profitability in particular is contract turnaround times which, in the
enterprise segment, are very long at up to 18 months.

The company’s business risks and mitigations for them are also described on the
company website at www.qt.io.

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 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 license 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 2017.

Outlook 2017

The company will invest significantly in developing its operations and
increasing its sales resources in line with its strategy. The company’s Board of
Directors plans to seek additional funding to finance investments in growth and
maximise future growth. The company estimates that its net sales in 2017 will
increase by 15–20 per cent year-on-year.

Due to investments in growth, the company’s operating result will show a
substantial loss in 2017.

MAJOR EVENTS AFTER THE BALANCE SHEET DATE

At its meeting on 15 February 2017, the Board of Directors of Qt Group decided
to propose to the Annual General Meeting to be held on 14 March 2017 that the
Board of Directors be authorised to decide on acquiring additional funding of
approximately EUR 15 million by means of a share issue based on shareholders’
pre-emptive subscription rights.

The Board of Directors proposes to the Annual General Meeting that the Annual
General Meeting authorise the Board of Directors to decide on the issuance of at
most 4,500,000 new shares or treasury shares in one or more ordinary share
issues.

Helsinki, 16 February 2017

Qt Group Plc

Board of Directors


BRIEFING

Qt Group will hold a briefing on the financial statements report for analysts on
Thursday, 16 February 2017 at 10:00 am, in the Paavo Nurmi cabinet of Hotel
Kämp, Pohjoisesplanadi 29, 00100 Helsinki, Finland. Welcome.


FURTHER INFORMATION

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

The financial statements report and CEO’s presentation will be available in the
Investors section at www.qt.io from 10:00 am on 16 February 2017.


DISTRIBUTION
NASDAQ Helsinki
Key media

Bifogade filer:

02162988.pdf