Qt Group Oyj (QTCOM) Earnings Call Transcript & Summary

Good afternoon and welcome to the Qt Company's Full Year 2021 Results Presentation. My name is Heli Jamsa, IR Manager. And with me today, our CEO, Juha Varelius; and CFO, Jouni Lintunen to go over the results. After the presentations, we will have Q&A on the conference call lines. Without further ado, Juha, the floor is yours.

Thank you. Thank you. Good afternoon, everyone. My name is Juha Varelius. And like I said, I'm going to go through the Q4 and 2021. There is a -- I'm going to talk bit about the business highlights '21, then Jouni is going to go through the financials. Then I'm going to, it's a bit of a combined, I'm going to talk about, shortly about outlook for 2022. And specifically, I'm going to talk about the, our strategy and our targets in 2025, which are very exciting for us at the moment. So if we go to a business highlights. Our net sales was, grew 52% last year. And what's -- what I'm really excited about is that the last year our distribution license sales grew on a healthy level compared to a year before. In 2020, our distribution license sales growth was merely 5%. And last year we were seeing a very strong growth on distribution license sales, which is the sales type that mostly gets affected on COVID and supply chain problems and logistical problems because it's related to the end-use products. Our EBIT was very healthy EUR 29 million last year, and that is -- we are not seeking to optimize our result, but of course we do want to make profit. And I think that the, our profit level was very nice compared with this nice net sales growth. Operating margin was 24%. The -- our personnel grew 130 people last year. And that is greatly due of course that we were very successful in hiring people, but also our -- we didn't that many levers. So the -- we had a -- personnel growth was in good level. I'm going to talk about that a bit more detail later as well. So if we look shortly, on sort the, what was our growth strategy in 2021, it's actually pretty much the same strategy that it's been since our last planning season when we set our targets, that we're going to make EUR 100 million in 2021. Now we exceeded that greatly. And this is our -- our core strategy is the same going forward also in 2025. But like I said, our net sales grew, that 52%. And I'm happy to say that this time to European EMEA was the -- was on top of the growth. We have 3 region, we have APAC, Asia Pacific, and we have North America, United States, North America. And they grow pretty evenly. So I'm happy, you know. So the poll position changes each year. And this year it was the EMEA. But I'm very happy that we were able to accomplish such a good growth in the European area. We also had a very great success in customer, new customer acquisition. That was the part of the business, I would say a bit concerned when the COVID started. And we were all thrown out into our homes, outside of the offices, and face-to-face meetings diminished 2020. And that's been pretty much in '21 the same case. But of course, luckily our customers had to adapt to also working remotely. And the -- we've been able to acquire new customers in a very healthy phase. Top line growth is our #1 priority. And top line growth will be our #1 priority going forward. So in our DNA, the -- we're looking -- the -- we're always looking for growth. But we're looking for profitable growth. I will talk about that more in the outlook session and in the strategy session. But the -- our focus is expanding our product portfolio. And our focus is to expand the, our potential market, total addressable market. And good example of that was the acquisition of froglogic, because the -- it gave us a new product. Our core offering obviously is the cross platform software development tool, Qt framework and Qt tooling. But now we do have also quality assurance tools. So when people are, we can ask the question that when people are using Qt and developing software, we can ask the question that what's your plan on testing the software you are about to develop. So it fell -- fits well into our product offering. On top of that, it expands our addressable market, because the -- you can use our quality assurance tools, testing on software that's being developed, also other technologies apart from Qt. The, strengthening our global sales network, I think that one key -- one key metric, one key thing for our success is our global sales network. So we've been able to build presence globally, but we have local offices throughout the markets where we operate in all these 3 regions I mentioned before. We have local sales people, we do have pre-sale engineers and consultants and so on. And we can serve and make sure locally that our customers are successful. So utilizing this sales network more efficiently, bringing more products in there makes all the sense obviously from our point of view. So now that when our sales goes and sells the software development tool, at the same time they can sell the quality assurance tools. So we can utilize the sales network much more efficiently. And I'm happy to say I'm very proud about our sales network. It is magnificently a well-operating organization. Organic product innovation projects we have in ongoing. We have our Ventures organization. I'm going to talk a bit about that more later on. But we are obviously doing R&D in our R&D product enhancement. And -- but on top of that, we have the Ventures organization. And they're always looking for new products and new business opportunities outside the core offering we have. So the continuous improvements we did last year, we did release the Qt 6.2, the long-term supported version, MCU 2.0. We also had a Qt World Summit event virtually again. It's a, probably our biggest event during the year where we gather together with Qt community developers, networking, hearing what's the greatest and latest in the Qt environment. And the -- also we had a great customer presentation over the Creative Assembly, Panasonic Avionics, and BSH Home Appliances. These virtual events are very important to us. And I must say that I'm very happy how our marketing has been adapted to be able to be more digital in the marketing which is again related to our great success in revenue, and also in the new customer acquisition. I wanted to highlight this slide because very often we talk about the same examples where Qt is being used. And we get kind of maybe a false idea that the -- the same examples that Qt is mainly used in these occasions. Qt's strategy has always been that we are a cross-platform product and we have a very horizontal product. And our offering is such that it's being used in 70 different industries throughout the world. None of these industries are dominant from our point of view, and we don't have any dominant customers in that sense. So all the industries are very important to us. And also that we do have a horizontal product, the -- means that when our customers are innovating, they're getting new ideas and they develop something. And on the next phase, they want to develop something new and different. Qt won't be hindering their innovation. Instead, Qt can be enabling that innovation and Qt can be used in very different use cases. Whereas if you are very focused on some use cases and some industries, it of course limits then the wider usage. So here we have the Vexcel Imaging; vochlea; Hyundai, obviously a very known brand; and Spotify. But just to highlight some of these different companies that are using Qt, the -- in creative way, creating great products. So in short, I feel very strongly that we are in -- we are in a great position. The market is growing. We do have a product that fits very well into the customer needs. And the -- I think that we are in early phases of this growth. So we are in the right place at the right time. And in some simplicity, we could say that the only thing we need, a superb execution. And what's always behind a superb execution is of course the personnel. Like I said before, we have a total headcount increase of 36% mainly on sales and R&D. Our employee engagement increased and our voluntary attrition rate was at very good level. So the total number of the employees were increased. We've put a lot of effort during this COVID time. And when people are being forced to work from home, their free movement has been limited. We've put a lot of effort into, that no one's left behind. And we put a lot of effort that the -- not only the work gets done but also the wellbeing of our employees. And I must say that if I look at the past year, that how in thos difficult environment we've been able to execute and deliver great results. I'm very proud of the Qt personnel. We have a excellent team at Qt, which is by the way going to grow again substantially during this year. Now we're going to go to financials, Jouni is going to walk you walk you through the numbers. And after that, I'm going to talk about -- a bit about this year outlook and the outlook for down the road. Thank you.

Thank you, Juha. Welcome from my behalf as well to the earnings call of Qt Group. My name is Jouni Lintunen, CFO. And I'll walk you through with the financial figures. As Juha said, we did have an excellent year-end. Our net sales in fourth quarter grew by 55%. And that was driven by the licenses and consulting, and specifically developer licenses and quality assurance tools in that regard. We did get a little bit of positive impact from exchange rates. Our currency-neutral growth would have been 51%. For the full year, we reported EUR 121 million net sales. And in that, out of that EUR 100 million was driven by licenses and consulting, growth of 69%. Whereas the sales of -- sales growth of maintenance was very modest. And this shift is due to the change from perpetual and term licensing base to subscription license model. Another important point here, this year in '21 was that our distribution licenses sales grew by 40% year-on-year after close to a flat year in 2020. At the same time, we still see that there are challenges in supply chains, logistical issues and component shortages, which are causing some risk in distribution licenses sales. The same time we see that there will be significant fluctuations between the quarters due to timing of the large deals and uneven distribution of the distribution licenses revenues. The same time again there -- the exchange rates will be impacting us since roughly 2/3 of our sales are in U.S. dollars. We did continue the heavy investments on our long-term growth. And that shows in our expenses accordingly. Our headcount did grow by 160 -- 130 employees, out of which roughly 100 organically and 30 as a result of the froglogic acquisition. Same time, we are putting plenty of effort into R&D. R&D expenditure did go up by 41% year-on-year and represented some 16% of net sales last year. However, despite the great -- the expenditure or investments, we are reporting EUR 22 million -- EUR 28 million, EUR 29 million operating margin EBIT, and then EUR 22 million net profit for the for the year. Here's a short version of the balance sheet. And the major movements in these are done by the acquisition of froglogic. The noncurrent assets are increased by the intangibles and goodwill of the acquisition, and trade receivables then are -- and the growth of that is in line with the year-end revenue growth. And in receivables due to our very horizontal business model, we don't -- do not see any major risk exposure based on customer groups. And we are ending our year with pretty strong cash position of EUR 17.4 million in cash. Equity did go up due to the net profit for the period, share subscriptions and then offset by the purchases of their own shares due to LTI program. Short-term liabilities then. We are having some loan due to acquisition and then other short-term liabilities and long-term liabilities. They are also driven, the growth is driven by the outcome of the acquisition. So this is in short the financials. And now I hand floor over back to Juha who will go through the '22 outlook and the strategy figures until '25.

Okay, thank you. Let's go for the 2020. Sweden start the -- we're looking to increase our sales 34% year-on-year, comparable exchange rates and looking for a profit of 20% to 30%. How are we going to do that, I'm going to talk in next slides. And that's going to be pretty much the, our strategy for the following years. So here it goes. Our mission is to increase the productivity of our customers' product development process. And what we are offering as of today, we're offering developers a cross-platform product for developers to be more efficient, to create more -- code less and to use the code multiple times. So in short, we're -- our core qt offering is for developers to be more efficient, to be able to create more with less time. If we are looking our mission, we're looking at the whole development process, and we're thinking going forward in 2025 that how can we help the developers even further make the developing fun and easy, and making fun and easy developing something through software. So it's not only the development part, but the, we're also looking at the -- how to enhance the whole process so to speak. I'll be more specific in a bit. And doing this, our core business is on embedded devices as well as desktop and mobile. So our vision is to have a multi-product strategy. So we're looking at the, like I was all earlier -- earlier saying that the developers are first developing something then they need to test it. There are also of course other parts in development process like development and security. I'm not going to go into that. But the -- our strategy going forward is that not only are we going to be offering the development tools but also other products for that development process. And our strategy is that in -- where we don't have the competencies to do this, then we are going to acquire it. And a good example of this is the quality assurance tools. Of course, over time we probably would have been able to create and develop quality assurance tools of ourselves testing automation, but it -- it would have taken a long time, instead we acquired froglogic. We got a great people and a great product. And we were off the ground very quickly and to be able to put it into our sales portfolio and in our sales network. And that in a nutshell is what we're looking to do also in future. We do have what I think strategically is a correct position because we do have the -- our license sales, we do have subscriptions of Qt framework, QA Tools and Design Studio. So we're selling developer licenses as a subscription model, which means that there is a continuous revenue stream from the developer licenses. And we are growing that base. Distribution license sales is very important for us. And I think that the -- that's going to -- I'm sure it will generate a bigger portion of our total revenue, whereas we do get paid by the device being produced into the market. And then we are looking in our Ventures organization, we are looking for transactional businesses like digital advertising. Obviously the clue from the monetary perspective is that then we would be getting money through the lifecycle of the product. Very interesting. But before we get too excited, we do have -- we do have projects in that area. We do have pilots. And we're looking ways to get into there. But the -- if I look into 2025 on our plans and this guidance, we have very little money from these transactional businesses inherited over there. So the -- we're looking to -- until 2025 we're going to be growing 20% to 30% -- 30% to 40% annually. So each year with an EBIT margin of 20% to 30%. So very rapid growth. And I think that the company that can put on a table such figures in these uncertain times, it's -- I think these are very impressive, impressive figures and very impressive outlook. And how are we so confident that the, we're putting these figures down. Well, first of all, in our sales processes such that the -- if we meet a new customer and we start negotiating, it takes many months to close the deal. And then we sell the developer licenses and people start developing something, and then later on we get the distribution licenses. So the lead time in slow moving industries can be 2 to 3 years. So to get into this business, it's the -- it's a slow start. And then the processes continued fairly long. So we do see a quarterly fluctuations and we do see that the life doesn't go like on a straight line, but we do have a confidence and we do have a -- we do -- on a longer term we do have a vision of where the market is going. We are looking at this growth both on organic and inorganic. So we're looking for acquisitions. When are these acquisitions going to happen, we'll see. They'll probably going to be not too many during this period until 2025, and they're going to be the size like froglogic. So we're looking for acquisitions, fairly small acquisitions that are adding specifically the, to our strategic product portfolio, increasing our product portfolio and increasing the, our total addressable market. And then we're going to put them into our sales network. So we're not looking to a -- we're not looking into very big acquisitions that the -- would change the whole structure of the company. So why are we investing already and why are we talking about these new things. We do see that our core product offering, the Qt Core software development tool offering, it's in its early phases in the product lifecycle. It's in the -- it's still in the early phase of rapid growth. And it will continue to be there for many years to come. But instead of waiting, that someday that growth will slow down, we are already looking for new growth initiatives. So we're looking that we can generate growth well beyond on 2025 as well. So in a very nutshell, if I'm going to put here that what are these tools to new markets as of today, they are quality assurance and Qt Design Studio. And we're looking for mortar there to come. And if we're thinking about these products that what is the total addressable market, it's kind of a 3-fold in a sense that today we have our, for example, our quality assurance tools. We do have the Qt commercial customers we can offer to cute quality assurance tools. We can also offer quality assurance tools to our open source user community. So we do have a big open source community which we think is great for the -- for Qt product. And of course what's being created through open source needs to be tested as well. And then we see that there is a -- there is a market outside of this ecosystem that our software being developed using other technologies than Qt and we can expand into those markets as well. So that is the, how we see that we're going to be adding new products into our portfolio going forward. And at the same time, of course invest further into sales and R&D and the core business we have. And doing that, I think that the -- we are in a great strategic position. We do have great assets. We do have a great platform to build upon. And I'm very confident that the -- we're going to have a -- we're going to have a eventful and full of surprises strategic period until up to 2025. But we also are going to be having a very nice growth path and story. And our journey is going to be probably very interesting going forward. So looking forward to that journey. At this point, I'd like to thank you for listening our presentation. That was my last slide. So we are a Qt developer accelerator as you can see over there. And I hope that picture doesn't mean that it's all downhill even though the guy is coming down there. But we are ready for questions now.

[Operator Instructions] And we will take our first question.

It's Felix Henriksson from Nordea. I have a few questions. I'll go one-by-one. Starting off with the success in a new customer acquisition. A year ago you stated that the number of customers you had was around 3,500. Could you share with us that that number today?

Thanks, Felix for the question. I don't have exact figure. And of course we do have a -- we do have customers with different license types. So some customers are shorter periods and some longer, and then there's a churn. But the -- if I just the -- to give you some idea that the growth rate -- the -- like I said, I don't have exact number to give you, but the -- it's well in the double digits.

That's helpful. Then looking into 2025, sort of envisioning the 3 revenue streams that you mentioned, subscriptions, distributions and transactional. If all goes well, what do you envision as your ideal sort of sales mix as sort of percentage of revenue between these 3 sources?

Well, yes, it's -- of course it's -- 2025 is -- it's a long way down the road. So the, let's both that the -- this is more like a guesstimate now, and it may vary. We do see a -- that the distribution license business will grow significantly where it is as of today. And that's based on the number of devices out there. At the same time, I think that from the last strategy presentations, or the last strategy time that we had when we last time presented our long-term plan that what we're going to make in 2021, we just moved from the perpetual licenses into term licenses and now we are in the subscription licenses. So the license base that we have in our customer base as they are transitioning into subscription licensing, that's going to increase the developer license revenue going forward. And it's going to be substantially bigger source of revenue than it would have been in a perpetual license. And at the same time, we are acquiring new customers. So the license revenue in that sense will grow, developer license revenue will be bigger. On top of that, we did a froglogic investment. And in froglogic, we don't have any distribution licenses. It's a developer license driven business. Also moving into subscription and as we speak. So the developer license business will be a bigger portion. So we're going to have -- I would -- if I look, the -- not giving you an exact number. If I look, the proportion I think that the distribution license revenue, and this is now -- disclosure, disclosure, this is my guesstimate. But I think that the distribution license revenue is probably going to be 30%, 40%. And the developer license revenue might be even a bit bigger chunk, and the rest remains to be seen that how. We do have of course consultancy business as well. It's not our primary business. We but we do see it as needed to support the developer license sales so that we do have, we do have consultants and expertise to help our customers in their development projects as they go forward. And then we do have this transactional revenue. So in this -- this transactional and digital advertising is very new to us. And on this strategic period we haven't put a letter numbers in it so that the, because it's in such an early phase, but the, I answered -- I'll say this as well, even though, Felix, you didn't quite exactly ask it, but, yes, we see the digital advertising that when we do have our design tools and people are designing user interfaces for their embedded products, it's -- it will be -- I think that it will be a common issue that people will start thinking that here is my user interface I'm designing with our design tools, and then they think that it would be nice to have a spot for advertising or maybe product information or a banner somewhere on that user interface. And by enabling that people can now design these spots while they're using Design Studio, makes all the sense in the world. And at the same time, if they want to have advertising, we can provide that advertising to them on a revenue share basis. So I think that the -- we haven't seen so much advertising yet on then -- on embedded world, as we see on the web world. So I think it's a growing area. And definitely we need to have design tools and -- that help, that design, that how to put that advertising in there. But we don't have a -- we haven't forecasted lot that revenue yet into our long-term vision just to be cautious.

That's helpful in any case. Then just thinking of the software development process overall, and the parts that you currently address, being developing, designing, deploying and now sort of quality assurance. Are there any other central parts of the process that you're currently not addressing sort of these white spots in your offering that I'm trying to capture, what could you add to develop [ that will bring ] significant amount of value? I think previous, in our previous conversations we've touched on sort of integrated cyber security or no coding, no code type of element, but could you mention any examples of what [indiscernible] in the developer's toolkit?

Well, I don't want to, I don't want to get too much into that. But the -- I think that we can still strengthen our quality assurance offering quite a bit. I think that the automation and quality assurance is a big thing going in the future, so to have more automatic quality assurance testing. That's one avenue. The -- definitely the kind of a low code or no code type of a thing that we're a bit addressing with our design tools that the, there is less coding needed, that's one avenue. Security definitely is and interesting area. But the, rather than highlighting the, we're looking into all of those, and in our Ventures organization we're looking into different avenues. We're looking at a lot of different areas, lot of different companies, and we're discussing with lot of different companies. And like I said, I believe there will be further acquisitions and we're going to announce then when we're going to announce them. But -- so I'm sorry, I don't want to get to further detail into that at this point of time. But those are the areas we are looking. So, on the other hand, we are looking to be in a software development space. We're not looking to expand much further out there.

Okay, got it. I got one final one. I have others. So your guidance on operating profit, just to pick [indiscernible] does that refer to EBIT or EBITDA [indiscernible] amortizations?

It is referring to EBIT.

Caller, please go ahead.

It's Antti from Inderes. Question on your guidance for the year. I mean, in previous years you have given quite conservative guidances. And if you think of forecasting how you look at that and giving guidances. has anything changed this year compared to previous years?

Well, no. If you're asking me that is this a conservative guidance, I must say to you that it's our guidance. But the -- I think that the -- if I elaborate that a little bit, obviously we are living in a situation where there is a -- there is component shortages, all kinds of components shortages, not only chip chips. We're living -- and I think that that's going to continue probably this year, maybe even next year and then probably in '24 we're going to have a surplus of all kinds of electrical components in the world and the prices will go down. Corona is probably going away. Last time I said that the Corona is probably going away, we got Omicron and the -- then we ended up, we were working on a hybrid model, and we ended up being in home office again where we are currently. And the last time I said that I think the Corona is -- gone away, I didn't envision at all that the -- we are in a brink of the war in Europe. So the -- I wonder what's next. So in that sense, the -- do we have that conservativeness in our '22 guidance? Well, of course we've been looking into these different scenarios and situations. Having said that, at the same time, we've already been in this situation in '20 and '21. So obviously we do have a lot more confidence and vision that although there are uncertainties that how things are working in these uncertain times. I do -- what we don't see, and it's hard to have a vision on that the -- when things are actually going to start getting better and back to normal and when are we going to be seeing a kind of a normal situation. And obviously that is a bit hard to estimate. But the -- we've given this guidance, and we believe that this is the guidance where we're going to end. And the -- we don't call it conservative or the -- as a matter of fact, if we look at the different analyst reports, the -- some analysts have a higher-end expectations and some analysts have actually been more on a lower end. So there is a variation also on the expectations in that respect.

That's helpful on the context of that. Question on the digital advertising open in Qt or announced earlier this year. Can you comment on the kind of early traction for that and your customer base right now? And also, if you have any view on how you think your customer base will be interested to utilize this solution? Is it more for certain smaller customer groups? Or is a broader customer base that you see could be interested in this?

Well, I do see that the -- well, I do see a lot of advertising on a web world and the -- and so far, we don't see a whole lot of advertising on embedded world. And obviously, not all -- some of the embedded devices will be product information only or a -- or related directly to the product. But then we do have a -- lots of embedded products. So I don't envision that you're going to have a lot of advertising on the infotainment in a car, for example, for the simple security issues and whatnot. And while the car is standing, I don't think that it's not worthwhile showing a lot of advertising. So I don't envision that. But I do envision that there are quite a lot of machines like vending machines or the -- what's the -- when you play a game, you put the coins and you twist whatever that machine is called, now I don't know. So you do have a lot of machines that you spend time in front of and there is a screen, and obviously that could be used for an advertising. So first of all, offering a solution with our design tools and with our offerings that you can design a user interface where that is -- where it's possible to place these ads, that's going to be needed for sure. And, yes, how much advertising there is going to be? Well, if I look at the amount of advertising elsewhere in the world, I think that the advertising will go -- it will find its way on these embedded devices as well. Where we're at today, we do have pilot customers that we are piloting, and we do have a -- well, we do have a quite a number of leads out of customers that have expressed interest. So definitely there is an interest and it's in -- on some customers, it's in piloting phase, but very early stage, obviously, to make estimations on that what would be the revenue stream. But yes, I think that one way or the other embedded devices will see advertising on them.

That's really helpful. One question on your plans to expand your current product. I know you're not going to give more details on what exactly you're going to do. But if we think broadly about kind of the current use cases for Qt technology, where is this kind of moving to new use cases overall? You mentioned that you might want to expand beyond your current ecosystem right now. Do you see more opportunities in kind of going deeper into the current development processes where Qt is being used? Or do you see new application areas altogether as more interesting? Or any kind of balance or idea of the balance between those 2 would be helpful.

Well, the core of Qt is the fact that we do have the Qt technology. So the cross-platform software development tool. And it's being used in open source, and it's being used commercially, and that's our core. That's our heart. And why do I see that -- this dual licensing and open source is very important. In the open source, it's a great support for the developers. Sometimes developers can get help through that community, and in those discussion forums they don't have to call our support. They can support its other -- the product quality is a lot better when the open source community, large communities using and reporting the box. And there are a lot of benefits in that. And that is the -- and we see that, that is our core of our business. And we see that in that business, there is a rapid growth for years to come. So our -- when we look for -- for example, froglogic and the quality assurance testing in that sense, the first thing we see is that well, it's very well integrated into Qt. So if you're using Qt technology, and you're developing something using froglogic tools, fits in very well. On top of that, the next step, we see that, okay, we have these open source users, and it's great that they are there. They are using the open source product on those license terms that they are, and we are happy with that. But we see that, well, of course, what you develop with open source, you need to test as well. And then we have this payable product for that community, that they can be more productive and get more benefit out of using Qt. So that's our core really. And so in these new products, that's the first offering expansion I can see. And of course, we do have a trade connection with these open source users. But it doesn't stop there because unlike on froglogic products, you can utilize that testing. Testing in that sense is universal that you can use that on testing also other products. And that further expands our total addressable market. And that's all fine, and we see that that's how we do. So we do see that the, each of these products need to be good to stand alone. But, yes, of course we are looking that we can offer them together to our existing customers and have more touch points in our customers. And in some sort of more closer relationship with existing customers more to use our product. So I would say that, that's kind of the sequence how we are thinking expanding further.

All right. That's helpful. And then the final question, and I guess the one that most Qt investors are always interested in. So your figures are looking great. The market is looking great. Everything is so far going good. But how are you sleeping these days? Do you see any -- do you have any worries that are keeping you up at night?

Yes, I know. That's interest TV question. The -- yes, first of all, thank you very much for all the investors. Thank you very much for all the forums that you've been discussing about Qt. I do follow the discussion. And I find it very interesting. The -- and to your question, I sleep very well. I mean, like I said in my presentation, the -- from a CEO point of view, obviously we started we started in 2012 we acquired. I was still at Digia. Digia acquired Qt, and then we separated the company in 2015. And we've been building this foundation. First, we raised money from the investors, owners, then to build our sales network and we were successful. We do have a great sales network in place. We built the foundation. We further invested on our R&D, and we made the product better. We invested on design tools. We added the design tools into our core offering. We added the MCU in our core offering. Now we added the quality assurance tools. And now we're in a position that we can offer a great set of tools to our Qt users, commercial customers and our open source users, and we can expand further from there. So I think that we have a great platform in place to add more products, more services, expand the customer base. And strategically, I'm very happy. I'm happy that we are where we -- we are in a good position. And now it's the question that the -- we need to execute fiercely, and we need to execute fiercely globally. But this position and situation is a lot easier than what it was in 2015 because in 2015 we had very little money and lot less people. Now we do have quite a lot of people on the ground. We have nice cash flow coming in. We can invest part of that cash flow and the -- we are in a good financial position. So a very long answer, but I sleep extremely well. Thank you.

[Operator Instructions] We'll go to our next caller.

Jaakko Tyrvainen here from SEB. Couple of questions from my end as well. I'll take them one by one. Firstly, just to clarify regarding the digital advertising solution, will it be -- so -- and the commercial logic for the solution. Will it be so that it will be based on the advertising volumes? Or what is the logic that you are considering there?

Well, it's the same logic then on web advertising basically, that you have cost per click or then if it's not interactive, then you have a -- you have a calculation on that, yes, how many predicted eyeballs they're going to be viewing that ad. And then that basically the revenue share seem to be going in the same fashion that on web advertising. So the -- we get a share of that. And then of course the party, the broker that the -- delivers the ads are going to get a share of the revenue. And then obviously the owner of the product or the -- where it's being displayed, they get a share of revenue. And the revenue shares are, it's very similar. At least this point seems to be very similar revenue shares and splits you have on a web world and the metrics and means. So we basically -- to answer your question, we would be getting a part of that revenue stream, making it available to end on those devices. So yes, it's based on the volume of the ads, and it's based on the potential eyeballs and their actions on -- in front of those devices.

Right, very helpful. A follow up on that one. In your vision, when that revenue stream starts to be material for you, in '25? Or do we have to look until the end of the decade?

Well, I'm impatient person, so definitely before '25, otherwise I'll shut it down. The -- yes, the -- hard to -- it's, like I said, early phase. We are enabling that, we've enabled that, that yes, you can -- on our design tools, you can actually design and you can plan that where the ads are going to be. We do have the -- we can -- you can design that where you're going to put the ads on your device and on your screen. We can deliver those ads and we do have pilot customers. So the -- technically, it works, and now we need to see that how big the market, where is the -- where are the early adopters, how we're going to get the early adopters, and at what market segments are going to be the first ones to attack. And so it's going to take a little while. But the substantial revenue streams, well it's kind of what is substantial. But yes, definitely well before '25 we're going to see that the -- if it's going to fly or not. But yes, so couple of years, yes. So if it's this year building and next year expanding, something like that, I would say that the latter part of next year we need to see a rapid revenue growth. Otherwise, we need to -- and of course we do have -- the way we do this is that the -- we kind of have sort of quarterly development gates that the -- so when we started this that -- it's technically possible. And then each quarter we are viewing that how it's progressing and you need to kind of go through the hoops in order to be able to get further financing and further investment. So the -- and they do have this kind of a quarterly get done kind of a list and then we're giving them financing. I'm actually very much involved personally in those. And yes, so basically if they start lagging behind or we start saying that they are not -- the project is not progressing as expected, then we need to change the direction or we need to do something. But I'm not going to finance a project forever. Let's put it that way.

Okay. Still continuing on that topic, the digital advertising market achieved hundreds of millions of [ USD ]. What is your vision, how large share of that market will be in the embedded device world?

Well, it's too early for me to say, but the -- a long time ago I used to work for Yahoo! And, yes, that was the -- then it was the web advertising world emerging. And the, I can tell it, it was a very lucrative business and still is. And if I looked at the -- is the -- if I look at all the kind of our devices where do you have screens, and I -- if I looked at how many -- how much time people spend in front of those screens, I'm sure advertising is going to find its way onto those screens. And I'm also sure that the -- in a way -- on a way to those screens you need to use development tools. You need to design that here is the ad, here is going to be a video, it's going to be 5 seconds long or whatever. And here is a banner, you can click and so on and so forth. See, you need to have those tools, and now we have those tools in place. Is the advertising going to find its way in the embedded devices, definitely. Can we find a way that the -- we are in that business in -- on some angle remains to be seen. But, yes, I'm pretty sure we're going to find a way.

Okay. Still on the kind of -- on your addressable market and -- but moving to the embedded device side. I recall that you have at -- in your previous slide deck, you've had a slide showing that your -- the number of devices in the sweet spot markets that you have is about to be 1.5 billion devices by '25. Is that number still intact? Or do you see that number larger nowadays?

Well, it probably is a bit larger nowadays. Do we have an updated number? No. But that's one part of -- if you look at our product development and our R&D, our R&D obviously is looking always to better serve our current customers. So we discuss with our current customers that what kind of challenges they have as of today and what current needs they have for tomorrow. And then we develop our core product based on that feedback. And of course we do have some own ideas as well. On top of that, we are looking at the -- how can we increase that addressable market. So how could we expand the capabilities of Qt to be used in more use cases. And MCU Qt for microcontrollers is a great example of that. So we introduced MCU that enables Qt to be used on a lower hardware and a lower memory environment. And we're continuously looking that kind of development as we speak so that the addressable market can be bigger. And it's not only we see, of course, it's good to have a bigger addressable market, but we do see that as also in a way that we have a very horizontal product and that's our core strategy, and we -- that's what we want to be, and we want to be cross-platform. But we see that the -- if you're building -- well, now the automotive is a good example. But if you're building a digital cockpit in a car, you're going to have lots of different screens. On some screens, you have more memory and you have more processing capability like on the infotainment in the middle, then you have less on a screen. And you might even have, and you usually do have some microcontroller screens in a car. So making it possible to use Qt on different use cases actually makes it easier for our customer. They can take Qt and they can build everything they need. They don't need to have multiple tools for that. So that's one thing. So I think that the -- that number has grown. We haven't updated that. But the -- on the other hand, even the EUR 1.5 billion is big enough. So basically we are saying that the market size is not limiting our growth now and not in the foreseeable future, either even though there is competition of course.

Okay. And then finally, from my side, looking at your numbers and growth, it seems that there's no rivalry out there. But have you seen any major changes in the competitive environment? And could you please remind us what is the reason for customers choosing Qt although there might be cheaper options available?

Yes. We do see competition. And when we started this business, there were some competitors, we were about equal size. And if we look now that the -- where they are, I think that they are far behind. So obviously they've grown, but they are a lot smaller. And I think that the -- there are few differences in that on strategic level. They've done -- many of them have not invested on direct sales as we have. So we put a lot of effort into building local offices and local people and executing locally with the -- our customers, whereas our competition did not, they relied more on resellers and whatnot. So that's one big difference. The other big difference I've seen in our competition that they've concentrated very focused on some industry or some use case. We're focused on a very horizontal. So I think the -- those are strategic differences. Then if we go and compare our product, which our customers very often do, the efficiency that we can provide and the efficiency and all the -- when they're comparing our product into our competitors' products, we are very competitive. So our product is very, very good. And on top of that, we've invested quite a lot on growing our personnel, and we've invested lots for this growth and concentrated on this growth. So we do have a great product and then those strategic differences I mentioned. And we've been growing very fast. So going forward, do I see that there's going to be more competition here? Probably. Although I haven't seen anything similar than we are. So we do see competition on different segments. So we do see competition fairly fragmented. We don't see competition like we have. So the -- I think that the -- that's basically where we're at as of today. Thank you. I think that the -- we are running out of time. Thank you very much for watching us. And thank you very much for the questions. Just the -- for kind of our sum up. I think that the, we had a great year. We are looking for a long-term growth until up to our strategic periods now up until 2025. I think we're going to be growing very nicely even after that. I think that we have a -- we do have a great strategy in place, we do have a great product in place, and I think that we are in a great position. And we do have -- I'm very proud of our personnel. And I think that we are in a great position to execute very well on our plan that we've laid out today. So the -- wish you all the best for the year and see you in 3 months. Thank you.

Thank you.

That does conclude today's conference.