Qt Group Oyj (QTCOM) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Qt's second quarter results. My name is Juha Varelius. I'm CEO of the company. And together with me today is Jouni Lintunen, CFO. He will go through the numbers in a bit more detail. As usual, I'm going to talk just briefly about the business highlights on second quarter, then we're going to have financials and then the outlook and guidance for the rest of the year. Business highlights for second quarter. Our net sales grew 17% and reached EUR 43 million, and growth was 19% on comparable currencies. Our EBIT margin was 29% and EUR 12 million, 25% increase and the profitability developed according to our business plan. So we have a very scalable profitable business. Our personnel totaled to 729 on June 30. So that's increased on 23 employees and growth investments continued as usual. We had a very good start for the quarter and then towards the end of the quarter, let's say, the last mile was a bit weaker than what we were expecting. So we were slightly behind what we were expecting for this quarter. If I look on the different reasons where we had a little softness, we were selling a bit more 1-year licenses compared to 3-year licensees. So that trend has a bit continued. There was a little effect. We also saw in consulting that consulting developed slower than we anticipated. And that, of course, we've been seeing all along. Basically, our customers are looking to costs, their cost levels very carefully. They are reducing subcontracting where they can, and they're trying to secure their cash flow as best as they can. We did have some deals that went over to third quarter that we were expecting to close on the second quarter -- on the other hand, I would say that, that's pretty typical that happens on each quarter that some of the deals they slip forward. So I would say that that's fairly typical. We haven't seen project delays or project cancellations in any number, significant number more. We haven't seen that our customers would be postponing or delaying their development processes. So basically, what we see, as always, that our customers, they are manufacturing and producing products for the markets and take on that work needs to go on and that work is going on. So we're selling licensees, and we are seeing projects going forward as usual. If I look at the geographic regions, Asia was doing pretty much as predicted. Europe is doing very well. And the softness we experienced and our last mile softness, so to speak, if we encountered in North America. Of course, we do know, we all know that the inflation is high. Interest rates are high and so on and the economy is slowing. On the other hand, I don't think that the situation in our case has weakened any particular way in second quarter, what it was in the first quarter honor. Well, this is already the forward, how we see the market developing. I don't expect the market weakness to be increasing on the second half either. So it was a bit of a headwind here and there, which ended up that we were a few million short of what we were expecting to close on this quarter. However, we did have a very good growth. I mean still, we did manage to grow pretty well, and we did have a very good profitability, and we expect that growth to continue going forward. We do invest on our growth plan. So we are still hiring people. We haven't changed our hiring plans, obviously. We do -- we introduced the 6.5 long-term supported version of Qt with lots of new functionalities. There was a new Axivion Suite 7.6 MCUs. On MCU, we've been gaining traction. So we have there good new customers coming on board, new versions on Design Studio's Qt Insight, Android Automotive and so on and so forth. So we do invest on our product, whole-product portfolio as we're going forward, and we are hiring people according to initial plan we've had. So we're not slowing down on any of our growth investments to put it so. Well, AI, artificial intelligence is a hot thing. This slide, I just want to highlight that the -- we do follow what's happening on AI. We see that the AI will be helping developers going forward, and we've done the first integration to co-pilots. It's a GitHub tool. And we see various opportunities going forward utilizing AI when developers are developing with Qt or doing testing, they can -- it can be utilized in helping on simple tasks, so to speak. We don't see that the AI, as we see it now, we're going to integrate that. It's going to be used together with Qt. We're following obviously how the development goes forward. We don't see a big business opportunity for us at this point of time, but we see that it enhances the product usage we have in other words in Qt and in quality assurance tools. So that was very briefly on the performance on Q2. So like I said, we had a very good -- we actually had a better start for Q2 than we usually have because the first couple of months were better. So usual quarter is that the first 2 months are very slow, and then we have a very busy last month. Well, we did have a very busy last month this year as well. But the kind of the last few deals that we usually do get and we make the final push that fell a bit short on our expectations. So we fell short a few million on what we were expecting ourselves where we're going to end up. But however, like I said, it came from various different sources, all fairly small, and we don't see any big change in the market nor we do change that the people would be shifting into different technologies or any of that. So in that sense, we see market pretty much the same as we've been seeing in the first half of the year. With these words, I'm sure you're going to have a lot of questions on this. So we'll continue on financials, and I'm going to then talk a bit the future outlook.

Thank you, Juha, and welcome from my behalf as well to the earnings call. Juha briefly discussed already about the revenues. Let's go through one more time, though. As discussed, net sales grew by 17.2%. There was some headwind from the exchange rates, namely negative EUR 0.6 million. And the growth at the constant currencies were 19.0%. For the full first half year, the FX did have a very small impact. We grew by EUR 21.5 million to EUR 68 million -- I'm sorry, EUR 83 million. And the constant currency growth were pretty much the same, 21.5%. The growth was driven by the distribution licenses and developer licenses, and we did see some softness in consulting side year-on-year. We keep on seeing the maintenance line going down going forward. I mean, it has gone down by 27%. This is as planned, and this is outcome of the subscription transition, we have been ongoing for 3 years now. We expect to keep on seeing the strong quarterly fluctuation going forward as well. That's because of timing of the large deals booking of the distribution licenses and also because of the FX. And for the second half year, we expect to be seeing a bad guy from FX, USD has gone or devaluated by quite a bit since last year. So that's going to make a difference in our reported numbers, but obviously not in constant currency reporting. Then about the P&L in Q2, growth was 17.2%. The first line to name here is the materials and services. And this again is the account which is used to book the third-party consulting services for our external consulting projects. And it's down year-on-year not only in Q2, but also for the full first half year. And that's the driver driven by the softness of the consulting business as well. This is as well a good way for us to mitigate the expense level of our doing. So profitability levels for consulting. We can balance the resources with the external help and now we were able to then reduce this number because of the lower volumes. Our headcount went up by 146 during the past 12 months' time, out of which roughly 110 organically and by 40 with the acquisition of Axivion. The personnel expenses grew by 21%, which is pretty much aligned with the result of the headcount increase. There is no major change in depreciation, and the other operating expenses are developing as well as planned. We are putting efforts on our long-term growth projects. And this then leads us, all in all, to the operating result, EBITDA result of EUR 12.5 million, up by EUR 2.5 billion over last year. EBITDA margin went up from 27% to 29%. Amortization from the acquisitions is up from EUR 0.9 million to EUR 2 million, and that's -- the difference is driven by the Axivion amortization. And our operating result EBIT is EUR 10.5 million, improvement of EUR 1.5 million over last year, and EBIT margin is 24%. There was EUR 0.5 million cost in financial items and income taxes were EUR 2.1 million, which is roughly 21% of the -- or it means 21% effective tax rate. Net profit is 18.2% or EUR 7.9 million then for the second quarter. And the same view actually holds for the whole first half. No major difference of variation between the development on the cost accounts here. We grew from EUR 69 million to EUR 83 million. The EBITDA margin is up from 23% to 24%, bringing us to EBITDA of EUR 20.3 million. And the EBIT for the first half year is EUR 16.3 million or 19.5% and net profit of EUR 12.3 million. Balance sheet then also, in general, rather small movements all in all, our operating cash flow was positive EUR 21.3 million for the first half year, primarily brought in by the obviously Q1. Our ending cash is EUR 27 million, up by EUR 18 million from early January. And the trade receivables, accounts receivable are about the same level as what they used to be at the end of the last year. However, then the contract assets are down slightly, roughly EUR 2 million now compared to the end last year. Equity and liabilities side, pretty much the only move in the short-term liabilities is the roughly EUR 2 million earn-out payment made in Q2 for the froglogic acquisition and then some EUR 4 million move from long-term liabilities to short term in the same period. So this is shortly the financials. And now I will hand it over back to Juha to talk through how markets are and the guidance for the year.

Thank you. So well, we don't have a change on our long-term market outlook. We -- the long-term growth prospects are very promising. Our runtime revenues are growing. We're doing big deals. We're having big customers and they're delivering more products into the market. So all in all, I -- and we see new customers coming on QA, we see that there is a great fit on what we're selling. We're selling a software development tool. So it links very close and very well into software testing. We see a growing marketing there. We see an independent growing market on testing because with our testing tools, people can test also software that's been not developed with Qt technology only. So we think that there is a big growing market over there. Well, we all know that the market is uncertain. The interest rate hikes are probably now at least slowing down. The inflation is coming down. I think we're heading towards better times next year. But of course, this H2 is going to be -- there are lots of uncertainties in that sense. On the other hand, do I see that the uncertainty has increased now during the first half? No, I don't. I think that this is -- if the things stay like this, then I wouldn't say that the uncertainty -- well, it's not increasing anymore. I actually see better times ahead. I think we are heading towards better times. We're not heading towards worst times. But of course, we do have worsened stuff like that. So you never know where that's going. If I look on the Qt side, the development side, we do have big customers. We've been gaining new ones, and they do product development on long perspective. So when they start product development, they think many years ahead. They're putting factories together and start producing products. So these investment decisions are not driven by short-term changes in the market environment, so to speak. There might be some postponements may be 1 quarter or 2 quarters, but in general terms, these investments and this market goes forward. So we haven't changed our guidance. We still expect our guidance to be between 20%, 30% year-on-year growth on comparable exchange rates and our EBITDA being in between 20% to 30%. And we don't see any change on that. If I'm looking next year, we expect world to continue pretty much in the same traction as this year. So that's basically the market outlook. So if I think that what we saw in Q1 that how the market is developing this year, there is no big change in that respect. And oops, that's it. And we're going to take questions first here in the room, right, and then we're going to take questions on our phone lines.

Felix Henriksson, Nordea. I have a few. I can go one by one. Firstly, starting on the sort of miss on the last push that you mentioned late in the quarter. So was that sort of related to customers delaying projects, canceling projects or did you just end up getting lower value on the deals that you were expecting to sign late in the quarter?

No, we don't give kind of a last-minute discounts. So what we easily experience is that the deal goes and also we don't experience usually a typical deal as such that the customer has done a proof of concept and they've tested the technology, they've looked into the technology. There's been discussions that how they're going to be using it and whatnot. So customer usually has done quite a bit of work. So at that point, they fairly seldom just walk away totally. Of course, we do lose deals during the course of the quarter all the time, but what we saw now is that -- so they usually go forward or they are lost. But we don't give discounts on the -- to close the deal because I think that you could do that once, right, but then you kind of educate your customers, but you give a last-minute discounts. And then you kind of were hooked that you need to do it each quarter. So I don't see any reason to go into that. So it's the -- what we experienced was that the deals we were expecting to come in specifically in North America that they didn't come in for many various reasons. And so the -- I mean to put this into this perspective, we mainly missed our expectations like EUR 3 million or so. So it's not -- it doesn't take a lot. It's not a huge amount of deals in that respect. So we made EUR 43.5 million. We were -- I was looking for EUR 47 million or so. So it's not a huge miss in that sense. It's easy to do.

That's actually very helpful. And related to this sort of shift from 3-year license maturities towards 20-year license maturities, that's typical and there is a bit of uncertainty in the economy. How large of a factor would you say that was in explaining that EUR 3 million miss?

Well, it's somewhere between EUR 1 million and EUR 2 million, I would say. Yes.

And you obviously have quite a bit of these 3-year licenses coming up for renewal in the second half of the year. And if I remember correctly, your guidance is sort of assuming that this will be renewed with maturities in line with historical patterns, i.e., through your licenses. Do you sort of have any visibility based on your customer discussions on what type of maturities are they looking to renew these deals with?

Well, no, in larger scale, I don't. We had some renewals in -- now in our first half, not many, but few and they renewed the licenses as is. So the very small amount that we had 3-year renewals in the first half renewed again. So I don't expect churn, right, because if you've been developing something 3 years, you're down the road. So obviously, you're going to continue. So I don't expect churn. But of course, then the question is that do all customers renew 3-year licenses into 1 year licensees. We don't expect that either to happen. But yes, that's going to be on the second half, they're going to be order. And it's kind of the first way of renewals, right. It's the first way that we've done the 3-year deals are coming down in the second half. So it's going to be interesting to see how that develops. Of course, we are monitoring it. And of course, we can influence that also that -- where does it end.

And then on the second half of the year, obviously, now you've delevered 21% year-on-year revenue growth in the first half in comparable currencies. So that sort of implies that you don't see -- or you will have to sort of maintain or even accelerate your revenue growth a bit in the second half to meet your guidance. So what sort of giving you confidence in doing this kind of -- that you'll be also facing tougher comparisons than in the second quarter?

Yes. Well, like I explained, we do kind of a different approach on estimating our revenue. One is that the -- or our sales guys, they have their own pipeline, they have their own gut feeling. They have their best case, and then it kind of rolls up. So I do have a visibility that what it's an individual sales guy is estimating that what is their gad-feel for the Q3? What is their gut feel for Q4? Where is their pipeline where they can end up front? Then I have the big pipeline that we look from the other angle. We look at the -- and then -- well, it's wrong to say that it's AI. It's not artificial intelligence, but it is statistical analysis being done that on this kind of a pipeline that the -- of course, we have history. So we analyze that in a bigger bulk, but where do we think that that's going to end. And then our product management is following each and every product very carefully, and they are making their own analysis that where they think that on these trends, given the churn and everything, things are going to end up. So I have that kind of information put together. So from the sales -- from the field, from sales guys from statistically that the -- how the pipeline looks and then we put that together and there it comes. Now the thing is that the -- as you all know, the fourth quarter is going to be the biggest quarter and December and the last 2 weeks will be where the magic really happens. So it's going to be, again, towards very year end when this all comes together. If I now look at the pipeline, if I look at where our estimates are and whatnot, the -- I think that I know that last year, we were in a bit similar situation and there were some doubts that we may not even meet our expectation. I think that the -- now where we are at and looking, we have actually even a bit or easier tasks. So I don't have any reason to doubt that we wouldn't be able to deliver over 20% year-on-year growth.

And then final one for me. It's been some time since you gave your sort of long-term target of growing 30% to 40% annually and the world has changed quite a bit since then in terms of the macro operating environment. Do you still find that sort of a growth range to be reachable for Qt during the strategy period over the coming years when we look at 2024 and 2025?

Yes. Well, we do have a Strategy Day with the Board of Directors at the end of September each year, and there we update that how do we see and how do we look at where we're heading and how do we see that growth. And of course, 20% to 30% year-on-year looking into a growing base number in absolute euros, you have to sell quite a bit more. We don't see -- of course, we see that in going forward, '26, '27, we need to do quite a bit more, and we will in that period of time. Like we've said in our strategy, we are building this company to be a multiproduct company, multiproduct strategy, QA testing tools are the first example of that. I think that the testing itself, it's going to grow pretty substantial in the coming years. So if I see that how this growth is continuing, just the QA tools and Qt product itself, it will continue growing years to come. And then it comes -- if I say that this will continue 3 years onwards and let's see what happens then gradually, maybe it's the growth, 20% growth, 20%, 30% growth rate just has to start slowing down because the numbers are getting so big. Are we looking and building other products into the portfolio to keep that growth continuing? Yes, we are. So we're looking to stay on that path. But of course, it's going to mean also other offerings to come into the table. And then I'm talking about '26, '27 and beyond. And as you know, it's rather difficult to see many, many years ahead. So it's more of a how are we going to be doing it? Well, that remains to be seen in '27 and beyond. But in general, if you look at the amount of software that's coming into the market, if you're looking at the amount of software being put on products, if you look at the lack of developers, we're actually helping our customers, that seems to be continuing forever.

Jaakko Tyrvainen from SEB. I could continue on the license renewals. You talked a bit on the few number of 3-year licenses that were renewed now in the second quarter or the first half. But last year, in Q2, you saw quite many 1-year licenses or the maturity mix was also tilted towards the 1-year licenses. Did you see those licenses being renewed now in the second quarter?

Yes.

And did you see any kind of extraordinary churn during this quarter?

No, we don't -- what we see now, we see nothing to be worried about for the second half, let's put it that way. Yes. And it's -- many of the product development projects where Qt is being used, they are multiyear developments. And as a matter of fact, our customers when some product ends, then they have a next one on a line and the next one on the line. So we kind of are -- unless the customer decides to go with an alternative technology, we see a continuous usage of Qt. So we do have customers that being our customers for years. And the product is very good. And if I look what the competing technologies are doing, we do follow them all the time very carefully. I haven't seen that they would be taking any market share from us or the things being changing in that particular set. In fact, Qt product is very good and our customers that are using Qt are very, very happy with it. So -- and that's, of course, the cornerstone. I mean once the product is not competitive, then no sales can save it, but when the product is very good, then we're alive and kicking. And it is very good.

Good. Then my second one, you mentioned a bit of a soft performance in consulting. However, we don't know the number for -- the sales number for consulting. Could you give some color here? For example, how much you kind of missed your own expectations in consulting in the second quarter or the first half, just to understand? And a follow up here, have you seen or are you seeing the slowness in consulting to continue towards the second half?

Yes. I think that the customers -- well, first, to your question, how do I see I said that EUR 1 million to EUR 2 million on the conversion rate, EUR 1 million to EUR 2 million on consulting, that's those type of ranges. We're talking about small amounts. But when we kind of remiss our expectations for EUR 3 million or EUR 4 million, it doesn't take a lot, right. Do we expect -- well, consulting is a -- it's a supporting business for us to -- first of all, I mean it's there to support our customers when they use our products. So it's not our primary business in that sense. What we did see is that the customers are -- businesses in general are getting more cost conscious overall in different industries. So our customers are looking at where can they cut their subcontracting and whatnot. Do I think that that's going to continue in the second half? Yes, definitely. Is it going to have a huge impact on our numbers? No, we're talking about EUR 1 million or EUR 2 million. So it's not substantial. How do we -- are we looking to grow the consulting going forward? No. I've said that it needs to be less than 20% of our revenue. As a matter of fact, I think it's half of that, what we see today, and it's going to be less and less as we go forward. And now in nontypical way if we look the positive things, the distribution revenue has been developing favorably. And we've been attracting new customers, big customers that's been going favorably. And I think that the -- on a QA, more we look into that business and more we see into the future in that business, we see actually a bigger opportunity that we see before. So those are on the positive side.

Good. Then regarding the softness or slowness in the U.S. market, you mentioned there. Has that trend also continued in the third quarter? And in your own analysis, what is driving the slowness in the U.S. market? And a follow-up here as well. Is it just the market? Or have you seen changes in the competitive environment there?

Well, on competitive environment, I haven't seen changes. So in that sense, it's same old in that sense. Do I have one particular reason that I would note that what caused, I -- no, I don't. I think it's say, a bit of a market, many different things. Obviously, we are having a very close eye on North American market. And the -- of course, we're going to get it back on track, so to speak. And why do I think that we're going to get it back on track. I don't see -- in our markets, I don't see United States being that different from Europe or from APAC. So in that sense, if we're selling well in Europe, we should be selling well in North America as well. So I think that it's a bit of bad luck bit of bad timing and a bit of different problems here and there. We need to get our execution better. I'm not saying that it's because inflation and markets and whatnot, we need to execute better, period, and we will.

Good. Then my final one. On the maintenance revenue line, which naturally comes down due to the license model change back in a few years ago. But could you help us when do you see that declining trend in maintenance revenue to stabilize because it should stabilize at some point, so?

I think that's a rather good one. And I think we are about that time right now. I mean there are not going to be new maintenance contracts, for example, renewed. So it's all going to be kind of a subscription license mode that we are selling. So it will stabilize too. There are some still running, generating some revenue still, but not being renewed anymore.

Waltteri Rossi from Danske Bank. I think actually most of my questions were answered. But maybe on the quality assurance business. I think in the pre-selling call, you painted a picture that it could be a very lucrative business in a few years. But just curious, how big is it right now? And how do you see the market is, the competitive environment there? And can you give any more specific guidance on that?

Well, we acquired roughly EUR 12 million. It's been -- if I -- let me -- we've acquired EUR 12 million. Would we acquire anything that would dilute our overall growth rate? No. Would we acquire something that dilutes our EBITDA? No. So they are performing -- they are performing on par or better than the Qt. If I look at the competition and competitive environment, it's -- I would say that the -- well, both products are very good. Axivion product is like a Formula 1. It is what Squish Coco or also world-class products. So they're very good. So they fit very well into our strategy that we have a world-class product. If I look at the competitive environment in QA, the market is more fragmented than any of our software development market. So there are very many various small players in that market serving different use cases. Do I expect to see their consolidation? Do I expect there to see that customers will eventually want to use less products that do more functions than many products for different use cases? I think that, that consolidation will happen in the same way that I think that in software development, it doesn't make any sense to develop different screens, for example, in different technologies. Instead, it's going to consolidate. That's the cornerstone of our strategy that we have a horizontal product in Qt that you can build everything with Qt, so you can build a whole product portfolio from low end to high end or you can build a digital cockpit in a car. I think the same will happen in testing in eventually that the fewer products will do more tasks. I think that the -- on architecture, where Axivion fits in, it's for architecture improvement testing. And if I look the -- many of the problems customers are having in their software development, it's because of a architecture is a bit of, let's say, spaghetti in some sense. And Axivion product is great, not only looking into that spaghetti, but also telling that where you have problems so to fix them. And I think that the -- and it's particularly good on safety critical things. And where do you see safety critical things? It's like in automotive, if you think you have brakes and clutches and whatnot. So they need to work, they need to be safety critical. So it fits very well in there. So Axivion usually goes into a bigger projects where you want to make sure, for example, that the architecture works fine, and it's a very good product. I think that there is going to be even more need for that, that the market sees as of today. So I'm not going to give you a time line. But if I look at QA as of today, what I see in my mind is like Qt 2012, right and that's how I say it's going to go forward. And in 2012, I said that in '21, the Qt will make EUR 100 million and nobody believed. So I don't bother say that what QA is going to be 5 years from now, but it's going to be substantially bigger that I can promise. And profitability is good. It's a product business.

Matti Riikonen, Carnegie. A couple of questions also. If you think about the revenue share of consulting and compare Q2 against Q1, was there a significant decline? Or are we just talking about the small decline?

Small?

EUR 1 million to EUR 2 million?

Yes.

Then regarding the maintenance revenue that was already discussed. Is it correct to assume that with your desktop customers, I mean, the old customers, if they discontinue using Qt and then end up paying the maintenance revenue at all, is that the reason why the maintenance revenue is also dropping? Or is it solely triggered by the change in the licensing model so that the revenue recognition is different?

It's solely because of the rev rec. And if you have a perpetual license, by nature, you can be using that, I mean, for a long time, but you will not get any updates on any maintenance if you didn't have the maintenance part. And we are not pretty much selling it at all anymore. So it's going to be all subscription. So that's the only driver in that.

All right. Fair enough. Then if we think about the split between distribution license revenue and developer license revenue, was distribution growing faster in first half than developer licenses? And what is going to happen in the full year according to your expectations? Is distribution going to accelerate? Or will it have the same revenue share as it had in '22?

That's a tough one. Well, we do disclose the distributional license revenues.

Why I'm asking because if you did, I would not ask this. I would see it in the numbers, right?

Yes. That's -- it's a good question. I think we need to look into it and get back. But how do we.

Well, let's -- I think we did put it in a way that -- I mean, distribution licenses and developer licenses are both growing very well right now. And I mean, that applies to distribution as well. And I guess that's a secret, but we want to go at this point of time.

Yes. And the prediction -- well, they are growing well.

Okay. Fair enough. When you talked about the 20% to 30% top line growth, and you were also discussing your future, did you just downgrade your midterm financial target of growing 30% to 40% in the previous dialogue?

Well, I think I was fairly vague that the -- I said that we're going to have a board meeting in September, and then we're going to set up targets going there. But the -- so if I look at the -- and we were talking about -- we were talking about 20%, 30% growth on the Qt product and how long that will last. And so I was referring to that at some point, that growth obviously will start slowing down. It's not going to be like dang and why that percentage will start slowing down is because of the base number is just getting so big that it won't hold. And then I said that -- obviously, we're going to look for new product initiatives. We're building a multiproduct company to keep up our growth levels as stated before. So that was basically it. But I think that fair to say, we're going to have our strategy meeting with our Board of Directors and then we're going to set up our outlook for, is it 3 or 4 years? Don't know yet, and then we're going to communicate that. So that's the right time to communicate the long term. But we're -- so what I was trying to say is that the -- obviously, 3, 4 years down the road, the Qt itself, the actual percentage, it will be growing in euros, but the actual growth percentage to keep it high up. That's not going to hold obviously. So to hold this kind of growth projections need additional products for our offering, and it needs also the QA product to take off with seems that it will.

All right. Good. Then about order slippages, you describe them as fairly normal. So there were no kind of major drama in those or some slippages, but nothing extraordinary that would make the miss more understandable?

No. I think that the -- what came a bit surprise were that some deals that we were really expecting that they're going to close there was a slippage. So the kind of the last mile push, which happens during the last basically 2 or 3 days, that was a bit softer than usual. But of course, given the numbers that there was a bit softness here and there. We're not talking about a huge effect. So I would say that the -- you could take that assay. Our regions do vary in their strength, sometimes usually, they are on par pretty much even. But now we saw a bit more softness in North America than the other regions. We're doing pretty much on their expectations. So which kind of gives us -- we don't see any changes in the market per se that it's the Europe and APAC were able to make their gut feelings, so to speak, U.S.A. was a bit soft.

Right. And then finally, what makes you optimistic about the second half? And if we think about the top line growth range, which is pretty wide from 20% to 30%. Usually, companies start at the middle and then they hope they won't end up being at the low end and also hope that they would be at the high end. Are you now hoping that you would meet just the low end or something else?

Our guidance is 20% to 30%. So we have a couple of minutes if there are any calls on the line, so. One more, sorry. I'm sorry.

Antti Luiro, Inderes. One quick one before we give the call...

As many as you like.

So I think you mentioned on distribution licenses that it's actually looking a bit better now than expected a bit before, if I heard you correctly. I know there's been a bit of changes on that front, like the volumes came down from the chip shortage time and now I mentioned it's a bit better. Is it volume or price driven now that it looks a bit better?

Volume.

Yes. And is this coming from what the customers are communicating towards you or...

Well, I think we gave guidance already last year on some event, I said that this year is going to be -- the distribution licenses will be growing. And then I was asked that how do I know? And I said that, well, I know that there are product launches coming into the market. So that's what's driving it. So we do have customers that be it they have done their development that the products are rolling out, and the run times are coming in. So it's volume, yes.

Right. And now the volumes that have been coming in have been at or above expectations?

Yes. It's the -- we do get runtime revenues from many different sources. So even if some customers may have some trouble, I don't -- I think that the -- there are still global shortages on some parts here and there. But in general, I think world is going in a better direction. And funny enough, people are spending money.

Surprising. On also the verticals and how they're performing. I know consumer and automotive have been maybe on the lower side compared to other industries, but have you been seeing any change now recently in how the verticals are performing?

Nothing material, no. No, nothing material. So the consumer electronics, medical, automotive, they are all, if you think automotive, for example, it's a long-term business, right, to start develop -- designing a car, putting it into the market and rolling out, it's a short-term implications in the market don't really affect what they do. If they have a capacity to build the cars, they'll build the cars.

And a short one, do you have any big deals in Q2?

We did have -- that's another thing that we haven't defined, let's say, a big deal. So they're getting bigger all the time, right. So yes, we do have -- we did have some bigger deals over there, and I think we're going to have -- well, I'm sure we're going to have bigger deals in Q3 as well. So it's a combination, yes. And we'll -- there are a few deals on Q3. I'm going to -- we're going to close. So in that particular manner, our deal sizes are getting bigger in general. So do we have any on the line?

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you very much for the participation. Thank you very much for the good questions. We had to conclude. We did a -- we had a healthy growth in the second quarter. We were a bit short on the expectations, but we were able to manage a very good growth with a very good profitability. We are maintaining our guidance intact, 20% to 30% growth year-on-year and 20% to 30% EBIT for this year. If I look forward to the remaining of the year, our pipeline looks good, and we're very confident that we'll be able to deliver on those expectations we have. Thank you very much.