Welcome to this webcast presentation of ETTA Planns Q1 results for 2025. My name is Johan Akdadi, I'm the CEO, and I will also be joined by our CFO Helena Kukkonen for the Q&A part of this webcast. The contents of the webcast follows the same line as we have had before, so we'll look at the quarter highlights and lowlights and the overview. look at the financial development in Q1 a bit more in detail, look a little bit on our service areas, and then to end, we will look at how we did against our targets and also give out our financial guidance. And then followed by the Q&A session. But if we get started with the highlights of Q1, so in the market situation after a difficult start, or let's say a difficult end for last year. We knew that the beginning of the year in January would be tough, and it was. But there were certain signs of a slight recovery in our European customers during the first quarter. We saw in particular the hardware design and hardware engineering and the software side improving slightly, which was a good indication because this is normally where R&D investments start when our customers start to invest a little bit more. And this was positive. Our customers were getting a little bit more orders and we also started to see some positives in the market. Investments related to defense were continuing on a high level and also energy industry continued at a moderate level. So investments were continuing as per last year in these areas. and also China was clearly positive for us in Q1. The market situation or the demand situation remained good despite all the turbulence that is happening around us. But still the number of hours sold to the Chinese market were increasing significantly by 21.9% and the performance in China was solid. However, in, if you look at the negative, so in the, in the first quarter, of course, the market was highly unpredictable. There was very high political tension and also the development of the trade war had a clear impact in the market at the end of the quarter. We started to see postponements and cancellations of investment decisions at the end of the quarter. So even if it looked a little bit positive during the quarter, the development of the trade war and the tariffs in the US had a clearly negative impact and again we are a little bit in a more difficult area when it comes to estimating the future. And in this weak market condition, of course, we did need to continue adaptation measures with our organization and that led to significant one-time items or non-recurring expenses. And this, of course, had a clear impact on our result. we also had one large credit loss in Germany, which also impacted the result. Also, our service area, technical communication and data solutions was not doing well. We had some turbulence with the Central European customers especially. I'll return to that with the service area presentation. If we look a little bit on the operating environment, so of course, it was very, very uncertain during the first quarter. and the war in Ukraine continued. And also the new uncertainty with the trade war was apparent and clearly affecting our customers' decision making. Defense industry energy continued, as mentioned earlier, but in all other markets, the customer decision making was very, very slow. There were also considerable differences between different customers. So some customers were moving slightly forward, others were waiting. But very, very few investment projects got started. The only ones that did get started were pretty much related to direct cost savings and all the other investments were on hold, basically. If we look at the markets a little bit more in detail, so in Europe, of course, the geopolitical tensions had an impact and basically all the countries were a little bit similar. There was no country that much weaker or that much better, but in all countries the uncertainty and especially the increasing uncertainty had an impact and different customers reacted in a different manner to this. And customer specific variations were of course high and especially in Central Europe we saw certain customers having difficulties with their deliveries and with their orders and this resulted in basically a standstill in any kind of new investment, which then had an impact on our demand situation. And China, despite the trade war developing and so on, in China, the situation was really good. Still, the development of the sort of services, buying services culture is the primary sort of movement that helps us with the demand and that still continues. Also, there are certain measures that the government has taken that is boosting the demand currently in the Chinese market. So there we see that that good situation will continue, at least during H1. Of course, very difficult to say what will happen after that, but, but we see a positive development in China currently. We didn't go to the figures, so slight decrease in revenue by 2.3% to 94.9 million, but of course organic development was much worse. EBIT had 5.8 million, 29.4% drop from last year, and EBIT 4.2 million euro, 37.9% decrease for last year, and also a drop in the EPS to 9 cents. Of course, this compared to a fairly good first quarter last year, or at least the market conditions were fairly positive compared to where we are right now. If we then look a little bit on the revenue and personal split in Q1, so revenue by service area, engineering solutions 56%, so growth mainly due to the acquisition of Novacon. Software and embedded solutions at 24%, and technical communication solutions at 20%. by area, Finland 45%, Scandinavia 27%, Central Europe growing at 25% and China 3%. So clearly, you know, the Novacon acquisition affecting the figures here. And personal by area of Finland 47%, Scandinavia 18%, Central Europe 24% and China 10%. So the acquisition of Novacon having an impact here otherwise fairly stable with the exception of China where the market has been strong. If we look at the revenue split by customer segment, automotive has actually grown in terms of percentage and this is mainly due to the fact that the Novacon acquisition took place in the beginning of the year. But also we have been doing relatively well in the automotive sector. Our position has improved and also there has been investments in the automotive sector, especially to new models and to electrification of cars, which has led to a slightly better demand situation than in some other industries. Defense very, very strong again, and aerospace and defense growing to 7% of the revenues. And all the others basically then marine and transportation, slight growth. They're also, and Novacorn had a slight impact with their work they're doing for four trains. but all the others are also relatively down and the weak conditions in the market continue. If we look then in a little bit more detail in the financial development, so overall all the key figures were dropping. Revenue not that much, but on the profitability side we had significant drops and personnel growing just slightly by 1.8% to 3,918 due to the acquisition of Novacon and also compared to the quarter last year, some other acquisitions. If we look at the revenue so clearly, the market uncertainty is high on an unprecedented level and forecasting the future is extremely difficult. So revenue was dropping by 2.3%. Organic growth at comparable exchange rates was minus 8%. -7.7% with normal exchange rates. And revenue from key accounts was growing by five, sorry, declining by 5% in Q1. There's a split between the growing defense and energy customers and then the rest are declining more than the 8%. So that is that is clearly visible in this number as well. So difficult condition, very difficult to predict, which had an impact on revenue. On the profitability, we had significant non-recurring items during Q1 and these amounted to 1.3 million compared to 0.2 million last year, so a significant increase. EBIT was at 5.8 million and 6.1% of the revenue, which was of course not satisfactory at all. The non-recurring items related to adaptation measures that we took in the organization to adapt ourselves to the current prevailing market conditions and also to enhance our strategy execution capabilities. And on top of that, we had, of course, some expenses and costs related to the Novacon acquisition and then a very unfortunate credit loss in Germany. that had a significant impact on the engineering solutions result level. Without the non-recurring items, the EBIT would have been at 7.5%, which in this market condition could have been considered decent. But of course, the non-recurring items are there. And this was the third quarter in a row where we had a fairly high number. This needs to stop, and we don't foresee that in Q2 there would be a very large number. There will be some, but not a very large number in Q2. This is our current expectation. EBIT was at 4.2 million, so a clear drop from last year. So EBIT percent was 4.4, not satisfactory, of course, at all. Amortizations related to acquisitions were at 1.6 million, so slightly growing compared to last year due to the Novacon acquisition. EPS was affected, of course, by the lower profitability, so shown at $0.09. Operating cash flow weakened also compared to last year. Of course, a very, very slow and short December month had an impact here. Also, the non-recurring items and lower profitability overall had an impact on the cash flow. And personnel at the end of the period was at 3,918 and the number was growing by 1.8%. And people outside Finland or personnel outside Finland was at 2,060, so clear growth there due to the acquisitions and also China having a positive impact here. But overall, we still had a difficult market situation. There were certain adaptation measures that took the personnel down. We haven't done that much recruitment in these kinds of weak market conditions. And also, we have had to take adaptation measures here in Finland in terms of temporary layoffs. So we had 157 employees temporarily laid off in the end of March. We had a clearly higher number during the quarter, so it was close to 180 or so. It started to decline a little bit during the quarter when the market situation seemingly improved. But now, of course, with the trade war measures, it's difficult to say how this development will continue. In the income statement, no major items, of course, financial expenses relatively on the same level as last year as the interest rates have been coming down. despite the fact that we have slightly more loans to finance the acquisitions, but with the lower interest rates that is coming slightly down. Nothing more in this one. And the balance sheet after the Novacon acquisition currently standing at 322 million euro. Nothing significant on this slide either. If we then go a little bit more in detail into the service areas, So in engineering solutions, of course, Novacon powertrain acquisition was completed and it is continuing as planned. The integration has started well and we are progressing forward. But of course, the high uncertainty in the market had an impact on the demand situation and we had to take adaptation measures and that kept our operational efficiency modest, which also had an impact on the result. We also had costs from the adaptation measures and a significant credit loss in Germany of about 800,000 euro in this service area, which clearly affected the result. So the profitability EBIT without the non-recurring items would have been 8.1% and that would have been fairly decent in the prevailing market conditions. But still, of course, the non-recurring items are there, so no way to avoid that. Slight growth, 1.1%, but the profitability down. In the software and embedded solutions, we continued on a relatively similar level as in Q4. Revenue was dropping clearly by 11.9%. compared to last year due to the difficult market situation and adaptation measures that we have taken. But EBITDA was at 8% lower than the previous year, but relatively similar to the previous quarters during last year. We clearly saw an improvement during the quarter, especially in the product development area and especially in hardware, where projects started to come in. We expected that to be followed by software and hopefully then application engineering as well. But unfortunately, this has not happened. And now with the recent development in the trade war, it's difficult to predict whether projects will continue or not. Certain customers have already postponed their investment decisions, and we need to wait and see how things move forward. But it's clearly twofold. The R&D activity started a little bit, especially in hardware, but then it did not develop into software yet. And also in the sort of application area, there is still very, very low levels of investment. Due to this, we had to also continue adaptation measures here, and that resulted in a slightly lower level than would have been without them. But here, not that big of a change in Finland or any other country. In the technical communication and data solutions area, we had a difficult quarter clearly. We had slight growth and this is related to our improving market position, especially in Central Europe. We had growth in Germany last year when we won clearly market share and this is visible in the growth numbers. We also had certain growing customers, especially in the defense area. in Northern Europe. But then during the quarter, due to the uncertainty, there were certain customers that were taking their investments down and we did have a lower demand situation in Central Europe. And especially in the Netherlands, we had difficulties with certain customers and the operational efficiency was really low. We had to also take adaptation measures in this service area. and that had an impact on the profitability. And without the measures, the profitability would have been at 5.7%. Now it was at 4.4%, which is very, very low for our standards and definitely something that we need to improve. But we have taken measures, we have made changes, and we feel confident that with the new offering we are developing with AI, we will be able to get back to the levels which we have seen before, but it will take a little bit of time and a little bit we need help from the market as well before things can really start to recover. If we then look at the financial targets and our strategy as well, so this is the strategy that we released at the end of last year and also communicated in Q1. So the strategy period is called Transformation with AI. And really what we plan to do is to transform the way we sell and deliver services and incorporate AI into the solutions that we are selling to our customers. We are three cornerstones: trusted partner, AI and technology empowered service solutions and success with people. And of course, we have strategy programs to execute the strategy moving forward. But we feel confident that with this strategy, we are able to really change the company to create more additional value for our customers and then move forward as a company. And the financial targets that we set were 35% of AI-driven solutions share of revenue. We are still at 2%. We have some more projects, some projects that we had last year, the revenues have started to go down as the projects are coming to an end. But the number of projects is continuing to increase and we see lots of potential with the new offering that we have been developing to increase this number further. When we are able to increase this number, we are also confident that our managed services share of revenue, which is a 75% target, that will also increase. Currently, we are at 66%. With that, with the more competitive offering, we also feel that we can grow and we are in a position to reach our 500 million euro revenue target. currently the rolling 12 months is at 359 after a slow, slow Q1. But we are confident that even during this year we are able to improve on that. And of course, the profitability target remains the same. We can by no means be happy with our current 6.1% target, but we have demonstrated in the past profitability of above 10%. And with the new offering, with some help of the market, we feel very confident that we are able to reach this kind of profitability levels also in the future. And if we then go to the financial guidance for this year, due to the weak start of the year, due to the very, very high uncertainty that we see in the market, we did lower or specify our guidance within our range. So the new range for revenue is 365 to 395 million euro, which is a 5 million drop from the higher end. and, or the higher end of the range. And on the operating profit EBIT, we estimate the profit to be between 23 and 28 million euro. And there is also a 2 million euro drop due to the high uncertainty in the market and also the high non-recurring items that we needed to take during Q1. But overall in the market, The tension is very high and it's very, very difficult to predict what will happen. But we do see that the industry needs to keep moving and maintain what is already there. And for this reason, even if the market will not significantly improve, we don't think that the market will go down further. And we do see that once we have taken all the necessary actions and activities and once our new offering is starting to really take or let's say accelerate in pace, then we feel that we can move forward in the prevailing market. And if we get some help from the market conditions, then we are definitely able to move forward and start to grow again. At this point, I would like to welcome questions from the audience. If you wish to ask a question, please dial 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial 6 on your telephone keypad. The next question comes from Atte Ahtikka from Evli. Please go ahead. Good afternoon and thank you for the presentation. This is Atte Ahtikka from Evli Research. So firstly, a housekeeping question on the non-recurring items. So could you give us a bit more color on the credit loss and how large share of total non-recurring items was it for the engineering solutions? We have not disclosed that number, so unfortunately I cannot give an exact number on that, but it was a significant part of it. There were also some adaptation measures regarding the organization, but it did have a high impact. The full impact is not even visible in these numbers, but there will not be any further impact from it. It could have had it not happened, it could have had a significant impact on the numbers. Okay, thank you. Then to the hot potato, namely trade war. Firstly, if we think of the business areas, in which of those have you seen the highest number of postponements of investments and projects, or has it been across the board more or less? Well, it has been more or less across the board. Some customers still continue. It really depends on the customer and how much trade with the US they have. But some customers continue, some even increase. Maybe they see some opportunity in this. But overall, it is having an impact. The customers are, of course, having a difficulty in deciding where to invest because you don't really know what will happen and what your investment case will look like tomorrow. So it's completely impossible for them. Therefore, it's somewhat understandable. But it's a really irritating situation that we are right now in. Yes, agreed. Then roughly a month has passed since the introduction of these tariffs. As your clients have now kind of assessed the impacts a little bit at least to their businesses, have you seen any restarts in projects or talks? Of course, some customers are redirecting their efforts and deciding differently, but so far, There's discussions, but not that many decisions have been taken that this would start and that would not. Currently, it's more of a waiting game for most of our customers. And we certainly hope that the situation will get clarified at least so that you will know what kind of an environment you're operating in. But right now, it's difficult to say. It's mainly waiting mode at the moment. Yes. Then last question on the trade war. Have you had to implement further efficiency measures after the escalation of the trade war and the tariffs? No, I would not say maybe some, but I would not say that that has been the case. We are already at the very, very low level. of investment. We were sort of hoping that the investments would start. There were certain signs of it, especially in the R&D and in the hardware side. But then, then with these new tariffs and with the new uncertainty, the investments have been postponed or, or stopped for the time being. So, so I, we have not so far, I don't, I wouldn't say that we have implemented new adaptation measures due to this situation, but the sort of potential improvement in the situation has certainly been postponed, at least for a while. Yes, very helpful. Then from the negatives to possibilities. So, Central Europe has grown to over 20% of your total sales. How do you think the a fiscal package introduced in Germany during Q1 will affect demand for your services in the market, in mid to long term, or have you already seen any improvement related to this? Well, I think that it will certainly have some kind of an impact. We have not seen it yet. Of course, it's still uncertain where the money exactly will go and who will get it and so on. But certainly, this kind of an injection will boost the market and it should also mean better demand for us. If we look at our organization, we start to be, well, not big, but we start to have enough size that we can really invest into the market and also attack the market. And it's such a large market that with better organizational capabilities and sales capabilities in place, plus a slightly wider service offering in place, we see lots of opportunities to win market share, etc. We feel very, very confident of our offering with this market. That's the reason why we have invested there. And we see lots of opportunities, so there's plenty of room for our size of a company to still grow. But of course, if there's this kind of a major capital injection into the market, for sure it will have an impact. Have not seen it yet, but in the midterm, in the long term, we feel confident that there will be a boost. Yes. Then my last question related on the offering. So you launched the AI-powered version of HyperST. During Q1, how has this been received by the client base and how large share of of the technical communication data clients have already taken it to use. It's a small share of our revenue, but it has been very positively received. And we, of course, use this product ourselves when we are doing technical writing and there the benefits are very visible. And there is interest from the clientele towards this new model. It's more efficient, et cetera. And that goes also for other services where we are currently still in the planning phase, but very close to introducing new ways of working with AI, etc. And once we do that, we are confident that we are able to again win more market share and move forward to improve productivity for our customers and get the 2% figure improving. So that's quite clear. And in the technical communication service area, as I mentioned, as we mentioned in the report, When we are talking about new projects and outsourcing and other things, AI always comes into play. And our AI-driven offering is clearly having an impact on why we are winning certain cases. So it's highly positive, not that visible in the numbers yet, but we are confident that it will be in the future. Okay, thank you. Very helpful. That's all from me. Thank you. The next question comes from Emil Emonon from Carnegie. Please go ahead. Hi, thanks for taking my questions. Maybe to start with the credit loss in Germany, could you elaborate a little bit more on it? What was it related to and where is the confidence that there will be no such losses in the future? Well, this was a project that we did for one of our major customers, a very, very very financially sound, large company. But in this particular project, we were requested and also agreed to go through an EPCM supplier. And then apparently there was some problems with this supplier. And this EPCM supplier went bankrupt. And unfortunately, that is where we got the credit loss. But we have a good continuation of our business with our main customer. and for this reason we don't believe that there will be any further. Of course, never say never, but this was very helpful. But this was a customer that is non-recurring for us and it was an EPC supplier that we had to use or where we had to supply in this particular project. But this is not a new customer in Germany. No. No, it's our old customer known this way of collaborating was simply new and unfortunately this, even though we checked, unfortunately this particular EPCM supplier for our customer went bankrupt and unfortunately we suffered this loss. Understood. Then on China, good growth continues. What do you believe is the reason why are you growing so strongly in that market? how much is it market driven and how much is it? Well, you're small, but you're still clearly growing very fast there. Well, we have done a really good job in China and there the market growth is one thing. And of course, that helps us. But still, I would say that the even more, let's say, influencing factor for us in terms of growth is the fact that also the Chinese companies are starting to buy more and more services. So the culture of buying services is developing further in China and also the sort of Chinese companies working in the China China business are starting to buy services, which was not the case five years ago, for example. And that is the primary factor driving the growth. And of course, we have slightly more than 400 people in China currently. It's such a huge market that there is definitely room to grow and we are working hard to expand on that. Is it growth with new customers or is it your old Chinese customers who you take more wallet with? It is actually both. But I would say that there's quite a lot of new customers and Chinese customers in particular. So when we look at our customer lists, so the new names are are predominantly Chinese companies and that's of course highly positive for us. Great. Then one more question on my part. On your leverage and capability to grow through M&A, is the leverage getting to be a limiting factor as it's going up all the time? Well of course it is currently under pressure, not under pressure we are managing it well but we do need to get our profitability back to the levels where it has been, which we are used to. So with that, there is no issue. If the profitability remains low, then we need to reconsider. But we are highly confident that we are able to recover in our profitability and then we should not have any problem with the leverage. But of course, if we continue to acquire companies, if we make bigger acquisitions, so then at some point, some kind of equity injection will have to be considered by the board of directors as well. Is there any reason to believe that the higher leverage would have an impact on, for example, your interest rates and the margins you have to pay? Not so far, but of course, if the profitability would continue to deteriorate then Maybe yes, but at the time, no. Okay, great. That's all from me. Thank you. Thanks. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. 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. Well, I mean, if we look at the Q1 so clearly, it was disappointing for us. The market showed some signs of improvement, but unfortunately, with the trade war development. The uncertainty is high again and it's difficult to say when it will change. But still, we still feel that the market is not going down. We have done acquisitions. We have taken lots of measures to improve our ability to execute our strategy. And with that, we are confident that we are able to continue on a growth path and also improve our profitability going forward. I would like to thank you for participating at this time to our conference and of course if you have any questions to us at any time, so please feel free to contact myself, our CFO Helena Kukkonen or our SVP for Marketing and Communications, Oliver Nylund at any time. Thank you very much for tuning in.