Half Year 2026 Etteplan Oyj Earnings Call

August 5, 2026

Speaker #2: Welcome to this webcast presentation for Etteplan's Q2 results for 2026. My name is Johan Eke. I'm the CEO of the company, and at the end of this session, there will be a Q&A session where you will also be able to ask questions of our CFO, Helena Kukkonen.

Juha Näkki: Welcome to this webcast presentation for Etteplan's Q2 results for 2026. My name is Juha Näkki. I am the CEO of the company. At the end of the session, there will be a Q&A session where you will also be able to ask questions from our CFO, Helena Kukkonen. As we have gotten used to, this is the agenda for the presentation. We will look at the Q2 highlights and overview first, a little bit more in detail to the financial development. We will have a look at our service areas and performance there. To end the presentation, we will look at our strategy, how we did on our strategic targets, and also give out the financial guidance. After the presentation, there will be the Q&A session. If I start with the highlights of Q2.

Speaker #2: As we have some news, too, this is the agenda for the presentation. We'll look at the Q2 highlights and overview first, and then go a little bit more in detail into the financial development.

Speaker #2: We will have a look at our service areas and performance there, and then, to end the presentation, we'll look at our strategy, how we did on our strategic targets, and also give out the financial guidance.

Speaker #2: And then, after the presentation, there will be the Q&A session. But if I start with the highlights of Q2—so, it was still a difficult quarter for us after a really bad Q1 and all the events that took place during Q1.

Juha Näkki: It was still a difficult quarter for us after a really bad Q1 and all the events that took place during Q1. Q2 took off in a slow manner. During the quarter, and especially towards the end of the quarter, there was clearly an improving demand situation. We could see clearly that especially R&D activity picked up, and that is, of course, an encouraging sign and the first sign in a long time when the market has actually started to recover for us. This is extremely pleasing and we certainly hope that it will continue. If we look at the different markets, China was stronger than Europe. In China, we had a good run in Q2. The hours sold to the Chinese market increased by 16%, which is a good number, and over the full year also, the development was solid.

Speaker #2: Q2 took off in a slow manner. But during the quarter, and especially towards the end of the quarter, there was clearly an improving demand situation.

Speaker #2: We could see clearly that, especially, R&D activity picked up, and that is, of course, an encouraging sign. And it is the first sign in a long time when the market has actually started to recover for us.

Speaker #2: And this is, of course, extremely pleasing. We certainly hope that it will continue. If we look at the different markets, China was stronger than Europe, and in China we had a good run in Q2.

Speaker #2: So, the hours sold to the Chinese market increased by 16%, which is a good number, and over the full year, also, the development was solid.

Speaker #2: We also used a lot of effort, as per the previous quarters and year. We used a lot of effort to develop our offering and include AI into our different service solutions.

Juha Näkki: We also used a lot of effort, as per the previous quarters and year, to develop our offering and include AI into our different service solutions. We have updated our existing offering with different kinds of AI applications, making them more efficient and more appealing to our customers. Also we introduced during H1 a new offering to the market, which we feel is in a good manner and bringing significant value to our customers. There seems to be a good interest to these new solutions and updated solutions, and we are confident that with the new solutions, once we get them underway, we will be able to return to a growth path again. During the quarter, we signed some new agreements, with, for example, Patria, which are clear indications that our new offering is working.

Speaker #2: We have updated our existing offering with different kinds of AI applications, making them more efficient and more appealing to our customers. Also, during H1, we introduced a new offering to the market, which we feel is well received and bringing significant value to our customers.

Speaker #2: So, we are there seems to be a good interest in these new solutions and updated solutions, and we are confident that with the new solutions, once we get them underway, we will be able to return to a growth path again.

Speaker #2: During the quarter, we also signed some new agreements. For example, with Patria, which are clear indications that our new offering is working. If we look at all the new agreements that we are signing, or the major offers that we are making today, all of them are including our AI offering.

Juha Näkki: If we look at all the new agreements that we are signing or the major offers that we are making today, all of them are including our AI offering. It seems to be working well and relevant for our customers. On the negative side, of course, the market uncertainty continues. While in Q2, the demand situation has started to pick up. The geopolitical events during the summer are still keeping the market risks high, and it is difficult to predict what will happen. Still, after the good development in the demand, we are hopeful that the situation will continue good, and with our own efforts, we can continue to develop our business favorably. In the difficult Q2, the financial results, of course, were not where they should be.

Speaker #2: So it seems to be working well and is relevant for our customers. On the negative side, of course, the market uncertainty continues. While in the second quarter the demand situation has started to pick up, the events during the geopolitical events during the summer are still keeping the market risks high, and it's difficult to predict what will happen.

Speaker #2: But still, after the good development in the demand, we are hopeful that the situation will continue to be good, and with our own efforts, we can then continue to develop our business favorably.

Speaker #2: But in the difficult Q2, the financial results, of course, were not where they should be. So, due to the market conditions, our revenue declined, and our profitability was clearly below our expected levels.

Juha Näkki: Due to the market conditions, our revenue declined, and our profitability was clearly below our expectation levels. For this reason, and also due to the weak Q1, and also the risks that there are apparent in the markets, we did a small adjustment in our financial guidance downwards from the top levels. If I look a little bit more in detail to the operating environment. Generally, the geopolitical tensions were high. As said, the events during July are keeping the risks up. Overall, we did see a positive momentum, especially in the R&D investments during Q2. This is encouraging and first signs of recovery for the markets in a long time. This was particularly perhaps visible in Finland, but also in other European countries and also in China, as I said.

Speaker #2: And for this reason, and also due to the weak first quarter, and also the risks that are apparent in the markets, we did a small adjustment in our financial guidance downwards from the top levels.

Speaker #2: And if I look a little bit more in detail at the operating environment, generally speaking, geopolitical tensions were high, and as mentioned, the events during July are keeping the risks elevated.

Speaker #2: But overall, we did see positive momentum, especially in R&D investments during Q2. This is encouraging, and it's the first sign of recovery for the markets in a long time.

Speaker #2: This was particularly perhaps visible in Finland, but also in other European countries and in China, as said. At the same time, there were still quite significant differences between different customers and different segments, and there were customer segments where the market declined clearly. Also, there were projects still postponed and delayed, and this had a negative impact, of course, on the demand situation overall.

Juha Näkki: At the same time, there were still quite significant differences between different customers and different segments, and there were customer segments where the market declined clearly. Also there were projects still postponed and delayed, and this had a negative impact, of course, on the demand situation overall. If we look a little bit more in detail to the countries, as said, Europe was weaker than China, but gradually improving towards the end of the quarter. In Finland, we had a fairly good situation at the end of the quarter. In Sweden and Germany, we have a quite strong business in the car industry. The car industry was still struggling quite a lot, or the automotive industry overall was struggling during the quarter, and the demand declined there. We had a little bit of an issue with Sweden and Germany with the demand.

Speaker #2: If we then look a little bit more in detail at the countries, as said, Europe was weaker than China but gradually improved towards the end of the quarter.

Speaker #2: In Finland, we had a fairly good situation at the end of the quarter. In Sweden and Germany, we have a quite strong business in the car industry.

Speaker #2: The car industry was still struggling quite a lot, or the automotive industry overall was struggling during the quarter, and demand declined there. So we had a little bit of an issue with Sweden and Germany with the demand.

Speaker #2: In China, as said earlier, the demand situation remained strong. Our business was developing favorably, and we foresee that will continue for the year.

Juha Näkki: In China, as said earlier, the demand situation remained strong. Our business was developing favorably, and we foresee that that will continue for the year. If we look at the key figures, our revenue declined by 2.7%. Operating profit, EBITA, was at EUR 5.5 million or 6.1% of our revenues. Operating profit, EBIT at EUR 4.2 million, 4.7% of the revenue, and EPS at EUR 0.10. If we look at the revenue split and personnel split in Q2, Engineering Solutions was at 58% of the revenue, Software and Embedded at 22%, and Technical Communication and Data Solutions at 20% of the revenues. If we look at the revenue by countries, Finland was 45%, Scandinavia 27%, Central Europe 25%, and China 3%. Personnel by country, Finland 47%, Scandinavia 19%, Central Europe 24%, and China 11%.

Speaker #2: If we look at the key figures, our revenue declined by 2.7%. Operating profit, EBITDA, was at €5.5 million, or 6.1% of our revenues.

Speaker #2: Operating profit EBIT at 4.2 million, so 4.7% of the revenue, and EPS at 10 cents. And if we look at the revenue split and personnel split, in Q2, so engineering solutions was at 58% of the revenue, software and embedded at 22, and technical communication and data solutions at 20% of the revenues.

Speaker #2: If we look at the revenue by countries: Finland was 45%, Scandinavia 27%, Central Europe 25%, and China 3%. And personnel by country: Finland 47%, Scandinavia 19%, Central Europe 24%, and China 11%.

Speaker #2: If we look at the segments, the energy segment continued to be solid and was the highest segment for us. Automotive declined by 2 percentage points, which was, of course, a disappointment, but this was particularly visible for our business in Germany and in Sweden.

Juha Näkki: If we look at the segments, energy segment still continued to be solid and was the highest segment for us. Automotive declined by 2 percentage points, which was of course a disappointment, but it was particularly visible for our business in Germany and in Sweden. Metal and mining was increasing, and this is of course an encouraging sign since we do see that in the past when a market has started to change and pick up, metal and mining has been the segment where it all starts. This is an encouraging sign, and we hope that it will continue. Aerospace and defense was also growing 9% compared to 7% last year. There are good inroads and new deals in this area, so we expect it to grow further going forward. Forest industry is still quite a lot down and at 9% of our total revenues.

Speaker #2: Metal and mining was increasing, and this is, of course, an encouraging sign since we do see that in the past, when a market has started to change and pick up, metal and mining has been the segment where it all starts.

Speaker #2: So, this is an encouraging sign, and we hope that it will continue. Aerospace and defense was also growing, 9% compared to 7% last year, and there are good inroads and new deals in this area, so we expect it to grow further going forward.

Speaker #2: And the forest industry is still quite a lot down, and 9% of our total revenues. If we then go into a little bit more detail on the financial development, so on the key figures, unfortunately, most of the key figures are down.

Juha Näkki: If we then go into a little bit more detail to the financial development, on the key figures, unfortunately, most of the key figures are down. EPS on par with Q2 last year. On the other notes, we are still struggling with the weaker market conditions, and the key figures are down. If we look at the revenue, 2.7% down for the quarter and 3.7% for the H1. Revenue from key accounts was dropping by 1%, and for the H1, 0.7%. The direction during the quarter was shifting. In April, May, we still had a negative balance, in June, we actually were growing already. The slightly better demand situation actually produced growth in June, which is an encouraging sign, and we certainly hope that market will support us and this development will continue.

Speaker #2: EPS is on par with Q2 last year, but on the other hand, we are still struggling with weaker market conditions, and the key figures are down.

Speaker #2: If we look at the revenue, it's 2.7% down for the quarter and 3.7% for the first half of the year. Revenue from key accounts was dropping by 1%, and for the first half, 0.7%. But the direction during the quarter was shifting, and in April and May, we still had a negative balance, but in June, we actually were growing already. So the slightly better demand situation actually produced growth in June, which is an encouraging sign, and we certainly hope that the market will support us and this development will continue.

Speaker #2: And organic revenue growth was minus 3.5%, and overall, the weak situation has had a negative impact. But now, as said, it looks a bit more promising.

Juha Näkki: Organic revenue growth was -3.5%, and overall, the weak situation has had a negative impact. Now, as said, it looks a bit more promising. EBITA was at EUR 5.5 million for the quarter, 6.1% compared to 6.6% last year. Non-recurring items were EUR 0.3, normalizing a bit from the Q1 level, which was fairly high. EBITA for the H1 was at EUR 9.2 million and EBITA 5.1% for the H1. Basically, the non-recurring items, as said, normalized during Q2. In Q1, there was a fairly high number, if we exclude the one-time items from the H1, then our EBITA would have been at 5.7%. Not at the level of where it should be, still starting to improve and definitely an improvement to the weak Q1. EBIT was at EUR 4.2 million, slightly below last year and 4.7%.

Speaker #2: EBITDA was at €5.5 million for the quarter, so 6.1% compared to 6.6% last year. Non-recurring items were €0.3 million, so normalizing a bit from the Q1 level, which was fairly high.

Speaker #2: And EBITDA for the first half was at €9.2 million, and EBITDA margin was 5.1% for the half year. And basically, the non-recurring items, as said, normalized during Q2.

Speaker #2: In Q1, there was a fairly high number, and if we exclude the one-time items from the first half, then our EBITDA would have been at 5.7%. So, not at the level where it should be, but still starting to improve, and definitely an improvement to the weak first quarter.

Speaker #2: EBIT was at €4.2 million, so slightly below last year, and 4.7%. The amortizations related to acquisitions mainly were at €1.3 million, compared to €1.6 million last year.

Juha Näkki: The amortizations related to acquisitions mainly was at EUR 1.3 million compared to EUR 1.6 million last year. For the H1, EUR 6.4 million and 3.5% after the weak Q1. Earnings per share at EUR 0.10, on par with last year. For the H1, due to the Q1, at EUR 0.14, clearly below 26.3% below last year. Operating cash flow reflecting the weaker performance, especially in Q1. Also the non-recurring items had an impact on cash flow also in the Q2. The operating cash flow was at EUR 3.7 million compared to EUR 6.9 million last year. For the H1, EUR 7.8 million compared to EUR 12 million last year. Personnel. Number of personnel was also dropping still and was at 3,680 compared to 3,870 last year. It is encouraging to see that, especially in Finland now, where we do have the temporary layoffs.

Speaker #2: For the first half, €6.4 million and 3.5%, after the weak first quarter. Earnings per share at €0.10, so on par with last year, but for the first half, due to the first quarter, at €0.14, so clearly below—26.3% below last year.

Speaker #2: And operating cash flow reflected the weaker performance, especially in Q1, and also the non-recurring items had an impact on cash flow in the second quarter. Operating cash flow was €3.7 million compared to €6.9 million last year, and for the first half, €7.8 million compared to €12 million last year.

Speaker #2: Personnel: the number of personnel was also dropping still, and was at 3,680 compared to 3,870 last year. But it is encouraging to see that, especially in Finland, now, where we do have the temporary layoffs, in the second quarter, the temporary layoff numbers started to drop towards the end of the quarter, and were actually at the end of the quarter lower than they were at the end of Q1—which is an encouraging sign of the market picking up again.

Juha Näkki: In Q2, the temporary layoff numbers started to drop towards the end of the quarter and was actually at the end of the quarter lower than it was at the end of Q1, which is an encouraging sign of the market picking up again. On the income statement, nothing major that has not already been mentioned. On the balance sheet, nothing major either. The total balance sheet standing at EUR 294.2 million at the end of June. If we go a little bit more into detail with the service areas for Q2. Starting with Engineering Solutions. Revenue was slightly up EUR 51.7 million and EBITA at 7.3%. Not good, but improving clearly after the weak Q1. Here with the improving situation in R&D towards the end of the quarter, supported the situation. However, the larger investments are still pending.

Speaker #2: On the income statement, nothing major that has not already been mentioned, and on the balance sheet, nothing major either. The total balance sheet standing at €294.2 million at the end of June.

Speaker #2: If we then go a little bit more into detail with the service areas for Q2, starting with Engineering Solutions, revenue was slightly up at €51.7 million, and EBITDA at 7.3%. So, not good, but clearly improving after the weak first quarter.

Speaker #2: And here, the improving situation in R&D towards the end of the quarter supported the situation. However, the larger investments are still pending. There are projects ongoing, there are quotes, but there are very few decisions on larger investments still.

Juha Näkki: There are projects ongoing, there are quotes, but there are very few decisions on larger investments still. This is having an impact, of course, on the operational efficiency. Also, the weaker situation in Germany, especially regarding the car industry and also in Sweden, has an impact on the profitability and on the operational efficiency of the unit. EBITA for the full year was at 6%. In the service area, we have had non-recurring items of EUR 0.5 million. If we exclude those for H1, the profitability in the service area would have been 6.5%. Not where it should be, but still going into the right direction. We are hoping to improve and looking to improve going forward. In the Software and Embedded Solutions area, we have had a turnaround program launched already during last year.

Speaker #2: And this is having an impact, of course, on the operational efficiency. Also, the weaker situation in Germany, especially regarding the car industry, and also in Sweden, has an impact on the profitability and on the operational efficiency of the unit.

Speaker #2: EBITDA for the full year is 6.6%, and in the service area, we have had non-recurring items of €0.5 million. If we exclude those for the first half, then the profitability in the service area would have been 6.5%. So not where it should be, but still going in the right direction, and we are hoping to improve and looking to improve going forward.

Speaker #2: In the Software and Embedded Solutions area, we launched a turnaround program already during last year, and in the first quarter, of course, we had significant one-time costs in this unit.

Juha Näkki: In Q1, of course, we had significant one-time costs in this unit. Overall, the market is still difficult for the software business. Our performance has improved in most of the units. We still struggle a little bit in our business in Sweden, somewhat related to the car industry as well. Overall, the efforts that we have taken to improve the performance of the service area are working, and the direction is going to the right one. The EBITA for H1 was at 2.8%. If we exclude the fairly high one-time, EUR 0.7 million for the service area, the January-June performance would have been 4.4% EBITA, which is of course not where it should be and clearly below last year. Still, the direction is the right one.

Speaker #2: But overall, the market is still difficult for the software business, but our performance has improved in most of the units. We still struggle a little bit in our business in Sweden, somewhat related to the car industry as well, but overall, the efforts that we have taken to improve the performance of the service area are working, and the direction is going in the right one.

Speaker #2: If we exclude the EBITDA for H1, it was at 2.8%. If we exclude the fairly high one-time—so €0.7 million—for the service area, then the January–June performance would have been 4.4% EBITDA, which is, of course, not where it should be and clearly below last year.

Speaker #2: But still, the direction is the right one, and with the continued effort in the restructuring and the continued effort in the turnaround for the unit, we are now starting to build up a new pipeline with the new offering that we have introduced, and we're confident that during the year, in the latter part of the year, we will be able to improve also in this business.

Juha Näkki: With the continued effort in the restructuring and the continued effort in the turnaround for the unit, we are now starting to build up new pipeline with the new offering that we have introduced. We're confident that during the year, latter part of the year, we will be able to improve also in this business. In Technical Communication and Data Solutions, we had slightly lower revenue, 3.8% down from last year. Lower number of deliveries had an impact on this one. Of course, the weaker situation in the car industry, and especially in Germany, had clearly an impact here in the service area. We have developed our offering further. We have very strong AI-driven offering here in the service area, and there's lots of good discussions out there with the customers.

Speaker #2: In Technical Communications and Data Solutions, we had slightly lower revenues—so, 3.8% down from last year. A lower number of deliveries had an impact on this one.

Speaker #2: And of course, the weaker situation in the car industry, and especially in Germany, had clearly an impact here in the service area. But we have developed our offering further.

Speaker #2: We have a very strong AI-driven offering here in the service area, and there's lots of good discussions out there with the customers. We have signed certain deals with new customers, and we have increased our market share. With the new offering that we are now in the process of introducing, we feel confident that we will be able to continue winning market share and improve the business situation here.

Juha Näkki: We have signed certain deals with new customers, and we have increased our market share. With the new offering that we are now in the process of introducing, we feel confident that we will be able to continue winning market share and improve the business situation here. EBITA for H1 was 4.8%, there was non-recurring items of EUR 4.4 million in January, June. Without the non-recurring, it would have been 5.7% EBITA, which is nowhere near where it should be. But still there is room to improve. The efforts that we are taking and the AI-driven solutions that we have developed are improving our profitability. Also here we are expecting to improve in H2. If we move on to our strategy and our financial guidance. The strategy is of course very heavily arriving on AI and AI-driven solutions, we are now making inroads.

Speaker #2: EBITDA for H1 was 4.8%, and there were non-recurring items of €4.4 million in January–June, so without the non-recurring items, it would have been 5.7% EBITDA.

Speaker #2: Which is nowhere near where it should be, but still, there is room to improve. The efforts that we are taking, and the AI-driven solutions that we have developed, are improving our profitability. Here, we are expecting to improve in H2.

Speaker #2: If we then move on to our strategy and our financial guidance—so the strategy is, of course, very heavily riding on AI and AI-driven solutions.

Speaker #2: And we are now making inroads. We are getting more and more business through our AI-driven solutions. Unfortunately, it was not visible in the numbers, so the AI-driven revenue was at 6%. There were certain projects that were actually stopped, which had a negative impact, but the number of projects is still increasing, and there is high interest in our solutions.

Juha Näkki: We are getting more and more business through our AI-driven solutions. Unfortunately, it was not visible in the numbers. The AI-driven revenue was at 6%. But there were certain projects that were actually stopped, which had a negative impact, but the number of projects is still increasing, and there is high interest for our solutions. We are confident that when we continue to work with the strategy, continue solid execution of our strategy, we will be able to start to get back to the growth path again, and also we will be able to improve our profitability. If we look at the strategic target, so 35% revenue from AI-driven service solutions, currently at 6%, so we have a long way to go. But as said, there's a lot of new stuff out there now, and there seems to be quite good interest from our customers.

Speaker #2: So we are confident that when we continue to work with the strategy, continue solid execution of our strategy, we will be able to start to get back to the growth path again, and also we will be able to improve our profitability.

Speaker #2: If we look at the strategic targets—so, 35% revenue from AI-driven service solutions, currently at 6%—we have a long way to go. But as said, there's a lot of new stuff out there now, and there seems to be quite good interest from our customers, so we expect this number to pick up during the latter part of the year.

Juha Näkki: We expect this number to pick up during the latter part of the year. MSI, 75% of the revenues is the target. We are currently at 66%, stalling a little bit. We have new MSI deals, but unfortunately, volumes of the existing ones are dropping, and for this reason, it remains a little bit flat for the previous quarters. On the revenue development, the target is EUR 500 million, we are fairly a lot behind that, so at EUR 355 on the rolling 12. But now we are expected to improve. But the EUR 500 million is clearly a very tough target for 2027. Operating profit, EBITA is 5.1% for H1. Not happy with that at all. In the difficult market conditions, this is what we have been able to do.

Speaker #2: MSI—75% of the revenues is the target. We are currently at 66%, stalling a little bit. We have new MSI deals, but unfortunately, the volumes of the existing ones are dropping, and for this reason, it remains a little bit flat compared to the previous quarters.

Speaker #2: On the revenue development, the target is 500 million, and we are fairly a lot behind that, so at 355 on the rolling 12, but now we are expected to improve.

Speaker #2: But the €500 million is clearly a very tough target for '27. And operating profit EBITDA at 5.1% for H1—I'm not happy with that at all. In the difficult market conditions, this is what we have been able to do, but now with the efforts that we have taken, with the new offering, and hopefully the improving market conditions, we expect this to improve significantly in H2.

Juha Näkki: But now, with the efforts that we have taken with the new offering, hopefully the improving market conditions, we expect this to improve significantly in H2. If we look at the market outlook, there are positive signs now in the market. Clearly, certain activity has picked up. We are seeing quite good numbers and good forecasts in different countries. With this development, we expect that the demand situation will improve. However, the risks are still high due to the geopolitical events, the recent events. It's difficult to estimate what will happen, how our customers will react to these changes and to these kind of events. For this reason, we updated our financial guidance slightly. Now we estimate that the revenue will be between EUR 360 to 375 million, and the EBIT will be between EUR 19 to 22 million.

Speaker #2: And if we look at the market outlook, there are positive signs now in the market. Clearly, certain activity has picked up. We are seeing quite good numbers and good forecasts in different countries.

Speaker #2: And with this development, we expect that the demand situation will improve. However, the risks are still high due to the geopolitical events and the recent events.

Speaker #2: And it's difficult to estimate what will happen—how our customers will react to these changes and to these kinds of events. For this reason, we updated our financial guidance slightly.

Speaker #2: And now we estimate that the revenue will be between €360 and €375 million, and the EBIT will be between €19 and €22 million. So, a slight drop on the upper end of the range.

Juha Näkki: A slight drop on the upper end of the range. That completes the presentation. Now it's time for the Q&A session.

Speaker #2: And that completes the presentation. So, now it's time for the Q&A session.

Speaker #1: If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Operator 2: If you wish to ask a question, please dial five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial six on your telephone keypad.

Operator: If you wish to ask a question, please dial five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial six on your telephone keypad.

Speaker #3: So I could start the questions. Ronnie Perlheimer from Inderes. You mentioned the positive signs in demand. Are you able to quantify in any way how big the improvement was compared to, for example, the end of Q1, when you also mentioned that there were some positive signs?

Roni Pärnänen: I could start the questions. Roni Pärnänen from Inderes. You mentioned about the positive signs in demand. Are you able to quantify in any way how big improvement was this compared to, for example, end of Q1, when you also mentioned that there are some positive signs? Maybe talk about the industry since I think you only mentioned about the clear improvement in mining. In which industries is it getting better?

Roni Peuranheimo: I could start the questions. Roni Peuranheimo from Inderes. You mentioned about the positive signs in demand. Are you able to quantify in any way how big improvement was this compared to, for example, end of Q1, when you also mentioned that there are some positive signs? Maybe talk about the industry since I think you only mentioned about the clear improvement in mining. In which industries is it getting better?

Speaker #3: And maybe talk about the industries, since I think you only mentioned the clear improvement in mining. So, in which industries is it getting better?

Speaker #2: Yeah, I would say that there are industries where it's still difficult. The car industry, or automotive industry, is clearly one where it is difficult.

Juha Näkki: Yeah, I would say that there are industries where it's still difficult. Car industry or automotive industry is clearly the one where it is difficult. There are some other industries and certain customers which are large for us that are still struggling. Perhaps pulp and paper still struggling, and some other industries. Of course, clearly the defense sector is strong and also energy sector is solid. Mining sector clearly has started to improve. Overall, I would say that we are seeing companies starting to engage our type of partners more into, for example, R&D activity. Companies that we have been working with for a long time, where we haven't done that much recently or in the last couple of years, have started to activate. This is an encouraging sign, and it's a wider range of customers that is actually starting to invest more into R&D.

Speaker #2: And there are some other industries and certain customers, which are large for us, that are still struggling. Perhaps pulp and paper are still struggling, and some other industries.

Speaker #2: But of course, clearly, the defense sector is strong, and also the energy sector is solid. The mining sector clearly has started to improve. And overall, I would say that we are seeing companies starting to engage our type of partners more, for example, in R&D activity.

Speaker #2: And companies that we have been working with for a long time, where we haven't done that much recently or in the last couple of years, have started to activate.

Speaker #2: So this is an encouraging sign. And it's a wider range of customers that is actually starting to invest more into R&D. We haven't seen large investments yet, large factories.

Juha Näkki: We haven't seen large investments yet, large factories. There's, of course, the data center investments ongoing. This is an area where everybody is investing, and many of our customers are benefiting from this. Overall, large factory investments are still pending. R&D activity on a quite wide scale in different industries is slightly improving. It's not growing fast yet, but there are clear signs that something is starting to happen, and this is encouraging.

Speaker #2: There's, of course, the data center investments ongoing. This is an area where everybody is investing, and many of our customers are benefiting from this.

Speaker #2: But overall, large factory investments are still pending. R&D activity, on quite a wide scale in different industries, is slightly improving. It's not growing fast yet, but there are clear signs that something is starting to happen.

Speaker #2: And this is encouraging.

Speaker #3: Regarding the guidance, you're expecting quite a steep improvement, especially in earnings. Is the required demand for this, as of early August, at a level where you can achieve it, or are you still expecting a clear improvement in demand during the second half of the year?

Roni Pärnänen: About the guidance. You're expecting quite a steep improvement, especially in earnings. Is the required demand for this currently in the beginning of August on a level you can reach this, or is it still expecting a clear improvement in demand during H2?

Roni Peuranheimo: About the guidance. You're expecting quite a steep improvement, especially in earnings. Is the required demand for this currently in the beginning of August on a level you can reach this, or is it still expecting a clear improvement in demand during H2?

Speaker #3: Do you have any numbers from, for example, July?

Juha Näkki: Well-

Juha Näkki: Well—

Roni Pärnänen: Do you have any numbers from, for example, July?

Roni Peuranheimo: Do you have any numbers from, for example, July?

Speaker #2: Well, July is still we don't have any numbers from July, so this is that is still pending. But I would say that if the situation is similar to June, or improves slightly, then we should be on a solid ground.

Juha Näkki: Well, we don't have any numbers from July, so that is still pending. I would say that if the situation is similar to June or improves slightly, then we should be on a solid ground. Of course, if it improves more than that, of course we are happy. If customers start to wait after the recent geopolitical events, which has unfortunately quite normally taken place, that will not be good. If the demand stays on a level where it was at the end of June, or even improves on that, then we have a solid ground to work with.

Speaker #2: And of course, if it improves more than that, we are happy. If market conditions change—if customers start to wait after the recent geopolitical events, which have unfortunately, quite normally, taken place—that will not be good.

Speaker #2: But if the demand stays at the level where it was at the end of June, or even improves on that, then we have a solid ground to work with.

Speaker #3: All right. Then one question about the productized AI solutions. How has your original thesis that these can be used to improve profitability in the long run played out so far in the customer relationships that have taken these solutions some time ago already?

Roni Pärnänen: All right. One question about the productized AI solution. How has your original thesis that these can be used to improve profitability in the long run played out so far in the customer relationship that have taken these solutions some time ago already?

Roni Peuranheimo: All right. One question about the productized AI solution. How has your original thesis that these can be used to improve profitability in the long run played out so far in the customer relationship that have taken these solutions some time ago already?

Juha Näkki: The theory is proving to be right. Where we are developing our own AI-driven models, customers are, of course, willing to pay for the additional value that they are getting. Our profitability is improving. We have invested quite a lot of money into developing our AI offering, but where we have been able to utilize this, it's clearly showing value for the customer, but it's also clearly showing value for Etteplan. The theory that we have had seems to be right, and we just simply need to continue working with it, get more customers engaged with these kinds of solutions. Now with the new offering that we have developed during H1, we feel that there's lots of potential.

Speaker #2: The theory is proving to be right. So, where we are developing our own AI-driven models, customers are, of course, willing to pay for the additional value that they are getting.

Speaker #2: So our profitability is improving. We have invested quite a lot of money into developing our AI offering, but where we have been able to utilize this, it's clearly showing value for the customer, but it's also clearly showing value for Etteplan.

Speaker #2: So the theory that we have had seems to be right, and we just simply need to continue working with it, get more customers engaged with these kinds of solutions, and now with the new offering that we have developed during H1, we feel that there's lots of potential.

Speaker #2: But we have to be strong in selling these solutions to the customers, and we need to engage more and more customers with these types of new things.

Juha Näkki: We have to be strong in selling these solutions out to the customers, and we need to engage more and more customers with these types of new things. The theory is working, and we just need to get more volume for it.

Speaker #2: But the theory is working, and we just need to get more volume for it.

Speaker #3: All right. No further questions from me at this point.

Roni Pärnänen: All right. No further questions from me at this point.

Roni Peuranheimo: All right. No further questions from me at this point.

Operator 2: The next question comes from Emil Immonen, from DNB Carnegie. Please go ahead.

Operator: The next question comes from Emil Immonen, from DNB Carnegie. Please go ahead.

Speaker #1: The next question comes from Emil Eminen from DNB Carnegie. Please go ahead.

Speaker #4: Hi, Juha. Thanks for taking my questions. Maybe I could continue on the guidance because it looks quite tough to reach, in my view. So, like Ronnie already mentioned, quite a pickup needs to happen.

Emil Immonen: Hi, Juha. Thanks for taking my questions. Maybe I could continue on the guidance, because it looks quite tough to reach in my view. Like Roni already mentioned, quite a steep pickup needs to happen. Could you describe, is this across all your business segments? Because Software and Embedded Solutions, that is looking very weak still at this point.

Speaker #4: Could you describe, is this across all your business segments, or is it because of software and the solutions? I mean, that is still looking very weak at this point.

Speaker #2: This is true. I would say that the pickup is visible in all the segments. But in Software Embedded, as you probably have seen also from other companies, clearly with the productivity improvement with AI and also with customers considering whether they should do things themselves or utilize partners, there is a slightly lower improvement there.

Juha Näkki: This is true. I would say that the pickup is visible in all the segments. In Software Embedded, as you probably have seen also from other companies, clearly with the productivity improvement with AI and also with customers considering whether they should do things themselves or utilize partners, there is a slightly lower improvement there. Still the improvement is all over the place, and with all the service areas and with the new offering that we are developing also in the Software and Embedded area, we do believe that there are growth opportunities for us and our pipeline is building up for the new solutions that we've been creating. We are confident that there are opportunities and we will be able to move forward in all the areas, given that the market would pick up.

Speaker #2: But still, the improvement is all over the place, and with all the service areas and with the new offering that we are developing also in the software and embedded area, we do believe that there are growth opportunities for us. Our pipeline is building up for the new solutions that we've been creating.

Speaker #2: So we are confident that there are opportunities, and we will be able to move forward in all the areas, given that the market would pick up.

Speaker #4: Okay. How about Technical Communication then? Because this was maybe the most surprising segment to me—that revenue declined quite steeply. It's been good, I think, for quite a few quarters, but now it seems to be slowing down.

Emil Immonen: Okay, how about Technical Communication then? Because this was maybe the most surprising segment to me, that revenue declined quite steeply. It's been good, I think, for quite a few quarters, but now it seems to be slowing down. Was there something specific happening in Q2 that caused the drop in revenues?

Speaker #4: So, did something specific happen in Q2 that caused the drop in revenues?

Speaker #2: Well, we have quite significant business with certain car industry customers in Germany, which has had the biggest impact on the drop. And there are some other customers where we have had a drop in delivery volumes.

Juha Näkki: Well, we have quite significant business with certain car industry customers in Germany, which has had the biggest impact on the drop. There are some other customers where we have had a slight drop. Also, perhaps the delivery volumes. This segment is very heavily dependent on the delivery volumes of our customers. When the delivery volumes are slightly lower in certain customers, that has a direct impact on our revenue. With some customers, we had also lower delivery volumes. For this reason, it took the revenue slightly down from last year's level. The profitability impact came from the difficulties, especially in Germany and in certain customers, and affected our operational efficiency and had a profitability impact.

Speaker #2: This segment is very heavily dependent on the delivery volumes of our customers. And when the delivery volumes are slightly lower with certain customers, that has a direct impact on our revenue.

Speaker #2: So, with some customers, we also had lower delivery volumes. For this reason, it took the revenue slightly down from last year's level. But the profitability impact came from the difficulties, especially in Germany and with certain customers, which affected our operational efficiency and had a profitability impact.

Speaker #4: But if I hear you correctly, then it's not a loss of customer or anything that would be concerning. It's simply that volumes were lower in this quarter.

Emil Immonen: If I hear you correctly, then it is not a loss of customer or anything that would be concerning. It is simply that volumes maybe were lower in this quarter.

Speaker #2: This is our interpretation, and as said, we have been developing a lot our offering in this particular service area, and it is very much a non-core area for our customers.

Juha Näkki: This is our interpretation, as I said, we have been developing a lot our offering in this particular service area, it is very much a non-core area for our customers. We are extremely strong with our new offering, we are introducing in the fall also a new AI offering, which will improve our efficiency even further. With this, we are confident that we can win market share and maintain the levels we have now and also start to grow again and also improve our margins. With the new offering, with the things we already have, we should and we are in a position to win market share. I would expect that growth will start to happen again and that we will be able to improve our margins with the new things that we have developed.

Speaker #2: But we are extremely strong with our new offering, and we are introducing in the fall also a new AI offering, which will improve our efficiency even further.

Speaker #2: And with this, we are confident that we can win market share, maintain the levels we have now, start to grow again, and also improve our margins.

Speaker #2: So with the new offering, combined with the things we already have, we should—and we are—in a position to win market share. So, I would expect that growth will start to happen again, and we will be able to improve our margins with the new things that we have developed.

Speaker #4: Great. And then maybe a final question on the guidance still. Is it based on a certain number of open tenders and your expected win rate, or how have you built this?

Emil Immonen: Great. Then maybe a final question on the guidance still. Is it based on a certain number of open tenders and your expected win rate, or how have you built the assumptions behind the guidance?

Speaker #4: The assumptions behind the guidance?

Speaker #2: Well, basically, we have—of course, we have our pipeline. We have our customer discussions, and we know certain projects that could already now start.

Juha Näkki: Well, basically, of course, we have our pipeline. We have our customer discussions, and we know certain projects that could already now start. We do have quite good visibility for what there is already going. If the market will support us in a similar manner that it did in June, we should be fine. If it even improves further, we should be fine. If the risks that are still out there materialize, of course we will have pressure on the guidance. This is something that we will see now after the summer, our customers are returning and when we start to see how this geopolitical situation evolves and how do our customers react to that, whether they take decisions or not, or do they continue with their investments or not. This will, of course, play a huge role in the guidance.

Speaker #2: We do have quite good visibility for what is already going on. And if the market will support us in a similar manner as it did in June, then we should be fine.

Speaker #2: And if it even improves further, we should be fine. If the risks that are still out there materialize, then of course, we will have pressure on the guidance.

Speaker #2: But this is something that we will see now when, after the summer, our customers are returning, and when we start to see how this geopolitical situation evolves and how our customers react to that—whether they make decisions or not, or whether they continue with their investments or not.

Speaker #2: This will, of course, play a huge role in the guidance. It is under pressure, I have to admit. But we are still of the opinion that it is possible to reach it, and if the market supports us, we are in that position.

Juha Näkki: It is under pressure that I have to admit, we are still of the opinion that it is possible to reach it, and if the market supports us, we are in that position.

Speaker #4: Okay. Thank you, Juha. That's all from me.

Emil Immonen: Okay. Thank you, Juhani. That's all from me.

Emil Immonen: Okay. Thank you, Juha. That's all from me.

Speaker #2: Thank you.

Juha Näkki: Thank you.

Speaker #1: As a reminder, if you wish to ask a question, please dial the pound key followed by five on your telephone keypad. There are no more questions at this time, so I will hand the conference back to the speaker.

Operator 2: As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, I hand the conference back to the speaker.

Operator: As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, I hand the conference back to the speaker.

Speaker #2: Okay, thank you very much. And yeah, I mean, if we look at the overall picture for this year, of course, the first half of the year has been disappointing.

Juha Näkki: Okay. Thank you very much. Yeah. If we look at the overall picture for this year, of course, the H1 of the year has been disappointing. We had a really difficult Q1. Now in the Q2, we had a difficult start, but there was clear improvement. It was the end of the quarter in demand, and we did manage to slightly grow in June compared to last year, even if we take into account the calendar effects. Right now, at the end of June, it looked promising. There are risks, but with decent demand going forward and with solid strategy execution, with all the new stuff that we have developed, all the new service solutions, we feel that there's a lot of potential, and we will be able to move back to the profitable growth path again.

Speaker #2: We had a really difficult first quarter. Now, in the second quarter, we had a difficult start, but there was clear improvement. It was the end of the quarter in demand.

Speaker #2: And we did manage to slightly grow in June compared to last year, even if we take into account the calendar effects. So, right now and at the end of June, it looked promising.

Speaker #2: There are risks, but with decent demand, going forward and with solid strategy execution with all the new stuff that we have developed, all the new service solutions, we feel that there's a lot of potential and we will be able to move back to the profitable growth path again.

Speaker #2: If you wish to ask questions, of course, outside this conference, you can always contact us—myself, our CFO Helena Kukkonen, or our SVP for Marketing Communications, Otti Torniainen.

Juha Näkki: If you wish to ask questions, of course, outside these conferences, you can always contact us, myself, our CFO, Helena Kukkonen, or our SVP for Marketing Communications, Outi Torniainen. Thank you very much for tuning in.

Operator 2: The host has ended this call. Goodbye.

Operator: The host has ended this call. Goodbye.

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