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Good afternoon and welcome to the QT company's Q1 results presentation. My name is Heli Jamsa, IR Manager, and with me today, our CEO, Juha Varelius and CFO, Jouni Lintunen to present the results. [Operator Instructions]
Without further ado, please, Juha, the floor is yours.
Thank you. Good afternoon, everyone. And welcome to our Q1 result release. We're going to have pretty much the same agendas. Before I'm going to first briefly talk about Q1, then Jouni is going to talk about the Q1 numbers in more depth. Then at the end, I'm going to have a review to outlook that how the rest of the year is looking out and then we're going to have a Q and A session. So if we look our Q1 highlights, our net sales grew 35% and it was a very good start for the year. I'm actually very happy for this start. We pretty much bang on, on our internal plan, how we were planning to execute this year. Revenue generation was pretty much the same than it has before.
We had a very strong developer license sales. We had a bit of headwind on our distribution license sales. Distribution licenses are growing, but obviously, the supply chain challenges and some other challenges in the market environment are affecting the growth rate. But developer licenses was very good. On Q4, we had EMEA region. Europe was the strongest performer. All our regions are about equal, but on Q1, specifically North America was performing extremely well. So on Q1, North America was our best performing region. However, as said, they do perform pretty evenly. And the number one poll position does change quarter on quarter, but this time it was United States.
Our EBIT was EUR 4.7 million, and we did have quite a lot of growth investments in R and D on our sales and on our ventures. I talk about all this EBIT more detail on the following slide. And as you know, we never activate our growth investments or R and D investments. Instead, we got them all as costs. We did add 59 people in Q1 and I believe we added-- on comparison year on year, we had something like 160 people more than a year ago, which is quite a big increase to our size.
What I'm happy about it is that we've been able to attract and retain people. So we've been very successful on our hiring. Like said if we look on Q1, I'm very happy about our performance on Q1. The headwind we had is obviously the war in Ukraine. It did not have that big of an impact. It started at the end of February. I think it will have a bigger European economy as we go forward later in this year. What does have an effect on supply chain logistics is a very strict restrictions in China. So I do expect that we're going to see a lot of logistical problems globally because of the fact the harbors are closed over there and whatnot.
And I'm not talking about only supply chain challenges here. We are seeing our customers are facing challenges on all kinds of components shortages. And I expect that to remain the same for throughout this year. When I say this, it does affect our distribution license growth rate, but obviously our distribution license sales is still growing nicely. If we look onto ventures business, we have a new business unit, ventures business unit, and they're actively looking for acquisition targets for us.
What we are looking for is to strengthen our core business, but we're also looking kind of our developers' normal day and the software developers' whole process. And what we're looking into there is that how can we add more product into that portfolio? And as said before, the acquisition of Fraudlogix last year was a very logical increment to our product portfolio when we added the quality assurance tools into our portfolio. So that continues.
We're not giving any timelines that when do we expect to have the next acquisition, because it's very hard to predict, but I'm pretty confident that we're going to see acquisitions this year. We do have also multiple product development projects in ventures, one being the digital advertising that we launched during the first quarter and there are also other product development projects. And we are planning to launch those products later on this year, and we announce them when the time is right.
We did also [ a major ] new version 7.0 release on our automation Squish tool, which is now the subscription model version only. So one of the Q1 offering highlights were the Squish 7.0 where now you can have a video to see how the test went. We launched Qt Creator, 7.0, Design Studio 3.0, MCU 2.0. And we also had our outrun digital cockpit demo that demonstrates specifically our real--time 3D capabilities for our automotive customers. So these are just few examples to demonstrate that we continued our R and D investments also on product side and we had a very, very exciting new enhancements on our product.
On top of that, as said before, we did invest quite a bit on personnel and that personnel mainly went into our sales operations, so to strengthen our sales throughout the world. With this Q1 highlights, I'm going to hand over to Jouni and he's going to talk about financials in a bit more detail.
Hello and welcome from my behalf as well to the earning call. I'm going to talk about the financials, talk about revenues, income statement and then couple of words about the balance sheet movement in Q1. As Juha said, we saw net sales growth of 35% in the first quarter and this was driven by the developer licenses, specifically out of regions, the Americas. The licenses and consulting, they grew by 44% to EUR 27 million. However, the maintenance that we report as a separate revenue line, it remained flat. And that line will start slightly going down, going forward in coming quarters because of our ongoing exercise to change over to subscription license mode.
We did get some tailwind from exchange rate changes, specifically from USD. And the impact of that was EUR 1.1 million. So in comparable currencies, the growth were at 29%. We see that the strong quarterly fluctuation will continue. And we see that the exchange rate impact will remain going forward as well. Exchange rate impact because of the fact that roughly 2 thirds of our revenues are in USD and our reporting currency is Euro. And then the other side of that is that the timing of large deals and then timing of the distribution license deals fluctuate from quarter to quarter. Here is a short version of our Q1 income statement.
And as I said, 35% revenue growth driven by America and developer licenses. Materials and services, which we used for-- this account we use for the third party consulting expenses. So that grew by 28%, I'm sorry. Our head count grew by 40% year on year. We are now 160 more than what we used to be a year ago and alone in Q1 head count increase was 60. So that impact shows directly in the personal expenses, which grew by 41.7 % to 17 EUR million.
Other operating expenses grew by EUR 2.2 million driven by the business development and ventures projects. And then also travel expenses, marketing are going up as well after 2 long years of COVID. This all leads us to EBITDA margin of 17.7% slightly down from last year in EUR 5.5 million. Amortization line, it's EUR 0.9 million per quarter and that increase is driven by the Fraudlogix acquisition that we executed last year in April.
This gives us EBIT margin of 15% or EUR 4.7 million. We did get some gain from financial items, EUR 0.3 million, specifically from the exchange rate gains and the income tax accruals were EUR 1.1 million, meaning that the effective tax rate is roughly 22%. All this leads us to 12.2% net profit or EUR 3.8 million. Here in the balance sheet side, I'm going to concentrate on the movement in Q1, and we see some increase on the non-current assets and also in the non-current long-term liabilities. The impact of that is driven by the lease contracts that we have now in our balance sheet.
Current assets are up by EUR 18 million, driven by the cash position. Let's talk about that a little bit later. There's no major change in the receivables part. And due to our diverse mode of business, multiple regions, multiple segments, we don't see any specific risk exposure on those accounts. Cash is up by EUR 18 million driven by the fact that 120,000 shares were sold in Q1 that had been initially purchased to hedge the 2019 LTI program.
Equity is down by EUR 6 million, components shortly net profit of EUR 3.8 million and then offset in the LTI program impact on equity. Short term liabilities as well are up by EUR 22 million. And that's driven by the impact of the long-term incentive program, [ tails ] of that are going to be executed now in Q2. So this impact is going to be fading out in second quarter. With these words, I will hand over to Juha to talk through the market outlook and the guidance for 2022.
Thank you. And now we get into the interesting part that how is the growth looking, going forward? Our long term growth prospects are pretty much unchanged in that sense that the increasing number of devices needing great graphical user interfaces, having great user experiences underneath for cross platform tools is not gone anywhere. Instead it's growing and it will be growing in the future. So there is a very clear customer need for our product and how software defines the value of a product, it's still there. And we do see more and more products that are being built with graphical user interfaces and applications on them. So there is no change in that.
I also see a very strong demand on developer licenses going forward because more and more this type of software needs to be developed. If I look how we've been able to attract new customers and how I see that our current customers are expanding the usage of Qt when they find how good product it is and how much it can enhance their productivity. I'm very certain that we have a very bright future, going forward in that sense. Also, we are adding more products like the quality assurance tools as we can offer now to our customers, not only the capabilities of developing world class software.
We can offer them tools to test and test those softwares when they do change and so forth. So I see that we can utilize in a future a lot better and a lot more the capabilities we have because we have our own sales channel. We have our own salespeople throughout the world. And on top of that, we do have a great product. If I look on a shorter term in this year on the second quarter and this year, particularly, I do see that-- well, obviously the Russian attack to Ukraine will affect some of our customers because some components have been done in Ukraine. We do see also impact in the European economy, inflation is rising and so on.
So obviously, the economy is going to cool down. I already mentioned that the COVID restrictions in China will be affecting the supply chain logistics throughout the world. It's not only going to be in China. On short term, obviously very tight restriction in China may affect a bit our ability to close deals in China, but those are kind of have minor effect on our top line growth.
This high inflation -- well, evidently the economy going to be cooling down all around the world. However, having said this, there is not much new in that sense that this is pretty much the same situation we had last year and a year before with COVID. And how we see it is affecting is that our developer license sales is performing very well. So many of our or all our customers when they see and when they look the future, they will have to think beyond this difficult times. And they need to think that what kind of products, what kind of user interfaces we are going to be launching this year, next year and a year after?
And therefore that development is actually not slowing down. So the only place where we actually see this affecting is that some of our clients are having difficulties on supplying products in volumes they were anticipating in the first place. However, our strategy has always been that we operate in 3 continents. We operate in multiple countries. So our country exposure risk is not limited into one particular country. Instead we are very spread out. Also, our product is very horizontal. So our product is used on over 70 different industries. So we are not affected on any particular industry, per se. So we do have industries that are not actually facing supply chain component shortages. I want to highlight here, by the way, that when I talk about component shortages, I'm not talking only about chip shortages.
There are logistical problems on all kinds of different products. So there are some headwinds ahead of us. Despite that, I'm very confident that if I look our pipeline on the second quarter, if I look our business outlook, we are reiterating, we're not changing our estimate that we're looking for 30%, 40% revenue growth and we are looking for 20% to 30% EBIT margin for this year. And I have no doubt my mind, at least at this point of time that we would not be able to meet these targets. On the contrary, the business looks very healthy at this point of time. So I think the headwind teams, unfortunately, they're going to be teams for the whole year.
I don't expect the supply chain logistic problems to go away. Hopefully, the war will end very soon, but the effects on economy will be affecting Europe and rest of the world for the remaining of the year. But despite that, we see that we're going to continue very well and we are keeping our targets as mentioned before.
With these words, I want to thank you all. And now we have time to go on a conference line and start our Q&A.
[Operator Instructions] And we will take our first question.
Juha and Jouni, Felix Henriksson. I have 3 questions. I will go one by one. Firstly, you delivered 29% growth in comparable currencies for the quarter, which is below your guidance of 30% to 40% on an annual basis. So I'm just curious on what gives you confidence on that the growth rates will improve in the coming quarters, especially as you're facing top comps for the second quarter. Is it just the likely M&A that you mentioned or do you also see improvement in the organic growth rates?
Yes, absolutely. I do see a growth on organic growth. So when I'm giving this guidance, like I said, we do have-- obviously we've had-- we've been looking on M&A side. We've been looking in companies, but I'm not counting any M&A to help us on that guidance. If I look our business historically, it's very clear that first of all, it does grow on top of business in a way that it keeps building up.
We do hire more people. We do investments. We expand our business and that's where the growth comes. I do see also that there are fluctuations on quarters, so quarters are not the same. And it's a very good point that you pointed out that last year, the second quarter was very, very good quarter with very, very high growth. So obviously this year, the comparable growth rate will be lower on the second quarter. However, having said that if I look for the overall and if I looked at how our organic growth is, how I see it developing, how I see pipelines developing, yes, I do have confidence that towards end of the year, the growth will accelerate and we're going to meet our targets at 30%, 40% targets.
If I'm now looking into our targets and obviously, we are very far from the year end. And as you know, our fourth quarter is usually very busy quarter and for some reason, the fourth quarter usually is the-- all our quarters are that towards end of the quarter that the sales accelerates. So towards the end of the year and fourth quarter, I do anticipate that our growth will accelerate as it has always done. And if I look the pipeline building and if I look outlook for the whole year, I'm not seeing at this point of time that we would even be on a low side of our guidance.
So in that sense, I'm happy. And like I said, our first quarter, we pretty much bang on, on our internal plan. So in that sense, the year started as we anticipated. So that gives me also confidence that where we're going to be heading.
Very helpful. Maybe follow-up on quarter fluctuation themes. Even though you did say that you did deliver bang on, in line with your own expectations, I'm wondering if you saw any sort of like deal slippage from the end of Q1 to Q2, that we should be aware of.
Can you repeat that question? The voice quality over here is not the perfect one. So could you please repeat it?
Yes, yes. So I was touching on the quarterly fluctuations and asking that even though you did deliver bang on, in line with your internal expectations, was there any sort of deal slippage from end of Q1 to Q2 that we should be aware of?
Okay. Well, yes. Okay. Yes, I see where you're heading. Well there always is. So if I look the first quarter, what did we get, then where there is some deals that actually went into second quarter. Yes, they were and there always is. So we always get a spillover to next quarter and then the deal's closed because for whatever reason our clients want to sign the deal on particular quarter. So yes, there was a spillover, but I would say that was normal.
The amount of spillover to the second quarter was normal. Do I anticipate that the second quarter, therefore that the quarterly fluctuations that the second quarter? We have to keep in mind that the second quarter last year was very, very good. So the comparable growth on the second quarter this year is going to be less than we have normally, but if I look at the pipeline building, if I looked at how the business is growing, we are pretty confident on the overall guidance for the whole year. And we didn't close any big deals obviously on the first quarter or major deals to that extent.
Got it. And then my final question is related to the distribution license growth. Obviously, it's clear that the developer license growth is spearhead for growth at the moment where, as you mentioned, the distribution license are facing some headwinds. I'm just curious if you could help us out at all with the sort of pace of the distribution license growth for Q1. You mentioned that this is growing, but are we sort of talking about single digit level or double digit levels, any sort of help, that would be much appreciated.
Well, on the first quarter, the distribution license revenue fluctuates depending on-- as you know, that our customers buy those in chunks and they may report in chunks later that this much they used. So I would say that if I look now that the distribution license revenue, that what is the growth rate and how does it look like, going forward? We don't disclose that number, but the it's-- how would I describe it? It's a bit slower than I would've hoped for.
I do see the reasons why there's been some slowness on some of our clients to get their products out, although I think that they will get-- they are products that will get delivered. So the delays are more like months, not like years or not like that they would not get out of the door at all. So in that sense, I do anticipate that the distribution license sales will pick up later.
And the only major risk in that is that if the very strict COVID restrictions in China will continue and if this logistical supply chain problems will get worse than they are today, then I would say that there are things to worry about, but if things remain as they are, then I'm sure that the overall distribution license revenue this year will be okay. And like I said, our business does fluctuate. So on quarter comparisons, I would say that half a year comparisons are better, full year comparisons are even better and we do anticipate the full year growth to be on 30%, 40% on comparable currencies.
And we are taking our next question.
Matti Riikonen, Carnegie. If I would continue with the internal expectations versus the outcome, would you kind of explain a bit how much developer license sales you expect? Was it kind of more than you expected, if you say that the distribution license was a bit of a disappointment in Q1? So I'm just trying to find the balance between those and your internal expectations.
Yes, of course. When looking just one quarter, the fluctuations in euro amounts are very small, but yes, I would say that if I look on the internal outcomes, so if I look the overall revenue, it was pretty much where we anticipated it to be. And if I look at where is the fluctuations, yes, the developer license sales has-- it was already last year and it has continued very strong. So developer license revenue sale is a bit stronger and distribution license sale is a bit lower, if we compare on kind of our internal quarter on quarter expectations. When I look the business, I actually look the business in a half a year sequence. So internally, what I look is that I look the pipeline, I look the pipeline build up. I have kind of a rule of thumb that how much we're going to close, how much it's going to go forward.
And there are estimate-- we do estimates that-- we do much more sophisticated estimates on that. I have my own rules of thumb and looking at that on a half a year. So if I'm looking at the first half of the year where we're going to probably end up with this pipeline on overall revenue, I think we're going to be very close to our internal targets for the first half of the year. And if I look the pipeline buildup, if I look the-- we also look on our distribution license estimate that what do we estimate that the distribution licenses are going to be on a half a year scheme.
There was a bit of softness, but I wouldn't say that the alarming software softness in any regard. And if I look on the customers where it's coming from, it was very obvious that they did have some component shortages. They weren't able to distribute and have the production they were planning to. On a quarterly basis, the chances are very subtle, I would say. So to answer your question more on developer license, less on distribution.
Right. If I continue with, was there any unexpected variation between customer segments, like the large customer volumes developed versus the smaller ones? Is there any deviation from your internal expectation?
No, no. Our customer relationships are very-- they're very long, they're very steady. If I look on a larger customer base, it takes-- to get a new customer for the first time, it takes some time. They usually take us for their new product development project that they have. They usually find out that the QT has very good product and then they start expanding that usage. And as they expand that usage more and more, their products are being developed using Qt and more they see benefits out of it. And this relationship building where the expansion of Qt happens over a longer period of time. It continues for longer period of time. So we don't see much of fluctuation over there. And the basis for such satisfaction obviously is that our product is very good.
Now, if I look that we added quality assurance tools into our portfolio, we see that some of our bigger clients are now investigating and seeing that how well those tools are integrated into Qt. And they're looking into starting using quality assurances tools in part of their product development efforts. Then we obviously have-- we do have startup customers. We have small companies in the various sizes and there, the deal is they contact us. We usually get a lead through the website. They contact us, we sell couple licenses and whatnot. So the development cycles are long.
These relationships are long and they're developing. So there are no short term fluctuations per se, but what we do obviously see that when the war in Ukraine started, it does affect on various components that were manufactured in Ukraine. Some of the raw materials that are from Ukraine and so on and so forth. And that will have a short term implications. And then the bigger picture that due to COVID we still are seeing chip shortages and shortages on a global scheme on some of the components.
Right. And then my last question would be that you already mentioned that the growth range for top line is pretty wide for this year, 30%, 40%, but you also said that you have not changed your internal expectations in which part of the bracket you would be. So I think you said that you're not looking to be at the low end of the growth range just to meet the guidance. So could you kind of confirm that where is the confidence coming from that you think that you are in the same spot after Q1 than you were before Q1 or coming to the year?
Well, if I look the pipeline build up, if I looked at how the internal projects in our customers are proceeding, the bigger cases, how they're going forward, if I look the pipeline build up and I see how the pipeline is being closed, that gives me the confidence where we're heading at this time of the year. Obviously, it's the first half of the year, very early and the end of the year is far out. But like I said, when we are meeting new customers and doing the deal, it takes some time, right? So we have a pretty good idea that how much pipeline we need, how it's going to be closing.
We do have an idea that how much distribution revenue we are going to be getting this year and so on and so forth. Obviously, there is a lot of deviation, but if I look the numbers in our plans, we are pretty much where we were thinking of. And when we gave this guidance, 30% to 40% year on year growth, obviously we weren't-- when we gave that guidance, we weren't thinking-- our internal plan was not to make a 30% growth, which is pretty obvious. And nothing has changed there. At this time of the year, yes, it looks that I am confident we are exactly where we were planning to be and the things are progressing well.
We take our next question.
Jaakko Tyrvainen from SEB. Can you hear me?
Yes, there is just a slight echo, so that's why I need to concentrate very carefully.
Okay. Well, let's try. I have got a couple of questions. And I'll take them one by one. First, regarding and following the escalation in Ukraine. Have you seen any changes in the customer behavior, especially when it comes to the decision making of acquiring development or developer licenses and are there any geographical differences in the behavior?
Well, the customer decision making, I think that mostly our customers are, they're developing great products with great user interfaces and great applications on those products. And obviously, they're planning to have a longer life cycle for those products and they need to be manufactured and what. So our customers are looking their products and product portfolios for many years and having kind of a short term challenges don't usually affect those plans because at the end of the day, those companies also they need to have those products into the market.
So in that sense, I don't see-- when the COVID started, we were a bit concerned what's going to happen when the factories were closed February 2020. And what we saw then very quickly was that yes, the factories were closed and there were logistical problems and there were less product manufactured because of all these restrictions, but we actually saw that all our customers, they didn't change their long term plans. Their developers were sent to home from the offices, but they continued working from there. So we haven't seen any hesitation on that. And we do see a healthy development on developer license sales.
What we do see -- well, if you want to look differences based on one quarter, it's very difficult to say because our quarters do fluctuate and whatnot, but obviously, the Q1 was very strong in North America. So you could argue that there was less effect, but I don't see that that was really decision making per se. It was that COVID is maybe a bit more-- it has less of an effect in United States now that maybe on some European in countries. There are less restrictions. People are going fast forward and whatnot. Europe is coming up.
On the other hand, Europe was very strong on a fourth quarter. So maybe the biggest impact I do see in a customer behavior is the fact that in China, it's very, very difficult to have customer meetings. It's very, very difficult to negotiate the deals and close the deals and so on and so forth. So on China, restrictions are really affecting the sales effectiveness, so to speak. But even in China, I don't see that our customers would be thinking that they put projects on hold. So that's basically what I do see.
This is my own interpretation that I do see growing inflation rate and growing interest rates, which probably will affect the economy and probably will affect consumer spending on some point of time. But giving all these logistical problems we have, I think that's actually going to be healthy and it's going to be partly helping out on this supply--demand problem we are having at this point of time.
Okay, great. Then my second question. On the competitive environment and a brief update on that one. For example, have you seen any certain rival in the market which is more open compared to the previous times? And do you think that Qt holds all the competitive edges that you've had in the past as well?
I do. And if I look in 2015, 2016, when we started ramping up this business, we decided to have our own sales channel, our own local offices and hired sales guys, pre-sale engineers and consultants locally. We have a direct relationship with our customers in their local language. And now we can add into that same sales channel. We can add more products. As we've grown, we can put even more effort into R and D projects. We can invest more on products and we can broaden our product portfolio and we can broaden our addressable market. So for example, in quality assurance tools, we can offer them to our commercial customers. We can offer them to our open source customers.
We can offer them also the technologies, where our customer has developed something using some other technology than Qt. So it opens up a bigger addressable market for us. I see all this playing for us and more size and muscle we have, more we can put effort into that. So I see our growth opportunities actually growing, going forward based on the strategic decisions we've done before. So if I look now the growth challenges, we are having as of today compared what growth challenges we had few years back when we had very few people in this company.
And obviously, the growth needs to be bigger, but we have more people to execute upon them. So in that sense, I think that we are in a very good position. Do I see any new competitors or rivals? No, I don't. Obviously, we do have the names we've mentioned before. Some of the smaller ones that we saw in the early days when we started this, I see some of them are kind of flattening out or declining. And obviously, the usual big names are there.
Does the Qt framework per se has its competitive edge? Yes, it does and embedded where you need the performance. You need to think about performance of the processors and whatnot. The Qt is an excellent choice. And we are a very, very good cross platform tool. And we keep on making it better. We do get feedback from developers using Qt and that's not getting any worse. Qt is getting better. So the more we can put effort into the product. So we do have a great product and people are very happy about it. So no worries in that sense. As well as we do have -- there is a COVID, there's a war. There are all kinds of hassles in the world. But the fact that software defines the value of product, the fact that people want even better user interfaces and they want even better usability and user experience when they purchase different products for their use, it's not going anywhere.
The demands are getting higher. So if you're building products, if you're building cars, if you're building refrigerators, you need to be even better on your digital experience than you were 2 years ago. So I don't see that-- the market is there. The market is still in its infancy, it's growing. So up until 2025, I don't see-- I'm not worried at all that the market would like be penetrating in any particular way. At this point of time, the competition rivals I see, I think it's good that there is competition. It tells you that there is a market when there is competition. It's also a good run--up for us that there is competition, but there is more than enough room for all the competition. The market is still growing very, very fast for many years to come.
Right. Excellent. Thanks. Then my final one, just briefly an update or first take on the piloting of the digital advertising solution. How has that gone? And do you expect the product to have some kind of impact on the 2022 numbers? And then if not, when should we think that the solution could have more meaningful impact on growth?
Well, let's put it this way. It's a very new offering to answer first your question. We are having pilot customers in there. There are pilot customer in there. There is a pipeline of customers that we are implementing as we speak and we are seeing that, how it works and how it should be built in a way that our customers will be able to make revenue out of it. And the revenue model is that we do get a revenue share out of the advertising revenue.
What we do offer is that when you do use our design tools and you design the user interface, you can design where you have an ad. You can design where you have a video maybe or a banner ad. And you can decide-- maybe that is only your internal advertising, maybe that is only your product advertising or product instructions, but you have this capability on your design tool. And I think it's very important to have that because there are customers that will want to have that feature. Well, as you do that and as you know, on embedded devices there is no advertising market as of yet.
So for customers, not only to be able to develop a design that where they want their ads, we can provide those ads. We do have the platform and capability that you can define that on this particular spot, I want to have ads and we deliver those ads. And then we share the revenue. So we do have pilot customers in there. I think it's a needed feature to sell our design tooling and our design tools because that is a capability some of our customers will definitely want. Not all, but many do. Keeping in mind that we do serve over 70 different industries. So there is a whole range of products that are being built using Qt. On our bigger vision, if I think that how this business has evolved, first, we were selling perpetual developer licenses way back and it was a one-time license. Then we started getting revenue.
We changed a bit our strategy and business models and our product and whatnot. And we went into business that we were selling developer licenses and a runtime revenue. So we do get paid when something is being developed and designed. And then we do get paid a small amount when a product leaves the factory. And that's really great. I mean, that's a great business model.
Now, what we are testing and we are looking for different opportunities that, wouldn't it be great if we would get a small fraction of revenue during the lifetime of a product? And that's kind of the strategic thinking and vision behind there that how could we be able to get into such position? And obviously, that needs some kind of different product offering we have of today and digital advertising is a one example of this. Will it succeed? Time will tell. Will it have a revenue impact this year? No, not a meaningful one.
Will it have revenue impact, let's say, 18 months from now? Yes, definitely. I do hope so. And we do have lots of different product initiatives. Some of them will fly. Some of them won't fly. Definitely, the ones that won't fly, we do have kind of internal development gates and business development gates you have to go through. And if you stop meeting those criteria and if you stop-- if we see that, well, this is not really working, then definitely we are going to close and kill it. So let's say that in the next 18 months, digital advertising will start generating revenue or I'll stop talking about it. But I won't stop our efforts finding, trying to find a way that we would be getting revenue through products through their lifetime, if you follow what I'm trying to say.
[Operator Instructions] And we will take our next question.
Can you hear me?
Yes.
This is [ James ] from Invesco. Just wanted to ask on your guidance, because from the last time we met, hinted that you may be looking to up guidance, so it's a bit surprising that you left as is. Is this you being overly cautious? Or is this a new paradigm we live where it is going to be [indiscernible] growth?
Can you elaborate a bit? Because I think our guidance is now 30% to 40% year on year and we did revise that. Not that long ago, our guidance before was kind of a long time that we would grow 15% or more. And obviously looking the numbers as of today and looking the numbers last year, that was a bit on a low side. But now, our guidance is 30% to 40% year on year growth. And that we did launch not that long ago. I can't remember now out of my head when that was announced, but I don't think that's 30%, 40% year one year growth and 20% to 30% EBIT, it's not particularly modest. So can you elaborate a bit your question, please?
Yes, so just looking at the history of the company, the growth has been growing at quite an extraordinary pace. And just the market was expecting a continuation of that pace of growth. Just wondering, is this you telling us that market was too ahead of itself?
Okay. Okay. Now I understand you, sir. Yes. Okay. So you're thinking that we had 50% growth and expectation was that that would continue at 50% growth. So if we look, we didn't definitely guide for 50% growth and we've never implied that we would be able to keep up a 50 growth year on year. So I think that on that sense, the expectation has been too high.
We haven't been guiding on that kind of expectation at all. You know, 30%, 40% year on year growth, I would take on that. And as of now, like I said, it doesn't seem that we are going to be on a low end, but the 30%, 40% year on year growth, I would stick to that. What comes to a 50% growth last year? Obviously the trade impact on that was the fact that we had a big deal on our second quarter and that affected the whole year. Last year, the second quarter year on year growth was exceptionally good with a very large deal. And that of course contributed to our whole year growth being so strong. And we did have a very strong fourth quarter, which is very typical. Usually, the first quarter is slower. Second quarter is faster.
Third quarter is slower. And fourth quarter is our busiest quarter of the year. Why does it go that way? I really don't know, but that's the way it is. And so I think that -- if you take away the effect of bigger deal, then obviously the whole year growth would've been a bit less. And our quarters also fluctuate. So an idea that the we would be having kind of a straight line growth, certain percentage. It's not going to be like that. It's going to go up and down.
Overall, if I look on this year, well, I've said this many times, we still think that we are certain that we are going to-- we strongly believe that we're going to make that 30%, 40% growth this year. Are we going to have such a mega deal that would affect the whole year and change, say, a particular quarter? Of course, in the future, there will be those big deals. I mean, sometimes we do get these major deals. Do I anticipate something like that to happen on a second quarter? No. Do I anticipate something to happen in the future? Yes, but when do they come? It's very hard to predict. However, am I kind of basing this year assumptions based on that I'm going to somewhere find a big deal? No. I hope I answered your question.
Yes. Just one last question for me. So, in terms of winning new customers, have you noticed yourself winning customers from competitors or have you been winning customers moving off their own internal legacy system to your system?
Yes. Very good question, sir. Both. So we do see that when a customer in, say, a situation that they start thinking about that, hey, we have this new product, whether it's a refrigerator, washing machine or they think a new product line and they think that they're getting ready designing, planning and what it's going to be like, they usually start looking that what kind of hardware, what kind of software, how they're going to be developing that?
And that's the moment we get in. And if it's a new customer, usually there is, say, we do proof of concepts and we might do demos. And the customers are comparing that using Qt what is the performance? What's the outlook? What kind of hardware I need to get the experience I want? And then Qt really shines because building with Qt you can use less hardware, you can save costs, you can be quicker. And then they compare other technologies usually.
And then we win or lose. And many times we win. The other that we see a lot that before in some industries, companies have been having their internal tools. They've developed some internal tools and they've been using those. So the question then is that, do I release my engineers from developing and upkeeping my own tool and put them into development and instead take Qt and then rely on the fact that Qt is a great product and we will also invest for Qt in the future. And actually, they're going to get a better software development tool and framework using Qt instead of trying to build their own using maybe 10 or 20 engineers. And it's usually an easy sale.
It's better to put your scarce resources on developing something new, pay a bit of money for us and get a lot better product because that's our business. And we have hundreds of people working on-- 150 people on R and D subcontracting and so on. And we've been doing it for years. So we do see both. So we do see customers moving away from their internal tools and we do see competition. And competition is, like I said, on a new customer, it is usually the proof of concept doing demos. And the customers can really see that what kind of usability and performance they can have using Qt on particular hardware compared to our competitors. And on embedded devices, we really shine on that. So we're good.
Then on customers that have been using Qt, obviously they already know this. Then the negotiation is usually more like that, hey we're going to add this new product. We're going to out more developers and so on and so forth. And then it's a negotiation with their sourcing department that since we're becoming now big of a customer, what are the terms and whatnot. So then we get into volume discussions and price negotiations. And usually, we do get in discussions of frame agreement. So our customers are usually big companies.
And when they see that they're going to be using Qt on a wider spectrum in their business on various different business units and products, they want to have a frame agreement. And then our sales negotiates a frame agreement that different business units can download and use Qt on particular terms. And so not each business unit has to make a deal by themselves. And that's a typical cycle. And a very typical cycle is that when customers first start using Qt, we usually see happy customers and smiling faces. And we usually see that usage will expand later on. And that's a cornerstone.
We need to keep our people executing. We need to get our new people executing very fast, but at the same time, we need to make sure that our product stays very competitive going forward. And I have no doubt. I mean, our R&D, it's best in the world for building Qt. Now, I think we've used our time.
Thank you very much for very good questions. Thank you very much for participating and listening. Looking forward, talking to you after second quarter. Please keep in mind that the comparable quarter last year was very good. So the comparable growth rates will be lower. We are looking forward to a very good year for Qt. Thank you very much.