Welcome to this webcast presentation for Etteplan's Q3 results for 2025. My name is Juha Näkki, the President and CEO of the company. At the end of the session, there will be a Q&A session where you will be able to ask questions from myself and also our CFO, Helena Kukkonen. The contents of the presentation will be as follows: follow the previous presentations that we have had, so we'll go through the highlights of the quarter and the overview of the business situation. We'll look a little bit more in detail on the financial development, look a little bit on the different service areas that we have, and then to end the presentation, look at how we're doing against the strategy and the strategic targets, and of course the financial guidance, followed by the Q&A.
If I start with the highlights of the quarter, profitability was improving in the quarter, of course against a weak comparison quarter, but nonetheless for a Q3, the profitability level was decent. Clearly, the measures that we have taken to improve our operational efficiency and to streamline our organization are starting to take effect, and this was visible in the profitability, especially in two of our service areas, but still relatively okay-ish level for the quarter. Also, we were happy to see that now our AI-driven service solutions are starting to have an impact on our profitability and improving our margins, especially visible in the Technical Communication and Data Solutions service area. Overall, the development has been positive. If we look at the share of revenue derived from AI-driven service solutions, that was still increasing.
We had certain projects that were stopped by some of our customers, which had a negative impact, but we were able to compensate for that by winning new businesses, and the number again developed favorably, being 5% at the end of this quarter for the full year. The highlight from the service areas was of course TCDS development in terms of profitability. We have been able to, with our new solutions that we have developed, AI-driven solutions, we have been able to win market share in this service area, and now finally also our profitability is starting to improve due to the better margins with the new solutions, and also better operational efficiency that relates to the fact that the measures that we have taken to improve our organization's capability are starting to take effect.
This is a good, very positive trend, and we expect it to continue as well going forward. On the negative side, the market uncertainty remains high. There is the geopolitical tension there. It remains and remains on a very high level. It's difficult to say what will happen in the future, but this led to a situation where we saw, especially towards the end of the quarter, a declining demand. In the first part of the quarter, there was a little bit of project delivery-related engineering, which had an impact especially on our Engineering Solutions service area and also our Technical Communication and Data Solutions service area. It looked slightly better, but unfortunately towards the end of the quarter and in the beginning of October, we've seen this development take a step back again, and there's a little bit lower demand situation there.
To top that, it seems like many of our customers are again taking new savings measures to improve their performance, and this is having an impact on our demand. The demand is decreasing at the end of the quarter and in the first parts of the basically fourth quarter, and for that reason, we needed to issue a profit warning yesterday, and this was related to not the Q3 performance as such, but due to the view forward and the demand situation going forward. This is the basic reason that we needed to adjust our guidance downwards, unfortunately. If we look at a little bit more in detail, the operating environment, it is difficult. Our customers have again suspended, postponed, and even canceled some of the projects that they have. In particular, in the R&D activity, there was clearly lower demand.
Many of the projects were stopped, which had especially an impact on our Software and Embedded service area. It was unfortunate, but this seemed to be the case with certain customer industries that we have, which had a negative impact. The defense industry and energy industry remain strong, and there we see demand developing favorably, but in all other segments, there are clear variations between customers. Some customers do certain things, some customers even invest, but there are very many customers, and in certain segments, there are customers that are clearly saving money. There's quite a lot of restructuring and union negotiations going on within our customer segments, and when these are taking place, it's quite difficult to start new things, and for these reasons, it remains quite challenging. If we look at the markets in specific, in Europe, in all countries, the weak demand continues.
Perhaps Finland and Sweden were the markets where we saw the weakest development, which resulted in Finland in the number of temporary layoffs increasing quite rapidly at the end of the quarter, in the third quarter, and also continuing to increase in the beginning of the fourth quarter. In Sweden, certain large customers in the car industry have taken quite severe actions to reduce their capacity, which has meant that there's quite a lot of free capacity available in the market, which creates turbulent situations for some parts of the industry, and this is having an effect on the demand. Outside Europe, in China, the market situation remains fairly good. Demand is healthy, but this is again driven mainly by the fact that the trend of buying services is increasing, and more and more customers are outsourcing development activity, and this is creating demand.
The market as such is okay and solid, but with this development in the culture of buying services, we see good demand and strong performance for us also in China. If we look at the key figures, slight growth, EUR 82.2 million in revenue, + 2.8%, but against the weak quarter and organically still slightly declining. EBITDA at EUR 5.6 million, so 6.9%, so fairly decent for a third quarter, but of course not where we should be against our targets. EBIT at 4.9% or EUR 4.1 million, and EPS at EUR 0.10. If we look a little bit on the revenue and personnel split in Q3, revenue by service area, Engineering Solutions 57%, Software and Embedded Solutions 22%, and Technical Communication Solutions 21%. By area, Finland 43%, Scandinavia 24%, Central Europe 29%, and China 4%. Then personnel by area, Finland 47%, Scandinavia 19%, Central Europe 24%, and China 10%.
If we look at the customer segments, automotive growing clearly due to the acquisition of Novacon Powertrain in January this year, and then defense continuing to grow, currently at 7%, and also marine and transportation growing, but all the others staying on the same level or slightly declining. That is the picture that we see today, and we expect it to stay relatively the same towards the end of the year. If we look at the financial development, then a little bit more in detail. On the key figures, of course, slight growth, but clear improvements in EBITDA and EBIT, and also EPS against, of course, a weak quarter last year. We did have quite a lot of unexpected events during last year, which resulted in a highly negative quarter for the third quarter, so the comparison period was weak.
Still, a clear improvement and that we are, of course, happy with. Revenue developing slightly improving, 2.4% at comparable exchange rates, and organic growth - 2.2% or at comparable exchange rates - 2.6%, but slightly less declining than in the previous quarters, and hopefully this will start to turn towards the following quarters. Revenue from key accounts growing at 0.5%, which is encouraging, but here we do need to remember that the mix of key accounts has changed a little bit with the Novacon acquisition. Certain new customers have come into play, which we did not have before, so that has a little bit of an impact here. Still, I would say that the decline in the key account sales is starting to at least slow down, and we are starting to see that in some areas, some key accounts, there are possibilities to start growing again.
When exactly this turn will take place is extremely difficult to predict due to the savings measures and the market situation at the moment. First nine months revenue slightly declining compared to last year, so at comparable exchange rates - 0.9%, organic -5.6%, and that overall slightly weaker than last year. Still encouraging that we were able to improve on last year, and we hope that this trend will, of course, continue. In EBITDA, EUR 5.6 million or 6.9% for the quarter, and as said, improving clearly against the weak comparison period, but also a decent level for the third quarter. Of course, we're happy that the measures that we have taken in the previous quarters are starting to show effect, and there were also considerably less non-recurring items in this quarter compared to the four previous quarters, so that is also starting to normalize, which is a good thing.
In this particular quarter, EUR 0.2 million, which came out from some organizational restructuring and also some credit losses that we had from two customers. If we look at the sort of operative performance excluding the non-recurring items for the first three quarters, then the EBITDA percent would have been 7.4%, not where we should be, but still decent for the market conditions we have had during the year. For the full year, the absolute number is 6.5%. EBIT was at EUR 4.1 million or 4.9%. Amortizations related to acquisitions were at EUR 1.6 million for this quarter. For the full year, EUR 12.6 million, so slightly catching up for last year, but not there yet, and at 4.7%. EPS was at EUR 0.10, of course, a clear improvement for last year, and for the full year, we are on par with last year at EUR 0.29 for the first three quarters.
Operating cash flow also improved in Q3. This relates to a slightly better or clearly better business performance than last year, and a very much lower number of non-recurring costs during the quarter. Personnel at the end of the period, 3,830, slightly decreasing from last year, but of course, organically decreasing quite a bit due to the fact that we have also acquired two companies, Novacon and Eltech in Sweden during the year. This is a reflection of the market conditions as well. There is very soft demand in some areas, and we are still not recruiting as much as we could due to the weak market, but we are still ready to jump to the train when it starts moving, so we are keeping the sort of recruitment engine going and are ready to start growing again once the market starts to have the needs.
Here we can also clearly see the change that took place mainly towards the end of the third quarter. In Finland, the number of temporary layoffs increased to 152. Last year, it was 158, but at the end of the second quarter, we were at 121. There's an over 30% increase in Q3, and unfortunately, this has continued in the early parts of Q4, which is basically one of the key reasons for us issuing the profit warning. In the income statement, no major items which have not been lifted earlier. On the balance sheet, total balance sheet standing at EUR 301.1 million. Of course, the acquisition of Eltech brought in, but no major changes to the previous quarter otherwise. If we go to the service area, here in the Engineering Solutions side, we could see positive development.
The margin was improving clearly, of course, compared to a weak comparison period where we had a lot of write-offs and we stopped business in Germany in the comparison period. Still, slightly improving profitability for Q3, which is a little bit encouraging. Again, our measures that we have taken to improve the operational efficiency are seemingly working, and for that reason, we are able to improve the profitability, but still the volumes are low. R&D is low, and we did benefit a little bit from certain customer project delivery project-related engineering during the quarter, but the profit improvement and the margin improvement came from improving the operational efficiency, not from the demand. In the Software and Embedded Solutions, this was clearly the weakest service area for us in this particular quarter, related mainly to the demand situation in the R&D sector.
After the summer vacation, clearly the decision-making for new projects was very, very low, and during the quarter, also there were customers that were suspending projects, pushing them forward, and even canceling some projects, saving money basically, and this had a negative, highly negative impact on our profitability and also the revenue development. Revenue declined by 17.7%, and EBITDA was at 3.7%, so clearly a weak performance from this service area in the quarter. We have taken measures. We have taken certain restructuring measures, and also we have now changed the leader of this unit and the business, so Harri Saikkonen has started as head of this unit, and with his leadership, we aim to first improve the profitability and secondly find new growth opportunities to really start moving towards our strategic direction and starting to grow again because there are definitely opportunities.
If we look at the performance for the first three quarters, the profitability would have been at 7.3% for the full year, excluding the non-recurring items, so decent, but of course not where it should be. Here clearly the issue being in the demand, perhaps a little bit surprisingly even weak demand in the R&D projects, which is the main driver for this segment. We hope that that will certainly stop, and we can then move forward in the coming quarters and next year. In the Technical Communication and Data Solutions, clearly improving performance.
We were happy to see that the operational efficiency improved due to the measures that we have taken, but also we see that this is the service area where we are the furthest in adapting our AI-driven service solutions, and here we are also clearly starting to see margin development positively from the AI solutions and the new offering that we have been able to build. We've been investing quite a significant amount of money into this in the previous quarters, and now it's finally starting to show also on profitability, which is very pleasing. Revenue was growing 5.3%, mainly driven by Sweden and Germany, but also otherwise decent, helped by the project-related deliveries in the third quarter, but still some growth and clear margin improvement compared to last year.
For the first three quarters, the profitability would have been at 6.1% if we exclude the EUR 0.3 million layoff and restructuring costs in the first three quarters of the year. The right direction and clearly benefiting from the new offering that we have invested in, so encouraging to see, and we expect this trend to also continue going forward. If we then look at our strategy and the financial guidance and start with this one, we are very heavily investing into the AI and technology-empowered service solutions. We are developing new offering. We're also making changes into our sales setups so that we will be more effective in selling the solutions by doing that, generating clearly better value for our customers. AI as a part of our revenue is starting to increase, so now we're at 5%, and we expect that to continue to increase going forward.
If we look at how we did against our targets, of course, AI-driven solutions share of revenue, the target is at 35% by the end of 2027. Still a long way to go, but we are happy to see that in the past two quarters, we have been clearly able to move forward. It was 4% after the second quarter and 5% now after the third quarter, and with new offering being put in place all the time, we expect it to continue to grow. Managed services share of revenue at 66%, so slight development there, but something that we need to work with and continue to work with.
On the revenue side, unfortunately, with this demand situation staying a little bit still, so at this EUR 360 million level for the rolling 12 months still, something that we need to improve on and something where we may need to revisit the period when we are able to reach the EUR 500 million, but this is something that we will be looking at going forward. Operating profit target remaining at above 10% and now at 6.5%, so nowhere near where we should be, but the direction is positive, so we have been able to improve now in Q3, and it is better level than in the past two quarters, and we expect it to continue improving going forward with the measures that we have taken. Certainly, we hope that the market demand will start to improve, and that should help us also moving forward with the margin development.
To end the show, to our financial guidance, as mentioned earlier, we did have to downgrade our financial guidance yesterday with the profit warning, which is related to how we see the market developing going forward, not that much to Q3. Unfortunately, with the demand situation weakening and with this sort of very uncertain demand situation in certain parts of our business, we had to lower the guidance, and now the current revenue estimate is EUR 355 million-EUR 370 million, and the operating profit EBIT estimated to be between EUR 17 million and EUR 20 million for the year. Of course, it was very, very unfortunate to have to downgrade the estimates, but in this current situation, unfortunately, this was necessary for us to do. At this point, I would like to welcome any questions that the audience may have.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speaker.
I could ask some questions from the audience. Ronnie Bernhard from Inderes. Maybe about the guidance still, since it's very wide, so what kind of scenarios is built into it? Maybe talk about the low end also and about the top end of the guidance.
Of course, it is highly uncertain, and we really don't know what will happen in the market. We currently see very many customers taking savings measures and even canceling projects that we have. If this trend continues and if there are perhaps also risks for some customers to close down operations during Christmas time, etc., if all these materialize, then of course we would be looking at perhaps the lower end. We do see it's quite safe, but still if all these sort of things start to happen, then of course it will be more difficult for us to make more profit.
To the other direction, of course, should the market conditions improve, if there would be something taking place that would encourage our customers to move forward and really start investing and reinitiate certain projects that have been canceled, then we have the possibility to ramp up fairly fast, which has a quite big impact on our profitability fairly fast. It all relates to the fact that how does the demand develop during the rest of the year if projects seem to start or not. We do see a lot of opportunities. We do see a lot of possibilities, and there are projects that our customers could start, but the decision-making is taking quite a lot of time, and it totally depends on how these things go and how do the risks that we have, how do they materialize.
Given the wide guidance, the visibility into next year, I assume, is quite weak at this stage.
That is true. Of course, economists have predicted that next year should be better, but then again they did predict that this year should be better as well and the previous year. It's been a difficult three-year period for us, and we have been clearly wrong in our estimates, so it's hard to say what will happen next year. Certainly in the beginning of the year, if no clear sign that things will be better will take place, the beginning of the year will be kind of similar to what we have. We, of course, hope that there would be some sort of help from the demand side from the market, but we are also heavily working with our own service offering and building new offerings, selling the new offering to our customers. With that, we expect to be able to grow next year despite the fact that the market is difficult.
Maybe considering the difficulties that you've had in the past few years, maybe a broader question, do you see any reasons to be kind of worried about your competitivity, or have you, for example, lost customers meaningfully?
We have not really lost customers. Volumes in different customers are, of course, changing. I would say that our market position remains fairly solid and has even improved in certain areas where we have developed new offering and so on. Of course, time will tell when the demand starts to pick up. Time will tell, but we have not really lost customers or been moved out from certain key accounts or so on. I think that our position remains solid, but the market demand needs to improve. Our customers need to have the sort of courage to continue with their investment plans, and then we can hopefully move forward.
All right, thank you. No further questions from me.
Thank you. Okay, it seems that there are no further questions. Just to conclude, this is, of course, we are a growth company, and now for the past three years, it's been sort of standing still, which is disappointing. We have continued to invest into our service offering. We continue to invest into our strategy execution, and we are confident that we will be able to move forward, start to grow again, and also improve our profitability when we are relentless in our strategy execution. We do need the market to be at least stable to be able to do that, but we certainly hope that will be the case, and we will be able to move forward during next year.
Should you have any questions, here are our IR contacts: myself, our CFO, Helena Kukkonen, or our SVP for Marketing Communications, Outi Torniainen, will be available to help you at any time. Thank you very much.