Welcome to Inderes TV! QPR released its Q3 earnings today, and we're going to discuss it with the company's CEO, Matti Erkheiki, among other things. Matti, hi.

Thanks for having me again.

Let's start the interview as usual. If you could go through the Q3 performance in a nutshell.

Yeah, well, Q3 was busy, of course, as usual, but in light of the figures, it was challenging. Both revenue decreased, slightly regarding SaaS as well, and then profitability also decreased compared to the comparison period, year on year. But of course, compared to the previous quarter, however, as we discussed last time, thanks to the cost-saving measures, it improved, and the EBITDA was clearly positive.

But then after the holidays, which has been very positive, we have indeed seen a clear pick-up in terms of interest. So there has been a significant number of direct inquiries from around the world from companies wondering how to continue their process mining journey in this era of the AI data platform.

That sounds promising, and we'll come back to that a bit later. But let's start by going through the SaaS revenue development and related drivers in a bit more detail.

Well, in August, we were forced to issue a profit warning and state that the decrease there was largely due to, in addition to normal customer churn, the termination of a few customer accounts of a somewhat more significant size than normal. That is what then materialized in full in the quarter's figures.

Right! If you could also talk a bit about profitability development and your financial position. There is still cash in the bank, but cash flow was somewhat negative.

Yeah, well, that comes straight from the annual cycle, but about profitability. As I said, if we look at the beginning of the year as a whole, it has improved significantly. The large Middle East deal from earlier in the year continues to have an effect there in particular. But nevertheless, even though it was a bit lower compared to the comparison period, if you look at the Q2 earnings as well, it shows the lightening of our cost structure. Virtually all lines there have decreased, and we have managed to streamline other business expenses in particular, and that will continue.

As for the financial position, it is quite satisfactory. And as a detail, of course, we can mention that, as we have communicated earlier, we will pay back the final loan installment during the end of the year. So we will head into next year with no interest-bearing debt at all. This lightening of the cost structure and debt-free status provide a good starting point for next year.

Exactly. Let's move on to the sales outlook, which you already talked about preliminarily. Indeed, in the summer you issued a profit warning, stating that customer decision-making is slow. But apparently there is some kind of pick-up now, or at least it can be seen in inbound inquiries.

Well, regarding the decision-making itself. It's hard to say if there has been a significant revision one way or the other yet, but what has clearly happened and was mentioned in the report as well, is yes. The level of interest has increased. And indeed, there have been direct inquiries from major international companies, and those are of course very motivating. They are still in the early stages, but they are now being worked on full steam ahead.

Could you elaborate a bit on what is driving this interest? As it were.

Yeah. Well, of course, based on the discussions held with them, a uniting factor there is Snowflake, among other things. They are almost without exception Snowflake customers, and our native ability to operate directly in the data platform without moving data to external SaaS services. That has been Snowflake's concept for a long time, and perhaps it is now starting to break through in our domain. Our competitive position in the Gartner report naturally comes up as well, but time will tell where those lead.

You have also commented that your MCP interface has attracted a lot of interest, so is that a driving factor here, and has it, on the other hand, resulted in any sales so far?

Well, undoubtedly it has also come up in discussions, meaning it is one contributing factor there. And now when we talk about MCP, it's just one standard and interface, and all software companies. If they haven't released something already, they probably will.

We see it somewhat as a working title for a broader matter, that it is a strong part of our product vision, and we see a lot of new use cases there, and particularly the expansion of the process mining user base, because it makes it possible not to require as much specialized expertise. We see huge potential in it. And these things have indeed come up in these discussions, where many experienced professionals see it the exact same way and are very pleased with our product vision and also find it. In addition to Snowflake and being native, as such a differentiator.

Right, there was the US public sector customer account. You announced this. In the summer it was an important icebreaker for you, so if you could comment a bit on how things have progressed in that regard. Yeah, here.

Well, often in such a large public sector organization, even though pilots and such had been done there, there was a certain initial friction.

But in recent months it has started progressing very well, and our partner Cognition Analytics is doing the delivery there. They have done a good job, and now we are right on the verge of whether the first benefits achieved are at a level where we could get the kind of reference that would enable Cognition Analytics to take this type of solution to sister companies or organizations in the public sector there. But time will tell. But now we've got things moving forward nicely.

How has the building of your partner network been progressing lately, by the way?

Well, we've probably shifted the focus a bit there, so that previously there was a lot of searching for new partners, and now we've concentrated more on customer acquisition and other things with our existing active partners. And that's definitely showing, in that if we look at the new customer accounts we've gained this year, partners have played a very significant role in various capacities. In some cases, it's been largely resale done by them, and then in others a smaller role, but still involved in making contacts and providing support. And of course, Snowflake as a slightly different type of partner always brings its own flavor to it, but partners are definitely important to us.

Exactly. Artificial intelligence is naturally transforming your industry a lot, we've talked about that in previous videos, and you already spoke a bit about this MCP interface too. But have any new thoughts arisen lately regarding both the opportunities and threats of AI? And could you recap your AI strategy a bit as well?

Absolutely, a very timely topic. Systematically throughout this year, the focus has shifted more and more towards the opportunities side and less towards threats. Perhaps that has also been visible in the big market picture, that SaaS company valuations have recovered a bit. But for us, of course, in our domain it is. It's extremely relevant. And as I already said, there are those things I mentioned, new use cases and a broader user base.

But in addition to that, during Q3 we now launched a new solution for this, as we call it, AI Agent Mining. Meaning that when agents operate, that's a certain kind of process, or they are part of a process, and the same kind of timestamped data is left there as from other transactional systems. So we have then taken these traditional process mining techniques and algorithms into that world and are able to show customers through that what kinds of agent behavior patterns or others are the ones related to those famous. exponentially growing token costs.

And it's now in trial use with the first customers and technically fully validated. What we're now showing together with them is how big the benefit is that they get from this visibility compared to a standard observability tool. We see that there is a clearly distinct angle and added value, but time will tell. So QPR AI Agent Mining is the name of this solution, and for agents running on top of Snowflake it is fully packaged, so with almost the push of a button you can start seeing that behavior. But of course it's also applicable to data from agents running on other platforms.

To wrap things up a bit and thinking about the outlook, with what kind of mindset is the CEO looking towards the end of the year? Perhaps even towards next year as well.

Yes, well, excited, that of course it shows there. Our official guidance hasn't changed. It's the one that was published in August, but then just today, with the increased interest, it's a really motivating situation and all that, a small Finnish technology company and big companies from around the world contact you and want to get to know your solution and seriously consider it as an option for their next phase.

Traditionally when we look at our sales data and history, these inbound leads have come before too. Maybe not to the same extent. We've certainly had a better success rate with them simply for the reason that by that stage, those projects are usually already underway at the customers. They possibly have a budget for them, they have a schedule. They are being carried out there. There's less of things going on hold or even being canceled. But what is certain is that it keeps the team motivated and 110 percent employed, these things over the coming months. And on that basis, we look forward to the future with interest and excitement.

Yes, let's hope that sales start coming in from there in due course. Thanks for the interview and good luck for the rest of the year! Great.

Thanks, same to you. Thank you.