Analyst Conference Cologne, 5 March 2018
THE DIGITISER TO THE GERMAN SME SECTOR
Disclaimer
This presentation contains statements relating to the future which are based on estimates of the QSC AG ("QSC") Management Board and which reflect its current views on future events. The statements relating to the future correspond to the circumstances at the time of creating the presentation. Statements of this nature are subject to risks and uncertainties which QSC is largely unable to influence. These risks and uncertainties will be dealt with in detail in the risk report as part of financial reporting.
Although the statements relating to the future have been made with the greatest of care, their correctness cannot be guaranteed. The actual results may therefore differ from the expected results described here. QSC shall neither adjust nor update statements relating to the future after publication of the presentation.
Words of welcome Jürgen Hermann
- Preliminary figures for 2017 & outlook for 2018 Stefan A. Baustert
- New growth opportunities in the new organisation Jürgen Hermann
Questions & answers
Stefan A. Baustert, CFO
Preliminary figures for 2017 & outlook for 2018
Financial development in 2017
QSC exceeds raised free cash flow target
|
2017 objectives |
2017 results |
|
| Revenues |
€ 355 – 365 million |
€ 357.9 million |
|
| EBITDA |
€ 36 – 40 million |
€ 38.3 million |
|
| Free cash flow |
€ 10 – 11 million
(raised FCF forecast) |
€ 12.6 million |
|
QSC is back in the black
| in $\epsilon$ million |
2016 |
2017 |
Δ |
| Revenues |
386.0 |
357.9 |
$-28.1$ |
| Costs of revenues |
282.9 |
266.1 |
$-16.8$ |
| Gross profit |
103.1 |
91.8 |
$-11.3$ |
| Sales and marketing expenses |
33.0 |
27.2 |
$-5.8$ |
| General and administrative expenses |
31.8 |
27.0 |
$-4.8$ |
| Other operating result |
(1.2) |
0.7 |
$+1.9$ |
| EBITDA |
37.1 |
38.3 |
$+1.2$ |
| Depreciation |
50.2 |
31.1 |
-19.1 |
| EBIT |
(13.1) |
7.1 |
$+20.2$ |
| Financial income |
(5.8) |
(4.4) |
$+1.4$ |
| Income taxes |
(6.1) |
2.4 |
$+8.5$ |
| Consolidated net income |
(25.1) |
5.1 |
$+30.2$ |
Revenues
- High growth in the Cloud
- Decline in Outsourcing and in the TC business with resellers (of which:
- ~ € 15 million regulation effect)
Results
- High cost discipline proving successful
- Depreciation clearly receding
Strict cost discipline in sales and administration
Depreciation continues to recede
- Scheduled depreciation decreased to € 31.1 million in 2017
- Lower depreciation reflects change in the business model
QSC increased all key earnings figures in 2017
Free cash flow up by 50%
- FCF of € 12.6 million clearly exceeds high forecast of € 10-11 million
- Positive FCF permits QSC to pay out a dividend once again
- Management Board proposes a dividend of 3 cents per share for the FY 2017
Moderate investments strengthen free cash flow
Two focal areas:
- Infrastructure and technology (41%)
- Customer projects (40%)
- Other tangible assets and licences (19%)
Continuous optimisation in the data centres
Customer projects in Cloud and IoT environment, among others, require initial investments
Cloud: moving into the black with high growth
- Pure Enterprise Cloud and IoT drive Cloud business
- High growth requires expansion of the team
- On an annual basis Cloud nevertheless achieved a positive segment contribution for the first time
Segment margin
Consulting: segment margin up by 1 percentage point
- Growth pause in 2017: revenues in Consulting did not quite meet up to expectations
- New initiatives will bring the segment back on a growth course in 2018
- Share of cloud projects (SAP HANA) continues to rise
- Segment margin in this personnel-intensive business remains two-digit
- Microsoft
SAP
- Microsoft & SAP
- Segment margin
Outsourcing: revenues are developing as expected
- Traditional Outsourcing business continues to change:
- First customers are migrating to the Pure Enterprise Cloud
- An internationally active major customer decided in favour of global IT service provider
- Tough price competition requires concessions in contract extensions
- Consequence: segment margin under pressure
Segment margin
TC: attractive margins in corporate customer business
- Stable TC business with corporate customers in a challenging environment
- Two effects with resellers:
- Stricter regulation (~ € 15 million)
- Tough price competition
- Greater weight of the corporate customer business causes the segment margin to rise
TC revenues with resellers
- TC revenues with corporate customers
- TC revenues (total)
- Segment margin
Higher revenues with resellers in Q4 2017
QSC AG
Progress made in forward-looking business fields
- Higher revenues in the forward-looking business fields in 2017 too: clear strategic alignment and reorganisation are bearing fruit
- Since 2015 the share of the three strategically important business fields in overall revenues has increased by 12 percentage points to 45%
Progress leads to higher profitability
Free cash flow increased for the third time in succession
Strategic alignment of QSC is bearing fruit:
- Rising revenues in the forward-looking business fields
- EBITDA, EBIT and consolidated net income have improved – markedly in some cases
- Free cash flow increases from year to year
Financial outlook for 2018
2018: free cash flow of more than € 10 million planned
QSC expects the following for the 2018 financial year:
Revenues of € 345 — 355 million
EBITDA of € 35 — 40 million
Free cash flow > € 10 million
2018: where QSC expects growth
|
Drivers in 2018 |
Revenue development in 2018 |
| Cloud |
Pure Enterprise Cloud and IoT |
|
| Consulting |
SAP HANA projects |
|
| Outsourcing |
Migration to cloud services, end of contract with a major
customer; realignment towards SME businesses |
|
TC for corporate
customers |
Growing demand for All-IP solutions; new opportunities
with regional carriers and municipal utilities |
|
| TC for resellers |
Tough price competition, receding importance of ADSL technology |
|
Accelerated growth in growth areas
- QSC is expecting the following for the current year:
- Further growth in Cloud revenues
- Return to growth course in Consulting
- Higher TC revenues with corporate customers
- Share of forward-looking business fields could exceed 50% for the first time
Cloud / Consulting / TC business with corporate customers
Jürgen Hermann, CEO
New growth opportunities in the new organisation
The new vertical organisation at a glance
The decisive advantages of verticalisation
New strength in an "old" business area
- TC networks are experiencing a renaissance as the backbone of digitisation
- QSC has a nationwide infrastructure:
- Nationwide 100 Gbit/s backbone network
- Broadband open access network
- xDSL access network
- Nationwide WLL infrastructure
- QSC has extensive all-IP expertise
- 11 years of experience with All-IP products
-
250,000 active SIP-Voice-over-IP connections
-
4 million active telephone numbers of our customers
-
1 billion connected mins./month via IP network
New opportunities with corporate customers: NetCologne
- QSC provides central components for the new cloud offering of NetCologne
- White label solution for the development of cloud-based telephone systems
- Fast time to market (TTM) thanks to flexible IT architecture
New opportunities with resellers: fibre optics
More and more local authorities are developing their own fibre optic networks – QSC can operate them
- Since October 2017, QSC has also been feeding this customer's network with voice, data and IPTV functionalities
- Fibre optic network will cover 50,000 FTTH and FTTB connections
Colocation services: flexible and individual
Banks and IT service providers appreciate QSC colocation
- Focus on potential customers in the environment of existing data centres
- Pros: efficient and scalable infrastructure plus high speed link plus certifications (ISO 27001, 9001, 20000, etc.)
- Numerous add-on products
- Offering convinces particularly critical customers: Banks and IT service providers
- New opportunities in these and other target groups
Consulting: QSC is an excellent SAP full-service provider
QSC is an SAP Gold Partner
The partner status recognises performance in terms of service, quality and SAP expertise. SAP customer projects and qualified customer references are included.
The award documents that the SAP-HANA offering as well as the project implementation satisfy the high expectations of QSC customers.
The award is given to partners with special expertise and successful reference projects for an SAP solution or sector.
SAP HANA Leader Germany 2017
The end-to-end approach – with which the SME sector is fully supported in all SAP-HANA services – was highlighted above all else.
QSC publishes book on SAP
17 QSC authors, 1 topic: "Logistics with SAP". The book was a bestseller at SAP PRESS in November and December 2017.
S4/Hana is the most important growth driver
- Virtually all existing SAP customers are concerned specifically with the migration to S/4 HANA and with the use of the SAP cloud platform and other cloud products in hybrid cloud models
- Back in 2014, QSC opened its own HANA centre and now counts as one of the leading providers in this growth market
- Entry is frequently via the S/4HANA Value Assessment with which SMEs can develop a plan for transformation, define the requisite changes in the organisation and get processes ready for the future
S/4HANA – Value Assessment by QSC
QSC AG
Consulting takes new paths with new partners
Integration of business process analyses in real time (process mining) into SAP service portfolio
QSC has been a "System Integrator Partner" of Celonis since 2017 and has put packages together specially for SMEs using which companies can gain an idea of their process landscape in real time. Using the process mining technology, companies can not only reduce throughput times of individual processes by up to 37%, but also reduce process costs by some 25% in many cases.
Facilitation of the transformation with new partner Processline since the start of 2018
Processline examines the degree of maturity of the organisation and the system affinity of the users, and develops measures and expense recommendations for organisational change as part of transformation processes.
These support services save costs for unplanned measures, secure the acceptance of work flows and guarantee a smooth use of the new system.
Cloud: PEC convinces our customers
- Sector: banks and insurance companies
- Revenues: € 1.3 billion
- Headquarters: Bad Homburg
Objective
- IT landscape is to grow flexibly and swiftly with the new business model and rapidly increasing data volumes
- Secure operation of the business IT in the German judicial area
- High availability
- Provision of virtualised enterprise workplace environments
- Cost efficiency through modern procurement model from the cloud
Realisation
- Provision of complete business IT from the Pure Enterprise Cloud
- Highly available operation in the QSC data centres
- Database services
- VoIP services
- Operation of the entire LAN/WAN
- Assumption of all desktop services
Outlook
- Fast integration of further life insurance companies into the IT environment
- First life insurance company has already been acquired and incorporated in the IT by QSC
The future belongs to the multi-cloud
Multi-cloud – a challenge for the SME sector
MODERN APP ENVIRONMENT
- Cloud-native applications
- Enterprise grade container environment
- DevOps toolchain
- Application optimisation
SECURITY & GOVERNANCE
- Micro-segmentation
- Policy enforcement
- Monitoring & logging (log & security analytics, App insights)
AUTOMATISATION
- Provision & migration
- Policy-based management
- Security best practices
- Disaster recovery
INTEGRATED CLOUD MGMT
- Orchestration of all cloud environments
- Dashboarding
- Business management (resources & costs)
- API & help desk integration
Multi-cloud functions even today
EU-GDPR is a challenge in the cloud era, but possible if the relevant checks are in place! Sensitive data should continue to be left in the private cloud/DC (DE)!
Even critical workloads can be moved to the cloud without problem!
Innovation possibilities, prototyping and provision times of Cloud-IaaS/PaaS/SaaS are elementary for future business agility!
IoT: Q-loud convinces with full-stack approach
Q-loud convinces Schüco
electric opening
Physical equipment Integration / hardware provision / operation Application/service
gateway
41
Q-loud convinces in Smart Energy (NB-IoT)
Edge Connectivity
42
Q-loud convinces in particulate matter measurement
New opportunities in all five business fields
- Back in the black QSC generates profit
- SME sectors expects individuality the positioning is correct
- Verticalisation creates agility and customer proximity – growth opportunities in all areas through innovation
Questions & answers
QSC AG
Contact
QSC AG Arne Thull Head of Investor Relations
T +49 221 669 -8724 M +49 221 669 -8009 [email protected] www.qsc.de
Twitter.com/QSCIRde Twitter.com/QSCIRen blog.qsc.de xing.com/companies/QSC AG slideshare.net/QSCAG
QSC AG QSC AG Mathias-Brüggen-Str. 55 50829 Cologne, Germany