Cologne, 8 August 2016 – Results Q2 2016
THE DIGITISER OF THE GERMAN SME SECTOR
1. Strategic Update
Q2 2016: Positive developments across the board
- High revenue growth in Cloud business (y-o-y: +135%) thanks to
- initial Pure Enterprise Cloud (PEC) projects
- considerable project revenues from IoT business
- High interest in PEC among existing and new customers
- Reorganisation ahead of schedule
- Return to profitability
- Positive EBIT for two quarters in a row
- First net profit since Q1 2014
- Positive FCF of € 6.3 million
QSC is growing in areas where the future is
| Drivers in Q2 2016 |
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Revenue development in 2016 |
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| Cloud |
Launch of PEC / considerable IoT project |
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| Consulting |
High demand for SAP projects |
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| Outsourcing |
Starting the migration to the PEC;
no new customers in 1:1 outsourcing |
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| TC for corporate customers |
Growing demand for All-IP solutions |
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| TC for resellers |
Fierce price competition |
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The PEC is picking up speed
- Sales push started in February 2016
- First projects with existing and new customers
- First significant order from apt Hiller Group in July 2016 (400 workplaces)
- According to Experton's Cloud Vendor Benchmark 2016, QSC is a "Rising Star" in the "Cloud Workplaces" category
- QSC is a "Cloud Leader" in three other categories
- H2 2016 will see more PEC projects going live
IoT is generating considerable revenues
- Commercialisation of IoT solutions is gaining speed
- Pilot projects in several industries: utilities, real estate, heating systems
- According to Crisp Research, QSC is now an IoT "Innovator" like Google and Oracle
- Since May 2016, QSC's IoT management has been strengthened by a seasoned IoT manager with an excellent track record
- Since July 2016, QSC has been part of Scheer's Industry 4.0 expert network
- Focus in H2 2016: further commercialisation and partnerships
Focus on All-IP is paying off
- In B2B TC business, QSC is focussing on All-IP solutions
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Unique opportunity: ongoing migration of approx. 3 million ISDN lines
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QSC's proven track record: some 250,000 accounts / 4 million lines
- All-IP sales push: most successful partner tour so far with more than 350 partners on site
- Solid increase in revenues
H2 2016: Well on track to fulfilling the guidance
- Growing revenues especially in Cloud business
- Further IoT projects
- More investments in PEC and infrastructure
- Completion of reorganisation
- Recruitment of a growing number of Cloud experts
- QSC is confident about the current guidance
- Revenues: € 380-390 million
- EBITDA: € 34-38 million
- Positive FCF
2. Financial Update
Q2 2016: Rising profitability in a good quarter
Faster-than-expected progress in the cost-cutting programme in Q2 2016
- Staff-reduction programme getting closer to its target of reducing headcount by some 350 employees
- Further improvement in EBITDA, EBIT and net income
- Strong improvement in FCF
- Further improvement in revenue mix
First net income since Q1 2014
Higher profitability despite revenue decline
| in $\epsilon$ million |
Q2 2015 |
Q2 2016 |
Δ |
$\Delta$ in % |
| Revenues |
100.9 |
99.2 |
$-1.7$ |
$-1.7%$ |
| Cost of revenues |
73.7 |
72.9 |
$-0.8$ |
$-1.1%$ |
| Gross profit |
27.2 |
26.3 |
$-0.9$ |
$-3.3%$ |
| Sales and marketing expenses |
8.5 |
7.9 |
$-0.6$ |
$-7.1%$ |
| General and admin expenses |
8.3 |
8.0 |
$-0.3$ |
$-3.6%$ |
| Other operating income |
0.3 |
0.3 |
$\overline{\phantom{a}}$ |
|
| EBITDA |
10.6 |
10.7 |
$+0.1$ |
$+0.9%$ |
| Depreciation |
12.8 |
8.7 |
$-4.1$ |
$-32.0%$ |
| EBIT |
(2.2) |
2.0 |
$+4.2$ |
$+190.9%$ |
| Financial result |
(1.5) |
(1.2) |
$+0.3$ |
$+20.0%$ |
| Income taxes |
1.0 |
(0.6) |
$-1.6$ |
nm |
| Net income |
(2.7) |
0.2 |
$+2.9$ |
$+107.4%$ |
Revenues
- Two-track development as expected:
- Growth in Cloud, Consulting and in TC for corporate customers vs. decrease in TC for resellers and in traditional Outsourcing
Earnings
Cost-cutting programme impacting positively
Cost cutting programme ahead of schedule
- Since February 2015, a company-wide cost-cutting programme has been in place
- Key aspects of the programme
- Reduction in headcount by some 350 employees
- Reduction in number of external consultants
- Reduction in number of locations
- Streamlining administration
- Optimisation of purchasing processes
- Standardisation/Industrialisation of IT operations
- Savings achieved by 30 June 2016: approx. € 20 million
QSC is nearing its target of 1,350 employees
Two-track development in H2 2016
- Recruitment of Cloud experts for sales and operation of the Pure Enterprise Cloud
- Staff cuts necessary in order to achieve the target of 1,350 employees by the end of 2016
- Staff reorganisation leads to further one-off costs in the mid-single-digit million euro range
Progress in cost-cutting contributes to higher EBITDA
- EBITDA continues to rise despite lower revenues
- H2 2016 will be impacted by the completion of the reorganisation
EBITDA margin
Significant decrease in depreciation
- QSC benefits from a significant decrease in depreciation on the TC infrastructure
- For FY 2016, QSC expects depreciation of approx. € 36 million
Significant improvement in EBIT
- Positive EBIT for two quarters in a row
- Successful cost cutting and lower depreciation helped to improve EBIT significantly
- H2 2016 will also be impacted by the completion of the reorganisation
EBIT margin
Cloud: Revenues more than doubled
- Cloud business still in its early stages
- Considerable IoT project revenues in Q2 2016
- Positive effects of the PEC will be felt in H2 2016
- Significantly improved segment contributions thanks to the business model's scalability
Segment margin
Consulting: Ongoing revenue growth
- High demand for SAP consulting
- Growing demand for Cloud expertise (SAP HANA)
- Lower segment contribution due to one-off effect in Q2 2015
- Attractive segment margin of 15% in personnel-intensive consulting
- Microsoft
- SAP
- Microsoft and SAP
- Segment margin
Outsourcing: Cost-cutting programme is paying off
- No new customers in 1:1 outsourcing
- Start of migration to the PEC and focus on high-margin revenues will lead to a further revenue decline in H2 2016
- Increase in segment margin thanks to success of the ongoing reorganisation and the cost-cutting programme
Segment margin
Telecoms: Growing All-IP revenues
CAPEX at a moderate level
Focus
- Infrastructure
- Developing the Pure Enterprise Cloud
- Customer projects
Higher CAPEX in H2 2016 due to further investments in infrastructure and PEC
Share of CAPEX in revenues as a percentage
Rapid increase in FCF in a good quarter
- Higher earnings and moderate CAPEX enabled QSC to increase FCF significantly
- FCF in H2 2016 will be impacted by higher CAPEX and one-off costs for the completion of the reorganisation
4. Questions & Answers
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
Disclaimer
This presentation contains forward-looking statements based on management estimates and reflects the current views of QSC AG's ("QSC") management board with respect to future events. These forwardlooking statements correspond to the situation at the time this presentation was prepared. Such statements are subject to risks and uncertainties, which often fall outside the sphere of influence of QSC. These risks and uncertainties are covered in detail within the Risk Report section in our financial statements.
Although the forward-looking statements are made with great care, their correctness cannot be guaranteed. Therefore the actual results may deviate from the expected results described herein. QSC does not intend to update or adjust any forward-looking statements after the publication of the presentation.
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