QSC AG Company Presentation Results Q2 2015 Cologne, 10 August 2015
AGENDA
1. Strategic Update
-
Financial Update and Outlook 2015
-
Questions & Answers
TURNAROUND IN Q2 2015
- Sequential increase in all key earning figures (EBITDA: +16%, EBIT: +27%, Net income: +21%)
- Cost-cutting programme has positive impact not only on costs: leaner organisation accelerates decision-making; clear responsibilities in all areas
- Huge increase in order income: TCV more than doubled
- Reorganisation of Outsourcing business progressed: First successful projects of Pure Enterprise Cloud
- Considerable progress in the Cloud area
- Udo Faulhaber started as the new Chief Sales Officer (CSO) on 1 August
QSC'S STRATEGY FOR THE DIGITAL AGE
QSC supports people, things and companies in being successful in the new digital world
LEADING PEOPLE INTO THE DIGITAL AGE – CASE STUDY: VODAFONE
- At CeBIT 2015, Vodafone presented Secure E-Mail
- This innovation is based on FTAPI technology, which enables the convenient and secure transmission of encrypted e-mails and documents
- Preparations are running at full speed
- Huge market potential, as only a minority of SMEs are already using e-mail encryption tools
- QSC will benefit because of a revenue sharing scheme
LEADING THINGS INTO THE DIGITAL AGE – CASE STUDY: NOVOFERM TORMATIC
- Hidden champion Novoferm tormatic and QSC are implementing a cloud-based control system for automatic gates
- QSC's SOLUCON gateway will allow an encrypted transfer of data between warehouses and trucks to optimise workflow and maintenance
- SOLUCON'S zero downtime architecture guarantees protection against system failure (cloud platform is operated simultaneously at three QSC data centers in Germany)
LEADING COMPANIES INTO THE DIGITAL AGE – THE PURE ENTERPRISE CLOUD
THE TECHNOLOGY BEYOND PURE ENTERPRISE CLOUD
Modular architecture is focused on products instead of projects
THE MIGRATION IS UP AND RUNNING
AGENDA
- Strategic Update
2. Financial Update and Outlook 2015
- Questions & Answers
Q2 2015 – QSC AT A GLANCE
- Turnaround in all relevant earnings figures versus Q1 2015
- Cost-cutting programme performing well
- Staff reduction programme ahead of schedule
- Outsourcing revenue reduction due to a shift in business focus (towards SMEs)
- Telecommunications revenue reduction only in B-B-C business (B-B-B business stable)
- Strong improvement in Consulting business
- Forecast for fiscal year 2015 confirmed
QSC IMPROVED EARNINGS IN ALL RELEVANT AREAS
HIGHER EARNINGS VERSUS Q1 2015
| (in $\epsilon$ million) |
Q1 2015 |
Q2 2015 |
$\Delta$ in $\epsilon$ mio. |
$\Delta$ in % |
| Revenues |
104.7 |
100.9 |
$-3.8$ |
$-3.6%$ |
| Cost of revenues |
77.6 |
73.7 |
$-3.9$ |
$-5.0%$ |
| Gross profit |
27.1 |
27.2 |
$+0.1$ |
$+0.4%$ |
| Sales and marketing expenses |
9.3 |
8.5 |
$-0.8$ |
$-8.6%$ |
| General and administrative expenses |
8.4 |
8.3 |
$-0.1$ |
$-1.2%$ |
| Other operating income |
(0.3) |
0.3 |
$+0.6$ |
nm |
| EBITDA |
9.1 |
10.6 |
$+1.5$ |
$+16.5%$ |
| Depreciation |
12.1 |
12.8 |
$+0.7$ |
$+5.8%$ |
| EBIT |
(3.0) |
(2.2) |
$+0.8$ |
$+26.7%$ |
| Financial result |
(1.4) |
(1.5) |
$-0.1$ |
nm |
| Income tax |
1.1 |
1.0 |
$-0.1$ |
nm |
| Net income |
(3.4) |
(2.7) |
$+0.7$ |
$+20.6%$ |
Revenues
- Growth in Consulting and Cloud business
- Reorganisation of Outsourcing
- TC revenues: stable B-B-B and declining B-B-C business
Earnings
• Positive impact of the costcutting programme
HIGHER EBITDA VERSUS Q2 2014
| (in $\epsilon$ million) |
Q2 2014 |
Q2 2015 |
$\Delta$ in $\epsilon$ mio. |
$\Delta$ in % |
| Revenues |
109.4 |
100.9 |
$-8.5$ |
$-7.8%$ |
| Cost of revenues |
81.6 |
73.7 |
$-7.9$ |
$-9.7%$ |
| Gross profit |
27.8 |
27.2 |
$-0.6$ |
$-2.2%$ |
| Sales and marketing expenses |
9.1 |
8.5 |
$-0.6$ |
$-6.6%$ |
| General and administrative expenses |
8.5 |
8.3 |
$-0.2$ |
$-2.4%$ |
| Other operating income |
0.3 |
0.3 |
$\qquad \qquad \blacksquare$ |
$\qquad \qquad \blacksquare$ |
| EBITDA |
10.5 |
10.6 |
$+0.1$ |
$+1.0%$ |
| Depreciation |
12.5 |
12.8 |
$+0.3$ |
$+2.4%$ |
| EBIT |
(2.0) |
(2.2) |
$-0.2$ |
$-10.0%$ |
| Financial result |
(1.6) |
(1.5) |
$+0.1$ |
nm |
| Income tax |
(0.3) |
1.0 |
$+1.3$ |
nm |
| Net income |
(3.9) |
(2.7) |
$+1.2$ |
$+30.8%$ |
Costs
- Effects of revenue decline reduced by noticeable decline in cost of revenues
- SG&A reduction leads to positive EBITDA effect
EBITDA
• Margin rose from 9.6% to 10.5%
POSITIVE IMPACT OF COST-CUTTING PROGRAMME
- In February 2015, QSC began implementing a comprehensive cost-cutting programme
- As of 30 June 2015, QSC had already achieved savings of more than € 4 million
- ~ 60% personnel expenses
- ~ 40% other costs (external consulting, rental, infrastructure and other costs)
- Announced savings of at least € 10 million in 2015 will be achieved
- Savings in 2016: another € 10 million to € 15 million
- Savings from 2017 onwards: more than € 25 million per year
DOWNSIZING PROGRAMME INCLUDES 350 JOB CUTS – MORE THAN 50% ALREADY AGREED
Major actions
- Termination of fixed-term contracts
- Natural staff attrition
- Socially responsible staff reduction
HIGHEST GROSS MARGIN SINCE Q1 2014
- In Q2 2015, QSC earned a gross margin of 27.0%
- QSC expects a further increase in Q3 2015
HIGHEST EBITDA MARGIN SINCE Q1 2014
• In Q2 2015, QSC earned an EBITDA margin of 10.5%
• QSC expects a further increase in Q3 2015
TELECOMS: STABLE B-B-B BUSINESS
- TC business impacted by regulatory effect of € 2.5 million
- Stable B-B-B revenues despite stricter regulation
- B-B-C additionally burdened by fierce price competition
- Fierce price competition and lower revenues impact negatively on gross profit
OUTSOURCING: FOCUS ON PROFIT
- Focus on SME customers
- High commitment of existing customers: TCV of € 55.6 million (Q2 2014: € 23.6 million)
- Ongoing industrialisation and virtualisation
- Reorganisation and cost-cutting programme supported increase in gross profit
CONSULTING: STRONG GROWTH
- Strong demand for SAP services increases efficiency per employee
- Growing demand for cloud expertise (SAP HANA)
CLOUD: PROMISING DEVELOPMENT
- Increased demand for cloud-based services, i.e. cloud-based telephony
- FTAPI-secured email services ready to go mobile
- Cloud business still in the early stages
TURNAROUND IN FREE CASH FLOW
- After two negative quarters, QSC is back to positive free cash flow
- Continued improvement until year-end expected
TURNAROUND SUPPORTED BY SOLID BALANCE SHEET
- Financing matches maturity: Long-term liabilities and equity cover 129% of long-term assets
- Strong cash position of € 66 million
TURNAROUND IN 2015: QSC AIMS TO INCREASE EBITDA AND FREE CASH FLOW
- Cost-cutting programme with growing impact in H2 2015
- Financial strength will be supported by CAPEX of € 25 million
AGENDA
-
Strategic Update
-
Financial Update and Outlook 2015
3. Questions & Answers
CONTACT
QSC AG Arne Thull Head of Investor Relations Mathias-Brüggen-Strasse 55 50829 Cologne
Phone +49-221-669-8724 Fax +49-221-669-8009 E-mail [email protected] Web www.qsc.de
twitter.com/QSCIRde twitter.com/QSCIRen blog.qsc.de xing.com/companies/QSCAG slideshare.net/QSCAG
SAFE HARBOR STATEMENT
This presentation includes forward-looking statements as such term is defined in the U.S. Private Securities Litigation Act of 1995. These forward-looking statements are based on management's current expectations and projections of future events and are subject to risks and uncertainties. Many factors could cause actual results to vary materially from future results expressed or implied by such forward-looking statements, including, but not limited to, changes in the competitive environment, changes in the rate of development and expansion of the technical capabilities of DSL technology, changes in prices of DSL technology and market share of our competitors, changes in the rate of development and expansion of alternative broadband technologies and changes in prices of such alternative broadband technologies, changes in government regulation, legal precedents or court decisions relating, among other things, to line sharing, rent for co-location and unbundled local loops, the pricing and timely availability of leased lines, and other matters that might have an effect on our business, the timely development of value-added services, our ability to maintain and expand current marketing and distribution agreements and enter into new marketing and distribution agreements, our ability to receive additional financing if management planning targets are not met, the timely and complete payment of outstanding receivables from our distribution partners and resellers of QSC services and products, as well as the availability of sufficiently qualified employees.
A complete list of the risks, uncertainties and other factors facing us can be found in our public reports and filings with the U.S. Securities and Exchange Commission.
DISCLAIMER
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