QSC AG
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Company PresentationResults Q1 2008
Cologne, May 15, 2008
15.05.08
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- Results Q1 2008 Markus Metyas, Chief Financial Officer
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- Strategic update / New segmentation Dr. Bernd Schlobohm, Chief Executive Officer
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- Questions & Answers
FINANCIAL OVERVIEW FOR Q1 2008
- •Revenues up by 27% to € 97.5 million
- •EBITDA up by 28% to € 11.4 million
- •EBITDA-margin of 12%
- •Net loss of € -4.1 million
- •CAPEX of € 28.6 million – thereof ~60% customer-related
- •€ 68.8 million liquidity as of March 31, 2008
FASTEST ORGANIC GROWTH IN QSC'S HISTORY
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DRIVING FACTOR: ACCELERATING RAMP-UP IN ULLsYear-to-date growth very promising
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HIGHER REVENUES LEAD TO HIGHER EBITDA
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RENEWAL OF STRONG, PROFITABLE GROWTH
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RETURN TO STRONG EBITDA GROWTH
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DEPRECIATION FOLLOWS CUSTOMER GROWTH
Drivers of depreciation
- • Network roll-out (April 2008: 1,800 COs)
- • Contract-related upfront expenses / installations(amortized over just 24 months)
CUSTOMER GROWTH DRIVES CAPEX
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90% OF CUSTOMER-DRIVEN CAPEX ISINVOICED TO CUSTOMERS
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Customer related CAPEX as a prepayment for future revenues
- In 2008, ~90% of customer-driven CAPEX is invoiced to customers
- Average term of cash payment: ~60 days
- Revenue recognition for upfront customer payment is spread over 24 months / same period for depreciation of CAPEX
- In 2008, QSC will profit from high stock of ports / line cards
NETWORK ROLL-OUT IS NEARLEY COMPLETED
- Until now, some 1,800 central offices under network coverage
- Next Generation Network (NGN) up and running
- •More than 90% of the traffic is IP-traffic
- •Significant cost-advantages
Nationwide voice network (474 POIs)
Separate Wireless Local Loop (WLL) network
NEW SEGMENTATION REFLECTS NEW ORGANIZATIONAL STRUCTURE
WHOLESALE / RESELLER ARE LARGEST SEGMENT
STRONG INCREASE IN WHOLESALE BUSINESS
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Break-up of revenues
- •Segment has not changed a lot
- •36% of segment revenues from ADSL2+
- •13% from conventional voice
Market 2008
- • 3.5 million new DSL customers expected for total market
- •Growing demand for unbundled lines
- •Gradual decrease of bottleneck of ULLs
QSC 2008
- • All major wholesale partners under contract: 1&1, freenet, HanseNet
- • Solid business with resellers i.e. international carriers
PRODUCT BUSINESS STILL AFFECTED BY LEGACY VOICE
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Break-up of revenues
- • Product segment corresponds largely with old Business & Residential Customer segment
- •47% conventional voice
Market 2008
- • Ongoing price competition in legacy voice, especially in the residential area
- •Rapid gain of market share of VoIP
QSC 2008
- • Efficiency gains through standardized product business
- • Profits from growing demand for Direct Access to QSC's network
MANAGED SERVICES WILL GAIN FROM REORGA
Break-up of revenues
- • Managed Services corresponds largely with Large Account segment
- • But: Managed Services is pure solution business without legacy voice!
Market 2008
- • High interest for new services like Unified Communications and Communication as a Service
- •Market demands solutions and service
- •Integration of VoIP in IP-VPN solutions
QSC 2008
- •Well-positioned for the new services
- • Managed Services profits strongly from reorganization
ALL SEGMENTS WITH ATTRACTIVE MARGINS
MANAGED SERVICESStrong market growth
PRODUCT BUSINESS Growing business customer market for DSL connections
WHOLESALE BUSINESSGermany is a DSL country
Main drivers
- •Growth in demand for DSL
- • Large retail ISPs need accessto "complete" ULL vs. "bundled" T-DSL wholesale lines
- new DSL lines on "complete" ULL
- migration of existing T-DSL wholesale lines to "complete"ULL
- •Possible consolidation in retail
Competitors
•T-Home, Telefonica, Arcor
QSC's BUSINESS MODEL:MOVING UP THE VALUE CHAIN
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OUTLOOKQSC with higher expectations for 2008
- • QSC expects revenues and EBITDA at the upper end of the guidance, announced in February 2008
- Revenue of € 385 to € 405 million
- EBITDA expected to rise to € 50 to € 60 million
- •Customer growth drives CAPEX and depreciation
- •Net income ~ € 0 million
MULTIPLE OPPORTUNITIES FOR FURTHER GROWTH
- •Germany = DSL country & direct access is "King"
- •Strong growth in Wholesale / Reseller business
- • QSC – The NGN-Carrier: Applications based on VoIP open up tremendous growth opportunities and afford substantial cost savings
- • New opportunities by moving up the value chain for enterprisecustomers (Centrex, ACD, SaaS)
- • Being a SME itself gives QSC a competitive edge as a premium provider in the SME business
- •Network break even in sight
MISSION STATEMENT
QSC will be Germany's premier alternative provider ofintegrated telecommunication and managed servicesto business and wholesale customers
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-
- Results Q1 2008 Markus Metyas, Chief Financial Officer
-
- Strategic update / New segmentation Dr. Bernd Schlobohm, Chief Executive Officer
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- Questions & Answers
FINANCIAL CALENDER 2008
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CONTACT
QSC AGArne ThullInvestor RelationsMathias-Brüggen-Strasse 55 50829 CologneGermany
Phone +49-(0)221-6698-724 Fax +49-(0)221-6698-009 E-mail [email protected] Web www.qsc.de
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 colocation 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
- • This document has been produced by QSC AG (the "Company") and is furnished to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person
- • No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein and, accordingly, none of the Company or any of its parent or subsidiary undertakings or any of such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document
- • The information contained in this document does not constitute or form a part of, and should not be construed as, an offer of securities for sale or invitation to subscribe for or purchase any securities and neither this document nor any information contained herein shall form the basis of, or be relied on in connection with, any offer of securities for sale or commitment whatsoever
APPENDIX
STABLE SHAREHOLDER STRUCTURE SINCE IPO
THE PERFECT COMPLEMENTWireless Local Loop (WLL)
- •Point-to-multipoint WLL for 42 German regions
- •Point-to-point nationwide
- • QSC offers WLL for small and large bandwidths (2-400 Mbps)
- •as VPN access (direct & backup – since mid 2007)
- •as Internet access (since January 2008)
- •Connections at year-end 2007: 843
Benefits
- •QSC offers the highest available bandwidths, availability >99.0%
- •Expansion of network coverage, overcoming ULL shortage
- •"real" physical redundancy for mission critical applications
- •WLL is faster than DSL and cheaper than STM-1
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THE TIME HAS COME FOR IP-CENTREX
- • Numerous customers want to use only IP-based and managed telco systems, after their current PBX contracts have run out
- • These customers want to implement applications based on Computer Telephony Integration (CTI) at the same time
- •Most new office buildings are equipped for ICT convergence
- •Customers save up to 50% of costs
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NGN SERVICES: ACD (Automated Call Distribution)Efficient and flexible call management
- • Virtual ACDs are purely net-based solutions for call management without any further hardware or softwareinvestments on the clients' side
- • Virtual ACDs enable the professional management of all callrelated activities and processes – not dependent on the telephone system or the number of calls.
- • Virtual ACD solutions are IP-based and allow smoothmigration from legacy ACD systems to the "new world"
THE NEXT LOGICAL STEP: SOFTWARE AS A SERVICE
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OPPORTUNITIES FOR QSC
- Fast-growing market, where Germany still lags behind other European markets and the U.S.
- • QSC's NGN is a perfect basis for integrated IT outsourcing services and unified communication
- Partnerships with IT companies will also raise awareness for QSC among its target, enterprise customers
- Cross- and upselling potential for QSC
- Convergence between IT Services and Telco Services for enterprise customers