Cologne, 7 August 2017 – Results H1 2017
THE DIGITISER OF THE GERMAN SME SECTOR
Disclaimer
This presentation contains forward-looking statements based on management estimates and reflects the current views of QSC AG's ("QSC's") management board with respect to future events. These forward-looking 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 annual report.
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.
1. Strategy Update
H1 2017: Progress in Cloud business and beyond
- QSC is visibly developing into the digitiser for the German "Mittelstand"
- Cloud revenues grew by 80% in H1 2017
- New customers for Pure Enterprise Cloud and SAP services
- QSC is now one of two SAP recognized experts in retail in Germany
- Expansion of cloud portfolio with Multi-Cloud Consulting
- QSC is stepping up marketing of colocation & virtual data centres
- New opportunities in TC for corporate customers
- Progress in strategy implementation leads to higher profitability and free cash flow
4
New PEC customer: Frankfurter Leben
- Sector: finance and insurance
- Revenues: € 1.3 billion
- Headquarters: Bad Homburg
Objective
- IT landscape should grow in a flexible and agile way in line with new business model and rapidly growing data volumes
- Secure business IT operations in German jurisdiction
- High availability
- Provision of virtualised enterprise workplace environments
- Cost efficiency thanks to modern cloud-based procurement model
Implementation
- Provision of all aspects of business IT from the Pure Enterprise Cloud
- High-availability operations at QSC's data centres
- Database services
- VoIP services
- Operation of entire LAN/WAN
- Assumption of all desktop services
Summary & Outlook
- Rapid integration of further life insurances into IT environment
- First life insurances (ARAG Leben) already acquired and integrated into IT by QSC
New IoT customer project: meine-energie.de
Physical appliance Integration / hardware provision / operation Application / analysis
New Consulting customer & more: Hermes Fulfilment
- Retail logistics: e-commerce
- 5,000 employees
- HQ: Hamburg, 4 locations
- Forms part of international Otto Group
Objective
- Meeting rising customer demands in the age of e-commerce ("immediacy")
- IT-based integration of customer logistics into own process worlds
- Maximum digitisation and automation of processes/ order management
- Focus on strategic enhancement of SAP landscape
- Assignment of application management and SAP operations to competent full-service provider
Implementation
- All-round end-to-end ICT and cloud services
- SAP consulting, including support in introducing SAP EWM Warehouse Management
- SAP application management & 2nd/3rd-level support
- SAP ERP, Retail, BW, EWM, FI-CAX, PI, …
- Operation of SAP system landscape incl. SAP BW on HANA
- Location networking (IP-VPN)
- Security/database/middleware management
Summary/outlook
"Our customers have ever higher expectations in us. This requires end-to-end digital processes and order management. QSC's services offer us the scope we need to actively structure these requirements on behalf of our customers."
Dr. R. Lenz, SAP Applications Manager, Hermes Fulfilment
QSC now is an "SAP Recognized" expert in retail
- Awarding of recognized expertise status by SAP confirms excellence of QSC's expertise in retail
- QSC is one of two certified SAP partners for retailers in Germany
- Status award based on: positive customer assessments by reference to a catalogue of criteria
- Criteria surveyed: time and budget management, project management, solution expertise, etc.
- QSC's strategic position as an SAP partner to retailers is confirmed by this certification and this supplements SAP's campaigns targeting retailers (see SAP PRESS book: "Logistics with SAP S/4 HANA")
New offering: Multi-Cloud management
Multi-Cloud is the future of cloud services
Main drivers:
- Maximum freedom in designing and enhancing cloud strategy
- Risk minimisation: avoidance of vendor lock-in
- Exploiting innovation potential (new cloud services always available from various providers)
- Different compliance requirements call for different deployment models
- Optimising data & system access performance (latency periods in international connectivity)
- Default security: high availability & backup
- Optimising costs: storage/processing uncritical workloads in public cloud
What is your favourite cloud deployment model (public, private, hybrid, multi) for now and the future?*
|
NOW |
FUTURE |
|
|
| Purely public cloud |
27.5% |
10.6% |
|
|
Hybrid cloud
Own IT infrastructure
in
combination with public cloud |
25.9% |
32.8% |
|
|
Multi-cloud
Managing various cloud
environments including at least
one public cloud |
12.7% |
36.0% |
|
|
Private cloud
Purely
private cloud
environment at proprietary
data centre |
33.9% |
20.6% |
|
|
n =
189
* Market study "Multi-Cloud Management Among German
SME Companies",
Crisp Research AG |
|
|
|
|
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QSC is becoming the single point of contact for IT services
Strengthening of data center services
- "Colocation & Virtual Datacenter" is now the 5 th main offering on our website
- Growing demand for classic colocation products as well as virtual solutions
- Portfolio ranges from data center installations incl. MPLS-VPN to IaaS and DevOps scenarios
- Dedicated sales force for data centre services
New opportunities in TC for corporate customers
- Continued high interest in All-IP solutions
- Especially high demand for SIP Trunks the retrofit for conventional TC systems
- IP-VPN solutions are becoming a part of many customer projects (e.g. Frankfurter Leben and Hermes Fulfilment)
- In H1 2017, QSC won several tenders of larger companies for IP-VPN solutions
- H2 2017 will see the start of migration of Telefónica's corporate lines
- QSC is developing a new business line with municipal utilities ("Stadtwerke"): Network operations + All-IP solutions
- A dedicated TC sales force will take these and other opportunities
H2 2017: Ongoing progress in cloud business and beyond
- QSC expects significantly higher cloud revenues in H2 2017
- Multi-Cloud Consulting will start to contribute to segment revenues
- SAP expertise will be the driver for growing revenues in IT consulting and SAP services
- TC business for corporate customers will benefit from dedicated sales force
- Rollout of colocation and virtual data services
- Strict cost management will ensure the necessary scope to develop forward-looking business fields
2. Financial Update
H1 2017: QSC posts steady net profit
- Net profit came to € 1.1 million in H1 2017
- EBIT margin doubled to 2%; EBITDA margin rose to 11%
- Free cash flow improved by 16% to € 6.4 million despite a 42% rise in CAPEX to € 9.8 million
- Cloud revenues rose by 80% to € 11.5 million
- Overall, revenues developed as expected except for TC for resellers
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H1 2017: Sustainable profit
Higher earnings despite lower revenues
| in $\epsilon$ million |
H1 2016 |
H1 2017 |
Δ |
$\Delta$ in % |
| Revenues |
198.0 |
175.9 |
$-22.1$ |
$-11.2%$ |
| Cost of revenues |
145.8 |
129.6 |
$-16.2$ |
$-11.1%$ |
| Gross profit |
52.2 |
46.3 |
$-5.9$ |
$-11.3%$ |
| Sales and marketing expenses |
15.9 |
12.8 |
$-3.1$ |
$-19.5%$ |
| General and admin expenses |
16.4 |
13.3 |
$-3.1$ |
$-18.9%$ |
| Other operating income |
0.4 |
|
$-0.4$ |
n/a |
| EBITDA |
20.4 |
20.2 |
$-0.2$ |
$-1.0%$ |
| Depreciation |
17.8 |
15.8 |
$-2.0$ |
$-11.2%$ |
| EBIT |
2.6 |
4.4 |
$+1.8$ |
$+69.2%$ |
| Financial result |
(2.8) |
(2.3) |
$+0.5$ |
$+17.9%$ |
| Income tax |
0.2 |
(1.0) |
$-1.2$ |
n/a |
| Net income |
0.0 |
1.1 |
$+1.1$ |
n/a |
Revenues
Slightly below expectations due to weakness of TC for reseller business
Earnings
- In line with expectations thanks to positive impact of
- Leaner cost basis
- Higher share of revenues in forward-looking business fields
Cloud: Revenues up by 80%
- Cloud revenues driven by Pure Enterprise Cloud and IoT business
- New customers for PEC and ongoing migration of Outsourcing customers
- QSC will continue to invest in future growth in the coming quarters
- Sales expects ongoing growth in H2 2017
Segment margin
QSC AG
Outsourcing: Focus on existing customer base
- Far-reaching change in traditional Outsourcing business:
- Initial customers are being migrated to the Pure Enterprise Cloud
- For new customers, QSC is focusing on standardised cloud-based outsourcing
- Further decline expected, partly due to the termination of one major contract in H2 2017
Segment margin
Consulting: Stabilises at a high level
- Consulting developed as expected in H1 2017
- Ongoing high demand for SAP consulting and QSC's broad HANA expertise
- Stable double-digit margin
- Growth expected in H2 2017
Telecommunications: Attractive margins
- For the first time, QSC has earned higher TC revenues with corporate customers than with resellers
- Higher share of business customers led to a strong increase in segment margin
- TC for resellers impacted by stricter regulation (~ € 8 million) and fierce price competition
- TC for resellers still expects to limit 2017 revenue losses to approx. € 25 million
- TC revenues with resellers
- TC revenues with corporate customers
- TC total
- Segment margin
Focus on forward-looking business fields is paying off
Cloud + Consulting + TC for corporate customers Outsourcing + TC for resellers
Lean cost base pushes earnings
EBITDA margin rises to 11%
EBITDA benefiting from
- Higher revenue share of forward-looking business fields
- Lean cost base
EBIT margin doubles in H1 2017
Main driver
Lower depreciation of - € 2.0 million
CAPEX still at a moderate level
Focus
- Infrastructure
- Data centres
- Customer projects
- Despite a 42% increase in CAPEX in H1 2017, QSC invested only 6% of its revenues
- FY 2017 expected CAPEX at approx. € 25 million
Free cash flow rises by 16%
Increase in FCF driven by
- Higher earnings
- Improved working capital
QSC on track to fulfil 2017 guidance
For the current year, QSC is expecting:
- Revenues of € 355 € 365 million
- EBITDA of € 36 € 40 million
- Free cash flow ahead of the previous year's figure (€ 8.4 million)
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No change in segment development expectations
3. 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
QSC AG QSC AG Mathias-Brüggen-Str. 55 50829 Cologne