QSC AG
Analyst DayHamburg, October 6, 2011
AGENDA
- • Growth Strategy 2011 – 2016 Dr. Bernd Schlobohm, Founder & CEO
- • Direct Sales Strategy 2011 – 2016 Thomas Stoek, Board Member
- • Indirect Sales Strategy 2011 – 2016 Arnold Stender, Board Member
- •Q&A
- •Break
- •Tour to our Hamburg Data Center
- • Profitability Strategy 2011 – 2016 Jürgen Hermann, CFO
- •Q&A
GROWTH STRATEGY 2011 – 2016Dr. Bernd Schlobohm, Founder & CEO
QSC 2011: A FULL-SERVICE ICT PROVIDER
QSC 2016: THE GERMAN CLOUD PROVIDER
GROWTH VISION:QSC WILL DOUBLE ITS REVENUES WITHIN 5 YEARS
In 2011, QSC is a company with
- •Revenues of € 478 million*
- •An EBITDA margin of 17%*
- • Free cash flow of € 35 – 45 million
In 2016, QSC will be a company with
- •Revenues of € 0.8 – 1.0 billion
- •An EBITDA margin of 25%
- • Free cash flow of € 120 – 150 million
* Consensus
QSC 2016:OUR STRATEGY FOR DOUBLING REVENUES
AGENDA:QSC WILL LEVERAGE ITS EXISTING CUSTOMER BASE
THE QSC GROUP IS ROOTED INTHE GERMAN MITTELSTAND
QSC + INFO AG + IP PARTNER = THREE COMPANIES WITH REMARKABLE STRENGTHS
QSC GROUP: BROAD ICT PORTFOLIO SERVES AS A PERFECT BASE FOR UP- AND CROSS-SELLING
IT OUTSOURCING: A MAIN TRIGGER FORUP- AND CROSS-SELLING
THREEFOLD SALES STRATEGY FOR TARGETING EXISTING AND NEW CUSTOMERS
⇒ Segmentation will be adopted according to levers of the sales organization
AGENDA:QSC WILL OFFER CLOUD SERVICES
CLOUD COMPUTING:A PARADIGM SHIFT IN THE ENTIRE ICT SECTOR
| IT department 10% |
90% Cloud Services |
20%
Coordination & steering |
80% Infrastructure/Application |
| Focus on applications 60% |
40% Infrastructure |
| Made by the company itself 100% |
$0\%$ |
CLOUD COMPUTING WILL OPEN UP A TREMENDOUS MARKET OPPORTUNITY…
… BECAUSE OF MULTIPLE CUSTOMER BENEFITS
QSC MEETS ALL THE PREREQUISITES FOR TARGETING THE MARKET FOR CLOUD SERVICES…
… AND WILL LEVERAGE ITS PORTFOLIO IN THE CLOUD
THE 1st KEY ADVANTAGE OF QSC: END-TO-END SERVICES OF HIGHEST QUALITY
- • QSC offers end-to-end services –from desktop to data center
- • Highest service quality is proofed by various customer surveys
THE 2nd KEY ADVANTAGE OF QSC: BEST-IN-CLASS SECURITY
- • Based in Germany, QSC complies with the country's strict data protection laws
- • QSC has a long tradition of highest security levels
- • Many certificates (e.g. TÜV, ISO) prove high quality standards
- • Strong company-wide IT security policy
- • Dedicated IT security manager witha direct reporting line to the CEO
THE 3rd KEY ADVANTAGE OF QSC:TRUSTED PARTNER OF THE GERMAN MITTELSTAND
- • Since 2000, QSC has established itself as a partner of choice for the German Mittelstand
- •QSC focuses on the German market
- • All Data centres and offices arebased in Germany
- • These data centers + NGN area perfect base for Cloud Services
- => QSC has all the assetsto provide the German Cloud
AGENDA:QSC WILL OFFER SCALABLE PRODUCTS
QSC HAS A LONG TRADITION OF DEVELOPING AND MARKETING SCALABLE PRODUCTS
- • QSC knows how to scale products
- • QSC knows how to industrialize processes
- • QSC knows how to manage a partner channel
QSC WILL DEVELOP FURTHER SCALABLE PRODUCTS
QSC IS WORKING ON CLOUD APPLICATIONSFOR HIGHLY ATTRACTIVE MARKETS
- •SensorCloud
- •O(SC)2AR – Open Service Cloud for the Smart Car
- •Öko – Energy management
SENSORCLOUD: READY FOR MARKET IN 2013
- • SensorCloud: A highly scalable platform for interconnected sensors and steering applications
- •First products for the retail market available from early 2013
- • Consortium under the lead of QSC – partner RWTH Aachen University, Cologne University of Applied Sciences ("Fachhochschule Köln"), symmedia GmbH, and the Dillenburger group, supported by the BMWi with a multi-million euro grant
O(SC)2 AR – OPEN SERVICE CLOUD FOR THE SMARTCAR (CERTIFICATION OF E-CAR EXPECTED IN 2014)
- •Objective: Smart Car drives into the Cloud!
- • A Communication and Cloud system for integrating electric cars in a SmartGrid and SmartTraffic
- • Consortium under the lead of StreetScooter; a cluster to builde-cars at RWTH Aachen University. QSC responsible for Communication and Cloud Services integration.Consortium supported by the BMWi with a multi-million euro grant.
A THIRD VERY INTERESTING MARKET: ENERGY MANAGEMENT
- •Energy management for decentralized regenerative power production
- • Aim is to cluster different types of regenerative power production for more equalization of production and consumption
- •Makes use of QSC real-time Cloud technology
- • Based on the technology of the publicly funded SensorCloudand O(SC)2AR projects
- •First negotiations with large utilities under way
OUR STRATEGY:QSC WILL BECOME THE GERMAN CLOUD PROVIDER
KEY TAKEAWAYS:QSC IS IN A PERFECT POSITION…
- • Realizing opportunities in cross- and up-selling
- •Fast sales integration of INFO AG and IP Partner
- • Joint customer base of more than 30,000 customers in theGerman Mittelstand
- • Seizing opportunities in Cloud computing
- • QSC is in the pole position for targeting the fast-growing market as we have all necessary competencies on board
- • Profiting from long experience in scaling products and services
- • QSC is rooted in the TC sector, a sector with a proven track recordof automation and industrialization
- ⇒ QSC will grow its business and focus on profitability and financial strength to generate returns for shareholders
… TO DOUBLE ITS REVENUES WITHIN 5 YEARS
-
QSC will strengthen its position as a medium-sized ICT provider, and will become the operator of the German Cloud
In 2016, QSC will be a company
- •Revenues of € 0.8 – 1.0 billion
- •An EBITDA margin of 25%
- • Free cash flow of € 120 – 150 million
Direct Sales Strategy 2011 – 2016Thomas Stoek, Board Member
QSC AIMS TO DOUBLE ITS REVENUESFROM DIRECT SALES
QSC: A LONG TRADITION OF MANAGED SERVICES
AND OUTSOURCING BUSINESS
IP PARTNER: A FAST GROWING HOUSING ANDHOSTING PROVIDER WITH ITS OWN DATA CENTERS
QSC-GROUP: A FULL-SERVICE ICT PROVIDER WITHHUGE POTENTIAL FOR PROFITABLE GROWTH
QSC EXPECTS TO GROW FASTER THAN THE MARKET
QSC IS WELL POSITIONED IN AN ATTRACTIVE MARKET
TWO MAIN GROWTH DRIVERS IN DIRECT SALES
FULL-RANGE ICT PORTFOLIO WILL LEAD TOA HIGHER SHARE OF WALLET
|
2009 |
2010 |
2011 |
2016 |
| Field of Activity |
TC Solution Provider |
ICT Service Provider |
ICT Full Service Provider |
Cloud Provider |
| Share of Wallet |
10% |
20% |
50% |
70% |
| Market |
€10bn |
€20bn |
€50bn |
€70bn |
INFO AG AND QSC ARE A PERFECT COMBINATIONFOR UP- AND CROSS-SELLING
Increase of average revenue and customer base!
MORE REVENUES ON THE SAME SPACE:A HUGE TRIGGER FOR ADDITIONAL REVENUES
GROWTH DRIVER NEW BUSINESS: QSC HAS WONCONTRACTS WORTH € 17.4 MILLION WITHIN 6 WEEKS
| Industry |
Services |
Total contract value |
Facility
. |
IT Infrastructure
Application Management
. |
€4,000,000
. . |
| Gas |
IT Infrastructure
IT Consulting |
€ 9,000,000 |
.
Manufacturing |
. . .
IT Infrastructure
SAP |
€ 1,900,000 |
.
Logistics/Shipping |
. . .
IT Infrastructure
User HelpDesk
Services |
.
€ 2,500,000 |
KEY TAKEAWAYS:DIRECT SALES EXPECTS STEADY GROWTH
- • Direct Sales aims to double itsrevenues in the next five years
- • Two main triggers for growth
- • Upselling of existing andnew services
- •New customers
- • A great start for up-selling
- •15 joint projects
- •Total contract value > € 1 million
INDIRECT SALES STRATEGY 2011 – 2016
Arnold Stender, Board Member
QSC AIMS TO DOUBLE ITS REVENUESFROM INDIRECT SALES CHANNELS
- Growth in Indirect Saleswill be triggered by:Leveraging theexisting customer baseCloud Services
- • Growth in Wholesalewill be triggered by:Cloud Services
•
Scaling the Cloud
STRATEGY FOR INDIRECT SALES BUSINESS
PARTNER AND WHITE LABEL CHANNELS
Three main channels:
•
- Partners: QSC with customer relationse.g. NouvelleCom, Bluestring
- • White Label: Resellers / ISPs / Carrierswith customer relationse.g. Avaya, DeTeWe, AT&T
- • Voice Business: German and foreign carrierswith customer relationse.g. Colt, KPN
THREE WAYS TO INCREASE REVENUESFROM INDIRECT SALES
CLOUD SERVICES AND MORE:NEW QSC PRODUCTS IN H2 2011 AND 2012
NEW PRODUCTS WILL ACCELERATEUP- AND CROSS-SELLING
TREMENDOUS UPSELLING POTENTIALFROM CLOUD SERVICES
QSC WILL BROADEN ITS SALES CHANNEL AND WIN MORE SALES PARTNERS WITH AN IT BACKGROUND
THE THREE WAYS TO INCREASE REVENUES WILL ENABLE QSC TO MORE THAN DOUBLE ITS REVENUES
STRATEGY FOR WHOLESALE BUSINESS
WHOLESALE: OPEN ACCESS AND CLOUD SERVICES WILL DRIVE GROWTH
FIRST GROWTH OPPORTUNITY: OPEN ACCESS
-
QSC HAS LAUNCHED THE FIRST NATIONWIDEOPEN ACCESS PLATFORM IN GERMANY
THE EARLY LAUNCH IS PAYING OFF
- • In 2010, QSC started Open Access business with two partners
- •Leipzig-based HL komm as the first infrastructure provider
- •1&1 Internet AG as the first provider
- • In 2011, QSC has became a partner in a unique pilot project for Next Generation Access in Berlin
- •Partners: Vattenfall, Ericsson and degewo (residential property company)
- ⇒ As QSC acts as a neutral integrator of networks and services, the company is in a pole position to participate in the growth of FTTx business
QSC WILL COMMERCIALIZE ITS POLE POSITION
- • Assumption: In five years' time, about 500,000 householdswill have been equipped with fiber via QSC
- • Internal processes are the same as ADSL processes, and therefore well-established
- •QSC has broad experience in automated systems
- •The systems are up and running
- •Many years of loyal partnerships with several service providers
- •No competition from NGA providers and residential customer brands
- •QSC is fast & flexible
SECOND GROWTH OPPORTUNITY: CLOUD SERVICES
- • Trusted Cloud (SensorCloud) is a perfect toolbox for further services:
- •Home automation
- •Smart metering
- •Smart grids
- •…
- • QSC is well positioned to offer Cloud Services
- •Close contact with utility companies (e.g. Vattenfall, RWE)
- •Close contact with residential customer providers (freenet, 1&1)
- •QSC will offer a German Cloud platform (hosted in Germany under German law)
- • QSC has broad experience in designing and marketing innovativeproducts & solutions
HOME AUTOMATION IS OF GREAT INTEREST
HOME AUTOMATION: QSC IS WELL POSITIONED
- • Trusted Cloud platform & German high-end data centerswill serve as a perfect base
- • Home automation is closely associated with the use of sensors and actuators – here QSC currently collects experiences
- • QSC is a network specialist and (thanks to close co-operation with e.g. RWTH Aachen) able to develop intelligent interfaces
- •QSC is perceived as a reliable vendor
- • QSC is an innovative company & experienced in occupying market niches
SMART METERING IS A HUGE OPPORTUNITY
DAWN OF THE GERMAN SMART METERING MARKET
SMART METERING: QSC IS WELL POSITIONED
- • QSC has broad experience in integrating different (data) networks(e.g. German Open Access platform)
- • QSC owns a NGN and employs many highly qualified data networks specialists
- • QSC is able to store huge amount of data in its own high-end data centers (and can guarantee highest data security)
- • QSC will be able to develop interfaces thanks to its own growing team of IT developers and the co-operation with different universities (e.g. RWTH Aachen)
A CLEAR STRATEGY TO INCREASE REVENUES IN INDIRECT SALES AND WHOLESALE BUSINESS
- • Indirect Sales
- •Define new products
- •Increase ARPU
- •Find new partners
- • Wholesale
- • Open Access
- •Portfolio for fiber companies
- • Cloud Services
- • Develop products for home automation
- • Develop products for Smart metering
-
PROFITABILITY STRATEGY 2011 – 2016Jürgen Hermann, CFO
STEERING LOGIC AND MANAGEMENT REPORTING NECESSIATE NEW SEGMENTATION
CURRENT SEGMENTATION
NEW SEGMENTATION WILL STRENGTHENTHE INDIRECT SALES BUSINESS
- • Managed Services / Direct Sales not affected by new segmentation
- • Products / Indirect Sales will benefit because of the inclusion of the B2B2B business
THREE LEVERS TO IMPROVE EBITDA MARGIN TO 25%
FIRST LEVER: QSC IS CHARACTERIZED BYSTRICT COST DISCLIPLINE
COST OF REVENUES INCLUDE DIRECT ANDINDIRECT COST OF REVENUES
SECOND LEVER: ONGOING REDUCTION OF STRUCTURAL NETWORK COSTS
SECOND LEVER: FURTHER ROOM FOR IMPROVING STRUCTURAL NETWORK COSTS
| Network (Backbone/Backhaul) |
30.0 |
| Costs ICA |
8.7 |
| . |
|
Costs CO/MSC
. |
9.6 |
| Maintenance |
4.2 |
| . |
|
| Others |
1.9 |
| Structural network costs 2010 |
54.4 |
SECOND AND THIRD LEVER: QSC IS ABLE TOINCREASE ITS GROSS PROFIT STEP BY STEP
"WEIGHT" OF STRUCTURAL NETWORK COSTSWILL DECREASE DUE TO PROFITABLE GROWTH
PROFITABLE GROWTH AND ALSO LOW CAPEX STRONGLY BACK RISING FREE CASH FLOW
- QSC targets to invest 8% of revenues per year
- Percentage can vary between 6-10%, mainly due to investments in new data centers
CAPEX STRUCTURE WILL CHANGE – BUT OVERALL QSC WILL CONTINUE TO INVEST 8% OF REVENUES
- • Bulk of infrastructure investments will be made in Housing and Outsourcing
- • Lower relevance of TC business will lead to declining customerrelated CAPEX
HIGHER EBITDA AND LOW CAPEX WILL LEAD TO HIGHER FREE CASH FLOW IN THE YEARS TO COME
AT A GLANCE: QSC IN 2016
| Net revenues |
800 |
$-1,000$ |
|
| Cost of revenues |
480 |
600 |
|
| Gross profit |
320 |
400 |
$(40\%)$ |
| SG&A |
120 |
150 |
|
| EBITDA |
200 |
250 |
$(25\%)$ |
| CAPEX = depreciation |
64 |
80 |
|
| Tax |
16 |
20 |
|
| Free cash flow |
120 |
150 |
$(15\%)$ |
QSC HAS SET ITSELF VERY AMBITIOUS BUT REALISTIC GOALS
In 2016, QSC will be a company with
- •Revenues of € 0.8 – 1.0 billion
- •An EBITDA margin of 25%
- • Free cash flow of € 120 – 150 million
* Consensus
QUESTIONS & ANSWERS
CONTACT
QSC AGArne ThullHead of Investor RelationsMathias-Brüggen-Strasse 5550829 Cologne
Phone +49-221-6698-724Fax +49-221-6698-009E-mail [email protected] www.qsc.de
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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. Manyfactors could cause actual results to vary materially from future results expressed or implied by suchforward-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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- • 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