q.beyond AG

Good afternoon ladies and gentlemen and welcome to QSC's conference call regarding the second quarter results 2020. At this time all participants have been placed on a listening remote. The floor will be open for questions following the presentation. Let me now give the floor to Mr. Jürgen Herrmann.

Yes, thank you very much and good afternoon to everybody as well. My name is Jürgen Herrmann. I'm the CEO of QSC and currently in Hamburg. So my colleague Arne is taking part as well, Head of Investor Relations, but out of Cologne. So ladies and gentlemen, still challenging times, not only due to the temperature here in Germany, COVID-19 is still an issue. And therefore we are proud to show growth four times in a row, which you can see on page three of our presentation. From related to Q1 to the first quarter, it was not a big jump, but it was growth again since we sold our Plusnet telco business in Q2 last year. Coming to page 4, you can see that order intake. reaches a record high. So since we started to report this figure, it is the highest number so far. And I can tell you that I'm happy that in this quarter only 40% are related to contract extensions. The 60% is related to new business, to existing and to new customers, so new additional services. And from our point of view, this is a strong performance under exceptional circumstances. And of course, I would like to mention that QSC has a stable and robust business model because and mainly driven by the fact that more than three-thirds of our revenues are recurring and platform-based. We are still strong in cash with net liquidity of approximately 55 million and an equity ratio of more than 70%. And we believe that the shutdown will trigger a wave of digitalization amongst meat companies. Maybe not this year mainly, but definitely starting next year. And therefore we are prepared with our core technologies cloud IoT and SAP to benefit from this development. Let's have a look on page six on the P&L. And here we can see, as mentioned, that revenue is up to $34.5 million the second quarter and ETA improved as well. So step by step, quarter by quarter, we are improving and therefore we are quite confident to reach the EBTA positive pre-given starting Q4 this year. Let's have a look at the segments. First of all, cloud and IoT on page seven. You can see that revenues are up as well. Main drivers are cloud solutions and definitely the digital workplace. And we can see the segment contribution with one million in Q2 may be counteracted by one of initial costs due to a large cloud project. This is scalable business, full stop. When we look at SAP, We can see the impact on the COVID-19 pandemic and Corona in Q2. I'm not sure how the rest of the year will develop. We cannot foresee how much, although the shutdown is gone, how much the projects will be postponed maybe into next year. But we are still confident that this segment will deliver its contribution to growth and definitely deliver its contribution to EBTA, create even in Q4. And the main drivers are still the transformation projects to the new technology S4 HANA. Yes, as mentioned in the introduction already, strong balance sheet, net liquidity of approximately 55 million and equity ratio of 72%. The capex in the first six months was 2.5 million and free cash flow in plan with minus 2%. 3.5 million excluding the payment of dividends in the second quarter. Therefore, ladies and gentlemen, page 10, we confirm our guidance despite the circumstances that we can see occurring not only in Germany but all around the world. So we expect revenue growth up to a target of more than 143 for the full year, we expect to be EBITDA positive in Q4 and which is a little bit far out, but definitely positive free cash flow Q4 next year. And that, despite the tech that we planned and invested in future growth with new services, new innovative services, new products, especially in the area of IoT. So QSC, and this is a slide on page 11, that is always part of our presentation because it's, yeah, in a certain way, shows how the main columns for our growth strategy are. It's the business portfolio with our recurring and scalable revenues. It's competence in technology. It's our effective go-to-market approach with the sector focus and our partnering. definitely the experience management team that supports me as well. And with that, we are still stick to our target of 200 million in 2022 with more than 10% EBTA margin and a positive free cash flow. Yeah, on page 12, recently we announced the acquisition of InCloud, and I'm happy that we were able to do this transaction. What we got is really more than 60 high-developed software engineering specialists, mainly in the area of IoT front-end and public cloud knowledge. Yeah, and the InCloud expects for the full year roughly a little bit more than 4 million in revenue and the positive earnings and we will consolidate because we are now have 100% of the company from August 1st. And on page 13 maybe you remember this slide where we show the value chain of QSC which is part of our strategy and part of our USP within Germany Due to the fact that we have the competence in sensor technology, we have the competence in applications with the focus on SAP and S4HANA, and we have the competence in cloud. And in cloud, the acquisition supports that perfectly. On the sensor area, with the knowledge in embedded software development, in the application area, with the competence in developing web applications, and native apps and in cloud area with the competence in public cloud to make sure that we are able to do the integration from private cloud to public cloud, especially Azure for Microsoft and AWS. Page 14, ladies and gentlemen, you can see two corporations that we announced recently. On the one hand, Advantech and TeamViewer, both in the area of IoT. And let me tell that IoT is still, there's no doubt, in an early stage. But once there will be products available and the demand is there, we are very, very confident that we can grow the market much faster using partner channels in a certain way, kind of indirect sales channels. And a good example for that is on page 15, the IIoT Starter Kit. And what is it about? It is about to demonstrate what QoS is able to deliver and we would like to prepare the market and raise interest in this environment and definitely to show our competence in IIoT and therefore this data kit is given for free and the companies and the customers can just use it, can develop it and they can in a certain way explore it and then we will see if there is a chance to get a foot into the door. Yeah, and this partnering and M&A will support our growth plans. And on page 16, you can see the numbers again. So the 143 for this year and leading up to the growth in 2021 and 2022 to a target of approximately 200 million. And with that, the main driver to achieve that will definitely be our as-a-service approach and the high share of recurring revenues and therefore a scalable and robust business model. What's going on in Q3, apart from the fact that we are prepared to deliver again our growth, there is the next growth push in the sense of market signal is our rebranding to Q Beyond. It will take place the end of September, to be precise, on the 20th 2nd, where let's say the big bang is. And we are pretty confident that this reprinting campaign, which symbolizes in a certain way the new QSC, now QBeyond, that it will raise awareness and generate further leads. Yes, ladies and gentlemen. That was it. Very shortly, what is the situation about QSC and future QBeyond currently and about Q2, and I'm very happy to take your questions now.

Ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone keypad. In case you wish to cancel your question, press 9 and star again. And the first question comes from Jonas Blum, Warwick Research. Please go ahead with your question.