q.beyond AG

Good afternoon, ladies and gentlemen, and welcome to QBeyond's conference call regarding the third quarter results 2021. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now give the floor to Mr. Jürgen Herrmann. Please go ahead.

Thank you, and hello and welcome to our Q3 conference call. My name, as mentioned, is Jürgen Herrmann. I'm the CEO of the company. And with me, like always, is Arne Thule, our head of investor relations and responsible for M&A. Yes, ladies and gentlemen, it was another quarter, by the way, the ninth one on the execution of our growth strategy 2020 plus that we launched in spring 2019. And yeah, it was, from my point of view, an extraordinary quarter because we were able to sell our colocation business as promised, and from my point of view, quite successful. And when we look on page three, you can see the impact of this sale. But let me start with the revenue development. And you can see that we were able to increase revenues from 35.1 million in the last quarter to 40 million in this quarter. And this was purely From the operating result, there was no impact from the collocation sale. The collocation sale with the impact can see on the EBTA and the consolidated net income, and I come to that later on, but the impact was quite high and very positive. And the free cash flow increased as well to $30.6 million. with a small impact out of the sale. The major impact will be shown in Q4 because the closing of the second transaction was done early October. So with that, let's come to page four where we have, because it was an extraordinary impact, you can see the collocation sale at a glance. Just to remember that collocation business is a business that is just based on renting space in our data centers in Munich and Nuremberg. And due to the fact that we decided not to invest or to build further data center capacity, it was consequently that we put that in a separate legal entity and sold it. So this sale was quite a strategic one. And it took place in two steps. The first one was end of July, when we sold IP Collocation, which is a separate entity, mainly or purely serving the existing customer data, and the second one was signed in September with the larger part, the company IP Exchange, and this was sold to North Sea Group, as mentioned. So both transactions, as shown in the slide before, led to one of accounting gains and high inflows of funds. But coming back to, I think, apart from this extraordinary impact on the normal business, and you can see on page five the development in revenues, and compared to Q1, Q2, and Q3 last year, you can see that we were able to increase revenues by 10, 12, and for this quarter, 14%. And for me, quite important is the fact that nearly 80% in this quarter is based on a recurring revenue level, and 65% of these revenues came from our four focus sectors, retail, logistics, manufacturing, and energy. Another important KPI, you know that on page six is our order entry. So order entry in the first nine months increased to 141.7. The number for Q3 was 25.4 million. And let me say at this point that we're always looking for, let's say, a basic normal order entry, which is between 20, 25, 30 million per quarter. And on top of that, and this is something we cannot plan on a daily basis, there are one, two, three larger projects. And I can tell you that we were able to sign a larger deal in October. Large means, in our definition, order entry with two digit million volume. So based on this signing, I'm pretty confident that we can achieve for the full year an order entry above 180 million, which is a new record in the history of the company. When we look at the segments, first on page seven, we can see that cloud and IoT was really the main driver of that revenue development. Q3 was up by 20% compared to last year, and based on the fact that there's a huge demand for cloud solution and still digital workplaces, and we know all that this is partly driven by the pandemic situation and digitization projects. And, yeah, I'm quite confident, quite happy that on the same side, we were able to increase the segment contribution from 1.4 to 3.2 million in Q3. SAP, on the next slide, is still impacted by the pandemic situation because we are not able to do the project on the customer frame. There's one reason, as mentioned in the calls before. And the second one is that there are still some companies that are in a certain way waiting what's going on with the development before they start S4HANA transformation. I do not expect, and we can see that already because you know that the year is nearly over, I do not expect a great change this year. but I'm still confident that we will have a positive development in next year concerning S4HANA transformation, and this is mainly driving our S4HANA business overall. Let's have a look at page 9 at the P&L, and you can see the development in revenues. you can see that cross-profit rises by nearly 50% and you can see that even the segment contribution increased from 2 million to 5 million. And these three numbers is based on our operating performance and has nothing to do with the sale of the collocation business. The impact of the sale of the collocation business you can see below the segment contribution There's roughly 1 million one-off transaction costs included in G&A expenses. You can see the other operating income plus 33.2 million, and you can see the other operating expenses of minus 3.8, which is nearly 100% based on the transaction as well. And when you take the 33 and the 3.8 and the 1 million mentioned before, you come roughly to the 27.8 million, which is net impact of the sale. So the accounting gains on one hand and reduced by goodwill and transaction costs on the other hand. Yeah, and this is runoff. So on page 10, you can see the operating EBTA. so in a certain way clean by the transaction. And you can see that EBITDA increased from 0.6 or minus 0.6 to 1.6 in this quarter, which is quite a positive development. And then on the next slide, on page 11, next slide, you can see that as in the quarters before, the marginal impact is quite substantial with more than 40%. So an increase of 4.9 million in revenues led to an increase in EBDA of 2.2 million. So apart from the fact that we were able to successfully sail the colocation business, the operational development is in a good shape as well. positive free cash flow in Q3, and we expect, of course, a huge impact on free cash flow in Q4. On this slide, on page 12, you can see the net cash position end of June. There were some outflows due to the latest M&A transactions with 6.3 million, and we have a positive impact of 3.6 million. to explain that there was, of course, the inflow of the first transaction due to data, and there was a negative impact because with the business and the consolidation impact minus 7 million out of the business. So we have a huge inflow that we expect in Q4, and with that, we will end up with a very positive cash balance end of the year. And this led on page 13 to, yeah, let's say a solid balance sheet. Equity ratio rises to 75%. And with that, we have a very good basis to look for further M&A transactions to support the development of the growth strategy and of the company. So, as mentioned, M&A, there's no doubt that when we look at the five columns of our growth strategy, which is recurring revenues with a core portfolio, we have our expect the next portfolio, platform-based business, we have our sector focus, We have our performance culture. And as always mentioned, we have our investments concerning research and development on one hand and on M&A on the other hand. And we are still looking for targets in the area of the focus sectors, in the area of extending our product portfolio, and concerning technology. The only point that changed with the sale of the co-location business is that we now can look even for higher targets, higher in the sense of revenues, and now we are looking for companies with annual revenues of up to $30 million. To support our growth strategy on one hand, but on the other hand as well, to compensate the fact that now collocation business is gone, and you know and you remember that it stands for roughly $20 million of revenues annually, which we want to compensate by M&A transactions. On page 15 is the forecast. So, for the time being, we expect an EBITDA of more than 31 million for this year. And of course, it was driven by the one-time impact of the sale. We are quite happy with that development. Coming to the revenues, you know the guidance which was adjusted after we sold the collocation business because for the fourth quarter, we are missing roughly 5 million in revenues. Consequently, so the former guidance from 160 to 170 is now transaction-based, 155 to 165. And the same to the target last year, but we will come out with the guidance for next year, end of March next year, maybe early April. We are just in discussion with that. So this was in a natural development Q3. Thank you very much so far. And of course, like always, we are happy to take your questions, ladies and gentlemen.

Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to cancel your question, press nine and the star key again. Please press nine and the star key now to state your question. And the first question comes from Jonas Bloom. Please go ahead. Yeah, good afternoon, and thanks for taking the questions.

That's firstly touching on CapEx. You mentioned in your report that you also invested in platform-based innovations. Could you just give us a bit more color here on what you invested in, and is this a finalized project, or is it rather a recurring or ongoing investment?

Yeah, thanks for that question, Jonas. What we mean with platform-based innovations or platform-based innovations CapEx is that platform in a certain way is mainly misleading. Platform in our definition means software as a service-based technology. That is what we are talking about when we are talking about platform economy. And the investment here is mainly the fact that we are investing in research and development to build up those platforms, which are roughly 5 to 6 million per year. We expanded last year and we will do it this year as well. So that is what we're talking about here. And the reason for that is that although our core portfolio is well-suited for the market and is still a growth driver, We want to prepare for the years 23, 24, 25, where we want to introduce new platform-based services for our sector focus.

Okay, understood. And then just coming back to the cloud and IT segment, could you just remind us on the organic growth you achieved in Q3? XMNA activities, and also perhaps if you could help us understand, did you already book incremental revenues from the ROLIC order, or is it too early? And do you rather expect those revenues coming in Q4?

So the impact of the cloud IT segment is mainly organic. And when we are talking about ROLIC, WURLIC has two elements. One is a customer WURLIC that we started to put on our platform on 1st of September. And the other, let's say, chances and potential that we see in logistics is that with a new company that will be, let's say, We'll start, I think, next week, maybe in two weeks, where we want to address further customers in the logistics market. And so, Wurlic is a normal customer in that context that we want, where we're doing just normal operating managed services business, and the transformation started in September. So, the cloud and IoT segment was mainly driven by the organic development.

Okay, thanks a lot.

Okay, so at the moment there seem to be no further questions. If you would like to state another question, please press 9 and the star key on your telephone now. Let's just wait a couple of moments. And the next question comes from Sebastian Weithuner. Please go ahead.

Good afternoon, and thank you for taking my questions, too. So I have two left. The first one, how is the business going at Snapple? I think at the time of the investment, the solution was installed in two Aldi stores, and currently there are 17 on the website. And in addition to that, Imkarai, Shiza, and Maymetzker have been acquired as new customers. Can you give me, please, an update here?

Of course, Sebastian, but you summarized it already very, very well. So the business is going well. Of course, there's a lot of, let's say, projects where the first retail stores and companies are getting the first experience with that solution. Let me just add, and this is quite important, sometimes we're talking about a scan and go. I prefer that we are talking about self-checkout. Because, of course, for the time being, scanning with the app is the preferred solution, especially T-Good is doing a very good experience here. But on the other hand, we are working on further technologies to record the pricing. So at the end of the day, the platform is the main, let's say, advantage of Snavel to drive that all and to implement at the end of the day a sophisticated self-checkout solution for the retail stores. And so far, since we acquired the stake in Snavel, we are happy with the development, and there are further projects in discussions with other retailers, and so far we are fully in plan.

Thank you. So do you have a view of the estimated revenue in full year 2021 for Snavel?

Definitely, I think it can be somewhere between 1.5 and 2 million if everything works well, which is far away from a startup from my point of view. So it already proves that the solution is well accepted and right in place.

Okay, clear for me. So, and the next one is you had a tax expense of 4.4 million euros in Q3 and cash effective where 3.4 million. And after nine months, this is a tax rate above 20%. With regard to the loss carry forward, what tax outflow do you expect in Q4?

I have to check out, I think, it's roughly 3 million, and this is mainly driven by the sale of the co-location business.

Okay, thanks a lot.

Okay, so at the moment we have no further questions, so let me hand back over to your host for some closing remarks.

When there are no further questions, I think then Arne did a good job in advance or the presentation was quite good or both, whatever. Thank you for attending the call. Thank you for the questions. And yeah, maybe we see us or meet us on the Eigenkapital Forum. But definitely, I think next year again, we plan end of March, early April to be prepared to present to you and to the market, let's say the the strategy beyond 2022 and the outlook for the next years, because next year is in our growth strategy 2020 plus the third year, and therefore we'll come out with a follow-up. Yeah, thanks for taking part again, and stay healthy, and see you.