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QSC AG
Company Presentation
Results Q3 2013
Cologne, November 11, 2013
2
AGENDA
1. Highlights Q3 2013
2. Financial Results Q3 2013 / Outlook
3. Questions & Answers
3
SOLID DEVELOPMENT IN Q3 2013
• QSC is well on track toward reaching its goals for 2013
• Direct Sales continues to be the growth driver
• Indirect Sales and Wholesale constrained by
• Negative regulatory impact in 2013
(€ 7-8 million less revenues per quarter)
• Declining demand for conventional TC products
• QSC is investing in future growth
• Talent: +298 additional ICT experts since the start of 2012
• Customers: Higher upfront CAPEX + additional storage capacities
• Products: Presentation of the QSC-Box
4
DIRECT SALES GENERATES A HIGH LEVEL
OF DAY-TO-DAY-ORDERS
• Day-to-day orders
from existing and
new customers on a
higher level than on
2012 average
• TCV in 2012 positively
impacted by three larger
outsourcing orders
• QSC does not expect
large orders in 2013
5
HIGH LEVEL OF DAY-DAY-ORDERS FUELS
REVENUE GROWTH IN DIRECT SALES
• Direct Sales is able to
increase its revenues
quarter by quarter
• Two-fold development
in Indirect Sales
• Positive impact
of new ICT products
• Decline in TC revenues
• Wholesale is suffering
from adverse market
conditions in TC business
6
• As of December 1, 2012, the German regulator lowered
interconnection fees. This involves three major changes:
• Lower mobile fees: minus 45 – 47%
• Lower fixed-line fees: minus 20 – 40%
• A new structure of fixed-line termination fees for altnets
• Effects on QSC:
• € 7-8 million less revenues per quarter in 2013
(~55% Resellers / ~45% Indirect Sales)
• Some € 1 million less profit per quarter in 2013
ADVERSE MARKET CONDITIONS IN TC BUSINESS –
TIGHTENED REGULATION
7
ADVERSE MARKET CONDITIONS IN TC BUSINESS –
LESS DEMAND FOR CALL BY CALL AND PRESELECT
8
QSC IS INVESTING IN FUTURE GROWTH:
MORE TALENT
9
QSC IS INVESTING IN FUTURE GROWTH:
LONG-TERM CUSTOMER RELATIONSHIPS
• Changing your Outsourcing provider is like an “open-heart surgery”
=> many customers stay for ten years or more
• Upfront-CAPEX are needed to build a long-term customer-relationship
• Customization of QSC’s own data centers
• Modernization of customer’s hard and software
• Realization of interfaces between QSC and the customer
• In Q3 2013, has to bear an extraordinary high level of investments as
• Several large projects went to regular operations
• Modernization of storage capacity of data centers was due earlier
than originally planned
10
QSC IS INVESTING IN FUTURE GROWTH:
INNOVATIONS SUCH AS THE QSC-BOX
Cologne
Munich
Nuremberg
QSC-Box works as a
gateway to the Cloud
Customer-specific
devices
Wireless
sensors, e.g.
in households
11
QSC IS INVESTING IN INNOVATIONS
• As of September 30, 2013, nearly 50 employees were focusing on
developing new ICT and cloud products for existing and new markets
• QSC is contributing to several highly promising initiatives
• EEBUS – home automation (presentation at IFA 2013)
• O(SC)2ar – smart car (DHL is testing pilot cars)
• Virtual power plant – working on the first pilot (FINESCE)
All of these developments have the chance to disrupt existing
markets and to open up tremendous growth opportunities to QSC
12
AGENDA
1. Highlights Q3 2013
2. Financial Results Q3 2013 / Outlook
3. Questions & Answers
13
(1) Excluding depreciation and non-cash share-based remuneration
Q3 2013 WENT AS EXPECTED
• Revenues
• Cost of Revenues
• Gross profit
• Other operating expenses
• EBITDA profit
• Depreciation
• EBIT profit
• Financial results
• Income taxes
• Net profit
In € million
113.8
75.9
+37.9
18.5
+19.4
13.8
+5.5
-0.9
+0.1
+4.7
(1)
(1)
-5.6%
-4.6%
-7.3%
-9.8%
-4.9%
+6.2%
-25.7%
+10.0%
nm
-35.6%
120.5
79.6
+40.9
20.5
+20.4
13.0
+7.4
-1.0
+0.9
+7.3
Q3 2013
Q3 2012
14
(1) Excluding depreciation and non-cash share-based remuneration
QSC IS ON A GOOD WAY TO REACHING
ITS GOALS FOR 2013
• Revenues
• Cost of Revenues
• Gross profit
• Other operating expenses
• EBITDA profit
• Depreciation
• EBIT profit
• Financial results
• Income taxes
• Net profit
In € million
340.3
226.9
+113.4
56.0
+57.4
39.0
+18.4
-2.9
-0.5
+15.0
(1)
(1)
-3.7%
-4.2%
-2.6%
-7.3%
+2.5%
-1.5%
+12.2%
-
nm
+21.0%
353.2
236.8
+116.4
60.4
+56.0
39.6
+16.4
-2.9
-1.0
+12.4
Q1-Q3 2013
Q1-Q3 2012
15
RISING NUMBER OF EMPLOYEES LEADS
TO HIGHER PERSONNEL EXPENSES
16
HIGHER DEPRECIATION IN Q3 2013 DUE TO
ONE-OFF EFFECT FROM THE INFO AG MERGER
17
LOWER REVENUES AND HIGHER DEPRECIATION
INFLUENCED PROFITABILITY IN Q3 2013
18
EBITDA BENEFITS FROM POSITIVE
DEFERRED COST EFFECT
• Cost reduction of € 5.2 million
per quarter since Q1 2011 due
to the premature termination of
the Plusnet contract (originally
to run through Dec 31, 2013)
in late 2010
• QSC used deferred costs to
return the payment from
TELE2 over the remaining
contract period
• This positive effect will stop
after Q4 2013, and will be
compensated, to some
extent, by a network deal
(€ 2.5 – 3 million per quarter)
19
9-MONTH COMPARISON SHOWS ROBUST
PROFITABILITY DEVELOPMENT
20
TEMPORARILY HIGHER CAPEX IN Q3 2013
21
HIGH OPERATING CASH FLOW HELPS QSC TO EARN
AN ATTRACTIVE FREE CASH FLOW IN Q3 2013
22
THE DETERMINING FACTORS OF FCF AT A GLANCE
23
QSC CONFIRMS GUIDANCE FOR FINANCIAL YEAR 2013
QSC anticipates:
• Revenues of at least € 450 million (9M: € 340.3 million)
• An EBITDA margin of at least 17% (9M: 16.9%)
• Free cash flow of at least € 24 million (9M: € 18.1 million)
24
AGENDA
1. Highlights Q3 2013
2. Financial Results Q3 2013 / Outlook
3. Questions & Answers
25
SHAREHOLDER STRUCTURE AFTER THE TWO
FOUNDERS HAVE BOUGHT ADDITIONAL SHARES
26
FINANCIAL CALENDAR
November 12, 2013 German Equity Forum,
Deutsche Börse, Frankfurt
November 14, 2013 5th German Company Day,
LBBW, London
December 12, 2013 Analyst Roundtable, Cologne
27
CONTACT
QSC AG
Arne Thull
Head of Investor Relations
Mathias-Brüggen-Strasse 55
50829 Cologne
twitter.com/QSCIRde
twitter.com/QSCIRen
blog.qsc.de
xing.com/companies/QSCAG
slideshare.net/QSCAG
paulrobertloyd.com/2009/06/social_media_icons
Phone +49-221-669-8724
Fax +49-221-669-8009
E-mail [email protected]
Web www.qsc.de
28
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 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.
29
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