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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)
2
ar


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

5
th
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

invest@qsc.de

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