QSC AG Company Presentation Results Q3 2013 Cologne, November 11, 2013
AGENDA 1. Highlights Q3 2013 2. Financial Results Q3 2013 / Outlook 3. Questions & Answers 2
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 3
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 4
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 5
ADVERSE MARKET CONDITIONS IN TC BUSINESS TIGHTENED REGULATION 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 6
7 ADVERSE MARKET CONDITIONS IN TC BUSINESS LESS DEMAND FOR CALL BY CALL AND PRESELECT
8 QSC IS INVESTING IN FUTURE GROWTH: MORE TALENT
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 9
QSC IS INVESTING IN FUTURE GROWTH: INNOVATIONS SUCH AS THE QSC-BOX QSC-Box works as a gateway to the Cloud Wireless sensors, e.g. in households Cologne Munich Nuremberg Customer-specific devices 10
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 11
AGENDA 1. Highlights Q3 2013 2. Financial Results Q3 2013 / Outlook 3. Questions & Answers 12
Q3 2013 WENT AS EXPECTED In million Q3 2012 Q3 2013 Revenues 120.5 113.8-5.6% Cost of Revenues (1) 79.6 75.9-4.6% Gross profit +40.9 +37.9-7.3% Other operating expenses (1) 20.5 18.5-9.8% EBITDA profit +20.4 +19.4-4.9% Depreciation 13.0 13.8 +6.2% EBIT profit +7.4 +5.5-25.7% Financial results -1.0-0.9 +10.0% Income taxes +0.9 +0.1 nm Net profit +7.3 +4.7-35.6% 13 (1) Excluding depreciation and non-cash share-based remuneration
QSC IS ON A GOOD WAY TO REACHING ITS GOALS FOR 2013 In million Q1-Q3 2012 Q1-Q3 2013 Revenues 353.2 340.3-3.7% Cost of Revenues (1) 236.8 226.9-4.2% Gross profit +116.4 +113.4-2.6% Other operating expenses (1) 60.4 56.0-7.3% EBITDA profit +56.0 +57.4 +2.5% Depreciation 39.6 39.0-1.5% EBIT profit +16.4 +18.4 +12.2% Financial results -2.9-2.9 - Income taxes -1.0-0.5 nm Net profit +12.4 +15.0 +21.0% 14 (1) Excluding depreciation and non-cash share-based remuneration
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
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) 18
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
QSC CONFIRMS GUIDANCE FOR FINANCIAL YEAR 2013 QSC anticipates: Revenues of at least 450 million (9M: 353.2 million) An EBITDA margin of at least 17% (9M: 16.9%) Free cash flow of at least 24 million (9M: 18.1 million) 23
AGENDA 1. Highlights Q3 2013 2. Financial Results Q3 2013 / Outlook 3. Questions & Answers 24
25 SHAREHOLDER STRUCTURE AFTER THE TWO FOUNDERS HAVE BOUGHT ADDITIONAL SHARES
FINANCIAL CALENDAR November 12, 2013 November 14, 2013 December 12, 2013 German Equity Forum, Deutsche Börse, Frankfurt 5 th German Company Day, LBBW, London Analyst Roundtable, Cologne 26
CONTACT QSC AG Arne Thull Head of Investor Relations Mathias-Brüggen-Strasse 55 50829 Cologne Phone +49-221-669-8724 Fax +49-221-669-8009 E-mail invest@qsc.de Web www.qsc.de 27 twitter.com/qscirde twitter.com/qsciren blog.qsc.de xing.com/companies/qscag slideshare.net/qscag paulrobertloyd.com/2009/06/social_media_icons
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 colocation 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. 28
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