Qsc ag company spotlight

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


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


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




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




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

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