QBeyond AG

XETRA:QBY

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the q.beyond's conference call regarding the first quarter results 2022. [Operator Instructions] Let me now give the floor to Jürgen Hermann.

[Jürgen Hermann, executive]

Thank you very much, and a warm welcome from my side. I'm here in Cologne, together with my colleague, Arne Thull, our Head of M&A and Investor Relations.

Yes. Concerning the financial markets, we are still in difficult times, and I think you know that much better than I do. However, our business is solid and is developing well. We had a good start in 2022, and it's the first quarterly results after our presentation on the Capital Market Day early April. And in general, everything is in line with our expectations. Yes, let's come to Page 3. What does it mean? You can see that we are on a growth course. And I think I want to highlight the double-digit revenue growth, the very, very good order entry. The fact that we were able to gain Fressnapf as a customer for our SaaS solution StoreButler, which is well suited for digitizing the stores in the retail area and the retail sector. And further SaaS solutions, for example, IoT-SIM platform are doing well also.

And above all that, and I will come to that later in much more detail, we are making good progress in integrating our new subsidiaries that we bought last year. Coming to the revenue on the next slide, you can see that we are up 10% compared to the first quarter last year and still near to 80%, to be precise, 78% of these revenues are recurring, which is especially in this environment for us as a management, as a company, very important because it gives us a stableness of our business, and as I said, much important in these times. And as you can see as well, the majority of these revenues are generated in our 4 focus sectors, retail, logistics, manufacturing and energy.

As said in the interims -- in the introduction, we had a very good order income in the first quarter. And order entry, which is a legally binding volume of signed contracts in our definition was EUR 76 million, which is much more than last year, EUR 35 million, which is approximately 47% is related to contract extensions especially one large customer, which is Fressnapf, where we were able to extend a part of the existing contract. The remaining part will follow up -- will follow during this year. So this is a reliable foundation for the growth to come in the next quarters.

On the next slide, you can see that we are in a good way concerning our SaaS business, just to repeat that. We are reporting in 2 segments, which is cloud and IoT on 1 hand and SAP on the other hand. And the SaaS business is so far part of our cloud and IoT segment but it is very important for the future. And we had a lot of slides, including our CMD presentation, as mentioned, to explain the different solutions that we developed or bought for the -- for focus sectors. And yes, we are gaining for -- up to EUR 15 million to EUR 20 million revenues in this year coming from a basis of EUR 8 million last year, which would be a very, very good development. And the way, as mentioned before is, on the one hand, developing it in-house or to generate via acquisitions.

And as mentioned, we are currently negotiating further SaaS solution, especially for the energy sector. But to be honest, we have no pressure here. It is important that at the end of the day, the valuation that we are discussing with this party meets our expectations. And so far, and you can see that related to the war in Ukraine, the energy sector is a little bit under pressure.

Yes, coming to our subsidiaries, on the next slide, and good news here, data as the specialist for digital workplace business is pressing ahead. And we made good progress in the integration of their solutions on one hand and our internal solutions and internal resources, on the other hand, and the portfolio in this important environment is aligned. In the logistics sector, you know that we have the 2 companies, logineer and cargonerds. And so far, we had the first promising projects started, which is quite positive because only a few months after we have founded the company, we have already 3 SaaS solutions in place.

Concerning scanplus, our latest acquisition with this developing as well. We have started the execution of the integration. We will move the data center in their region in our data center in Hamburg until end of this year. And concerning, which is important for the sales area, we are extending the portfolio of scanplus, which is well suited for Telekom Deutschland, with SAP and other services. So overall, these new subsidiaries are doing well and are already offsetting the impact of the Colocation sale last year concerning the revenue side.

Let's take a look on the 2 segments. We start with the cloud business. Here, we can see a various strong growth for 22% compared to last year. And the drivers are the rising demand for cloud and SaaS solutions on one hand and as mentioned, the success of the new subsidiaries. On the other hand, we have 2 cost factors. One is the expansion in this environment. And the third one -- the second one is change structure. So you know that Colocation business is very CapEx intensive, but with high margins. So there was a change. But definitely, and this is something that we announced during the CMD as well, we expect 2-digit margins starting next year concerning scanplus. So overall, the segment contribution is expected to increase in quarters ahead.

Concerning SAP, we can see, yes, expected, but a weak start. This has to do with the fact that projects have been delayed due to the fact that entire teams on the customer side on one hand as well as at q.beyond are in quarantine but we are quite sure that we are able to improve that in the second half of this year concerning revenues as well as margins.

The next slide is a full view on the P&L, which is at the end of the day, the result of the 2 segments. And let me just highlight the 2 cost factors that have an impact on the P&L. One is the investment in SaaS business, which is our entrepreneurial decision; and second, the integration of scanplus, especially concerning data center migration and other aspects.

With that, let's come and have a short view -- a quick view on the balance sheet. Still rock solid financing. Net liquidity was affected by the redemption of the lease liabilities at scanplus as planned and as expected. But q.beyond is still in the position to finance its course from its own resources with an equity ratio of more than 75% as to repeat that no liabilities at all to banks.

With that, we are, yes, confident to confirm the full year forecast for this year, especially headed by the strong order income in the first quarter. So we expect that the revenues will grow to at least EUR 180 million up to EUR 200 million, which would mean at the lower end and a growth of 16%. EBITDA is expected to rise up to EUR 8 million on the lower side and EUR 60 million on the upper side and free cash flow at a maximum of minus EUR 10 million, as announced so far.

Yes. And what are the key drivers that make us confident to confirm our guidance concerning revenues? It's 3, it's a recovery in SAP business, especially in the second half; it's the ongoing cloud growth that we can see even today and its development and positive growth in the SaaS revenues.

Yes. And with that, just let me highlight our -- yes, let's not say strategy at the end of the day, but it's the fact that we continue what we started in 2019 where we announced our Strategy 2020 Plus for the year 2020, '21 and 2022. And in April, we announced our prolongation of that with our Strategy Beyond 2022.

And you can see that on that slide, where we give you a full sight concerning revenue growth on one hand and how it is split into the different, let's say, segments or business areas. And we mentioned that as well that starting next year, we will show SaaS as a separate third segment on its own. Yes, this was the presentation of Q1. No big surprises, on one hand is just what we already told early April. So no surprises. We had a good start. And I'm prepared to take your questions. Thank you very much.

[Operator]

[Operator Instructions] And the first question comes from Jonas Blum from Warburg Research.

[Jonas Blum, analyst]

3 from my side, please. Firstly, with regards to the quarter intake besides the large-scale order you received from Fressnapf. Where do you currently see strongest demand? And just out of curiosity, is there also any inorganic factors driving this number in Q1, which was obviously very strong? And secondly, with regards to current macroeconomic uncertainties, do you forecast or do you actually already see a change in customer behavior, especially when it comes to investing in new IT projects?

And finally, just on the number side, could you quantify the total upfront investment in your SaaS business? And also could you give us a bit more color on what goes into higher personnel and what goes into advanced services? And do you see this number flattening out over the year? Or is it more steady number?

[Jürgen Hermann, executive]

Yes. Thanks, Jonas, for your questions. As mentioned, you can see that in the Q1 numbers that cloud business is a driver. And what we can see here is still the fact that this kind of business or let's say, our portfolio meets the expectations of our customers to increase efficiency. That's at the end of the day, the name of the story. And what we can see here is definitely the change from own data centers from own operation of IT to a professional provider, which is the first driver and the second driver is definitely a digital workplace.

So all the solution is around Microsoft 365 where we can see a strong demand. These are the main drivers in this area. Concerning the macroeconomic environment, I can tell you that so far, apart from the SAP business where we have a delay in project, we can see in the cloud area and other behavior no changes so far. And I hope this will stay as so far, we can see it. But this is definitely something that is on our wishing list.

As mentioned, for us, it's very important that we have a solid, stable business concerning the existing contracts. And I'm pretty sure that if the pressure, if the macroeconomic pressure is increasing, there's still the demand of increasing the efficiency, and we have the right answer and the right solutions for that. Concerning the investment of SaaS business, we invested in Q1 between EUR 1.5 million and EUR 2 million, which is fully on P&L.

[Jonas Blum, analyst]

And can I just follow up how much of those EUR 1.5 million to EUR 2 million goes into personnel? And how much does go into Advanced Services?

[Jürgen Hermann, executive]

At the end of the day, it's nearly all personnel because it's the fact that our own developers, our own people are not in projects that we can build to the customer. They are working on our own solutions. So this is a driver. And as long as the solution is not generating high revenues, we are still putting on the P&L. So let's say, more than 90% is headcount.

[Operator]

The next question comes from Yannik Siering from Stifel.

[Yannik Siering, analyst]

Two questions left for me pretty much. So one would be on the new SaaS solutions. Is there the interest in these solutions? Is it already visible from the order entry that you see? And then the second one, maybe an update on the general M&A pipeline. And then just if you can, also some details on the status of the potential SaaS target that you talked about earlier.

[Jürgen Hermann, executive]

Yes. Thanks, Yannik. New SaaS solutions. So far, we can see definitely the order entry which is included in the first quarter number as well, which is Fressnapf, which was 1-digit million number with a contract period of 5 years. In the other areas, it's more project-driven so far, to be honest, but of course, we are quite confident that this will change within the next quarters.

Concerning the M&A pipeline, we have, of course, always, let's say, 3 to 5 projects where we have an eye on, but hot in the sense of intensive talks is one target that we already mentioned. And as said, we are not done, and we will look at that, and it's not that we have to pressure to execute that. At the end of the day, it's a question how confident we are that the development of this new business, of the SaaS solutions will be positive in a short, at least midterm period. And secondly, the valuation should fit our expectations. And so far, we are not in the position to sign it tomorrow, put it this way. But I can tell you if it will be successful, it will be signed in the second quarter or not. So this is my expectation here.

[Operator]

[Operator Instructions] There are no further questions.

[Jürgen Hermann, executive]

Yes. Thanks. Which is not a big surprise for me, to be honest, because we had intensive and good discussions early April with our Strategy Beyond 2022, where we have a lot of investors and analysts in Frankfurt and virtually connected as well. So thank you very much for taking part today. And hopefully, we will see us on our virtual AGM on May 18. Thanks a lot and stay healthy.