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QBeyond AG
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Good afternoon, ladies and gentlemen, and welcome to the q.beyond's conference call regarding the second quarter results 2020. [Operator Instructions]
Let me now give the floor to Mr. Jürgen Hermann.
Yes. Thank you very much, and a warm welcome from my side as well to our Q2 conference call. Together with me in the room, like always, is our Head of Investor Relations and M&A, Arne Thull.
Ladies and gentlemen, before we start into the presentation, let me send you 3 key messages. First of all, we managed to grow even though it is still a challenging environment. Secondly, management needs to act. So we already introduced a package of measures regarding this challenging environment. And last but not least, like last year, we do expect a strong second half of 2022. So we will still be able to reach our targets.
Let's come to the figures on Page 3. Although SAP did not confirm our expectations, we grew top line by 8%. You can see on the slide the comparison of Q2 this year to Q2 last year. EBITDA and free cash flow just follow the revenue growth. And this is a consequence of our business model. So with increasing revenues, we will be able to increase profitability. It was in the past, the situation, and it will be the situation for the future.
The overall environment remains challenging, and you know that maybe much better than I do. But as said, it is important to act. And especially the high impact on the energy sector, which was much greater than in the other sectors, we took the decision not to pursue the potential acquisition in this area that we mentioned in the early days of April on our Capital Markets Day. And concerning the increased uncertainty among companies, we took the measures to make sure that we still can reach our targets.
Let's have a look on the order entry, which is still an important figure to measure the business for the future. We achieved for the first 6 months a number of EUR 106 million, which means legally binding contracts signed, and which gives us a comfort for the future growth. And let me highlight that we still expect to exceed the EUR 200 million for the full year. 72% of these orders for the first 6 months came from new customers or new projects with existing customers, something that we do expect for the second half of this year as well.
The revenues on Page 6. As mentioned, overall revenues increased by 8%. The main drivers are Cloud & IoT, the SaaS business, so the software-as-a-service area, and the acquisitions that we made last year. And the very high share of recurring revenues gives us a lot of comfort in this area. And as mentioned, we do not have longer a focus in the energy sector due to the underlying conditions.
The Cloud & IoT segment on the next slide is a very strong segment, and you know that this figure does include a Software-as-a-Service business. And the expansion in this Software-as-a-Service business is the right strategy, there is no doubt, although it burdens in a certain level our segment margin. And I want to highlight that compared to last year, it is important to mention that in Q2 last year, the high-margin colocation business was included in the figures. So overall, cloud business is crisis-resistant and is a very, very important column of our business model.
Let's have a look at SAP, the second segment. And there's no doubt this was below our expectation. It's something that we already mentioned in the Q1 conference calls. I'm confident that we will be a much better business in the second half of the year. We took a lot of measures in this area. We have adopted our market alignment, which means at the end of the day, we are focusing on smaller projects and in those projects that are not only S/4HANA transformation. And at the end of the day, we have reduced in a further way our external resources.
So the full P&L on the next slide is nothing else than the result of the operating segments. Let me highlight one impact that is not operating, and you can read that in the half year report as well. So the nonoperating part, the part that is not cost of revenues, was positively influenced by the legal dispute with EnBW, and I'm happy that I can tell you that q.beyond was fully dismissed on May 16 this year.
The balance sheet. Yes, ladies and gentlemen, in uncertain times, a strong balance sheet is an important asset. And there's no doubt, I'm happy that we have still no bank liabilities and that we still have an equity ratio of 75%. Cash position end of June this year was nearly EUR 45 million. And with that strong balance sheet, we can still support our M&A strategy.
But fair enough, we adopted our view on the potential targets. As mentioned, we took the decision not to pursue planned acquisition in the energy sector. And I do not expect acquisitions in the energy sector at all.
And secondly, when we look at our potential targets, and this is what is given by the macroeconomic uncertainty as well, we are looking much more on positive earnings of potential targets. So they contribute not only on revenue growth but on EBITDA growth as well. And as mentioned, debt-free, net liquidity, EUR 44 million. The equity ratio gives us the power and the strength to execute such M&A strategy to support our overall strategy.
Yes, strategy means future. Let's have a look at the future. We already introduced a package of measures to remedy situation with 4 key focuses. We highlighted that in our press release as well in the half year report. And to be very clear here, we are not talking about cost-cutting program. We are talking about operating adjustments due to the overall market situation. And as mentioned, concerning SAP, we are focusing on smaller projects, and we are focusing on projects that are not only made for S/4HANA transformation, and we reduced external resources.
Concerning Software-as-a-Service, we are focusing on such products and services with a faster market entrance. And concerning sales, pretty the same, focusing on faster revenue recognition projects. And concerning cost and liquidity management, it's -- yes, it's on the table that we are looking very precisely on the energy cost development and concerning development of the maintenance contracts.
And with these measures and the -- our planning for the second half of this year, we are still confident to reach the target of EUR 180 million in revenues, which would mean that we grow compared to last year by 16%, and this is due to the overall market situation. EBITDA is nothing else than the consequence of revenue growth. Therefore, we expect EBITDA at the lower end of the previous forecast. And concerning free cash flow, I can tell you that we will definitely end up with a number which is better than minus EUR 10 million.
Yes, the last chart on Page 14 just underlines the fact that we were able to perform in the second half of the year. When you look at the chart on the right side, you can see the numbers for last year and this year concerning revenue growth. And if we just adjust the fact that colocation business was not included in Q4, you can see that we were able to grow by more than EUR 8 million last year compared to second half of the year to the first half of the year.
And this fact adjust -- or on top of that, further measures like recovery in the SAP business, the ongoing double-digit cloud growth, we have some very, very remarkable Software-as-a-Service project in the second half in the pipeline and some other measures. As mentioned, we are quite confident to meet our targets.
We are part of the overall situation, something that we cannot change at all. But we do have a solid business model, and the outlook is still positive.
And with that, ladies and gentlemen, I'm happy to take your questions.
[Operator Instructions] And the first question comes from Jonas Blum from Warburg Research.
Yes. It's actually Jonas Blum. Just three questions, please. Firstly, could you share with us organic growth in Q2 in your Cloud & IoT business? And also related to that, could you share with us Software-as-a-Service revenue contribution for Q2?
Secondly, I was just wondering to get a better picture concerning your SAP business and the weakness you mentioned, there were also peers quoting that their customers are actually postponing projects into the later part of the year. So I was just wondering, do you expect the business to pick up significantly just from customers that have to spin projects now in H1? Or do you expect to acquire new business as well?
And finally, concerning your M&A strategy, and you already mentioned that you want to focus more on profitability. But could you just share with us a bit more with regards to -- are you looking into additional sectors? Or are you just focusing around your current portfolio and then screening for add-on technologies or simply IT staff?
Thank you very much, Jonas. Let's start with the first question. I think in the presentation it was already mentioned when we look at the full numbers, the organic growth, including the declining SAP business was 3% for the first -- for the second quarter. And I can tell you, when we just highlight the Cloud & IoT segment, we were able to grow nearly 13% organically, which is a very strong number. So we see really the weakness of the SAP business.
And we are -- yes, to transform to the second question, we expect, of course, that this will recover. Already in the second half due to our measures concerning S/4HANA transformations, we see really the postponement of our clients, and I see a strong recovery early next year, to be honest. And you can see that with our market competitors, we are not alone in this landscape. It's just the situation that a lot of our business customers are really postponing for the large S/4HANA transformation projects.
Concerning the M&A strategy, as mentioned, due to this uncertainty in the market, we can see that, yes, we are more looking on potential targets that shows a fit to our growth strategy, which means that we are looking for, yes, companies that are supporting our portfolio or technology or sector competence. This has not changed. The large change is things that we are much more prioritizing the fact that we are looking on profitability concerning our potential targets. I think that is the main change in this uncertain situation.
And now just a follow-up, Software-as-a-Service revenue contribution in Q2, could you also share with us this number?
Of course, I missed that. It was roughly near to EUR 5 million for the first 6 months. So we are quite in the situation that we will -- with the normal business, I'm confident to reach the EUR 10 million. And as mentioned in the presentation, there is at least 2 projects with a higher impact for the second half of the year, which would add another EUR 4 million to EUR 5 million in the second half.
The next question comes from Lukas Spang from Tigris Capital.
My first question would be also on the SAP business. Can you please shed a little bit more light what makes you confident to see a better...
A better second half of the year. Hello? Lukas, I think we lost you.
He's dropped the call, sorry. Maybe he will dial again.
Let's go on with further questions if there are some.
The next question comes from Yannik Siering from Stifel.
Yes, can you hear me?
Yes.
Okay. Maybe going back to the SaaS business. Could you provide an update here? When you talked about it in April, I think you were aiming for around EUR 15 million to EUR 20 million in revenues this year. Now it looks rather like EUR 15 million maybe in this year. Just in general, is now the start of this business, is it according to plan? Or is it according to expectations that you had a couple of months ago? Or how would you describe it? Maybe some more color would be helpful here.
Yes, definitely, Yannik. As we mentioned that, that number in the April conference, we were still confident to close the M&A transaction in the energy sector, which is 100% part of the SaaS segment or the SaaS business.
So in the moment, that project is no longer on our schedule and it was definitely in the area of, yes, let's say, depending on the closing timing, in the area of high -- high single million digit revenues, and this is now not part of our planning anymore, and this was part of the EUR 20 million?
And once again, Mr. Spang from Tigris Capital.
Yes, to the SAP business, can you please share a little bit light what makes you confident to see a better second half of the year?
Definitely, after the weak performance in the first 6 months due to the, at the end of the day, overall market situation. As mentioned, there are a lot of measures. Let me highlight the main measures. One is definitely the fact that we are focusing on projects that are not only S/4HANA projects.
Secondly, we are not -- let's say, we are more focusing on smaller projects where we even can, let's say, sell consultants on a weekly and day basis and a smaller project. And we have some indirect channels, sales channels, that we explored as well to make sure that we have, yes, let's say, high usability on our workforce, on our resources, and this will end up in this guidance for the second half.
Okay. So when did you implement these measures?
After Q1 already. So although the -- yes, it took time. So that was the reason why we mentioned in Q1 that we see better development in the second half and not in Q2. So Q2 was a weak, Q2, no doubt about that, but it was in a certain way expected when we already had the Q1 call.
Good. Then related to order intake in Q2. Can you remind us if there was, or probably there was, a bigger order intake in Q2 last year. So to just, let's say, a more comparable base if we would, yes, take this out.
It's like always in order entry, I call it -- there's a certain amount that comes in quarter-by-quarter, which is in the area of, let's say, roughly EUR 30 million, sometimes EUR 35 million. So in Q2 this year, it was exactly EUR 30 million. And I do expect always 2 larger projects. And in Q1 this year, this was a prolongation of a large contract with an existing customer. And last year, it was the order entry of Röhlig, logistics area.
Can you remind us, please, of the size?
When we are talking about large projects, it's definitely 2-digit million. So it's definitely more than EUR 15 million, sometimes it's EUR 30 million in this area, are these large projects.
Okay. And the first concrete Röhlig project? Or didn't...
Yes. We didn't disclose that last year. This was in the area between 50 and 60, let's say. And for this year, in Q1, it was in the area of 35.
Okay. And then last question, your CapEx now in the first 2 quarters was very low. Is this also a level...
A level for the future? Yes. Because you know that, of course, we have no colocation business any longer in our balance sheet, so definitely, the company is developing in a certain way in asset-light business model. And therefore, yes, this is in a certain way, the level even for the future.
Sorry, Mr. Spang dropped out of the call once again. At the moment, there seem to be no further questions. Maybe Mr. Spang will dial in again.
[Operator Instructions] There are no further questions.
Yes. Let me thank you for taking part in our conference call and your questions. As mentioned, ladies and gentlemen, we are living in a challenging environment. However, q.beyond is a solid finance company with a clear strategy and a healthy business model. Yes, we do have a plan, and we still know how to execute this plan. And always, as we do not know when things are changing. But when they are changing, I think it's quite normal to take measures to work against this development.
And yes, with that, looking forward, maybe to see you in Hamburg on the next conference of Montega or otherwise within the Q3 conference call. Thank you very much, and stay healthy.