QBeyond AG

XETRA:QBY

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon, ladies and gentlemen, and welcome to q.beyond's conference call regarding the third quarter results 2021. [Operator Instructions] Let me now give the floor to Mr. Jürgen Hermann. Please go ahead.

[Jürgen Hermann, CEO & Member of Management Board]

Thank you, and hello, and welcome to our Q3 conference call. My name, as mentioned, is Jürgen Hermann. I'm the CEO of the company. And with me like always is Arne Thull, our Head of Investor Relations and responsible for M&A.Yes, ladies and gentlemen, it was another quarter, by the way, the ninth one, on the execution of our growth strategy, 2020plus, that we launched in spring 2019. And yes, it was, from my point of view, an extraordinary quarter, because we were able to sell our colocation business as promised, and from my point of view, quite successful. And when we look on Page 3, you can see the impact of the sale. But let me start with the revenue development. And you can see that we were able to increase revenues from EUR 35.1 million in the last quarter to EUR 40 million in this quarter. And this was purely from the operating result. There was no impact from the colocation sale. The colocation side with the impact you can see on the EBITDA and the consolidated net income, and I come to that later on, but the impact was quite high and very positive. And the free cash flow increased as well to EUR 30.6 million (sic) [ EUR 3.6 million ] with a small impact out of the sale. The major impact will be shown in Q4 because closing of the second transaction was done early October.So with that, let's come to Page 4, where we have -- because it was an extraordinary impact, you can see the colocation sale at a glance. Just to remember that colocation business is a business that is just based on renting space in our data centers in Munich and Nuremberg. And due to the fact that we decided not to invest or to build further data center capacity, it was consequently that we put that in a separate legal entity and sold it. So this sale was quite a strategic one. And it took place in 2 steps. The first 1 was end of July when we sold IP colocation, which is a separate entity, mainly or purely serving the existing customer, datac. And the second 1 was signed in September with the larger part, the company IP Exchange and this was sold to NorthC Group as mentioned. So both transactions, as shown in the slide before, led to one-off accounting gains and high inflows of funds.But coming back to, I think, apart from this extraordinary impact on the normal business, and you can see on Page 5, the development in revenues. And compared to Q1, Q2 and Q3 last year, you can see that we were able to increase revenues by 10%, 12% and for this quarter 14%. And for me, quite important is the fact that nearly 80% in this quarter is based on a recurring revenue level and 65% of these revenues came from our 4 focus sectors: retail, logistics, manufacturing, and energy.Another important KPI you know that on Page 6 is our order entry. So order entry in the first 9 months increased to EUR 141.7 million. The number for Q3 was EUR 25.4 million. And let me say at this point that we're always looking for, let's say, a basic normal order entry, which is between EUR 20 million, EUR 25 million, EUR 30 million per quarter. And on top of that -- and this is something we cannot plan on a daily basis. There are 1, 2, 3 larger projects. And I can tell you that we were able to sign a larger deal in October. Large means, in our definition, order entry with 2-digit million volume. So based on this signing, I'm pretty confident that we can achieve for the full year an order entry above EUR 180 million, which is a new record in the history of the company.When we look at the segments, first on Page 7, we can see that Cloud and IoT was really the main driver of that revenue development. Q3 was up by 20% compared to last year based on the fact that there's a huge demand for cloud solution and still digital workplaces. And we know all that this is partly driven by the pandemic situation and digitization projects. And yes, I'm quite confident -- quite happy that on the same side, we were able to increase the segment contribution from EUR 1.4 million to EUR 3.2 million in Q3.SAP on the next slide is still impacted by the pandemic situation, because we are not able to do the project on the customer prem. There's 1 reason as mentioned in the calls before. And the second 1 is that there are still some companies that, in a certain way, waiting what's going on with the development, before they start S/4HANA transformation. I do not expect -- and we can see that already, because you know that the year is nearly over. I do not expect a great change this year, but I'm still confident that we will have a positive development in next year concerning S/4HANA transformation. And this is mainly driving our S/4HANA business overall.Let's have a look at Page 9 at the P&L. And you can see the development in revenues. You can see that gross profit rises by nearly 50%. And you can see that even the segment contribution increased from EUR 2 million to EUR 5 million. And these 3 numbers is based on our operating performance and has nothing to do with the sale of the colocation business. The impact of the sale of the colocation business, you can see below the segment contribution. There's roughly EUR 1 million one-off transaction costs included in G&A expenses. You can see the other operating income plus EUR 33.2 million. And you can see the other operating expenses of minus EUR 3.8 million, which is nearly 100% based on the transaction as well.And when you take the EUR 33 million and the EUR 3.8 million and the EUR 1 million mentioned before, you come roughly to the EUR 27.8 million, which is a net impact of the sale. So the accounting gains on 1 hand and reduced by goodwill and transaction costs on the other hand. Yes. And this one-off -- so on Page 10, you can see the operating EBITDA. So in a certain way, clean by the transaction. And you can see that EBITDA increased from EUR 0.6 million or minus EUR 0.6 million to EUR 1.6 million in this quarter, which is quite a positive development. And on the next slide, on Page 11, next slide, you can see that as in the quarters before, the margin impact is quite substantially with more than 40%. So an increase of EUR 4.9 million in revenues led to an increase in EBITDA of EUR 2.2 million. So apart from the fact that we were able to successfully sell the colocation business, the operational development is in a good shape as well.So positive free cash flow in Q3, and we expect, of course, a huge impact on free cash flow in Q4. On this slide, on Page 12, you can see the net cash position end of June. There were some outflows due to the latest M&A transactions with EUR 6.3 million. And we have a positive impact of EUR 3.6 million. To explain that, there was, of course, the inflow of the first transaction due to DATEV and there was a negative impact, because with the business and the consolidation impact, minus EUR 7 million, out of the business. So we have a huge inflow that we expect in Q4. And with that, we will end up with a very positive cash balance end of the year.And this led, on Page 13, to, yes, let's say, a solid balance sheet. Equity ratio rises to 75%. And with that, we have a very good basis to look for further M&A transactions to support the development of the growth strategy and of the company. So as mentioned, M&A, there is no doubt that when we look at the 5 columns of our growth strategy, which is recurring revenues with the core portfolio. We have our expected next portfolio, platform-based business. We have our sector focus. We have our performance culture. And as always mentioned, we have our investments concerning research and development on 1 hand and on M&A on the other hand. And we are still looking for targets in the area of the focus sectors, in the area of extending our product portfolio and concerning technology.The only point that changed with the sale of the colocation business is that we now can look even for higher targets, higher in the sense of revenues. And now we are looking for companies with annual revenues of up to EUR 30 million to support our growth strategy on one hand, but on the other hand as well, to compensate the fact that now colocation business is gone. And you know and you remember, that it stands for roughly EUR 20 million of revenues, which we want to compensate by M&A transactions.On Page 15, it's the forecast. So for the time being, we expect an EBITDA of more than EUR 31 million for this year. And of course, it was driven by the onetime impact of the sale. We are quite happy with that development. Coming to the revenues, the guidance, which was adjusted after we sold the colocation business, because, for the fourth quarter, we are missing roughly EUR 5 million in revenues. Consequently -- so the former guidance from EUR 160 million to EUR 170 million is now a transaction-based EUR 155 million to EUR 165 million and the same to the target last year, but we will come out with the guidance for next year end of March next year, maybe early April. We are just in discussion with that.So this was in a nutshell the development in Q3. Thank you very much so far. And of course, like always, we are happy to take your questions, ladies and gentlemen.

[Operator]

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

[Jonas Blum, Analyst]

Just perhaps firstly, touching on CapEx. You mentioned in your report that you also invested in platform-based innovations. Could you just give us a bit more color here on what you invested in? And is this a finalized project? Or is it rather a recurring or ongoing investment?

[Jürgen Hermann, CEO & Member of Management Board]

Yes. Thanks for that question, Jonas. What we mean with platform-based innovations or platform-based CapEx is that -- and platform in certain ways is mainly misleading. Platform in our definition means software-as-a-service-based technology. That is what we are talking about when we are talking about platform economy. And the investment here is mainly the layers. The fact that we are investing in research and development to build up those platforms, which are roughly EUR 5 million to EUR 6 million per year. We expanded -- spent it last year, and we will do it this year as well. So this is -- that is what we are talking about here. And the reason for that is that although our core portfolio is well suited for the market and is still a growth driver, we want to prepare for the years, '23, '24, '25, where we want to introduce new platform-based services for our sector focus.

[Jonas Blum, Analyst]

Okay. Understood. And then just coming back to the Cloud and IoT segment. Could you just remind us on the organic growth you achieved in Q3 ex-M&A activities? And also perhaps if you could help us understand, did you already book incremental revenues from the Rohlig order? Or is it too early? And do you rather expect first revenues coming in Q4?

[Jürgen Hermann, CEO & Member of Management Board]

So the impact of -- or the Cloud IoT segment is mainly organic. And when we are talking about Rohlig, Rohlig has 2 -- yes, 2 elements. One is the customer, Rohlig, that we started to put on our platform on 1st of September. And the other, let's say, chances and potential that we see in logistics is that with a new company that will be, let's say -- will start, I think next week, maybe in 2 weeks, where we want to address further customers in the logistics market. And so Rohlig is a normal customer in that context that we -- one, where we are doing just normal operating managed services business and the transformation started in September. So the Cloud and IoT segment was mainly driven by the organic development.

[Operator]

Okay. So at the moment, there seem to be no further questions. [Operator Instructions] And the next question comes from Sebastian Weidhüner.

[Sebastian Weidhüner, Analyst]

So I have 2 left. The first one, how is the business going at Snabble? I think at the time of the investment, the solution was installed in 2 Aldi stores. And currently, there are 17 on the website. And in addition to that, [ Emkry, Shisha ] and MeinMetzger have been acquired as new customers. Can you give me please an update here?

[Jürgen Hermann, CEO & Member of Management Board]

Of course, Sebastian, but you summarized it already very, very well. So the business is going well. Of course, there is a lot of, let's say, projects where the first retail stores and companies are getting the first experience with that solution. Let me just add, and this is quite important, sometimes it's -- we're talking about Scan-and-Go. I prefer that we are talking about self-checkout, because, of course, for the time being, scanning with the app is the preferred solution, especially tegut is doing very good experience here. But on the other hand, we are working on further technologies to -- yes, to record the pricing. So at the end of the day, the platform is the main, let's say, advantage of Snabble to drive that all and to implement at the end of the day a sophisticated self-checkout solution for the retail stores. And so far, since we acquired the stake in Snabble, we are happy with the development and there are further projects in discussions with other retailers. And so far, we are fully in plan.

[Sebastian Weidhüner, Analyst]

So do you have a view of the estimated revenue in full year 2021 for Snabble?

[Jürgen Hermann, CEO & Member of Management Board]

Definitely, I think it can be somewhere between EUR 1.5 and EUR 2 million, if everything works well. We're just far away from a start-up, from my point of view. So it's already proved that the solution is well accepted and right in place.

[Sebastian Weidhüner, Analyst]

Okay. Clear for me. So -- and the next 1 is you had a tax expense of EUR 4.4 million in Q3 and cash effective were EUR 3.4 million. And after 9 months, this is a tax rate above 20%. With regard to the loss carryforwards, what tax outflow do you expect in Q4?

[Jürgen Hermann, CEO & Member of Management Board]

I have to check out. I think it's roughly EUR 3 million, and this is mainly driven by the sale of the colocation business.

[Operator]

Okay. So at the moment, we have no further questions. So let me hand back over to your host for some closing remarks.

[Jürgen Hermann, CEO & Member of Management Board]

When there are no further question, I think then Arne did a good job in advance or the presentation was quite good or both, whatever. Thank you for attending the call. Thank you for the questions. And yes, maybe we see us or meet us on the [ ICAN Capital Forum ]. But definitely, I think next year, again, we plan end of March, early April, to be prepared to present to you and to the market, let's say, the strategy beyond 2022 and the outlook for the next years, because next year in our growth strategy, 2020plus, the third year, and therefore, we'll come out with a follow-up. Yes, thanks for taking part again and stay healthy, and see you.