Implied Q4 sales increased by 9% yoy to € 50.8m (eNuW: € 47.6m, eCons: € 47.4m). Growth was predominantly driven by the continued recovery of the SAP segment (21% of sales), where revenues increased strongly by 28% yoy to € 10.8m (eNuW: € 8.9m), following several key customer wins as well as a pick-up of the S/4HANA transformation. The Cloud & IoT segment (79% of sales) showed yet another quarter with muted growth of 4.9% yoy to € 40.1m (eNuW: 2.7% organic growth), although exceeding our estimate of € 38.7m. Overall, FY ’23 sales increased 9.4% yoy to € 189m (eNuW & eCons: € 186m). 50% of the growth is attributable to the productive-data acquisition.

Q4 EBITDA came in at € 5.8m (eNuW & eCons: € 5.2m), implying an 11.5% margin and a 358% yoy increase. However, the strong increase is mainly due to a decision of the tax authorities in favor of q.beyond, which had a positive effect of € 8.6m (eNuW: € 3.2m net cash effect in ‘24). On the other hand, the company built up provisions amounting to € 5.3m mainly related to the ongoing business transformation. Hence, while FY reported EBITDA came in at € 5.7m, the operating EBITDA amounted to € 2.4m.

Notably, the company generated FCF of € 1.7m (eNuW: €1.4m, eCons: € 0.2m), thus reaching break-even one year ahead of target

. With now € 37.6m of net cash, CEO Rixen indicated in yesterday’s CC that M&A might already be on the table for late 2024. Here

, one possibility could be to partner up with a company from a respective industry in order to access new verticals (see logineer). Mind you, future M&A is not reflected in our model, thus providing a certain upside to our estimates.

Bullish FY ’24 guidance. With the release, management also provided a 2024 outlook, targeting sales of € 192-198m (eNuW new: € 197m, eCons: € 196m) and an EBITDA of € 8-10m (eNuW new: € 8.1m, eCons: € 7.4m). While 3% sales growth at mid-point should be achievable, the EBITDA guidance appears quite ambitious, as it implies an incremental margin of 125% at mid-point with respect to the operating EBITDA. Yet, with our new estimates we expect the company to achieve the lower end of the guided range due to (1) an increased off- and near-shoring ratio, (2) an increased consulting and development ratio as well as the (3) ongoing streamlining of processes in connection with one-q.beyond (i.e. eliminate duplicate structures, optimize order-to-cash).

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New segmentation: From 2024 onwards, q.beyond will change its segment reporting, as the new segments “Managed Services” and “Consulting” will replace the current segmentation (“Cloud & IoT” and “SAP”). "Managed Services" will comprise the q.beyond data centres in Hamburg and Ulm as well as logineer while "Consulting" will comprises the former SAP segment as well as the Microsoft services, IT-security, software development, data-intelligence and cloud consulting. A more detailed overview is provided below.

Remains a BUY with an unchanged PT of € 1.00 based on DCF.