Topic: q.beyond will report Q2/H1 figures on August 12^th. We expect a slight sequential improvement compared to the already strong first quarter.

Q2 sales are seen to increase 2.1% yoy to € 47.4m, which should again be driven by the Managed Service segment (eNuW: € 33.2m). On the other hand, we expect sales from the Consulting segment to slightly decline qoq to € 14.1m (eNuW), due to the continuous reduction in low-margin project sales. As we expect a slightly lower utilization in Q2 on the other hand, we hence expect the gross margin to remain stable at 8.5%. Mind you, that management is targeting to significantly increase the Consulting margin in the mid-term, driven by an increased utilization as well as a higher near- and off-shoring ratio (target: 20%, eNuW: 13% at H1 ’24). As the Managed Service margin should also remain stable, we expect the company to report a gross profit of € 8.3m for Q2, implying a 17.6% margin.

On this basis, Q2 EBITDA looks set to come in at € 2.1m (Q1: € 2.0m), implying a 4.3% margin as well as a 98% yoy improvement. Besides the already increased near- and off-shoring ratio, the strong yoy improvements should have been driven by continued implementation of the One q.beyond strategy allowing for cost reductions in sales & marketing as well as G&A.

With this, management should confirm the FY guidance of € 192-198m in sales (eNuW: € 194m), € 8-10m EBITDA (eNuW: € 9.7m) and a positive FCF (eNuW: € 6.0m). While our EBITDA forecast might look ambitious at first glance after H1 (eNuW: € 4.1m EBITDA), it should be justified by ongoing efficiency gains throughout the second half of the year.

Overall, the release is seen to fully support the company’s transformation according to its Strategy 2025, where management is targeting an EBITDA margin of 7-8% (eNuW: 7.1%) as well as a sustainable positive net income.

Valuation continues to look undemanding, as shares are trading at only 7.1x EV/EBITDA '24e (4.1x '25e). Hence, the stock remains a BUY with an unchanged PT of € 1.10 based on DCF.