Final Q3 offers no surprises

Following the guidance cut from 21 October and the preliminary sales and EBITDA figures, the weak Q3 published by QBY yesterday did not come as a surprise. To recap, Q3 sales declined 1.1% yoy to € 43.2m, as Consulting growth (+13.2% yoy to € € 17.3m) could not fully offset persisting Managed Services weakness (-8.8% to € 25.8m). The newly acquired GITG should have contributed some € 1.5m (eNuW) in its first c. 2 monhts of consolidation to Consulting, putting organic segment growth at 3.4%. The main organic driver was an S/4HANA transformation mandate from Vitakraft.

More interesting is the quality of the EBITDA of € -7.1m. Of the € 9.5m special items, € 7.3m are non-recurring (restructuring, internal S/4HANA project, licences, Romania), while the € 2.2m of variable compensation were merely pulled forward from Q4, which also explains the correction of the prelims on 29 October. Adjusted for both, Q3 EBITDA stood at € 2.4m (eNuW), compared with only c. € 0.4m in Q3 25 excluding the Plusnet gain. With adjusted COGS of c. € 34m (Q3 25: € 36.3m), the cost measures already seem to bite.

The main issue remains Managed Services as price pressure persists in both new business and renewals. The adj. Q3 gross margin of 12% (vs 20% target) should be mainly seen as a volume problem given the largely fixed cost base. While OI turns points to the turn with the Q3 figures (€ 49.7m) almost matching H1, 9m book-to-bill still stands at only 0.8x and new contracts usually take c. 6 months to ramp up, i.e. top-line effects should become visible only in FY27e. Positively, management told investors during the cc, that the Fressnapf renewal, one of QBY's largesst customers, is about to be signed.

The FY guidance now implies € 0-2m EBITDA in Q4 (eNuW: € 1.7m), which looks achievable given the seasonally strong Q4 and the relief from the variable compensation. However, the bridge for the € 8m mid-point cut remains less comforting, as it is unrelated to the restructuring. Management now attributes € 3m to pipeline shifts into FY27, with the the rest explained by one-off licence and internal S/4HANA costs (€ 4m) as well as largely one-off staff expenses incl. the Romania ramp-up (€ 1m).

That said, our view has not shifted since our last update two weeks ago: the story lacks a catalyst at the moment, and a likely withdrawal of the FY28 targets could work in the opposite direction. On the other hand, we continue to see significant potential in the company, which in our view should be able to achieve EBITDA margins of c. 10%. Raising data centre utilisation to 80% alone would generate c. € 2.5m of EBITDA on sales of c. € 4m (eNuW). On top of this come the savings from the restructuring programme. Q1 27 should therefore be the first reality check, as it will show whether the measures are taking effect. BUY, unchanged € 4.9 PT based on DCF.