Highlights in 2020: q.beyond on growth course +13% revenue growth on previous year € 161 million new orders set further record € 44.9 million liquidity – q.beyond is free of debt +60% rise in q.beyond’s share price Revenues in € million 200 160 – 170 143.4 127.4 2019* 2020 2021 2022 * Excluding Plusnet revenues.
01 Our strategy is working. We set ambitious targets in our “2020plus” growth strategy. This was put to the test – and proved itself – during the coronavirus pandemic in 2020. Revenues showed double-digit growth while new orders surged to new record highs. Our vision is convincing customers: we are reimagining SME digitalisation – with inno- vative end-to-end solutions to revolutionise any business model!
02 2020: success in all key areas of our strategy 66% of 2020 revenues generated in focus sectors of retail, manufacturing and energy Sector focus IoT Investments in future and M&A INCLOUD q.beyond acquired a 100% stake in this software engineering specialist in 2020 and thus boosted its development expertise
Cloud 03 Edgizer Scalable solution manages edge devices and software IIoT starter kit All-in-one solution digitalises existing industrial machinery StoreButler platform transforms every shop into a digital store Attractive core business Platform-based innovations 78% revenues in 2020 share of recurring SAP For more, visit www.qbeyond.de/strategy
04 2020plus: growth opportunities with integrated solutions New work: mobile work now Fast forward to the digital store Aim for bullseye with the bespoke cloud On your guard: cybersecurity Edge computing: the easy route to industrial IoT Education beyond digital Safe landing with SAP S/4HANA transformation
05 We accompany our customers securely and reliably throughout their digital journey – they benefit from our extensive Cloud, SAP and IoT expertise. Cloud New work Bespoke cloud Digital store IoT Cybersecurity Edge computing Digital school SAP S/4HANA transformation SAP
“2020 and the pandemic proved beyond doubt: our core business of Cloud, SAP and IoT solutions is crisis-proof.” Jürgen Hermann CEO of q.beyond AG
Letter to Our Shareholders 07 2020 and the pandemic proved beyond doubt: our core business is crisis-proof. With our Cloud, SAP and IoT solutions, we increased our revenues last year by 13% to € 143.4 million. That meant that we met not only our revenue target, but all other targets communicated ahead of the first lockdown as well. We owe this positive performance to the whole q.beyond team. Last year, my colleagues accom- plished exceptional things in exceptional circum- stances. They kept all company operations up and running from their home offices, provided existing customers with the professional support to which they are accustomed and acquired new customers via virtual channels. That deserves respect and I would like to offer them my sincerest thanks. Scalable core business I would also like to thank our customers, who re- mained loyal to us in a period of profound restric- tions. We have worked together for many years in most cases and the trust that has grown between us is a key component of our business relationships. It also forms the basis for the high share of recur- ring revenues, which made up 78% of total revenues last year. Our core business is scalable and is as attractive as ever in our growing markets. As our revenues continue to rise, our existing workforce and infrastructure will guarantee above-average earnings growth. This core business is one of the five key pillars of our “2020plus” growth strategy. It goes along with platform-based innovations, investments in the future, our sector focus and an actively lived perfor- mance culture. A prime example of a platform-based innovation is the “StoreButler”, a unique solution for digitalising retail operations. Comprising cloud and IoT technology, this end-to-end solution makes it easy for customers to network their stores with edge devices. It covers all their needs, from digital price labels at the shelf through to checkout. In recogni- tion of this innovation, the prestigious EHI Retail Institute selected us in March 2021 for this year’s “reta award” as the best technology supplier to retailers. We were awarded the prize together with Fressnapf, a customer of ours, in the “Enterprise Solutions” category. Another example of a platform-based innovation is our “Edgizer”. It involves a cross-sector software so- lution for centrally operating edge devices. We are currently testing this with a first customer in manu- facturing, one of our focus sectors. Further innova- tions are set to follow in the quarters ahead. They will all supplement and expand our core business in particular. They promise to gene rate substantial revenue contributions in the medium term and will promote the scalability of our business. Successful takeover of Incloud Our innovative strength is driven by continuous in- vestments in the future. Last year, the focus was on expanding our development capacities in Germany and establishing a new outlet in Riga / Latvia. By ta- king over the software engineering specialist Incloud in its entirety, we gained more than 60 further ex- perts in one go.
08 q.beyond Annual Report 2020 “Our aim is to further increase the value of our company in the years ahead. Our growth story has only just begun.” Incloud’s front-end, software and development ex- pertise ideally complements our own platform, cloud and sales competence. Progress towards integration has been superb. After just a few weeks, our new colleagues have made valuable contributions towards developing innovations, attracting new customers and extending contracts with existing customers. We plan to acquire further technology companies that match our strategy in the current year. Our solid balance sheet, with an equity ratio of 72% and net liquidity of around € 45 million at the end of 2020, gives us the necessary financial scope. In our acqui- sitions we are pursuing three objectives: firstly, the businesses we acquire should underpin our strong position in our focus sectors. Secondly, the acqui- sitions should promote the targeted expansion of our product portfolio. One current topic here involves expanding our expertise in business relating to enterprise software. Thirdly, we aim to supplement our technology expertise and further enhance our position in forward-looking markets such as cloud services, data analytics, embedded software, IoT, and artificial intelligence. Viewed this way, our “Expect the next” motto equally refers to the stra- tegic expansion of our core portfolio. Two thirds of revenues in three sectors Our focus on three sectors is the fourth key pillar of our growth strategy. In the past year, we generated two thirds of our revenues in the retail, manufac- turing and energy sectors. The experience we have built up here makes it easier to attract new custo- mers and enables us to expand into related industrial segments. Further options are possible: in retail- related logistics, for example, many medium-sized hauliers are only just beginning to digitalise their businesses.
Letter to Our Shareholders 09 The final ingredient in our growth strategy is an actively lived culture of performance that is charac- terised by a high degree of individual responsibility, a clear team spirit and fairness in our dealings with one another. We know that highly qualified and motivated staff are the foundation for our success. That is why this year we are introducing an emplo- yee share plan modelled on the executive share plan. With this, our executives have already acquired one million q.beyond shares on their own account via the stock exchange in autumn 2020. The plan only kicks in if the share price amounts to at least € 2.80 by the end of 2022. q.beyond share price doubles At the end of 2019, q.beyond shares were still listed at € 1.05. By the end of 2020, the share price already stood at € 1.68 and even reached € 2.12 at the end of February 2021. In short, our share price doubled in just 14 months. When we presented our growth strategy, we explained to our shareholders that they would participate in our future performance mainly by way of value growth. Consistent with this ap- proach, the Management and Supervisory Boards will propose to the Annual General Meeting that no dividend should be distributed for the 2020 financial year. Our company would rather invest the amount in its further growth. As is apparent from their per- formance, q.beyond shares are now viewed by the capital market as a growth stock. I am in no doubt that we share the same goal, na- mely that of further increasing the value of q.beyond in the years ahead. We have the tools we need to achieve this goal with our “2020plus” growth stra- te gy and our highly motivated team. Today’s q.beyond stands for innovative IT from one end of the digital value chain to the other. That means no isolated solutions, but rather services from a single source – adaptive, secure and scalable. And we base this on partnerships of equals forged between our own medium-sized company and others. After all, our customers expect specific solutions in what is becoming an ever-more com- plex environment. Growth beyond 2022 Our solutions expertise is powering our growth. The increase in our revenues this year and next year will largely be driven by our crisis-proof core busi- ness. In May 2019, we set ourselves the following targets for 2022: revenues of € 200 million, an EBITDA margin of more than 10% and sustainably positive free cash flow. Despite the coronavirus crisis and the severe recession in 2020, we are on course to meet these ambitious targets. As you would expect, we are already planning beyond next year. We are boosting and expanding our core business, particularly with our platform- based innovations and ongoing investments in the future. In so doing, we are creating a basis to gene- rate consistently strong growth beyond 2022. I am convinced that q.beyond’s growth story has only just begun. To our shareholders, I would say this: thank you for your loyalty and especially for the trust you have placed in us. Please be assured: we have entered a new era at q.beyond. Cologne, 23 March 2021 Jürgen Hermann CEO
Focus sector: retail q.beyond’s digital services are making retail smart – enhancing customer experience and boosting retention Shopping 4.0
Contents 12 – 25 To Our Shareholders 12 The Management Team 14 The Supervisory Board 15 Report of the Supervisory Board 21 q.beyond’s Share Performance 26 – 63 Group Management Report 28 Group Fundamentals 33 Corporate Governance 43 Business Report 54 Outlook, Opportunity and Risk Report 64 – 140 Financial Report 66 Consolidated Financial Statements 73 Notes to the Consolidated Financial 130 Statement of Responsibility 131 Independent Auditor’s Report Statements 141 Further Information 141 Calendar, Contact
12 q.beyond Annual Report 2020 The Management Team q.beyond’s management is in the hands of a five-member team comprising the CEO and four other top man- agers. They collectively offer all the skills needed to find the best digital solutions for our customers and then put them into practice. Their expertise ranges from innovation and software development to portfolio and product management, and from consulting, operations and supportive core functions through to sales and marketing. Together, the team ensures that the “2020plus” growth strategy is consistently implemented. Jürgen Hermann Chief Executive Officer q.beyond’s CEO has a clear goal – to sustainably increase the company’s value. To achieve this, the economics graduate has worked in recent years to turn our company into what it is now: a Cloud, SAP and IoT provider. Measures such as the sale of the telecommunications business, the strategic realignment and the rebranding as q.beyond provide the foundation for the company’s successful growth. Alongside strategy, Jürgen Hermann also focuses on Investor Relations, M&A, Marketing and Communications. As a founding member, he played a key role in organising our company’s IPO in 2000. He became CFO in 2009 and in 2013 succeeded the company’s co-founder Dr. Bernd Schlobohm as CEO. “The management’s key strength is its breadth of expertise. As a team, we are shaping q.beyond’s future.”
To Our Shareholders The Management Team 13 Christoph Reif Chief Financial Officer Waldemar Gerlach Portfolio and Product Management / Strategic Partner Management The tangible success of our growth strategy is re- flected in our quarterly and annual financial statem- ents. These are compiled under the guidance of our CFO, Christoph Reif. A graduate in business admi- nistration, he has headed the Finance department since 2013. In 2019, he also took on responsibility for Compliance, Procurement, HR and Legal. He pre- viously held senior positions at 1&1, where he was responsible for central procurement decisions. Waldemar Gerlach embodies our motto of “Expect the next”. His main focuses are on consistently de- veloping our overall portfolio and products and on forging cooperations with strategic partners. This business IT specialist is familiar with the perspec- tives of both customers and partners. He owes that not least to his previous career in IT, in which he worked for the Bayer Group and in the manage- ment at Atos and CSC. Thorsten Raquet Consulting, Innovation and IoT Thies Rixen Sales and Operations Whenever new solution architectures and techno- logical innovations are called for at q.beyond, Thorsten Raquet is the person to ask. He initiates new projects and monitors their implementation. He is also responsible for the SAP and Microsoft consulting business. A graduate in business admi- nistration, he began his career at SAP and then headed global sales systems at BSN medical. Close to customers and in the thick of things: Thies Rixen successfully balances his role as Head of Sales and his responsibility for ensuring the smooth operation of our Cloud, SAP and IoT business. This business administration graduate benefits here from his extensive management and IT expertise gained in senior positions at companies such as DXC and Deutsche Telekom, as well as in his role as CIO and Managing Director of the Ingenico Group.
14 q.beyond Annual Report 2020 The Supervisory Board The six-member Supervisory Board comprises four shareholder and two employee representatives. At the Annual General Meeting held in Cologne on 12 July 2018, shareholders re-elected their existing representa- tives. Their terms in office now run until the conclusion of the Annual General Meeting for the 2022 financial year. The employees had selected their two representatives in advance of the meeting. Dr. Bernd Schlobohm Chairman Dr. Frank Zurlino Deputy Chairman Dr. Schlobohm, who holds a doctorate in engineer- ing, founded q.beyond in 1997, had the company publicly listed in April 2000, and then managed it as CEO until May 2013. Together with q.beyond’s co-founder, Gerd Eickers, he is the largest share- holder. At the end of 2020, these two share holders held a combined stake of 25% in q.beyond. Dr. Zurlino, holder of a doctorate in business engi- neering, was elected to the Super visory Board in May 2013. Formerly head of strategy consulting and development at IBM Deutschland, he is now Managing Partner at the international management consultancy Horn & Company. Gerd Eickers Ina Schlie q.beyond’s second founder, Gerd Eickers, moved to the Supervisory Board in June 2004 after three years on the Management Board. In subsequent years, this graduate in economics played a major role in shaping the political framework for the Ger- man technology market, particularly in his capacity as President of the Association of Telecommunica- tions and Value-Added Service Providers (VATM). A graduate in economics and former long-standing head of the group tax department at SAP, Ina Schlie has been a member of q.beyond’s Supervisory Board since autumn 2012 and chairs its Audit Committee. As a financial expert, she is a member of two other Supervisory Boards and one Advisory Board and is also a visiting lecturer at LMU Munich. Martina Altheim Matthias Galler Martina Altheim, at the time Head of Central Pro- cess and Quality Management, joined the Supervi- sory Board as the second employee representative in July 2019. Since January 2020, the graduate in biology who is based at q.beyond’s location in Co- logne, has been responsible for the company’s Corporate Social Responsibility. In June 2018, q.beyond’s workforce elected the Hamburg-based Works Council Chairman as a new member of the Supervisory Board. The IT specialist has worked at our company as a senior IT consultant since 2002 already.
To Our Shareholders The Supervisory Board Report of the Supervisory Board 15 Report of the Supervisory Board Dr. Bernd Schlobohm Supervisory Board Chairman Dear Shareholders, Activities of the Supervisory Board The coronavirus pandemic confronted both our com- pany and society as a whole with unprecedented challenges in 2020. This Annual Report shows how well q.beyond mastered these. We took every con- ceivable step to offer the best possible protection to our employees, partners, customers, suppliers and other stakeholders and to avoid personal con- tacts. For this reason, we held our Annual General Meeting for the first time on a virtual basis. All Su- pervisory Board meetings also took the form of video conferences. We were impressed by the unerring dedication shown by all employees and the Management Board in this exceptional historic situation. We would like to take this opportunity to thank the entire q.beyond team for its outstanding work in the past financial year. The Supervisory Board would also like to thank all company shareholders for their commitment and loyalty. In what follows, we inform you about the activities of the Supervi sory Board in the 2020 financial year. The Supervisory Board performed all the duties in- cumbent on it by law and the Articles of Association again in 2020. It continually monitored and advised the Management Board in its management of q.beyond AG and the Group. It was directly involved in all decisions and measures of material significance, particularly those impacting on the company’s finan- cial position, financial performance and cash flows. After careful consideration, it voted on all measures for which its consent is required by law, the Articles of Association and the Rules of Procedure of the Management Board. The Supervisory Board held regular meetings, at times also without the Management Board. At such meetings, the Supervisory Board addressed agenda items relating either to the Management Board or to internal Supervisory Board matters. At their joint meetings, the Supervisory and Management Boards discussed key aspects of the company’s business policy and strategy, as well as its performance and planning. Moreover, the chairs of the two boards were in regular contact to discuss current company-related topics arising between Supervisory Board meetings.
16 q.beyond Annual Report 2020 The Management Board informed the Supervisory Board with regular, timely and detailed reports, both written and oral, about the company’s business performance, drawing in particular on monthly and quarterly financial statements and rolling budget / actual comparisons. In particular, these reports also included information about variances between the company’s actual business performance and its in- ternal planning and publicly communicated finan- cial targets. The corresponding Management Board reports also contained all relevant information about the company’s strategic development and planning, risk situation, risk management and compliance. All enquiries and requests for additional information by the Supervisory Board were promptly and thor- oughly answered by the Management Board. Topics addressed by the Supervisory Board The main focuses of Supervisory Board meetings and resolutions in the 2020 financial year were: 1. “2020plus” growth strategy The Supervisory Board regularly addressed the progress made with implementing the company’s growth strategy, mainly referring in this respect to the monthly reports. Furthermore, it regularly inspected the sales pipeline and obtained informa- tion about the progress made with internally de- veloped innovations. 2. Rebranding One milestone in the implementation of the “2020plus” growth strategy was the rebranding of QSC as q.beyond. The Supervisory Board dealt with the necessary measures at an early stage of proceedings and, at its meeting on 25 March 2020, approved the draft resolution to the Annual General Meeting in respect of the company’s new name. 3. Acquisitions One major aspect of the growth strategy involves acquisitions. Here, the Management Board kept the Supervisory Board regularly informed about poten- tial takeover candidates and options for action. This way, the Supervisory Board was involved at an early stage in the decision to acquire 100% of the shares in the Darmstadt-based company Incloud Enginee- ring GmbH. The board approved this acquisition by circulating and approving the respective documents on 20 July 2020. 4. Spinoff of “IP Exchange” The Supervisory Board closely accompanied the thought given by the Management Board to spin- ning off the colocation business to a separate com- pany and thus extending the range of options avail- able for this business field. 5. New Management Board remuneration system One important topic in the Supervisory Board’s ac- tivities in the past year involved implementing the requirements of the German Act on the Transposition of the Second Shareholder Rights Directive (ARUG II), particularly with regard to Management Board remuneration. Drawing on the assistance of an inde- pendent remuneration advisor, the board considered potential models which, alongside financial targets, also integrated non-financial targets more closely into the remuneration system. The Supervisory Board approved the basic principles of the new re- muneration system at its meeting on 25 November 2020. The remuneration system will now be sub- mitted for approval by the Annual General Meeting on 12 May 2021. 6. New incentive system for executives The Supervisory Board welcomes the Management Board’s initiatives to step up q.beyond’s capital mar- ket orientation by way of incentive systems and thus to enable employees to participate in their success
To Our Shareholders Report of the Supervisory Board 17 in implementing the “2020plus” growth strategy. In the first step, a share-matching plan was intro- duced for executives in October 2020. The Super- visory Board examined and approved this plan at its meeting on 20 August 2020. Composition of the Supervisory Board The Supervisory Board is composed in accordance with the requirements of the German Stock Corpo- ration Act (AktG) and the German One-Third Partici- pation Act (Drittelbeteiligungsgesetz) and continues to comprise four shareholder representatives and two employee representatives. The shareholder re- presentatives on the Supervisory Board are still its Chair, Dr. Bernd Schlobohm, and its Deputy Chair, Dr.-Ing. Frank Zurlino, as well as Gerd Eickers and Ina Schlie. The employee representatives are still Martina Altheim and Matthias Galler. Supervisory Board meetings and committees As well as four scheduled meetings, the Supervisory Board also held one unscheduled meeting in the 2020 financial year. Due to the Covid-19 pandemic, all meetings were held as video conferences. All mem- bers participated in all these meetings. Where nec es- sary, the Supervisory Board also adopted resolutions on individual topics by circulating and approving the respective documents. To assist it in its work, the Supervisory Board has formed four committees. These are the Human Resources Committee, the Audit Committee, the Nomination Committee and the Strategy Commit- tee. Committee chairs regularly report to the full Supervisory Board on the work of their committees. All committee members attended all meetings of their respective committees in 2020. The Human Resources Committee met twice in the year under report. The committee prepared the Supervisory Board’s decisions concerning the target achievement of Management Board members in the 2019 financial year and the amendment made to target agreements with the Management Board in March 2020 to account for the adjustment in the multi-year targets already communicated in 2019. Apart from this, it dealt in particular with preparing the resolutions needed for the new Management Board remuneration system The committee still comprises the following members: Dr. Bernd Schlo- bohm (Chair), Martina Altheim and Gerd Eickers. The composition of the Audit Committee is also un- changed; its members are Ina Schlie as its Chair and independent financial expert, as well as Dr. Bernd Schlobohm and Dr.-Ing. Frank Zurlino. The Audit Committee monitors the financial reporting process and may submit recommendations to safeguard its integrity. It also monitors the effectiveness of the internal control, risk management and internal audit systems, as well as compliance, and prepares all decisions required by the full Supervisory Board in this respect. The Audit Committee deals with the audit of the financial statements and is responsible for selecting and issuing the audit assignment to the auditor, as well as for monitoring the auditor’s inde- pendence and audit quality. It decides whether the company may commission the auditor to provide non-audit services and, where appropriate, monitors the auditor’s provision of such services. The Audit Committee held five meetings in the past financial year. It reviewed the documents relating to the annual and consolidated financial statements, including the dependent company report, for the 2019 financial year, held in-depth discussions about these documents and the accompanying audit re- ports in the presence of the auditor and adopted recommendations for the full Supervisory Board resolution concerning the annual and consolidated
18 q.beyond Annual Report 2020 financial statements and their audit. Prior to their pub- lication, the half-year financial report as of 30 June 2020 and the interim statements as of 31 March and 30 September 2020 were discussed with the Audit Committee. The committee also dealt with planning the audit and key audit focuses for the 2020 financial year and negotiated and concluded the auditor’s fee agreement. Moreover, it addressed the reorganisation of the internal risk management process, the implications of the Q-loud GmbH mer- ger and the changes arising for q.beyond as a result of the ARUG II legislation, as well as regularly taking receipt of reports from the Head of Internal Audit and Compliance on his area of activity. Furthermore, the Audit Committee decided to issue a public call for tenders for the audit mandate for the 2021 financial year and organised a correspond- ing process in the period from September 2020 to February 2021. As a result of this process, the com- mittee submitted a substantiated recommendation with two proposals to the full Supervisory Board for its own resolution to be addressed to the Annual General Meeting in respect of the auditor. The can- didates are Mazars GmbH & Co. KG Wirtschafts- prüfungsgesellschaft Steuerberatungsgesellschaft, based in Hamburg and with offices in Cologne, and Rödl & Partner GmbH Wirtschaftsprüfungsgesell- schaft Steuerberatungsgesellschaft, based in Nu- remberg. Consistent with legal requirements, the Audit Committee accompanied its proposals with a substantiated preference, in this case for Mazars GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft. At its meeting on 24 March 2021, the Supervisory Board accepted this recommendation and decided to submit an election proposal to this effect to the 2021 Annual General Meeting. The task of the Nomination Committee is to pro- pose suitable candidates to the full Supervisory Board for its nomination of candidates at any forth- coming election of shareholder representatives to the Supervisory Board at the Annual General Mee- ting. The composition of the Nomination Committee has not changed; its members are still Gerd Eickers (Chair) and Dr.-Ing. Frank Zurlino. The Nomination Committee did not hold any meetings in the 2020 financial year as no Supervisory Board elections were pending. The composition of the Strategy Committee is also unchanged; its members are Dr. Bernd Schlobohm (Chair) and Dr.-Ing. Frank Zurlino. The Strategy Committee has a purely advisory function and ad- dresses the strategic, and thus long-term, devel- opment of q.beyond AG. The committee held two meetings in 2020 and dealt in particular with the Management Board’s plans to implement the “2020plus” growth strategy and with potential acquisition targets. Corporate governance The Supervisory Board continuously monitors the status and development in the German Corporate Governance Code and the implementation of the Code’s recommendations at q.beyond AG. At its meeting on 25 November 2020, the Supervisory Board acting together with the Management Board submitted its annually updated Declaration of Com- pliance with the recommendations made in the Code versions dated 7 February 2017 and 16 December 2019 pursuant to § 161 AktG. This declaration is permanently available on the company’s website. Together with the Supervisory Board, the Manage- ment Board reports in detail on corporate governance in the Corporate Governance Statement, which is also permanently available on the company’s website. Each member of the Supervisory Board discloses any conflicts of interest that may arise, taking due account of the recommendations made in the Ger- man Corporate Governance Code. No conflicts of interest arose in the year under report.
To Our Shareholders Report of the Supervisory Board 19 Members of the Supervisory Board take responsi- bility for undertaking any training or professional development measures necessary to fulfil their duties, such as with regard to changes in the legal framework, and are supported by the company. The company keeps Supervisory Board members regularly informed of the latest legislative amend- ments and of any relevant developments in corpo- rate governance. New members of the Supervisory Board are able to meet the Management Board to discuss underlying and current topics, and thus gain an overview of those topics relevant to the company (“onboarding”). Audit of financial statements Consistent with the recommendation submitted by the Audit Committee, the Supervisory Board pro- posed to the Annual General Meeting on 20 May 2020 that KPMG AG Wirtschaftsprüfungsgesell- schaft, based in Berlin and with offices in Cologne, should be re-elected as auditor and group auditor for the 2020 financial year. In line with the resolu- tion adopted by the Annual General Meeting, the Audit Committee awarded the audit assignment to KPMG AG Wirtschaftsprüfungsgesellschaft. KPMG AG Wirtschaftsprüfungsgesellschaft audited both the annual financial statements of q.beyond AG as of 31 December 2020 prepared by the Manage- ment Board in accordance with the requirements of the German Commercial Code (HGB) and the conso- lidated financial statements as of 31 December 2020 prepared in accordance with International Financial Reporting Standards (IFRS) as requiring application in the European Union and the supplementary pro- visions of German commercial law applicable pur- suant to § 315e of the German Commercial Code (HGB), as well as the management and group ma- nagement reports. Key audit matters and focuses for 2020 included the recoverability of goodwill, the impact of the Covid-19 pandemic, revenue recognition under IFRS 15, the disclosures made on risks and the outlook in the management report and the risk of fraud upon rev- enue recognition. The auditor granted unqualified audit opinions to the company’s annual financial statements (HGB) and consolidated financial statements (IFRS) for the 2020 financial year, including the respective mana ge- ment reports. Furthermore, the Management Board compiled a report on relationships with affiliated companies for the 2020 financial year (dependent company report). The auditor reviewed this report, reported in writing on its findings and granted the following unqualified opinion: “Based on our audit and assessment performed in ac- cordance with professional standards, we confirm that 1. the factual information in the report is correct; 2. the company’s compensation with respect to the transactions listed in the report was not incom- mensurately high.” The aforementioned documents, including the audit reports submitted by the auditor, were provided to all Supervisory Board members in good time ahead of their review. At its meeting on 24 March 2021, the Supervisory Board discussed all these documents and the auditor’s reports with the Management Board and the auditor, taking due account of the findings of the preliminary review conducted by the Audit Committee. The auditor reported to the mee- ting held on 24 March 2021 on its key audit findings and was available to answer questions and provide further information. The auditor also reported on
20 q.beyond Annual Report 2020 the audit of the internal control system in respect of the financial reporting process and the risk manage- ment system. It informed the Supervisory Board of services it provided in addition to the audit of the financial statements and that there were no circum- stances indicating that its impartiality was impaired. Having conducted its own review, the Supervisory Board did not raise any objections to the annual financial statements (HGB) of q.beyond AG for the 2020 financial year, the consolidated financial state- ments (IFRS), the management report of q.beyond AG or the group management report and concurs with the findings of the audit performed by the auditor. Consistent with the recommendation made by the Audit Committee, the Supervisory Board therefore approved the consolidated financial state- ments (IFRS) and the annual financial statements (HGB). The annual financial statements are thus adopted. Furthermore, following its own review the Supervisory Board approved the Management Board’s report on relationships with affiliated com- panies and concurred with the findings of the audit of the report by the auditor. Based on this review, the Supervisory Board established that no objections were to be raised to the declaration by the Manage- ment Board at the end of the report on relationships with affiliated companies. The Supervisory Board also reviewed the Separate Non-Financial (Group) Report for the 2020 financial year. This will be published on the company’s web- site at the latest at the end of April 2021. At the meeting on 24 March 2021, the Supervisory Board concluded that no objections were to be raised to the Separate Non-Financial (Group) report. Cologne, 24 March 2021 On behalf of the Supervisory Board of q.beyond AG Dr. Bernd Schlobohm Supervisory Board Chair
To Our Shareholders q.beyond’s Share Performance 21 q.beyond’s Share Performance Share price rises 60% in 2020 The coronavirus pandemic shaped developments on global capital markets in 2020. The first lockdown in March 2020 led prices to plummet, while the approval of the first vaccinations triggered a rally towards the end of the year. At the end of 2020, the DAX was 4% up on the previous year, while the TecDAX closed 7% higher. With 60% growth, our share price significantly outperformed the relevant indices in 2020. Having posted a pleasing start to the year, it too could not escape the coronavirus crash and reached its annual low at € 0.78 on 16 March 2020. Just two weeks later, however, it was back above € 1.05, its 2019 year-end price. By 30 June, the share price rose to € 1.35. While our share price already gained 29% in the first half, at this point the DAX and TecDAX were both still below their 2019 year-end levels. During the summer months, our share price stabilised at this higher level. Publication of the company’s Q3 results then triggered a second upward trend, one which continued in the first weeks of 2021. Our share price reached its annual high at € 1.73 on 9/10 December and closed the year at € 1.68. Shareholders benefit from rising company value Within a year, q.beyond shares gained € 0.63 in value, while our market capitalisation rose by € 78 million to € 209 million. When presenting the new growth strategy in May 2019, the Manage- ment Board already explained that shareholders would in future mainly participate in q.beyond’s performance by way of its value growth. Measured as market capitalisation less net liquidity, the com- pany’s value more than doubled in 2020. The Ma- nagement Board will therefore propose to the An- nual General Meeting that, unlike in the previous year in which a dividend of € 0.03 was distributed per share, in the current year no dividend should be paid and the amount should rather be invested in further growth. Shareholders have already bene- fited from further share price growth in the first two months of 2021, with the price rising by a further € 0.44 to € 2.12 as of 26 February. This value growth has been driven by the company consistently implementing its “2020plus” growth strategy and the resultant advances in its operating business. Revenues rose from quarter to quarter in 2020. Not only that, record new orders convinced investors of the sustainability of this growth course. The trust placed in the company by the capital mar- ket grew noticeably as the year progressed and faci- litated substantial share price growth. Analysts set target prices of up to € 2.50 Even after its 60-percent rise in 2020, our share price still offers upward potential. The targets set by analysts regularly covering our company were as high as € 2.50 by the end of February 2021. Bankhaus Lampe, Commerzbank and Stifel Europe Bank (formerly Mainfirst) have long had buy recom- mendations in place for q.beyond. However, Bank- haus Lampe discontinued its coverage at the end of 2020. Independent Research and Warburg Research advise holding the shares, with Warburg’s analyst raising his target price in January 2021. A further institution, Montega, published its first study on q.beyond in February 2021, in this case with the title “Beyond your expectations”. This ana- lyst advised buying our shares and issued a target price of € 2.50. With current coverage by five ana- lysts, our company has attracted unusually great attention for a second-tier stock. This too docu- ments the potential of our company’s shares.
22 q.beyond Annual Report 2020 Institutional investor acquires more than 3% of shares In 2020, our company’s sustainable growth caused institutional investors in particular to acquire or ex- pand their positions in q.beyond shares. Their share of free float rose by six percentage points to 29%. On 14 December 2020, Paladin Asset Management notified us that its share of voting rights had exceeded the three-percent threshold. Further well-known small and midcap investors also acquired smaller stakes and increased their holdings in the first two months of the current financial year. By 26 February 2021, the free float share held by institutional inves- tors rose by a further 2 percentage points to 31%. Conversely, the share held by retail investors de- creased to 69%. Overall, free float accounts for 74.7% of q.beyond’s shares and is distributed among 25,001 shareholders. The remaining 25.3% of shares are held by the two founders, Gerd Eickers and Dr. Bernd Schlobohm. Now members of the Supervisory Board, these two individuals have not sold any shares since the com- pany’s IPO in spring 2000 but have rather repea- tedly increased their shareholdings further in the intervening years. Our CEO Jürgen Hermann has also expanded his shareholding on several occa- sions in recent years. In 2020, he acquired a further 330,000 shares, taking his current holdings to one million, or 0.8% of our shares. Executives invest with a target price of at least € 2.80 Since October 2020, our executives have also held 0.8% of q.beyond’s shares. To be able to participate in the new share matching plan, they acquired one million shares on their own accounts via the stock market. This plan runs until 31 December 2022. To take effect, q.beyond’s share price must have risen to at least € 2.80 by then. In this case, the plan rewards the ongoing commitment shown by exe- cutives by granting a defined number of matching shares that are issued on a linear basis depending on the share price performance and capped at a maximum price of € 4.00. This plan is being followed in the current financial year by a share matching plan for all company em- ployees. This will provide q.beyond’s team with an even greater incentive than before to sustainably increase the company’s value. Intensive IR activities pay off The growth in the company’s value and increasing interest shown by institutional investors have bene- fited not least from our investor relations (IR) activi- ties, which continued just as intensively as before. Unlike previously, since the start of the first lock- down in March 2020 we have presented our com- pany almost exclusively on a virtual basis. The coro- navirus pandemic has enormously accelerated the digitalisation of capital market communications. The Management Board and IR took part in the fol- lowing virtual capital market conferences, among others, in the past year: • 29th Munich Capital Market Conference • Mainfirst (now Stifel Europe Bank) Virtual SMID Cap One-on-One Forum • Commerzbank Sector Conference – TMT, Consumer & Real Estate • Berenberg/Goldman Sachs – Ninth German Corporate Conference • German Equity Forum
To Our Shareholders q.beyond’s Share Performance 23 q.beyond share price performance (indexed) q.beyond TecDAX DAX 70 60 50 40 30 20 10 0 -10 -20 -30 -40 +60% +7% +4% Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Shareholder structure as of 31 December 2020 12.67% Dr. Bernd Schlobohm 12.68% Gerd Eickers 74.65% Free float Institutional investors increased their share of free float by 6 percent- age points in 2020.
24 q.beyond Annual Report 2020 We also held numerous conference calls and one- to- one discussions, with a noticeable rise in interest here too as our share price rose. dings of comments made by the Management Board in conference calls can be found following the publi- cation of quarterly results. Anyone interested can find all relevant information about our shares in the IR section of our website at www.qbeyond.de/en/investor-relations. Visitors here will find our reports and announcements, as well as key figures on our shares, the latest consensus among analysts, corporate governance and much more. This is also where presentations and recor- The IR Department also maintains an ongoing exch- ange of information with retail and institutional in- vestors by mail and telephone. It draws on various social media to keep interested capital market play- ers up to date. These particularly include q.beyond’s IR Newsletter and its IR channel on Twitter. www.twitter.com/qbyiren Key facts about q.beyond shares Securities identification code ISIN Trading symbol Bloomberg symbol Reuters symbol Market segment Stock exchanges 513 700 DE0005137004 QBY QBY GY QBYn.DE Prime Standard Xetra and regional German stock exchanges Designated sponsorship Shares outstanding as of 31 December 2020 Stifel Europe Bank AG 124,472,487 Share class No-par-value registered shares of common stock Xetra closing price on 30 December 2019 Xetra share price high in 2020 Xetra share price low in 2020 Xetra closing price on 30 December 2020 € 1.05 € 1.73 € 0.78 € 1.68
To Our Shareholders q.beyond’s Share Performance 25
Focus sector: manufacturing q.beyond’s digital solutions are making SME manufacturers fit for the future Smarter manufacturing
27 Group Management Report 28 – 32 33 – 42 43 – 53 54 – 63 Group Fundamentals 28 Business Activities 29 Market and Competitive Position 29 Strategy 31 Research and Development 31 Employees 32 Sustainability Report 32 Organisational Structure 32 Corporate Management Corporate Governance 33 Corporate Governance Statement 33 Remuneration Report 40 Takeover-Related Disclosures and Explanatory Comments Business Performance Business Report 43 Overall Summary / Actual vs. Forecast 43 Macroeconomic and Industry Framework 44 Business Performance 48 Key Performance Indicators 49 Earnings Performance 50 Earnings Performance by Segment 50 Financial Position 52 Net Asset Position Financial Performance and Cash Flows Outlook, Opportunity and Risk Report 54 Overall Summary of Outlook 54 Future Macroeconomic and Industry Framework 56 Expected Financial Position, 56 Expected Earnings Performance by Segment 56 Opportunity Management 56 58 Risk Management 58 Organisation and Procedures 59 Assessment Methodology 60 Supplementary Disclosures 61 63 Overall Summary Individual Opportunities Pursuant to § 315 (4) HGB Individual Risks
28 q.beyond Annual Report 2020 Group Fundamentals Business Activities q.beyond AG (“q.beyond” or “the company”) is the key to successful digitalisation. We help our custom - ers find the best digital solutions for their business and then put them into practice. Our strong team of 900 people accompanies SME customers se curely and reliably throughout their digital journey. The company has all-round expertise in Cloud, SAP and IoT. With nationwide locations and its own certified data centres, it is one of Germany’s leading IT service providers. Since 2020, the operating business has been ma- naged in two segments: “Cloud & IoT” and “SAP”. Cloud & IoT: comprehensive range of services for state-of-the-art IT This segment pools q.beyond’s Cloud and IoT ex- pertise. The services offered range from turnkey cloud modules through to individual IT outsourcing services. Here, private enterprise cloud solutions are just as feasible as hybrid cloud solutions. The cloud solutions function independently of underly- ing in frastructures and, depending on customers’ pre- fer ences, can be run at our proprietary data centres or at data centres operated by third parties, such as the major cloud providers (“hyperscalers”) Amazon, Google and Microsoft. In parallel to these services, we are also systematically expanding our develop- ment expertise. Via our new subsidiary Incloud Engineering GmbH (“Incloud”), we offer front ends for app, web and IoT applications. Further infor- mation about this acquisition can be found in the Business Report on Pages 47 to 48. Another subsid- iary focuses on the colocation business and thus on developing and operating a secure high-availability IT infrastructure. We supplement our services with an extensive IoT portfolio. In this, we supply all key elements for turnkey and scalable IoT solutions by way of edge computing: consulting, hardware and software development, standard products such as sensors, actuators and adapters, as well as components such as chips and protocols. From development to pro- duction through to operations using IoT platforms, SMEs can receive all the services they need to enter the Industry 4.0 age. SAP: q.beyond is a full-service provider with 20 years of project experience (unaudited *) We cover the entire range of services involved in using SAP software. Introducing and operating the new SAP S/4HANA programme generation is play- ing an increasingly prominent role in our activities here. Together with our customers, we devise road- maps, put these into practice, convert existing sys- tems, automate processes and thus create the con- ditions for companies to succeed in the digital world. As a medium-sized company ourselves, we under- stand the processes in place at SMEs and know ex- actly how to portray these with maximum efficiency in SAP. Our portfolio therefore includes SAP consult- ing, as well as application manage ment, hosting and basic operations. We also pro vide maintenance and licence management services. With “SAP Managed Service”, we offer all-in packages including software and hardware for direct deployment. * Contents of the sections designated “unaudited” have not been reviewed by the auditor.
Group Management Report Group Fundamentals 29 TÜV and ISO-certified data centres in Germany (unaudited *) Strategy Both segments work with q.beyond’s proprietary infrastructure, and above all its TÜV and ISO-certi- fied data centres located within Germany. We ope- rate data centres at four locations with total floor space of around 20,000 square metres. All data centres are governed by German data security re- quirements, which are very strict by international standards. Drawing on a high-performance back- bone, they act as a geo-redundant network and thus meet the utmost standards in terms of scal- ability, availability and security. Market and Competitive Position We are an IT service provider with key focuses on Cloud, SAP and IOT. We concentrate our activities on medium-sized companies based in Germany. Thanks to our own character as a medium-sized company, our presence throughout Germany and the fact that all our data centres are located within the country’s borders, we enjoy a high degree of acceptance among this target group. To be able to address the specific needs of our customers, we focus on three key sectors: retail, manufacturing and energy. In the 2020 financial year, these three sectors accounted for two thirds of our revenues. Further information about our markets can be found in the work” on Pages 43 and 44. chapter “Macroeconomic and Industry Frame- Heading for revenues of € 200 million in 2022 Our “2020plus” growth strategy sets clear targets for 2022: revenues of € 200 million, a sustainably positive free cash flow and an EBITDA margin of more than 10%. On the way there, we expect to generate double-digit revenue growth each year. This consistent growth and a business model that is entirely focused on digitalisation create a convinc- ing basis for continually increasing the company’s value. The core elements of our business model are: • Attractive core business. Software-based services and internally developed products and services (proprietary IP) facilitate high scalability. Long- term customer agreements provide for recurring revenues and high levels of customer retention. • Platform-based innovations. The portfolio of ser- vices covers the digital value chain, from sensor technology to SAP applications to cloud scenarios, and combines these intelligently. • Sector focus. Our product development, partner management and sales focus on the three sectors of retail, manufacturing and energy. • Experienced management team. The industry, technology and sales expertise pooled in the ma- nagement team ensures that our growth strategy can be smartly implemented. * Contents of the sections designated “unaudited” have not been reviewed by the auditor.
30 q.beyond Annual Report 2020 Profitable growth offers the possibility of sustainably increasing the company’s value in 2021 and beyond. • Investments in the future. Our high equity ratio and high volume of available liquidity enable us to make continuous investments in future growth, and particularly in internally developed innova- tions and highly qualified staff. q.beyond is also boosting its growth momentum by making tar- geted acquisitions. Strategy proves its value during pandemic in 2020 With our strategy, we focus on supporting and ac- companying medium-sized companies in Germany in their digital transformation. We aspire to show companies easy ways to move to new digital pro- cesses, business and service models and thus make them fit to compete in the digital age. According to a study by Bitkom Research and Tata Consultancy Services 1, the coronavirus pandemic has lent even more impetus to the process of digitalisation. Given the temporary lockdowns, there was particularly great demand for ways of using technologies on a location-independent basis. We offer these kinds of solutions in Cloud, SAP and IoT environments. This meant, for example, that we were able to provide hundreds of cloud-based workplaces to customers within just a few days, enabling them to relocate their activities to home offices. This acceleration in the process of digitalisation of- fers a superb basis for achieving the growth tar- geted for the years ahead. Thanks to our business model, this growth will be accompanied by rising EBITDA margins. And this profitable growth will in turn open up the possibility of sustainably increasing the company’s value once again in 2021 and beyond. 1 Bitkom Research, www.bitkom-research.de/de/pressemitteilung/ corona-fuehrt-zu-einem-digitalisierungsschub (press release only available in German).
Group Management Report Group Fundamentals 31 Research and Development We operate in highly dynamic markets and deploy the latest technologies. Innovation is therefore an integral component of our operating business. This mostly involves quality and process-related innova- tions. It also means integrating new technologies, such as artificial intelligence, into existing or new solutions. This being so, we view research and development (R&D) as a cross-divisional activity which does not involve the separate allocation of resources. We there fore do not report the number of employees working in R&D. The R&D budget also provides only limited information about innovation processes. Here, q.beyond chiefly recognises work performed on further developing its IoT portfolio and sector solutions. Given the company’s increasing invest- ments in its future growth, total research and de- velopment expenses amounted to € 6.7 million in 2020, as against € 3.6 million in the previous year. Of this sum, an amount of € 0.0 million was ca - pi talised (2019: € 0.4 million). Amortisation of capi talised development expenses amounted to € 0.9 million in 2020 (2019: € 0.8 million). Continuous expansion in software expertise (unaudited *) The rising number of software experts working in all our business fields shows how closely our R&D activities are interlinked with the operating busi- ness. Over time, the work performed by these ex- perts is expanding our intellectual property (IP). Successful developments in the past financial year included the “StoreButler”, a digitalisation platform for retailers, and the “Edgizer”, a smart platform for edge device management. Further information can be found in the Business Report on Page 47. The 100-percent takeover of Incloud at the end of July 2020 further boosted our software expertise. Incloud’s development and front-end expertise ideally complements our platform, cloud and sales competence. At Incloud, more than 60 experts from a variety of disciplines work together in agile project teams to develop and implement digital business models. They rapidly advance innovations to market matu- rity, such as an IoT platform for remote machine monitoring and an app for processing measure - ment results. Employees Our success is based on the commitment and wil- lingness to perform of all our employees. For this reason alone, our company has always accorded great priority to employee concerns. q.beyond had 936 employees as of 31 December 2020, as against 902 employees one year earlier. Our Sustainability Report contains extensive information about our personnel strategy and policies. * Contents of the sections designated “unaudited” have not been reviewed by the auditor.
32 q.beyond Annual Report 2020 Sustainability Report Corporate Management Pursuant to § 289b (3) and § 315b (3) of the Ger- man Commercial Code (HGB), we compile a separate non-financial (group) report independently of the Group Management Report. This separate report will be made available on the q.beyond website at www.qbeyond.de/en/ir-publications by the end of April 2021 and will then be permanently available there. The report will include disclosures on the non-financial declaration pursuant to § 315c HGB in conjunction with § 289c HGB and will be re- viewed by the Supervisory Board. Organisational Structure Our company has its legal domicile in Cologne and a second major location in Hamburg. These two sites are supplemented by eight further locations in Germany and a software development centre in Riga in Latvia. Following the takeover of the Darm- stadt-based company Incloud as of 31 July 2020, our company held one material shareholding at the end of the 2020 financial year. The IoT subsidiary Q-loud GmbH was merged into q.beyond AG as of 30 June 2020. A complete overview of the scope of consolidation as of 31 December 2020 can be found in Note 34 in the Notes to the Consolidated Financial Statements. q.beyond is managed on the level of its segments, which are based on a system of profit, cost and ser- vice centres. The following are the most important key financial performance indicators referred to on group level: revenues, EBITDA and free cash flow. To date, no reference has been made to non-finan- cial performance indicators for corporate manage- ment purposes. EBITDA is defined as earnings before interest, taxes, non-cash share-based compensation, and depre- ciation / amortisation and impairment losses on pro- perty, plant and equipment and intangible assets. The EBITDA margin presents EBITDA as a percen- tage of revenues. The free cash flow presents the change in net liquidity before acquisitions and dis- tributions, including divestments. The key figure referred to by management when managing the segments is the segment contribution. This is de- fined as EBITDA before general and administrative expenses and the other operating result. The seg- ment margin presents the segment contribution as a percentage of the respective revenues. The monthly reports contain all relevant key figures and budget / actual comparisons. They serve as a key basis of discussion for the Management and Super- visory Boards. Moreover, the latest budget / actual comparisons are used as a basis for regularly updat- ing the rolling planning. This acts as an early war- ning system for potential variances, thus en abling corrective measures to be taken at an early stage. One integral component of reporting is the risk management system, which is described from Page 58 onwards of this Group Management Report. This en- sures that any changes in opportunities and risks are directly factored into the management system.
Group Management Report Corporate Governance 33 Corporate Governance Corporate Governance Statement www.qbeyond.de/en/cgs and made We have published our Corporate Governance Statement for the 2020 financial year pursuant to § 289f and § 315d of the German Commercial Code (HGB) at this permanently available. As well as the declara- tion made pursuant to § 161 of the German Stock Corporation Act (AktG), this statement also includes extensive disclosures on corporate governance prac- tices, on the composition and mode of operation of the Management and Supervisory Boards, and a diversity concept. Remuneration Report Our company has traditionally attached great im- portance to presenting the remuneration paid to the two governing bodies of the Management Board and the Supervisory Board both transparently and in detail. The Management Board remuneration sys- tem was most recently approved by the Annual Ge- neral Meeting on 27 May 2015. In November 2020, the Supervisory Board adopted a new remuneration system for the Management Board. This takes due account of the requirements November 2020 The Supervisory Board adopts a new Management Board remuneration system of the new German Act on the Transposition of the Second Shareholder Rights Directive (ARUG II) and the revised recommendations of the German Cor- porate Governance Code (DCGK). The amendments mainly relate to variable remuneration components paid for the achievement of long-term targets. In future, these latter targets will be provided with greater weighting than short-term targets, will be granted on the basis of a specified share price and will account for non-financial performance indica- tors. Furthermore, stockholding requirements will be introduced for the Management Board, as will provisions governing the withholding or clawback of variable remuneration components in justified cases. The Supervisory Board will present the new Management Board remuneration system for ap- proval by the Annual General Meeting in May 2021. Management Board remuneration system: performance and success- oriented as well as sustainable Under the remuneration system applicable to the 2020 financial year, the Supervisory Board deter- mines the total remuneration payable to individual members of the Management Board. In assessing the appropriateness of this remuneration, the Su- pervisory Board is guided by the tasks of the indi- vidual Management Board member, his or her per- sonal performance and the company’s economic situation and its sustainable development. It also takes due account of the appropriateness of the remuneration by reference to peer group compa - nies and remuneration structures otherwise appli- cable within the company and at comparable com- panies. Total remuneration is structured in such a way as to be competitive in the market for highly qualified executives.
34 q.beyond Annual Report 2020 A high share of annual target remuneration for the Management Board is perform- ance-related. The remuneration system provides for fixed and va- riable remuneration components, pension benefits and other fringe benefits. A high share of annual tar- get remuneration for Management Board members is performance-related. The annual non-performance-related fixed remun- eration should make up a maximum of 50% of total annual target remuneration (comprising fixed and variable remuneration based on 100% target achieve- ment). Fixed remuneration accounts for the perfor- mance of the respective member of the Manage- ment Board and the function and responsibilities assigned to him or her. It is paid by bank transfer and in 12 equal monthly instalments at the end of each calendar month. Management Board members do not receive any separate remuneration for as- suming further group-internal positions. Furthermore, Management Board members receive variable remuneration (bonus). The amount of this bonus is based on the achievement of the annual targets (short-term incentives) and multi-year targets (long-term incentives) to be agreed in separate target agreements. These targets may be based on company-related key figures and / or individual con- siderations. For company-related key figures, they may also include more ambitious minimum targets than those communicated in external outlooks. The assessment period for multi-year targets (LTI) covers three financial years. Multi-year targets are agreed at the beginning of the assessment period and must be met by the end of such period. When defining target achievement, the Supervisory Board may also agree interim targets to be met over the individual financial years in the assessment period and / or further conditions. Variable remuneration is payable in cash and should account for at least 50% of the total annual target remuneration (based on 100% target achievement). Target achievement is basically determined follow- ing the adoption of the consolidated financial state- ments relevant to the targets defined in the target agreement. Any resultant bonus is paid out at the end of the month in which the Annual General Meet- ing is held following expiry of the financial year, to the extent that it relates to annual targets, and at the end of the month in which the Annual General Meet- ing is held following expiry of the assessment period, to the extent that multi-year targets are involved. Furthermore, the company also grants pension be- nefits to its Management Board members. These involve defined contribution commitments for bene- fits provided by insurance companies and pension funds and / or commitments to pay a fixed amount to enable the member to secure his or her own suitable provision for retirement and for surviving depen- dants. The other fringe benefits granted to Manage- ment Board members mainly relate to the provision of a company car, payment of a car allowance and insurance provision customary to the market.
Group Management Report Corporate Governance 35 Acting upon a recommendation made by its Human Resources Committee, on one occasion in the 2017 financial year the Supervisory Board diverged on an exceptional basis from this remuneration system. When extending the employment contract with Stefan A. Baustert, it was agreed that, as of 1 Jan- uary 2018 and for the remaining term of the employ- ment contract, his fixed remuneration would make up 54.5% of his annual target remuneration (based on 100% target achievement) and thus exceed the 50% mark. This exemption was approved, as the in- crease in fixed remuneration represented a key fac- tor in Stefan A. Baustert agreeing to the extension of his employment contract. At the time at which the contract was extended, the Supervisory Board and its Human Resources Committee believed that it was in the company’s interests to extend the Ma- nagement Board activity of Stefan A. Baustert. Variable remuneration dependent on achievement of minimum targets The Supervisory Board agrees lower and upper limits for the achievement of each individual annual and multi-year target. Failure to meet lower limits or any condition governing an annual target and / or multi-year target results in the complete loss of the variable remuneration attributable to the respective target. In the case of the multi-year target, the vari- able remuneration attributable to the respective target may be lost for the entire assessment period. Non-achievement of an interim target results in the partial or complete loss of the remuneration dependent on achievement of such target. The up- per limit serves to cap variable remuneration in the event of exceptional developments at a maximum of 1.5 times the target remuneration attributable to variable remuneration and attainable upon 100% target achievement. In concluding target agreements, the Supervisory Board ensures that the share of variable target re- muneration due to achievement of the multi-year targets basically reaches a minimum of the share attributable to achievement of the annual targets. The share of variable remuneration due to annual targets may nevertheless be weighted more signi- ficantly to the extent that the remuneration struc- ture remains focused on the company’s sustain - able development and on providing a long-term performance incentive by including other elements (such as additional bonuses by way of shares and stock options). To recognise the achievement of multi-year targets and promote the company’s sustainable develop- ment, the Supervisory Board may commit to paying Management Board members an appropriate addi- tional bonus in the form of shares or stock options in q.beyond AG and, if so, agree suitable waiting, holding and exercise periods. This may further in- crease the share of total variable remuneration at- tributable to variable remuneration of a long-term incentive nature, as well as the share of total target remuneration attributable to variable remuneration. Finally, to acknowledge exceptional performance, the Supervisory Board may – at its own discretion – grant Management Board members a suitable addi- tional bonus in cash or in the form of shares or stock options in the company. Holding and exercise periods may be agreed in this regard as well. Management Board remuneration for the 2020 financial year The total remuneration paid to Jürgen Hermann, the sole member of the Management Board, for the 2020 financial year amounted to € 852k. The com- parative figure for the previous year (€ 929k) still
36 q.beyond Annual Report 2020 included the total remuneration of € 461k paid to Stefan A. Baustert, a member of the Management Board who left the company as of 31 December 2019. The remuneration of the Management Board is pre- sented in the table on Page 37. Once again in the past financial year, no loans were granted to Manage- ment Board members. In the target agreement entered into for the 2020 financial year, an annual target and two separate, equally weighted multi-year targets were agreed with Jürgen Hermann, the sole member of the Ma- nagement Board. The annual target and the multi- year targets were each weighted at 50%. The annual target was linked to the level of the Group’s revenues in the 2020 financial year. The annual target was also subject to the secondary condition that consolidated EBITDA should be sus- tainably positive for the fourth quarter of the 2020 financial year, i.e. consolidated EBITDA should also be expected to be positive in subsequent quarters. The annual target was 54% met. The assessment period for the multi-year targets covers the financial years 2018 to 2020. The version of the target agreement entered into at the begin- ning of 2018 included the provision that the Super- visory Board could adjust the targets to account for changes in accounting and / or the scope of consoli- dation and / or the occurrence of significant one-off events during the current LTI performance period. In the original version of the target agreement, the multi-year targets were each largely linked to conso- lidated key figures that were significantly influenced by the execution of the Plusnet sale in June 2019 and the removal of this company from the scope of consolidation. Furthermore, in the wake of the Plus- net sale q.beyond amended its reporting segments from 1 January 2020. This too had a significant impact on the stipulation of LTI targets. In March 2020, the Supervisory Board therefore adjusted the multi-year targets for the performance period from 2018 up to and including 2020 to account for the aforementioned one-off events and set new targets. Based on the amended target agreement, the multi- year targets are now linked to consolidated EBITDA for the 2020 financial year and to the revenues ge- nerated in the Cloud & IoT segment in the 2020 fi- nancial year. Entitlement to remuneration upon the achievement of one sub-target is in each case sub- ject to achievement of the other sub-target and respective minimum targets. Should either of these secondary conditions not be met, entitlement to re- muneration for each sub-target and for all financial years in the assessment period is forfeited entirely. Previously, the relevant key financial figures were the consolidated EBITDA margin at the end of the assessment period in 2020 and the revenues gene- rated in the Cloud segment in the 2020 financial year. The additional conditions, namely that the free cash flow generated at the Group in the 2019 and 2020 financial years should be positive in each year and that the Cloud segment should generate a positive segment contribution at the end of the assessment period in the 2020 financial year, also no longer apply. Overall, the multi-year targets were 97.5% met. The conditions governing entitlement to the portion of variable remuneration attributable to the multi-year targets were met for each year in the three-year as- sessment period. The corresponding total remune- ration will be disbursed after the expiry of the assess- ment period, and thus in the 2021 financial year.
Group Management Report Corporate Governance 37 Beneﬁts granted € 000s Jürgen Hermann Management Board Stefan A. Baustert Member of the Management Board (until 31 December 2019) 2019 2020 2020 (min.) 2020 (max.) 2019 2020 2020 (min.) 2020 (max.) Fixed remuneration Fringe benefits Total One-year variable remuneration Multi-year variable remuneration Long-term incentive (2018 – 2020) 1 Total remuneration pursuant to DCGK Reconciliation with total remuneration pursuant to § 314 (1) No. 6a HGB in conjunction with DRS 17 Less annual variable target remuneration granted Less long-term incentive (2018 – 2020) Plus actual one-year variable remuneration Plus long-term incentive paid (2018 – 2020) 2 Total remuneration Total expenses for share-based compensation 300 32 332 150 150 632 300 32 332 150 150 632 300 32 332 0 0 332 300 32 332 225 225 782 (150) (150) (150) (150) 136 - 468 81 439 852 300 36 336 125 - 461 (125) - 125 - 461 recognised in reporting period - - 30 - - - - - - - - - - - - - - - - - - - - - - - - Beneﬁts paid € 000s Fixed remuneration Fringe benefits Total One-year variable remuneration Multi-year variable remuneration Long-term incentive (2018 – 2020) 2 Total remuneration pursuant to DCGK Jürgen Hermann Management Board Stefan A. Baustert Member of the Management Board (until 31 December 2019) 2019 2020 2019 2020 300 32 332 136 - 468 300 32 332 81 439 852 300 36 336 125 - 461 - - - - - - 1 The variable remuneration for the long-term incentive (2018 – 2020) was agreed on the basis of two separate, equally weighted multi-year targets. The assessment period for the multi-year targets covers the financial years from 2018 to 2020. The multi-year targets are linked to consolidated EBITDA for the 2020 financial year and the revenues generated in the Cloud & IoT segment in the 2020 financial year. The amount stated involves prorated LTI remuneration for the respective financial year based on 100% target achievement. 2 Consistent with § 314 (1) No. 6a HGB, LTI remuneration is only deemed to have been granted at the end of the three-year assessment period. The amount stated involves the LTI remuneration for the entire three-year assessment period.
38 q.beyond Annual Report 2020 Benefits in the event of premature termination The Management Board member Jürgen Hermann has been promised a settlement should his Manage- ment Board position be prematurely terminated due to effective revocation of his appointment by the company. This settlement amounts to € 600k in the first two years covered by his employment contract. In the final year of the employment contract, the settlement reduces by one twelfth per month in which the employment relationship still pertained in the final year of the contract. There is no entitle- ment to any settlement payment should the em- ployment relationship be terminated without notice due to compelling reason (§ 626 BGB) or in the event of the employment relationship being terminated due to the Management Board member legitimately resigning from his position. Should Management Board activity be terminated by mutual agreement and without compelling reason, the total value of the benefits committed by the company in any agreement of this nature should not exceed the amount of € 600k. Total remuneration for former Management Board members came to € 0k in the 2020 financial year (2019: € 550k). Dr. Bernd Schlobohm, a former Management Board member, was granted a direct pension commitment for a retirement, occupatio- nal disability and widow’s pension in 1997. At the balance sheet date, the obligation amounted to € 2,531k prior to the offsetting of reinsurance claims of € 2,133k. The actuarial present value of provisions for vested pension claims for other former Manage- ment Board members amounted to € 113k. Shares and conversion rights held by Management Board members The table below presents individualised infor mation about the number of shares and convertible bonds held by members of the Management Board. Via the stock market, Jürgen Hermann purchased 330,000 shares in the company in the past financial year, and 70,000 shares in the previous financial year. Further details can be found in the directors’ dealings notifi- cations made pursuant to Article 19 of the Euro pean Market Abuse Directive on www.qbeyond.de/en/directors-dealings. q.beyond’s website at Supervisory Board remuneration system clearly regulated in Articles of Association Consistent with the provisions of the Articles of Association, each member of the Supervisory Board receives fixed annual remuneration of € 35k payable after the end of the financial year. The Chair and his or her Deputy receive € 70k and € 50k respectively. In addition to remuneration for their duties on the Supervisory Board, each Supervisory Board member receives separate remuneration of € 5k for their Shares Convertible bonds 31 Dec. 2020 31 Dec. 2019 31 Dec. 2020 31 Dec. 2019 Jürgen Hermann 1,000,000 670,000 150,000 Stefan A. Baustert (until 31 December 2019) - 1 40.000 1 40,000 - 150,000 200,000 1 1 Holdings at the time of retirement from the Management Board.
Group Management Report Corporate Governance 39 activities in any Supervisory Board committee (except the Nomination Committee). Committee chairs receive € 10k. Members sitting on several committees nevertheless receive a maximum total of € 25k for their committee activities. Supervisory Board members sitting on the Supervisory Board or a committee for only part of a given financial year received prorated remuneration. Supervisory Board remuneration for the 2020 financial year As in the previous year, for its activity in the 2020 financial year the Supervisory Board received total remuneration of € 315k. The table below provides individualised information about the remuneration paid to Supervisory Board members, as well as about their respective holdings of shares and con- version rights. Ina Schlie acquired 50,000 shares via the stock market in the 2020 financial year. Further details can be found in the directors’ dealings notifica - tions made pursuant to Article 19 of the European Market Abuse Directive on www.qbeyond.de/en/directors-dealings. q.beyond’s website at Apart from the reimbursement of travel and other out-of-pocket expenses, no member received any further remuneration or other advantages for per- sonal services rendered over and above the remune- ration presented here, neither were any loans gran- ted to Supervisory Board members. q.beyond also maintains a liability indemnification insurance policy which covers the members of the Supervisory Board. Remuneration as per § 15a of Articles of Association (€ 000s) 1 Shares Number of convertible bonds 2020 2019 31 Dec. 2020 31 Dec. 2019 31 Dec. 2020 31 Dec. 2019 Dr. Bernd Schlobohm, Chairman Dr. Frank Zurlino, Deputy Chairman Gerd Eickers Ina Schlie Matthias Galler 2 Martina Altheim (from 1 July 2019) 2 40 (5) 20 (3) Cora Hödl (until 30 June 2019) 2 - - 20 (2) Total 315 (55) 315 (55) 95 (25) 95 (25) 15,769,910 15,769,910 60 40 45 35 (10) (5) (10) - 60 40 45 35 (10) (5) (10) - 10,000 10,000 15,777,484 15,577,484 50,000 - - - - - - - - - - - - - - - 2,700 2,700 1,900 1,900 - 4,100 3 1 Numbers in parentheses refer to remuneration for committee activity included in total amount. 2 Employee representative. 3 Holdings at the time of retirement from the Supervisory Board.
40 q.beyond Annual Report 2020 Takeover-Related Disclosures and Explanatory Comments The following overview outlines the disclosures man datory under § 315a (1) of the German Com- mercial Code (HGB). Overall, these involve regula- tions that are typical at listed companies. The dis- closures below reflect the circumstances at the balance sheet date. Composition of issued capital Issued capital amounted to € 124,472,487 as of 31 December 2020 and was divided into 124,472,487 no-par registered ordinary shares. According to the Share Register, these shares were distributed among 25,001 shareholders. Limitations on voting rights or transfer of shares Each share grants one vote at the Annual General Meeting. A voting and pooling agreement is in place between the following shareholders with direct and indirect holdings in q.beyond: Dr. Bernd Schlobohm, Gerd Eickers and Gerd Eickers Vermögensverwaltungs GmbH & Co. KG. This agreement provides for the uniform exercising of voting rights and restrictions relating to the disposability of the pool-bound shares. The Management Board is otherwise not aware of any further limitations on voting rights or restric- tions on the transfer of shares. There are also no special rights conferring powers of control. Fur- thermore, there are no voting right controls for employee holdings in capital. Capital holdings of more than 10% The following direct and (pursuant to § 34 of the Ger man Securities Trading Act [WpHG]) indirect holdings in the company’s capital exceed 10% of voting rights: • Dr. Bernd Schlobohm, Germany, 25.34% of voting rights (of which 12.67% directly and 12.68% indirectly) • Gerd Eickers, Germany, 25.34% of voting rights (indirectly) • Gerd Eickers Vermögensverwaltungs GmbH & Co. KG, Cologne, Germany, 25.34% of voting rights (of which 12.68% directly and 12.67% indirectly) Appointment and dismissal of Management Board members The appointment and dismissal of members of the Management Board is governed by § 84 and § 85 of the German Stock Corporation Act (AktG) and by § 7 of the Articles of Association in their version da- ted 18 January 2021. Pursuant to § 7 of the Articles of Association, the Management Board comprises one or more individuals. The Supervisory Board de- termines the number of Management Board mem- bers. Even though issued capital exceeds € 3 million, the Supervisory Board may stipulate that the Ma- nagement Board should consist of only one indivi- dual. The appointment of deputy members of the Management Board is permitted.
Group Management Report Corporate Governance 41 Amendments to Articles of Association Pursuant to § 179 AktG, amendments to the Articles of Association require a resolution adopted by a majority of at least 75% of issued capital represen- ted at a shareholders’ meeting. Pursuant to § 15 of the Articles of Association, the Supervisory Board is authorised to adopt amendments and additions to the Articles of the Association that are of a purely formal nature and do not in themselves involve any changes to actual content. Acquisition and buyback of treasury stock By resolution of the Annual General Meeting on 12 July 2018, the Management Board is authorised pursuant to § 71 (1) No. 8 AktG until 11 July 2023 to acquire q.beyond shares on a scale of up to 10% of issued capital. To date, the Management Board has not acted on this authorisation. suant to § 186 (3) Sentence 4 AktG, the new shares are issued in return for cash contributions and if, at the time of final stipulation, the issue price does not fall materially short of the stock market price of the shares already listed; (4) to the extent necessary to issue subscription rights for new shares to the bear- ers or creditors of warrant and / or convertible bonds in order to avoid dilution of their respective holdings; and (5) if the new shares are to be issued to emplo- yees of the company, employees of a company affi- liated to the company, or members of the manage- ment of a company affiliated with the company in the context of share participation or other share-ba- sed plans. The number of shares issued to the exclu- sion of subscription rights in the final case may not exceed an aggregate total of 5% of issued capital. This authorised capital is intended to enable q.beyond to react swiftly and flexibly to opportunities arising on the capital market and where necessary to obtain equity capital on favourable terms. No use was made of authorised capital in the past financial year. Authorised capital Conditional capital By resolution of the Annual General Meeting on 20 May 2020, the Management Board is authorised, subject to approval by the Supervisory Board, to in- crease the company’s issued capital by up to a total of € 37,000,000 on one or several occasions up to 19 May 2025 by issuing new no-par registered shares in return for contributions in cash and / or kind (Authorised Capital 2020). When drawing on authorised capital, the Management Board may, subject to approval by the Supervisory Board, ex- clude shareholders’ subscription rights in five cases: (1) to exclude residual amounts from shareholders’ subscription rights; (2) when the new shares are is- sued in return for contributions in kind, particularly in the context of company acquisitions; (3) if, pur- The company had conditional capital totalling € 27,451,500 as of the balance sheet date. This was divided into Conditional Capital IV (€ 25,000,000), Conditional Capital VIII (€ 2,001,500) and Condi- tional Capital IX (€ 450,000). Conditional Capitals VIII and IX serve to secure the conversion rights of bearers of convertible bonds that q.beyond has issued within the framework of existing stock option plans to Management Board members (Conditional Capital IX) or to Management Board members, managing directors of affiliated companies, employees of q.beyond or affiliated companies (Conditional Capital VIII). Conditional Ca- pital IV may be used by the Management Board to
42 q.beyond Annual Report 2020 create tradable warrant and / or convertible bonds. The Management Board is authorised by resolution of the Annual General Meeting on 20 May 2020 to issue such instruments in order to access an additi- onal, low-interest financing option given favourable capital market conditions. The bonds may be issued in return for both cash contributions and contribu- tions in kind. The Management Board is authorised, subject to approval by the Supervisory Board, to exclude shareholders’ subscription rights to these warrant and / or convertible bonds in four cases: (1) to settle residual amounts resulting from the subscription ratio; (2) when the bonds are issued in return for contributions in kind, particularly in the context of company acquisitions; (3) if, in the case of bonds being issued in return for cash contribu- tions pursuant to § 186 (3) Sentence 4 AktG, the is- sue price does not fall materially short of the market value of the bonds; and (4) to the extent necessary to issue subscription rights to the bearers or credi- tors of warrant and / or convertible bonds pre viously issued in order to avoid dilution of their respective holdings. To date, the Management Board has not acted on the authorisation to issue tradable warrant and / or convertible bonds. Capital limits for the exclusion of subscription rights The exclusion of shareholders’ subscription rights pursuant to § 186 (3) Sentence 4 AktG may apply for the use of treasury stock, for the issue of new shares from authorised capital and for the issue of warrant and / or convertible bonds corresponding to an aggre gate total of no more than 10% of issued capital during the term of the respective authorisa- tion. Apart from this, the exclusion of shareholders’ subscription rights for the issue of new shares from authorised capital and for the issue of warrant and / or convertible bonds (excluding those issued within q.beyond’s stock option plans) may not exceed an aggregate total of 20% of issued capital during the term of the respective authorisation. Treasury stocks sold with the exclusion of subscription rights would be imputed to the 20% of issued capital limit if they were sold during the term of the other authorisations. Further details apply in accordance with the under- lying resolutions adopted by the Annual General Meeting for each of these measures. Material agreements taking effect in the event of a takeover bid The company has no material agreements condi- tional on a change of control due to a takeover bid. Furthermore, no compensation agreements in the event of a takeover bid have been concluded either with the Management Board or with employees.
Group Management Report Business Report 43 Business Report Overall Summary / Actual vs. Forecast Business Performance q.beyond meets all targets in 2020 financial year Our company can report a very successful perfor- mance for 2020 and, despite the coronavirus crisis, met all of the targets set ahead of the first lock- down in March 2020. At € 143.4 million, revenues exceeded the target of more than € 143 million. At € -15.8 million, free cash flow was consistent with the expectation of up to € -16 million, while, EBITDA as defined on Page 32 at € -2.0 million, was even well within the budgeted limit of up to € -5 million. This very pleasing business performance was due to the consistent implementation of the “2020plus” growth strategy. The company’s growth path is con- firmed by its new orders, which rose year-on-year 21% to a new record level of € 161.1 million. We there- fore have a very strong foundation to generate fur- ther sustainable growth in the current financial year. 76% of companies in Germany use cloud computing Macroeconomic and Industry Framework q.beyond focuses on the German market. In 2020, Germany’s gross domestic product contracted by 5.0% 2. After ten years of growth, the coronavirus crisis triggered a severe recession which impacted on large sections of the economy. Exports and im- ports both showed significant reductions, while the temporary lockdowns had a particularly ad - verse effect on sectors such as stationary retail and gastronomy. The IT sector was unable to escape the economic contraction entirely, but nevertheless recovered far more quickly from the downturn in spring 2020. Among other factors, it benefited here from com- panies in some cases accelerating their digitalisation during the crisis. Based on calculations compiled by the Bitkom sector association 3, IT revenues in Ger- many decreased by a mere -0.7% to € 94.6 billion. While hardware revenues even managed to post positive growth of 3%, the IT services business suf- fered from the various restrictions on contact. Rev- enues here fell by 3.2%. Core market of Cloud: multi-cloud is the way forward In its IT business, our company focuses on the three forward-looking markets of Cloud, SAP and IoT. Cloud is viewed as the motor of digitalisation. Ac- cording to KPMG’s most recent Cloud Monitor 4, 76% of German companies with more than 20 em- ployees now use cloud computing, while 77% of users see the cloud as being of great or very great 2 Federal Statistical Office, press release no. 020, 14 January 2021. 3 Bitkom, ITC market figures, January 2021, press release, 13 January 2021. 4 KPMG, Cloud Monitor 2020.
44 q.beyond Annual Report 2020 significance for their own digitalisation. Companies are increasingly combining solutions from various public and private cloud providers. One in three companies is drawing on multi-cloud computing, while a further 18% of companies plan to do so. We acted early to prepare for this market situation as well and in many cases already integrate services from various cloud providers at our customers. Core market of SAP: S/4HANA offers great growth opportunities We also made early preparations for what is the decisive change in the SAP business in this decade, namely the conversion to the new S/4HANA soft- ware generation. According to the “German-speak- ing SAP User Group (DSAG)” 5, 14% of companies have so far made this transition. Another 10% of companies intend to tackle the topic this year de- spite the ongoing coronavirus crisis, while 39% are planning to transition in the years ahead. Companies continue to earmark substantial bud- gets for the conversion. Of the participants in the latest DSAG survey, 44% have budgeted for high or medium investments in S/4HANA. The attrac- tiveness of our core market is underlined by another finding of the survey: 43% of companies intend to increase their investments in SAP in 2021, while a further 35% plan to uphold these investments at a stable level. 39% of SAP users planning to convert to S/4HANA Core market of IoT: higher investments Our third core market of IoT is also characterised by growing investments. Based on an IDC survey pub- lished in November 2020 6, nearly 40% of companies intend to invest greater amounts in the core busi- ness with industrial IoT, i.e. the digitalisation and networking of machines, tools and products, with only 18% of companies planning to scale back their investments in this area. Not only that, many com- panies hope to overcome short-term challenges by drawing on industrial IoT. Of those responding, 53% wish to optimise processes and cut costs, while 47% hope to make better and faster deci- sions based on more exact data. With its integra - ted portfolio, q.beyond acted early to prepare for these requirements as well. Business Performance Strong growth in exceptional historic situation Revenues rose in 2020, and that despite the excep- tional historic situation. Our business model facili- tated this consistent growth during what was the severest recession of the post-war period and the ongoing coronavirus crisis. Our revenues are parti- cularly characterised by a high share of recurring items, which accounted for 78% of revenues in 2020. Moreover, the exceptional circumstances in 2020 further increased the importance German SMEs attach to digitalisation and their acceptance of this process. Our concentration on the key techno- logies of digitalisation, namely Cloud, SAP and IoT, 5 German-speaking SAP User Group, www.dsag.de/pressreleases/ dsag-investment-report-2021-defying-crisis-increasing-it-budgets. 6 IDC press release (only available in German), 18 November 2020, www.idc.com/getdoc.jsp?containerId=prEUR147017420.
Group Management Report Business Report 45 78% of our rev- enues in 2020 were recurring. This high share is characteristic of our business model. and our focus on the three sectors of retail, manu- facturing and energy are consistent with these developments. In 2020, we generated two thirds of our revenues in these three focus sectors. The dynamic growth we achieved in 2020 is not immediately apparent in this year’s consolidated financial statements, as they still include the fi- gures for our former subsidiary Plusnet GmbH through to 30 June 2019. The complete sale of this telecommu nications subsidiary to EnBW Telekom- munikation GmbH, a subsidiary of EnBW Energie Baden-Württemberg AG, represented a milestone in the implementation of our “2020plus” growth strategy. As Plusnet traditionally accounted for a high share of our revenues and earnings, in this presentation of our company’s earnings position we have focused on developments in the 2020 financial year. Excluding Plusnet, our revenues grew from € 127.4 million in the previous year to € 143.4 million in 2020. New orders rise by 21% to € 161.1 million Alongside this continuous growth, the high volume of new orders offers particular proof of the attrac- tiveness of our business model. This key indicator of our medium-term growth rose by 21% to € 161.1 mil- lion in 2020. Of this total, around 70% related to new customers, especially in our focus sectors of retail and manufacturing, as well as to new projects with existing customers. The success of our sales activities is supplemented by extensions in the term and scope of contracts with existing customers. One of our new customers is Sachsenlotto, a lottery company that commissioned us to transform its entire ERP landscape. We are now consolidating all of its business management processes in a central S/4HANA environment and, based on a hybrid cloud
46 q.beyond Annual Report 2020 “The high volume of new orders provides a superb basis for maintaining our double-digit revenue growth.” Jürgen Hermann // CEO of q.beyond AG New orders in € million 70% of orders in 2020 came from new customers and new projects with existing customers 30% of orders in 2020 involved contract extensions 161.1 132.6 +21% 2019 2020
Group Management Report Business Report 47 approach, are integrating further services from the SAP cloud. S/4HANA projects of this nature were one of the key factors driving the success of our SAP segment. In the Cloud segment, new orders ranged from ta- king over customers’ IT to migrating complete IT landscapes to the cloud through to relocating work- places to a cloud-based environment at short notice in order to secure companies’ ability to operate dur- ing the lockdown. At Swiss Steel Group, one of the world’s leading companies for special long steel pro- ducts, for example, our cloud specialists created hundreds of complete cloud-based workplaces in just four days. New products open up new growth opportunities (unaudited *) We are continually expanding our development and software expertise. Two innovations for our focus sectors of retail and manufacturing provide examples of our development success in 2020: • StoreButler. This platform for retailers enables sector players to advance swiftly and securely to the digital store. The end-to-end solution can centrally manage shelf prices, simplify shelf stocking with augmented reality and optimise checkout operations with waiting time sensors. • Edgizer. This smart platform enables SMEs to centrally manage both their edge devices – figu- ratively speaking mini data centres – directly at the respective machine and their software, as well as to orchestrate their deployment. The platform also facilitates worldwide software lifecycle ma- nagement, the marketing of proprietary software and the integration of new applications. Further innovative solutions offered in cooperation with strong partners are also opening up new op- portunities for manufacturers. Together with Advan- tech, one of the world’s leading providers of smart IoT systems and embedded platforms, we have of- fered one-stop packages of fully integrated hard- ware and software components since June 2020. These enable companies to implement new As-a- Service business models without long run-up times. Mechanical engineering companies, for example, can directly move into the digital service and main- tenance model business. Since July 2020, we have marketed an IoT starter kit for digitalising existing systems in cooperation with TeamViewer, one of the world’s leading providers of remote connectivity solutions. The plug-and-play solution combines remote maintenance software from TeamViewer with q.beyond’s edge computing expertise. The edge components collect sensor data and transfer them to a portal. Via a central dash- board, users therefore have access to real-time data, a factor that makes it far easier to control and main- tain the system. Incloud takeover boosts software and development expertise Our company acquired a 100% stake in Incloud Engineering GmbH, Darmstadt, as of 31 July 2020. This software engineering specialist develops cloud and web solutions, mobile apps and IoT products and has established itself in recent years as an IT service provider. The front-end, software and development expertise available at Incloud now ideally complements our platform, cloud and sales competence. Since the takeover, the experts at Incloud, now numbering * Contents of the sections designated “unaudited” have not been reviewed by the auditor.
48 q.beyond Annual Report 2020 more than 60, have supported our team, particu- larly in developing sector solutions and integrating these into modern cloud architectures. They are also making valuable contributions towards attrac- ting new customers and extending contracts with existing customers. q.beyond launched on 22 September 2020 One of the most important events in the past finan- cial year was the renaming and rebranding of our company. The Annual General Meeting on 20 May 2020 already approved the new name “q.beyond AG” with a large majority. The new brand was then un- veiled at the end of September 2020. With our new motto of “Expect the next”, we have since been pro- moting our customers’ digitalisation projects with a more clearly focused portfolio of services. The po- sitive response to the new name and brand have shown how important this milestone has been in resetting market perceptions of our company. Key Performance Indicators Full-year revenues of € 143.4 million in 2020 EBITDA approaches break-even EBITDA can be found on Page 32. The EBITDA of At € -2.0 million, our EBITDA was in line with our budget and thus approached break-even. A definition of € 140.3 million reported for 2019 was largely shaped by the other operating income of € 135.3 million re- sulting from the Plusnet sale. Free cash flow consistent with budget Free cash flow amounted to € -15.8 million in 2020, as against € 136.4 million in 2019 and thus conformed to expectations. Like EBITDA, the high previous year’s figure was due to the effects of the Plusnet sale. Since this transaction, our company has been free of debt and finances its activities from liquid funds. We had net liquidity of € 44.9 million as of 31 December 2020, as against € 66.0 million as of 31 December 2019. The change in net liquidity excluding IFRS 16 lease liabilities traditionally cor- responds to the free cash flow, with this figure previously being adjusted to exclude non-operat - ing items such as acquisitions and distributions. An amount of € 3.7 million was incurred for the distribution of the dividend in the second quarter of 2020, while the takeover of Incloud led to an outflow of € 1.5 million in the third quarter of 2020. Including these non-operating factors and when rounded down as appropriate, the free cash flow for 2020 amounted to € -15.8 million. At € 143.4 million, as against € 238.0 million one year earlier, revenues were in line with our expecta- tions. In assessing the year-on-year performance, it should be noted that the previous year’s figures still included revenues of € 110.6 million generated by our former telecommunications subsidiary Plusnet in the first six months of 2019. Excluding this factor, our revenues grew by 13% in the past financial year. 13% revenue growth in 2020 excluding Plusnet
Group Management Report Business Report 49 Earnings Performance Based on revenues of € 143.4 million, the cost of revenues totalled € 131.8 million in 2020. This re- sulted in gross profit of € 11.6 million. Of the cost of revenues, 55% involved internal and external per- sonnel expenses. Not only that, this line item also includes expenses for upstream services, licences and software, general service expenses and depre- ciation and amortisation. Sales and marketing expenses amounted to € 12.7 mil- lion in the 2020 financial year, while general and administrative expenses came to € 19.9 million. Over the course of 2020, the company completed the process of adapting its administration to its new size in the wake of the Plusnet sale. Our company’s operating earnings strength is best understood if, like in the quarterly reports published during the financial year, depreciation, amortisation and non-cash share-based compensation are repor- ted separately in the income statement. Consistent with IAS 1, these items form part of the individual cost items in the consolidated financial statements in this report. The abridged income statement pre- sented below includes depreciation and amortisa- tion as a separate line item. In 2020, depreciation and amortisation, including non-cash share-based compensation, amounted to € 16.8 million, of which € 5.0 million related to de- preciation of IFRS 16 lease liabilities. Operating earn- ings (EBIT) came to € -18.8 million. Accounting for the financial result and taxes on income, con- solidated net income amounted to € -19.9 million, as against € 73.5 million in 2019. € million Revenues Cost of revenues 1 Gross profit 1 Sales and marketing expenses 1 General and administrative expenses 1 Other operating result EBITDA Depreciation and amortisation (including non-cash share-based compensation) 2020 2019 143.4 (120.3) 23.2 (12.6) (14.7) 2.1 (2.0) (16.8) 238.0 (177.8) 60.2 (22.0) (32.3) 134.4 140.3 (52.4) Operating earnings (EBIT) (18.8) 87.9 1 Excluding depreciation, amortisation and non-cash share-based compensation.
50 q.beyond Annual Report 2020 Earnings Performance by Segment Cloud business posts strong growth, with disproportionate increase in earnings Revenues in the Cloud & IoT segment rose by 12% to € 102.0 million in the past year. This strong growth was driven in particular by the company’s success in its Cloud Services business, with parti- cularly strong demand for virtual workplaces during the coronavirus pandemic. Furthermore, demand from SMEs for professional solutions to operate their IT and for their cloud transformation also con- tinued to grow just as rapidly. The cost of revenues rose to € 85.6 million in 2020, as against € 76.4 million in 2019. Gross pro- fit improved to € 16.5 million in 2020, up from € 14.5 million in the previous year. Sales and mar- keting expenses decreased to € 8.7 million in 2020, compared with € 11.5 million one year earlier. As a result, the segment contribution (segment EBITDA before general and administrative expenses and the other operating result) rose to € 7.8 million, up from € 3.0 million in 2019. Based on revenue growth of € 11.2 million, the segment contribution improved within one year by € 4.8 million. SAP revenues rise by 13% despite restrictions on contact The SAP business, parts of which require intensive consulting input, was affected far more significantly than the Cloud & IoT Business by the temporary lockdowns and ongoing restrictions on contact in 2020. Against this backdrop, the 13-percent growth in revenues in the SAP segment to € 41.4 million in the past year is all the more remarkable. The SAP team benefited on the one hand from its early focus on the new S/4HANA software generation. On the other hand, the broad-based approach in this seg- ment served to stabilise business. Alongside SAP consulting, we also offer SAP application manage- ment, hosting and basic operations. The cost of revenues rose by just 2% to € 34.7 mil- lion in 2020. This made it possible to more than double gross profit to € 6.7 million, as against € 2.7 million in 2019. At the same time, this seg- ment stepped up its sales and marketing efforts with existing and new customers. The associated expenses rose to € 3.9 million, up from € 1.6 million one year earlier. The segment contribution never- theless showed a sustainable improvement, rising from € 1.1 million in the previous year to € 2.8 mil- lion in 2020. Financial Position Since the Plusnet sale, our company has financed all its activities from existing liquidity. As of 31 Decem- ber 2020, the balance sheet showed liquid funds of € 44.9 million. There were no liabilities to banks, as our company is free of debt. Financial management safeguards the smooth financing of the operating business and of upcoming capital expenditure. In this, it pursues two core objectives: maintaining and optimising the company’s financing capacity and reducing its financial risks. Surplus liquidity is exclu- sively invested in money market and low-risk invest- ments. As virtually all of q.beyond’s operations are
Group Management Report Business Report 51 Strong growth in both segments: Cloud & IoT and SAP generated double-digit revenue growth in 2020 Cloud & IoT revenues in € million 102.0 90.8 +12% SAP revenues in € million 41.4 36.6 +13% 2019 2020 2019 2020
52 q.beyond Annual Report 2020 Our company has been free of debt since 2019 and is fully financed with its existing liquidity. in the euro area, the company is not exposed to any exchange rate risks. Further information about finan cial risk management can be found in Note 40 in the Notes to the Consolidated Financial Statements. The cash flow statement provides information about the changes in liquid funds in the past financial year. The cash flow from operating activities amounted to € -5.0 million in 2020, as against € -17.7 million in the previous year. The cash flow from investing activities totalled € -7.1 million in 2020, compared with € 173.2 million one year earlier. The high figure for 2019 resulted from the Plusnet sale. The same applies to the cash flow from financing activities, which stood at € -9.1 million in 2020, compared with € -143.1 million in 2019. Net Asset Position Capital expenditure of € 5.5 million in 2020 financial year Excluding the impact of IFRS 16, capital expenditure totalled € 5.5 million in 2020, down from € 12.0 mil- lion in the previous year. The previous year’s figure still included capital expenditure of € 4.6 million relating to the Plusnet business. In the past year, investments related almost exclusively to techno- logy and other items of property, plant and equip- ment. Only € 0.2 million related to the acquisition of intangible assets and licenses.
Group Management Report Business Report 53 Non-current assets and liquidity dominate asset side of balance sheet Solid balance sheet with equity ratio of 72% Total assets amounted to € 190.9 million as of 31 December 2020, as against € 225.1 million in the previous year. Here, non-current assets de- creased to € 102.1 million as of 31 December 2020, compared with € 111.7 million at the previous year’s balance sheet date. The largest items with- in non-current assets are still property, plant and equipment (€ 28.3 million), land and buildings (€ 20.7 million) and right-of-use assets (€ 15.8 mil- lion). The increase in goodwill by € 2.6 million to € 21.0 million as of 31 December 2020 resulted from the 100-percent takeover of Incloud. Current assets fell to € 88.8 million at the 2020 balance sheet date, compared with € 113.4 million one year earlier. This reduction was due in particular to the change in cash and cash equivalents, which stood at € 44.9 million as of 31 December 2020 as against € 66.0 million at the previous year’s balance sheet date. Furthermore, the settlement of receiv- ables due to the former subsidiary Plusnet led other current assets to decrease to € 3.5 million, compa- red with € 12.6 million as of 31 December 2019. By contrast, the company’s revenue growth led the second largest item within current assets, trade receivables, to rise to € 37.1 million, up from € 31.0 million as of 31 December 2019. Shareholders’ equity totalled € 136.6 million as of 31 December 2020, compared with € 160.2 million at the previous year’s balance sheet date. The re- duction was due to the accumulated deficit, as well as to the distribution of the dividend, which was charged directly to the accumulated deficit. Irres- pective of this, the equity ratio rose by one percen- tage point to 72% as of 31 December 2020. Liabilities showed a further reduction to € 54.3 mil- lion at the 2020 balance sheet date, down from € 64.9 million at the end of 2019. Non-current liabi- lities chiefly relate to lease liabilities of € 12.4 million (31 December 2019: € 16.7 million), as well as to un- changed pension provisions of € 6.3 million. Current liabilities are dominated by trade payables and other liabilities, which totalled € 22.4 million as of 31 December 2020, as against € 28.6 million at the 2019 balance sheet date. € 44.9 million q.beyond’s liquidity as of 31 December 2020
54 q.beyond Annual Report 2020 Outlook, Opportunity and Risk Report Overall Summary of Outlook Double-digit revenue growth planned In the current financial year, we will press ahead with consistently implementing our “2020plus” growth strategy. We therefore expect our revenues to show double-digit growth to between € 160 million and € 170 million. Furthermore, we have budgeted a significant improvement in EBITDA to between € 5 million and € 10 million, as well as free cash flow of between € -10 million and € -5 million. Free cash flow is budgeted to be sustainably posi- tive from the fourth quarter of 2021. This further double-digit revenue growth, and that despite the ongoing coronavirus pandemic, will be driven by our business model, with its high share of recurring revenues (2020: 78%), as well as by per- sistently high demand from companies. Irrespective of the pandemic, new orders in 2020 rose by 21% to € 161.1 million. Our budgets assume that economic activity in Germany will begin to normalise from the second quarter of 2021. Not only that, once the co- ronavirus crisis has been successfully overcome, the pace of digitalisation is set to accelerate among SMEs 7. We are preparing for the resultant oppor- tunities by consistently investing in future growth. We will develop further digital products, platforms and services while also recruiting software and other technology specialists. Furthermore, we plan to make targeted acquisitions to expand our product and service portfolio, extend our technological ex- pertise and sharpen our sector focus. With liquid funds of € 44.9 million and no debts at the end of 2020, our company is very well placed to finance the organic and external growth it has planned. Future Macroeconomic and Industry Framework In its Annual Economic Report published at the end of January 2021, the German Federal Government forecast that the economic downturn in 2020 would be followed in 2021 by GDP growth of 3.0% 8. The IT sector is set to benefit disproportionately from this upturn. The sector association Bitkom 9 has forecast 4.2% growth in German IT revenues to € 98.6 billion. Our three core markets of Cloud, SAP and IoT will show significantly greater momentum. That is par- ticularly true of the cloud as the motor of digitali - sa tion. As explained in the “Macroeconomic and Industry Framework” chapter on Pages 43 and 44, the conver sion to S/4HANA is gaining momentum in the SAP market, while the IoT business continues to be driven by a companies’ high propensity to invest. 7 Bitkom Research, www.bitkom-research.de/de/pressemitteilung/ corona-fuehrt-zu-einem-digitalisierungsschub (press release only available in German). 8 Press release (only available in German) by the Federal Ministry for Economic Affairs and Energy, 27 January 2021, www.bmwi.de/ Redaktion/DE/Pressemitteilungen. 9 Press release by Bitkom, 13 January 2021, www.bitkom.org/EN/ Bitkom-Industry-Growing-Again.
Group Management Report Outlook, Opportunity and Risk Report 55 Ambitious targets for 2021: q.beyond aims to generate further strong growth and significantly improve its EBITDA and free cash flow. Revenue forecast in € million 160 – 170 143.4 EBITDA of € 5 million to € 10 million expected for current financial year Free cash flow of € -10 million to € -5 million budgeted for full financial year – sustainably positive from Q4 2021 2020 2021
56 q.beyond Annual Report 2020 Expected Financial Po si tion, Financial Per- form ance and Cash Flows We have budgeted for a significant improvement in our earnings performance in 2021. The key factor driving this improvement is the scalability of our bu- siness model, in which revenue growth is not matched by cost growth. In view of this, we have budgeted for EBITDA to rise to between € 5 million and € 10 million, compared with € -2.0 million in 2020. Strong growth solidly financed Our company is still free of debt and intends to finance its growth in 2021 as well with its own re- sources. The consolidated balance sheet showed net liquidity of € 44.9 million at the end of 2020. The full-year budget for 2021 still provides for ne- gative free cash flow of between € -10 million and € -5 million. Free cash flow is budgeted to be sus- tainably positive from the fourth quarter of 2021. Opportunity Management We are focusing on three growing markets: Cloud, SAP and IoT. The dynamic growth in these markets presents us with ever new opportunities. Responsi- bility for identifying and acting on such opportuni- ties lies with the operations managers. They are fa- miliar with their specific market environments and their inherent potential. They also draw on expertise available in the sales and marketing department, as well as on various market and competition analyses. Specific opportunities are factored into the rolling planning, with a review being performed at an early stage to ascertain the risks involved in pursuing and implementing these opportunities. Here, the bene- fits of dovetailing risk and opportunity management are especially clear. In what follows, we report on the future developments and events that could lead to a positive variance from the full-year outlook for 2021. By analogy with risks, the company classifies these as “large opportunities” with a comparatively high probability of occurrence and a substantially positive contribution to its financial position, finan- cial performance and cash flows. Expected Earnings Performance by Segment Individual Opportunities Both of q.beyond’s segments, “Cloud & IoT” and “SAP”, have budgeted substantial revenue growth for the current financial year. They will also continue to invest in further growth, focusing in particular on promoting the development of innovations and ma- king targeted additions to their teams. Irrespective of these measures, they will significantly increase their segment contributions once more in 2021. Our “large opportunities” are presented below in de- scending order of their significance to our company: • Additional customers for Cloud Services. Enor- mous technological advances and the require- ments of digital business models mean that the IT in place at growing numbers of SMEs is increas- ingly reaching its limits. It is currently not yet fore-
Group Management Report Outlook, Opportunity and Risk Report 57 q.beyond focuses on three growing markets: Cloud, SAP and IoT. Their dynamism provides us with ever- more new opportunities. seeable whether and how quickly these SMEs will tackle the crucial task of modernising their IT and, here in particular, of making increasing use of the cloud, once the coronavirus crisis has been suc- cessfully overcome. As digitalisation is increas- ingly becoming the centrepiece of business mo- dels at SMEs as well, actual demand, particularly for Cloud Services, could significantly exceed our planning assumptions. • Rapid implementation of new SAP solutions. The technological advance to S/4HANA will continue to drive business in our “SAP” segment in 2021 as well. As this new product family is a key to digita- lising business models, demand for corresponding advisory and implementation services may pos- sibly exceed expectations. • Proprietary software solutions. We are systema- tically expanding our software expertise along the digital value chain. Our company is increasingly creating its own products and platforms, such as “StoreButler” and “Edgizer”. For these innovations, we have initially budgeted only a low volume of revenues. As they offer bespoke solutions to key challenges in the retail and manufacturing sec- tors, however, demand may well exceed expec- tations this year already. • More IoT projects in regular operation. Many of our IoT customers have to date focused on pilot projects and, together with our experts, tested the opportunities offered by deploying this inno- vative technology on an industrial scale. In 2020, we began aligning our IoT structures more closely towards regular operations and serial production and dovetailing them with other company de- partments. This may result in additional, as yet unbudgeted revenues. That would particularly be the case if SMEs draw on our comprehensive IoT expertise in the mass production of net- worked devices.
58 q.beyond Annual Report 2020 Risk Management Like any other company, q.beyond is permanently exposed to numerous potential risks. Consciously addressing and assessing these risks enables us to boost our competitiveness and lay a key foundation for our sustainable business success. Professional risk management ensures that all events, actions or neglected actions that could potentially pose a threat to the success of our company, or even to its continued existence, are already identified, analysed, assessed, managed and monitored at the earliest possible stage of their development. Risk manage- ment comprises coordinated procedures, measures and the necessary rules for dealing with risks and thus often supports decision-making processes at the parent company (AG) and all its subsidiaries. Organisation and Procedures We have implemented a company-wide uniform in- tegrated risk management system (RMS) to ensure the effectiveness of our risk management and faci- litate the aggregation of risks and transparent repor- ting. The use of a risk management software that has proven its worth enables us to classify risks pre- cisely and, as a result, to focus on material risks. Risk management as integral component of decision-making processes The RMS is an integral component of decision-ma- king processes. It ensures that risk assessments are considered in all decisions and that measures to reduce, transfer or avoid risks are taken at an early stage. Quarterly reports raise awareness of risk issues among all managers with relevant responsi- bility. Guidelines, procedures and work instructions are in place to flank the RMS and ensure its imple- mentation in day-to-day operations. The risk ana lyses, such as those required for management systems under ISO 27001 (Information Security) or ISO 9001 (Quality Management), ensure uni- form, efficient reporting. The RMS covers all company departments. Mana- gers reporting directly to the Management Board (heads of department) continually monitor and as- sess the risks arising. Within the RMS framework, they act as risk coordinators and are responsible for making sure that the risks identified are always up to date. Heads of department report to Corporate Risk Management at least once a quarter. They also regularly check whether any new risks with material implications and previously undetected have arisen in their areas of responsibility and whether there is any need to amend the assessment of risks already identified. This process ensures that potential risks in the operating business can be detected at an early stage. Corporate Risk Management responsible for reporting Corporate Risk Management is responsible for risk reporting to the Management Board. It sees to the consolidation and documentation of the risks as- sessed by the risk coordinators. Based on the risk
Group Management Report Outlook, Opportunity and Risk Report 59 reports for departments, it compiles a compact re- port (using the “R2C_GRC” risk management soft- ware) and forwards this to the Management Board on a quarterly basis. The Management Board is in- formed immediately of any newly detected high risks. The Management Board informs the Supervisory Board Audit Committee with an extensive risk report at least once a year. Corporate Risk Management also serves as an interface to other audit and / or cer- tification processes and ensures that, there too, the risks relevant to the company are uniformly recorded. The Finance department is responsible for monitor- ing risks on the basis of key operating and financial performance figures. Risk Management Guidelines issued by the Manage- ment Board govern the approach to handling risks and define risk management processes and organi- sational structures. These guidelines are reviewed and modified as necessary on a regular basis, and at least once a year. In the context of the audit of the financial statements, the external auditors each year review whether the early-warning risk identification system is suitable for the early detection of any risks to the company’s continued existence. Further in- formation about the RMS in respect of financial instruments recognised under IFRS 7 can be found in Note 40 in the Notes to the Consolidated Financial Statements. Assessment Methodology The risk management software supports the overall risk management process throughout the company. The tool initially uses a gross view to classify a risk in terms of its estimated probability of occurrence and potential implications. This means that the prob - ability of occurrence and extent of damage are as- sessed without accounting for any measures taken to minimise, transfer or avoid risks. In the past fi- nancial year, this classification was simplified by reducing the number of risk classes from five to three, thus rendering risk reporting more transparent. Classiﬁcation of risks Probability of occurrence > Damage class Low Medium High Assessment of probability of occurrence Low: Medium: Probable High: Improbable (less than 30%) Highly probable (more than 70%) Low Medium High Low risk Medium risk High risk Assessment of extent of damage (adverse impact on liquidity / cash flow) Low: Below € 50,000 Medium: Up to € 250,000 High: Above € 250,000
60 q.beyond Annual Report 2020 The classification of a risk as “low”, “medium” or “high” continues to be based on the combination of its probability of occurrence and damage class. The chart on Page 59 shows the methodology used to classify risks. General risks are analysed to assess whether and how these could specifically harm our company. If this analysis concludes that relevant damage from such risks really is conceivable, then these risks are included as specific risks. General risks with no spe- cific reference to the company are otherwise not recorded in the RMS. General risks include develop- ments such as global disasters, financial system col- lapse, war and terrorist attacks. As a result of this risk analysis, in our external risk report we report risks that are either individually material or aggregate individually immaterial risks in suitable risk categories. At q.beyond, relevant risk categories particularly comprise industry-specific and macroeconomic risks, operating risks (cost structures, procurement, stability of operations, customers, sales activities, IT security, human re- sources) and finance and compliance risks. The as- sessments and accompanying comments and re- quirements are only provided in quantitative terms in cases where quantitative assessment of the spe- cific extent of damage is possible. As this is gener- ally not the case, however, the relevant risks are usually classified in terms of classes of damage. This risk analysis and classification is followed by measures aimed at dealing with and monitoring risks. These serve to reduce existing risks, to hedge risks with insurance coverage, where this is econo- mically expedient, and to raise awareness of existing residual risks and / or risk acceptance. Focus on high risks The risk is subsequently reassessed in terms of its probability of occurrence and extent of damage to account for the aforementioned measures (net view). The external risk report only includes those risks that still have to be deemed material for our future business performance even after all risk reduction, transfer and avoidance measures have been fac- tored in, i.e. subsequent to performance of the net analysis. Based on this classification, these risks are categorised as “high risks”. A risk that is allocated to the “high” damage class, for example, is only as- sessed as constituting a “high risk” in the overall assessment if there is also at least a “medium” pro- bability of occurrence. Supplementary Disclosures Pursuant to § 315 (4) HGB Risk management in respect of financial reporting forms an integral component of the RMS. The risks involved in accounting and financial reporting are constantly monitored, with the results being fac- tored into Group-wide reporting. Within the audit of the annual financial statements, the external au- ditor also reviews the financial reporting process. Based on the auditor’s findings, both the Supervi- sory Board Audit Committee and the full Supervisory Board deal with the internal control system in respect of the financial reporting process.
Group Management Report Outlook, Opportunity and Risk Report 61 The RMS is characterised by the following key features: • Our company has a clear management and corpo- rate structure. Accounting activities for subsidia- ries are performed either by q.beyond AG itself on the basis of agency agreements or handled in close liaison with the subsidiaries. Individual process responsibility is clearly allocated at all subsidiaries. • Our company ensures strict compliance with legal requirements and International Financial Report- ing Standards (IFRS) by means of a range of mea- sures including employing qualified specialists, providing targeted and ongoing training and de- velopment for these specialists, strictly observing the dual control principle by separating execution, billing and approval functions in organisational terms and clearly segregating duties for document creation and posting in the controlling department. • Our company uniformly deploys standard SAP software across all divisions. • The accounting software is comprehensively pro- tected against unauthorised access. It ensures that all major transactions at all companies are consistently, correctly and promptly recorded. • Once prepared, separate financial statements are transferred to a uniform consolidation system in which intercompany transactions are eliminated. This system then provides the basis for the conso- lidated financial statements and for major disclo- sures in the Notes to the Consolidated Financial Statements and the Group Management Report. • Group-wide monthly reporting ensures the early detection of potential risks during the fin- ancial year. With these measures, we create the necessary transparency for our financial reporting and – to the greatest extent possible – prevent any potential risks arising in this process. Individual Risks Risk monitoring focuses on the actual risk situation, i.e. due account is taken of existing measures to re- duce, transfer or avoid risks. Based on this net per- spective, the following relevant risks were assessed as “high” and are presented below in descending order of significance. Shortage of specialists Our company needs qualified specialists to operate and further develop its proprietary product portfolio. Given the shortages, particularly of IT specialists, in the German labour market, it is sometimes difficult to find adequate replacements for the relevant po- sitions within a short timeframe. This risk may be exacerbated by employees resigning, particularly when this leaves the company without the resources needed to maintain the same level of performance capacity or when the employees resigning have spe- cial expertise that cannot be replaced immediately. The shortage of specialist staff may result in bottle- necks in operations, in the development of services and in the IoT business.
62 q.beyond Annual Report 2020 Our company has countered this risk for years now by consistently training young specialists, coope- rating with select universities and offering a range of targeted retention measures for those specialists and executives who are especially important to the company’s operations. Furthermore, we are making efforts to ensure duplicate coverage for key functions. Uncertain success in new business fields Success in new business fields such as Cloud Ser- vices and IoT is a factor of great strategic signifi- cance to our company. We are continually develo- ping new digital services and thus strengthening our position in forward-looking markets. These kinds of innovation provide us with a variety of opportunities, but may also prove to be risks in the event of delays arising in development processes and market launches. Reasons for such delays in- clude protracted agreement processes with de- velopment partners and pilot customers, as well as a lack of internal resources. We limit this risk by cooperating with select part- ners, drawing on external experts and, where pos- sible, recruiting additional specialists for the de- velopment of new products and business models, for example in the energy business. In 2020, these resources made major contributions to far-reach - ing innovations which q.beyond launched onto the market, thus accessing new business fields. These innovations include the IoT device platform “Edgizer” and “StoreButler”, a digitalisation plat- form for retailers. Impact of coronavirus pandemic The coronavirus pandemic dominated economic de- velopments in the past financial year. Our company may be benefiting from the resultant acceleration in digitalisation among SME companies, but also had to deal, particularly in its SAP business, with the va- rious restrictions imposed on contacts. Temporary lockdowns made it more difficult to acquire new projects and put pressure on retail, one of our three focus sectors. An easing in restrictions became ap- parent in the third quarter of 2020, but the renewed lockdown at the end of 2020 and beginning of 2021 threatened this progress. The speed at which we can overcome this risk cru- cial depends on the further course of the pandemic. Until then, q.beyond will be limiting the implications by maintaining strict cost management, optimising its internal resources, and working very closely with existing customers. In recent months, this dialogue has repeatedly resulted in the initiation of new SAP projects. This way, the “SAP” segment was able to increase its revenues in 2020 despite the effects of the pandemic. IoT: from project to series production We expanded our IoT business at a very early stage of developments and have documented its perfor- mance capacity in numerous pilot projects. It will now increasingly be about transferring these pilots to normal operations and having the relevant com- ponents produced on a serial basis. There is the risk that existing structures and processes will not meet the new requirements and that quality defects in
Group Management Report Outlook, Opportunity and Risk Report 63 terms of operations and production will pose a risk to customer relationships. We are countering this risk by stepping up our efforts to develop the rele- vant structures and processes. Key focuses here are on guaranteeing smooth operations and on expand- ing serial production of IoT components with exter- nal contract manufacturers. Overall Summary Taking due account of the potential extent of dam- age and probabilities of occurrences of these and other potential risks, no risks that could result in any permanent and significant impairment of the com- pany’s financial position, financial performance or cash flows in the current financial year are discern- ible at present. In organisational terms, all meaning- ful and reasonable measures have been taken to enable the company to detect potential risks at an early stage and take appropriate action. Due to these or other risks, or to erroneous assump- tions, future earnings may nevertheless deviate materially from the expectations of our company and its management. To the extent that they do not constitute historic facts, all disclosures in this Group Management Report are forward-looking state- ments. They are based on current expectations and forecasts of future events and are regularly reviewed within the company’s risk management.
Focus sector: energy q.beyond shows you how to manage your future energy mix and get moving with e-mobility Reimagining electricity
Financial Report 66 – 72 Consolidated Financial Statements 66 Consolidated Statement of Income 67 Consolidated Statement of Comprehensive Income 68 Consolidated Balance Sheet 70 Consolidated Statement of Changes in Equity 72 Consolidated Statement of Cash Flows 73 – 129 Notes to the Consolidated Financial Statements 73 Company Information 73 Accounting Policies 89 Notes to the Consolidated Income Statement 95 Notes to the Consolidated Balance Sheet 113 Notes to the Consolidated Statement of Cash Flows 114 Other Disclosures 130 Statement of Responsibility 131 – 140 Independent Auditor’s Report
66 q.beyond Annual Report 2020 Consolidated Financial Statements Consolidated Statement of Income € 000s Revenues Cost of revenues Gross profit Sales and marketing expenses General and administrative expenses Other operating income Other operating expenses Operating earnings (EBIT) Financial income Financial expenses Income from associates Earnings before taxes Income taxes Consolidated net income Attribution of consolidated net income Owners of the parent company Non-controlling interests Earnings per share (basic) in € Earnings per share (diluted) in € Note 2020 2019 6 7 7 7 9 9 10 10 11 38 12 12 143,416 238,047 (131,795) (208,818) 11,621 (12,694) (19,896) 2,850 (707) (18,826) 52 (464) (39) (19,277) (620) 29,229 (22,787) (38,722) 139,068 (18,851) 87,937 87 (6,108) (16) 81,900 (8,357) (19,897) 73,543 (19,897) - 73,619 (76) (0.16) (0.16) 0.59 0.59
Financial Report Consolidated Financial Statements 67 Consolidated Statement of Comprehensive Income € 000s Consolidated net income Other comprehensive income Line items that are not reclassified in the income statement Actuarial losses from defined benefit pension plans Tax effect Line items that are not reclassified in the income statement Line items that were or might subsequently be reclassified in the income statement Fair value measurement of cash flow hedge Tax effect Line items that were or might subsequently be reclassified Total fair value changes (net of tax) recognised directly in the income statement 2020 2019 (19,897) 73,543 (474) 155 (319) - - - (319) (1,314) 438 (876) 318 (106) 212 (664) Total comprehensive income (20,216) 72,879 Attribution of total comprehensive income Owners of the parent company Non-controlling interests (20,216) - 72,955 (76)
68 q.beyond Annual Report 2020 Consolidated Balance Sheet € 000s ASSETS Non-current assets Property, plant and equipment Land and buildings Goodwill Right-of-use assets Other intangible assets Financial assets recognised at equity Prepayments Other non-current assets Non-current assets Current assets Trade receivables Prepayments Inventories Other current assets Cash and cash equivalents Current assets TOTAL ASSETS Note 31 Dec. 2020 31 Dec. 2019 14 14 15 16 17 11 19 21 18 19 20 21 22 28,252 20,749 20,993 15,826 12,382 163 1,664 2,061 30,341 21,498 18,365 19,127 15,911 202 1,401 4,819 102,090 111,664 37,064 3,214 57 3,514 44,925 88,774 31,034 3,525 228 12,610 66,031 113,428 190,864 225,092
Financial Report Consolidated Financial Statements 69 € 000s Note 31 Dec. 2020 31 Dec. 2019 SHAREHOLDERS’ EQUITY AND LIABILITIES Shareholders’ equity Issued capital Capital surplus Other capital reserves Accumulated deficit Shareholders’ equity Liabilities Non-current liabilities Lease liabilities Other financial liabilities Accrued pensions Other provisions Non-current liabilities Current liabilities Trade payables and other liabilities Lease liabilities Other financial liabilities Other provisions Accrued taxes Deferred income Current liabilities Liabilities 23 24 26 16 27 28 29 30 16 27 29 29 31 124,472 144,160 (2,466) 124,172 144,132 (2,147) (129,611) (105,989) 136,555 160,168 12,408 16,698 21 6,327 565 25 6,293 548 19,321 23,564 22,436 5,460 2 6,192 332 566 34,988 54,309 28,593 5,501 - 7,030 54 182 41,360 64,924 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 190,864 225,092
70 q.beyond Annual Report 2020 Consolidated Statement of Changes in Equity € 000s Equity attributable to equity holders of q.beyond AG Issued capital Capital surplus Note Other capital reserves Actuarial losses Cash flow hedge reserve Balance as of 1 January 2020 Consolidated net income Other comprehensive income, net of taxes Total comprehensive income Exercising of convertible bonds Dividends paid Non-cash share-based compensation Balance as of 31 December 2020 Balance as of 1 January 2019 Consolidated net income Other comprehensive income, net of taxes Total comprehensive income Change in scope of consolidation Dividends paid Non-cash share-based compensation 124,172 144,132 (2,147) - - - 300 - - - - - 38 - (10) - (319) (319) - - - 124,472 144,160 (2,466) 124,172 144,119 (1,319) - - - - - - - - - - - 13 - (876) (876) 48 - - 26 23 36 26 23 36 Balance as of 31 December 2019 124,172 144,132 (2,147) - - - - - - - - (212) - 212 212 - - - -
Financial Report Consolidated Financial Statements 71 Accumulated deficit Total Non-controlling interests Total equity (105,989) (19,897) - 160,168 (19,897) (319) (19,897) (20,216) - (3,725) - 338 (3,725) (10) (129,611) 136,555 (175,883) 73,619 - 73,619 - 90,877 73,619 (664) 72,955 48 (3,725) (3,725) - 13 (105,989) 160,168 - - - - - - - - (780) (76) - (76) 856 - - - 160,168 Balance as of 1 January 2020 (19,897) Consolidated net income (319) (20,216) Other comprehensive income, net of taxes Total comprehensive income 338 Exercising of convertible bonds (3,725) Dividends paid (10) Non-cash share-based compensation 136,555 Balance as of 31 December 2020 90,097 73,543 (664) 72,879 Balance as of 1 January 2019 Consolidated net income Other comprehensive income, net of taxes Total comprehensive income 904 Change in scope of consolidation (3,725) Dividends paid 13 Non-cash share-based compensation 160,168 Balance as of 31 December 2019
72 q.beyond Annual Report 2020 Consolidated Statement of Cash Flows € 000s Note 2020 2019 Cash flow from operating activities Earnings before taxes Depreciation and amortisation of non-current assets Write-downs of goodwill Depreciation of right-of-use assets (IFRS 16) Other non-cash income and expenses Profit from sale of subsidiaries Loss on disposals of assets Income tax paid Income tax received Interest received Interest paid in connection with leases (IFRS 16) Net financial expenses Income from associates Changes in provisions Changes in trade receivables Changes in trade payables Changes in other assets and liabilities Cash flow from operating activities Cash flow from investing activities Purchase of intangible assets Purchase of property, plant and equipment Payments for acquisition of a subsidiary, less liquid funds thereby acquired Purchases of financial assets recognised at equity Proceeds from sale of property, plant and equipment Proceeds from sale of a subsidiary, less liquid funds thereby disposed of Cash flow from investing activities Cash flow from financing activities Dividends paid Repayment of convertible bonds Proceeds from loan to former subsidiary Proceeds from issue of shares Taking up of loans Repayment of loans Interest paid Repayments of lease liabilities Cash flow from financing activities Change in cash and cash equivalents Cash and cash equivalents as of 1 January 32 8, 14, 17 15 16 16 10 11 28, 29 18 32 33 2 33 33 23 16 33 (19,277) 11,906 - 4,951 610 - 14 (406) 104 9 (401) 412 39 (787) (6,252) 91 4,021 (4,966) (173) (5,409) (1,515) - 10 - (7,087) (3,725) (4) - 338 - - (11) (5,651) (9,053) 81,900 18,253 14,172 19,939 485 (135,253) 239 (1,744) 61 10 (2,051) 6,022 16 1,341 24,269 (33,827) (11,542) (17,710) (4,256) (8,179) - (218) 33 185,813 173,193 (3,725) (11) 3,430 - 23,000 (142,000) (4,993) (18,771) (143,070) (21,106) 66,031 12,413 53,618 Cash and cash equivalents as of 31 December 22 44,925 66,031
Financial Report Notes to the Consolidated Financial Statements 73 Notes to the Consolidated Financial Statements for the 2020 Financial Year Company Information QSC AG was renamed as q.beyond AG in September 2020. q.beyond AG is the key to successful digitalisation. It helps its customers find the best digital solutions for their business and then puts them into practice. q.beyond accompanies SME customers securely and reliably throughout their digital journey and has exten sive expertise in the fields of Cloud, SAP and IoT. With nationwide locations and its own certified data cen tres, the company is one of Germany’s leading IT service providers. q.beyond AG is a stock corporation registered in the Federal Republic of Germany. Its legal domicile is MathiasBrüggenStrasse 55, 50829 Cologne, Germany. The company is registered in the Commercial Register of the Cologne District Court under number HRB 28281. q.beyond AG has been listed on the Deut sche Börse stock exchange since 19 April 2000 and in the Prime Standard since the beginning of 2003. Accounting Policies 1 Basis of preparation Pursuant to Article 4 of Regulation (EC) No. 1606 / 2002 of the European Parliament and the Council dated 19 July 2002, the company is required to prepare consolidated financial statements in accordance with In ternational Financial Reporting Standards (IFRS). Pursuant to § 315e (1) of the German Commercial Code (HGB), it is thus exempted from preparing consolidated financial statements in accordance with HGB. q.beyond prepares its consolidated financial statements in accordance with the IFRSs issued by the Inter national Accounting Standards Board (IASB) that require application in the EU as of 31 December 2020, as well as with the supplementary requirements of § 315e (1) HGB. The company took due account of all IFRSs requiring mandatory application in the EU in the 2020 financial year, as well as of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Com mittee (SIC). In its consolidated financial statements, q.beyond generally makes application of the cost method. Material exceptions relate to liabilities for equitysettled sharebased payments and the net liability for defined bene fit pension plans. The financial year of q.beyond AG and its subsidiaries included in consolidation (hereinafter also referred to as “q.beyond”) corresponds to the calendar year. The consolidated financial statements are presented in euros, the company’s functional currency. All amounts, unless otherwise stated, are rounded up or down to the nearest thousandeuro amount (€ 000s). The rounding up or down of figures may result in minor discrepan cies on a scale of € 1k or 0.1% between numbers and percentages in this Annual Report.
74 q.beyond Annual Report 2020 No events or transactions which would have a material effect on the Group’s financial position, financial performance or cash flows occurred between the end of the reporting period and 23 March 2021 (the date on which the consolidated financial statements were approved by the Management Board for submission to the Supervisory Board). The consolidated income statement has been prepared using the costofsales method. In the interests of clarity and informational value, individual line items have been aggregated in the income statement and balance sheet. These line items are reported and commented on separately in the notes. 2 Scope of consolidation and amendments under company law The consolidated financial statements comprise the financial statements of q.beyond AG and its subsidiaries as of 31 December of each financial year. The financial statements of subsidiaries included in consolidation have been prepared on the basis of uniform accounting policies pursuant to IFRS 10 (Consolidated Financial Statements). All subsidiaries have the same balance sheet date as the parent company q.beyond AG. All intragroup transactions and balances are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, i.e. the date on which q.beyond obtains control. Inclusion by way of full consolidation ends upon the parent company no longer exercising control. Information on the companies included in the consolidated financial statements is provided in Note 34. Noncontrolling interests are measured upon acquisition at their respective share of identifiable net assets at the company thereby acquired. By articles of association dated 29 April 2020, q.beyond AG founded Q.BEYOND, SIA, a subsidiary in Riga / Latvia, and provided this company with share capital of € 2.8k. By articles of association dated 15 September 2020, q.beyond AG founded IP Exchange GmbH, a subsidiary based in Nuremberg, and provided this company with share capital of € 500k. By notarised contribution agreement dated 21 December 2020, q.beyond AG transferred the following items to the capital reserve of IP Exchange GmbH with economic effect as of midnight on 1 January 2021: the assets, rights, contractual relationships, receivables and liabilities attributable to the colocation business in Munich and Nuremberg, as well as all shares in IP Colocation GmbH. By agreement dated 21 July 2020, q.beyond AG acquired all of the shares in Incloud Engineering GmbH, Darmstadt. The date as of which q.beyond took over the respective assets and liabilities was 31 July 2020. In the five months to 31 December 2020, Incloud Engineering GmbH contributed revenues of € 2,771k and income of € 427k to consolidated net income. If the acquisition had been executed as of 1 January 2020 then, based on Management Board estimates, consolidated revenues would have amounted to € 145,460k and the annual consolidated net deficit would have amounted to € 19,940k. Consideration transferred. The fair values as of the acquisition date of each main group of consideration are presented in summarised form below:
Financial Report Notes to the Consolidated Financial Statements 75 € 000s Cash and cash equivalents Conditional consideration Total consideration transferred 1,828 900 2,728 The preliminary purchase price for the acquisition of the 25,000 shares with a nominal value of € 1 each amounted to € 2,728k and comprises a basic purchase price of € 828k, a preliminary purchase price of € 1,000k and an additional purchase price of € 900k, payment of which is conditional on the achievement of predefined financial targets (EBIT) for the 2020 and 2021 financial years. The target for the 2020 finan cial year was met. Achievement of the 2021 target is deemed likely; the resultant purchase price has there fore been added to the costs of the shares. Costs associated with the business association. In connection with the business combination, q.beyond incurred costs of € 74k for legal advice, notary fees and the performance of due diligence by an auditing company. These costs are recognised in general and administrative expenses. Identiﬁable assets acquired and liabilities assumed. The amounts recognised for the assets acquired and liabilities assumed as of the acquisition date are presented in summarised form below: € 000s Property, plant and equipment Right-of-use assets Trade receivables Prepayments Other non-current assets Other assets Cash and cash equivalents Lease liabilities Other financial liabilities Other provisions Trade payables and other liabilities Total identifiable net assets 68 376 397 5 1,188 87 313 (376) (105) (32) (1,821) 100
76 q.beyond Annual Report 2020 Goodwill. The goodwill arising upon the acquisition has been recognised as follows: € 000s Consideration transferred Fair value of identifiable net assets Goodwill 2,728 100 2,628 The goodwill is chiefly attributable to the skills and specialist qualifications of the workforce and the syn ergies expected to arise from integrating the company into the existing Cloud & IoT segment. None of the goodwill recognised is deductible for tax purposes. Changes in the company structure in the previous year. By purchase agreement dated 6 May 2019, a con tract was concluded with EnBW Telekommunikation GmbH, a subsidiary of EnBW Energie BadenWürttem berg AG, regarding the sale of all shares in Plusnet GmbH. This transaction was closed as of 30 June 2019. Control by the parent company ended upon the expiry of 30 June 2019 and Plusnet GmbH was deconsoli dated as of this date. The sale also involved all shareholdings directly and indirectly held by Plusnet GmbH. Due to the disposal of Plusnet GmbH and its subsidiaries in the previous year, the figures in the consolidated income statement and the consolidated statement of cash flows are only comparable to a limited extent with the respective previous year’s figures. 3 Significant judgements and estimates The application of accounting policies requires the use of judgements as well as of forwardlooking assump tions and estimates. Actual outcomes may differ from those assumptions and estimates. Significant adjust ments to the carrying amounts of assets and liabilities may therefore be required within the coming financial year. The use of judgements, assumptions and estimates was required in particular for the accounting treat ment of the following items: (a) Judgements made when applying accounting policies which could have the most material impact on the amounts recognised in the consolidated financial statements relate to the following items: Note 6 – Revenues: Determining the percentage of completion for performance obligations satisfied over time Note 6 – Revenues: Determining allocation of the transaction price to the performance obligations Note 16 – Term of lease contract: Determining whether the exercising of extension options is reasonably certain
Financial Report Notes to the Consolidated Financial Statements 77 (b) Assumptions and estimates mainly relate to the following items: Notes 15 and 17 – Impairment test on intangible assets and goodwill: Significant assumptions underlying calculation of the recoverable amount Note 16 – Determining discount rates to calculate the present value of lease liabilities Note 18 – Trade receivables: Measuring impairments based on expected credit losses: significant assump tions used to determine weighted average default rate Note 38 – Recognition of deferred tax assets: Availability of future taxable earnings against which deductib le temporary differences and tax loss carryovers can be offset Note 28 – Measurement of pension provisions: Significant actuarial assumptions Note 29 – Recognition and measurement of provisions: Significant assumptions concerning probability and scale of outflow of benefits 4 Summary of significant accounting policies Revenue and expense recognition. q.beyond recognises revenues upon satisfaction of the respective perfor mance obligation by transfer of the promised good or promised service to the customer. The asset counts as transferred when the customer gains control over it. Furthermore, the following criteria have to be met for revenues to be recognised: • For services performed by q.beyond, the benefits of those services generally flow to customers who simul taneously receive and consume the benefits of the services while they are being performed (IFRS 15.35a). On this basis, revenues are recognised over time. • For services performed in regular IT service operations, q.beyond draws on the practical expedient provided for in IFRS 15.B16, under which revenues are recognised in the amount for which q.beyond is entitled to invoice the customer, as q.beyond is entitled to consideration in the amount directly corresponding to the value of services already performed. • For the performance of transition services (mainly in connection with the outsourcing of IT infrastructures) which precede the performance of regular IT service operations, revenues are recognised based on the percentage of completion. This is determined using “milestones reached” as a specific variant of the out putbased method. • For services performed in regular IT service operations, standalone prices are, as a general rule, contrac tually allocated to the individual performance obligations. No further allocation is therefore required. • For transition services, standalone milestones are measured at expected cost plus a margin (IFRS 15.79b), with the transaction price being allocated to individual milestones on this basis.
78 q.beyond Annual Report 2020 • Disbursements and reimbursements of shorttime allowances represent transitory items. As a result, neither income nor expenses require recognition for these items in the income statement. By contrast, reimbursements by the Federal Labour office of the social security expenses borne by the employer re present performancebased grants pursuant to IAS 20 and are recognised at q.beyond as a reduction in personnel expenses. Other government grants are recognised as other operating income over the periods in which q.beyond expenses those costs the grants are intended to compensate. • q.beyond recognises interest income when it arises using the effective interest method (i.e. the rate that discounts estimated future cash flows over the expected life of the financial instrument to its net carrying amount). Interest unwound on finance lease receivables from multiple element arrangements is also pre sented as interest income. • Multiple element arrangements consist of a service portion and a hardware lease, where the fair values of the two components are separable and can be reliably determined. Application of IFRS 16 requirements to hardware leases means that q.beyond functions as lessor in certain multiple element arrangements. The lease agreements relate to identifiable assets usable exclusively by the customer. Revenues for ser vices performed under the service contract are distributed in line with performance over the contractual period. For the portion of the multiple element arrangement classified as a finance lease, the revenues are recognised upon inception of the arrangement and the interest portion is recognised over the term of such. In these cases, amounts owed by customers (lessees) under a finance lease are recognised as discounted receivables. When measuring hardware leases as operating leases, the revenues are recognised on a monthly basis in accordance with the contractual terms. The total contractual performance is appor tioned to the respective components using the residual value method, as this most closely reflects the economic substance of the contracts. • Operating expenses are recognised when the performance has been utilised or at the time they are incurred. Specifically, q.beyond structures its revenue recognition as follows: The Cloud & IoT segment pools all IT services that assist companies in gradually transitioning to the digital age and also includes a broad portfolio of IoT services. All major IT functions can be procured as turnkey cloud modules or as individual outsourcing services. These range from virtual IT workplaces and business applications to flexible IT resources through to comprehensive communications and network services. They are supplemented by colocation services involving the provision of data centre capacities. The IoT business also covers the whole spectrum of services, including software competence, hardware from sen sors through to gateways, and secure data transmission and storage. Revenues from rental and service agreements are recognised in line with the services performed, i.e. basi cally on a timeapportioned basis over the contract term. Furthermore, this segment generates revenues from sales of hardware and software. Revenues from the sale of hardware and from rental and lease transactions viewed as sales in terms of their economic substance are recognised upon shipment of the hardware to the customer and provided that the company does not have any unsatisfied obligations impact ing on final acceptance by the customer. All costs resulting from these obligations are recognised at the same time as the corresponding revenues.
Financial Report Notes to the Consolidated Financial Statements 79 The SAP segment involves the provision of consulting services to companies to assist them in digitalising and optimising their business processes based on SAP technologies and the operation of corresponding applications. Revenues from the respective service contracts are recognised in line with the services performed, i.e. basi cally on a timeapportioned basis over the contract term. Revenues from contracts for services charged in line with time inputs are recognised upon performance of the working hours and at the contractually agreed hourly rates. Foreign currency translation. q.beyond presents its consolidated financial statements in euros. Transactions in currencies other than the euro are initially recognised using the spot exchange rate on the transaction date. Differences arising from changes in the exchange rate between the transaction date and the settlement or balance sheet date are recognised through profit or loss. Property, plant and equipment. q.beyond recognises property, plant and equipment at cost less accumulated depreciation and impairment losses. Repair and maintenance expenses that do not constitute material replace ment investments are directly expensed in the period in which they are incurred. The estimated useful lives of assets are taken as the basis for applying straightline depreciation. Any excess in the carrying amount of an asset over its respective recoverable amount is recognised through profit or loss as an impairment loss. Property, plant and equipment are subject to straightline depreciation over the following expected useful lives: Property, plant and equipment Buildings Network and technical equipment Installations on third-party land Plant and operating equipment Useful life in years 8 – 50 2 – 25 3 – 20 3 – 15 Borrowing costs. Borrowing costs are recognised as an expense in the period in which they are incurred. There are no qualifying assets as defined in IAS 23. Business combinations and goodwill. q.beyond accounts for business combinations using the acquisition method. This involves recognising all identifiable assets, liabilities and contingent liabilities of the acquired business at fair value. Goodwill arising in a business combination is initially measured at the amount by which the company’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination. q.beyond tests goodwill for impairment at least once a year and upon any indication that the carrying amount is potentially impaired.
80 q.beyond Annual Report 2020 Other intangible assets. Intangible assets are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination corresponds to their fair value as of the date of acquisition. Inter nally generated intangible assets are capitalised if the IAS 38 recognition criteria are met. The costs involved relate primarily to personnel and materials. Costs not eligible for capitalisation are recognised through profit or loss in the period in which they arise. An assessment is made initially as to whether the useful lives of intangible assets are finite or indefinite. Intangible assets with finite lives are subject to straightline amor tisation over their useful economic lives and tested for impairment whenever there is any indication of such. For assets with finite useful lives, the amortisation period and method are reviewed at least at the end of each financial year. Other intangible assets primarily include software, licences and similar rights. Moreover, brands and cus tomer bases have been recognised as assets in conjunction with initial consolidations. Any excess in the carrying amount of an asset over its respective recoverable amount is recognised through profit or loss as an impairment loss. Acquired software is amortised over periods of 3 to 5 years. Internally generated intangible assets (devel opment costs) are amortised after completion of the development phase over a period of 2 to 5 years. Acquired brands are written down over periods of 2 to 10 years. The useful lives of intangible assets identified in the business combinations with IP Partner AG and INFO AG in 2011 are 10 to 20 years for customer bases. Financial assets recognised using the equity method. The shares held by q.beyond in financial assets recog nised using the equity method comprise investments in associates. Associates are companies over which q.beyond has significant influence, but not control or joint control, over the financial and operating policy decisions of the companies. The equity method requires investments in an associate to be recognised in the balance sheet at cost. The goodwill relating to an associate is included in the carrying amount of the investment and is not subject to amortisation. In applying the equity method, q.beyond determines whether any additional impairment losses require recognition in connection with the net investment held by q.beyond in the associate. The income statement includes q.beyond’s share in the performance of the associate. Changes recognised by the asso ciate directly in equity are recognised by q.beyond directly in equity in line with its share and – where neces sary – included in the statement of changes in equity.
Financial Report Notes to the Consolidated Financial Statements 81 Financial instruments Financial assets and liabilities. Within the scope of IFRS 9, q.beyond has financial assets liabilities that are primary debt instruments. q.beyond measures financial assets and liabilities within the scope of IFRS 9 as follows: Assets not measured at fair value Cash and cash equivalents Current trade receivables Liabilities not measured at fair value Trade payables and other liabilities Other financial liabilities IFRS 9 category Amortised cost Amortised cost Amortised cost Amortised cost The classification category is based on the management requirements for financial debt instruments (“business model”) and the cash flow criterion (“basic loan feature/SPPI”). The company determines this classification upon initial recognition and reviews the allocation at the end of each financial year. Where permitted and necessary, items are reclassified between categories. Upon initial recognition, q.beyond measures financial assets at fair value. q.beyond recognises all regu lar way purchases and sales of financial assets using trade date accounting, i.e. as of the date on which q.beyond enters into the obligation to purchase or sell the asset. Regularway purchases and sales involve purchases or sales of financial assets under a contract whose terms require delivery of the asset within the timeframe established by regulation or convention in the marketplace. q.beyond measures cash and cash equivalents and trade receivables with fixed or determinable payments that are not listed on an active market at amortised cost using the effective interest method, less any im pairments, and including transaction costs. Gains and losses are recognised in period earnings if the assets are derecognised or impaired, as well as in the context of amortisations. Moreover, other assets are recognised at nominal value and reported in line with their respective terms in the “Noncurrent assets” and “Current assets” line items. Impairments of ﬁnancial assets. The expected credit loss model pursuant to IFRS 9 requires not only an appraisal of information about past events and current conditions but also due consideration of forecasts of future economic conditions. Financial instruments and contract assets. The estimated volume of expected receivables defaults is calcu lated using the simplified lifetime model based on experience with actual receivables defaults. All receivables have homogenous risk characteristics and are therefore not divided by customer group.
82 q.beyond Annual Report 2020 q.beyond recognises impairments for expected credit losses on: • Financial assets measured at amortised cost • Contract assets • Other receivables, including lease receivables Application of the IFRS 9 impairment requirements has not resulted in any material impairment of cash and cash equivalents. These are exclusively deposited on a shortterm basis at German banks with investment grade ratings issued by the rating agencies Standard & Poor’s, Fitch and Moody’s. q.beyond measures impairments in the amount of lifetime expected credit losses. When determining whether the default risk of a financial asset has increased significantly since initial recognition and estimat ing expected credit losses, q.beyond draws on reasonable and supportable information that is relevant and available within a reasonable timeframe and at reasonable cost. This includes both quantitative and quali tative information and analysis based on historical data at q.beyond and on indepth assessments which include forwardlooking information. q.beyond assumes that the default risk for a financial asset has increased significantly when it is more than 180 days past due. q.beyond considers a financial asset as being in default when the debtor is unlikely to be able to meet its credit obligation to q.beyond in full without q.beyond reverting to measures such as drawing on collateral (if available). Lifetime expected credit losses are the credit losses expected to result from all potential default events during the expected term of the financial instrument. The maximum period over which expected credit losses are measured is the maximum contractual period over which q.beyond is exposed to credit risk. Expected credit losses represent the probabilityweighted estimates of credit losses. Credit-impaired ﬁnancial assets. q.beyond determines as of each balance sheet date whether financial assets recognised at amortised cost are creditimpaired. A financial asset is creditimpaired when one or more events that have a detrimental impact on the estimated future cash flows of that asset have occurred. Indicators that a financial asset may be impaired included the following observable data: • Significant financial difficulty of the debtor • Breach of contract, such as default or more than 180 days past due • Probability that the debtor will enter bankruptcy or other financial reorganisation Presentation of impairments for expected credit losses in the balance sheet. Impairments of financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Impairments. An impairment loss is charged to the gross carrying amount of a financial asset when, based on reasonable assessment, q.beyond expects that all or a portion of the financial asset will not be recovered. q.beyond performs an individual assessment of the time at which an impairment loss should be recognised, and the amount of such, based on whether there is reasonable expectation of collection.
Financial Report Notes to the Consolidated Financial Statements 83 Reminders are issued for outstanding receivables as soon as they become overdue. For all receivables, if pay ment is more than 180 days past due this is viewed as an indication of an increase in default risk. This trig gers an impairment test for the receivable, i.e. all receivables that are more than 180 days past due are indi vidually analysed to assess any need for impairment. Based on historic recoverability data for the past five years, receivables that are not more than 180 days past due have a very low default rate of 0.08%. In response to the Covid19 pandemic, the risk provision stated for expected defaults in this group of receivables has been increased for the first time in the 2020 financial year, in this case by a factor of nearly four. q.beyond does not expect to collect any significant proportion of impaired amounts. Financial assets for which impairment losses have been recognised may nevertheless be subject to enforcement measures to collect overdue receivables. Contract acquisition costs. Contract acquisition costs are accounted for in accordance with IFRS 15. This in volves recognising the costs incurred to obtain and perform the contract and writing these down over the contract term. If the costs exceed the expected revenues, the resultant loss is recognised immediately as an expense. Prepayments. Transitory items involving outlays prior to the balance sheet date and relating to a specified period after the balance sheet date are recognised as prepayments. Inventories. q.beyond initially measures inventories at cost. As of the balance sheet date, items are stated at the lower of cost and net realisable value. Cash and cash equivalents. Cash and cash equivalents reported in the balance sheet and statement of cash flows comprise cash on hand, cash at banks, and shortterm deposits with original maturities of three months or less. Cash funds that are subject to restrictions on disposal are recognised under other assets. Provisions. A provision is recognised when q.beyond has a legal or constructive obligation as a result of a past event, when it is likely that an outflow of resources embodying economic benefits will be required to settle such an obligation, and when the amount of obligation can be reliably estimated. Where q.beyond ex pects some or all of a recognised provision to be reimbursed, the reimbursement is recognised as a separate asset if the reimbursement is virtually certain. The expense for allocations to the provision is recognised in the income statement net of any reimbursement. • Severance payments. Provisions are recognised for any existing legal or constructive obligations to grant severance payments to employees in connection with the termination of employment. • Dismantling obligations. Provisions are recognised to cover the obligation to return the space let at a data centre and in office complexes to a contractually agreed state following expiry of the expected term of letting. • Restructuring measures. A provision for restructuring measures is recognised as soon as q.beyond has approved a detailed and formal restructuring plan and the respective measures have either begun or been publicly announced.
84 q.beyond Annual Report 2020 Pensions. The obligations for defined benefit plans are determined separately for each plan using the projec ted unit credit method and on the basis of actuarial surveys. Actuarial gains and losses are recognised under other reserves within other comprehensive income. The assumptions used by the company to measure ac tuarial obligations are described in Note 28. Obligations for contributions to defined contribution plans are expensed as soon as the associated work has been performed. Stock option plans. q.beyond’s employees may receive sharebased compensation in the form of equity in struments in return for work performed. q.beyond measures the expense of issuing such equity instruments on the basis of the fair value of the equity instrument at the grant or provision date (based on the stock option plans resolved or modified after 7 November 2002) and uses an appropriate option price model. Further de tails can be found in Note 36. The expense recognised for granting equity instruments and the correspond ing increase in equity are spread over the vesting period of the options. q.beyond does not recognise any expense for remuneration claims which cannot be exercised. If the terms and conditions of an equitybased remuneration agreement are modified, q.beyond recognises as a mini mum the level of expense that would have arisen in the absence of such modification. If an equitybased remuneration agreement is cancelled, q.beyond accounts for the agreement as if it had been exercised on the cancellation date and recognises the previously unrecognised expense immediately. Leases. Upon commencement of the respective contract, q.beyond assesses whether it is or contains a lease. This is the case when the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. q.beyond bases its assessment of whether a contract conveys the right to control an identified asset on the definition of a lease provided in IFRS 16. This method is applied to con tracts concluded on or after 1 January 2019. I q.beyond as lessee Upon the commencement or amendment of a contract containing a lease component, q.beyond divides the contractually agreed consideration on the basis of the relative standalone prices. For leased data centre space and for closed nonlease components in the case of leased vehicles, q.beyond has nevertheless opted to forego separating the nonlease components and has rather recognised the lease and nonlease compo nents as a single lease component. At the commencement date, q.beyond recognises an asset for the right thereby conveyed to use the leased asset (“rightofuse asset”) and a lease liability. The rightofuse asset is initially measured at cost, corresponding to the initial measurement of the lease liability, adjusted to account for payments made at or before the commencement date, plus any initial direct costs and the estimated costs of dismantling or removing the underlying asset or of restoring the underlying asset or the place in which it is located, and less any lease incentives received. In subsequent periods, the rightofuse asset is subject to straightline depreciation from the commencement date though to the end of the lease period. Furthermore, the rightofuse asset is corrected where necessary to account for impairments and adjusted to account for specified remeasurements of the lease liability.
Financial Report Notes to the Consolidated Financial Statements 85 The lease liability is initially recognised at the present value of the lease payments that have not yet been paid at the commencement date, discounted using the interest rate implicit in the lease or, if that cannot be readily determined, using q.beyond’s incremental borrowing rate. In general, q.beyond uses its incremental borrowing rate as the discount rate. To calculate its incremental borrowing rate, q.beyond obtains interest rates from various external financing sources and makes specified adjustments intended to account for the lease conditions and asset type. The lease payments included in the measurement of the lease liability comprise: • Fixed payments • Variable payments that depend on an index or a rate • Payments of penalties for terminating the lease if the lease term reflects the lessee exercising an option to terminate the lease The lease liability is measured at its updated carrying amount using the effective interest method. It is remea sured if the future lease payments change due to a change in an index or if q.beyond changes its assessment concerning the exercising of any extension or termination option. Any such remeasurement of the lease liability leads to a corresponding adjustment in the carrying amount of the rightofuse asset, or to recognition of such remeasurement through profit or loss if the carrying amount of the rightofuse asset is reduced to zero. q.beyond has drawn on the following significant options and practical expedients: • Rightofuse assets and lease liabilities are recognised as separate line items in the balance sheet. • Lease contracts for lowvalue assets are not treated as leases, but will rather be presented as current expenses in future as well. • Shortterm leases (less than twelve months) are not recognised in the balance sheet. • Leases of intangible assets are not within the scope of IFRS 16 but are rather governed by IAS 38. • Consistent with the internal management of the company, intragroup leases will in future basically still be presented in segment reporting as operating leases pursuant to IFRS 8. II q.beyond as lessor Upon the commencement or amendment of a contract containing a lease component, q.beyond divides the contractually agreed consideration on the basis of the relative standalone prices. For arrangements containing lease and nonlease components, q.beyond applies IFRS 15 to allocate the contractually agreed consideration. When q.beyond acts as a lessor, each lease is classified upon commencement of the contract either as a finance lease or as an operating lease.
86 q.beyond Annual Report 2020 To assess each lease, q.beyond has performed an overall assessment to ascertain whether the lease trans fers substantially all of the risks and rewards incidental to ownership of the underlying asset. The lease is classified as a finance lease where this is this case, and otherwise as an operating lease. In making this assessment, q.beyond accounts for certain indicators, such as whether the lease covers the major part of the economic life of the asset. q.beyond recognises the head lease and the sublease separately in cases in which the company acts as an intermediate lessor. q.beyond classifies the sublease by reference to the rightofuse asset arising from the head lease rather than by reference to the underlying asset. If the head lease is a shortterm lease, q.beyond classifies the sublease as an operating lease. q.beyond applies IFRS 9 requirements for derecognition and impairment to its net investment in a lease. Lease payments from operating leases are credited to sales on a straightline basis over the term of the lease. Contract liabilities. Oneoff payments that have been received before the related performance obligation has been satisfied are stated as contract liabilities and recognised as sales over the agreed contractual term. Taxes. q.beyond recognises current income tax assets and liabilities for current and prior periods at the amount expected to be reimbursed by or paid to the tax authorities. To calculate this, the company uses the tax rates and tax laws applicable to the relevant assessment period. Current income taxes relating to items recognised directly in equity are also recognised in equity. Deferred taxes are recognised using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. q.beyond recognises deferred tax liabilities for all taxable temporary differences, except: • Where the deferred tax liability arises from the initial recognition of goodwill • Where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and that at the time of the transaction does not affects taxable profit or loss • Where the deferred tax liability arises from taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the fore seeable future q.beyond recognises deferred tax assets for all deductible temporary differences and unused tax loss carry overs to the extent that it is probable that taxable profit will be available against which the deductible tem porary differences, tax loss carryovers not yet used and tax credits can be utilised except: • Where the deferred tax asset relating to the deductible temporary difference arises from the initial recog nition of an asset or liability in a transaction that is not a business combination and that at the time of the transaction affects neither the reported result for the period nor taxable profit or loss
Financial Report Notes to the Consolidated Financial Statements 87 • Where the deferred tax asset relates to deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, if it is probable that the temporary differences will not reverse in the foreseeable future and insufficient taxable profit will be available against which the tem porary differences can be utilised The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Previously unrecognised deferred tax assets are also reassessed at each balance sheet date and recognised to the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered. q.beyond measures deferred tax assets and liabilities at the tax rates expected to apply to the year when the asset is realised or the liability settled based on tax rates and tax laws that have been enacted as of the balance sheet date. Future changes in tax rates have to be accounted for if enacted or substantively enacted by the end of the reporting period. Deferred taxes in connection with items recognised directly in equity in other comprehensive income are likewise recognised directly in equity (through OCI) and not through profit or loss. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to taxes on income at the same taxable entity and due to the same tax authority. IFRIC 23 “Uncertainty over Income Tax Treatments” clarifies application of IAS 12 recognition and measure ment requirements in cases where there is uncertainty as to the income tax treatment. In recognising and measuring items, companies have to work with estimates and assumptions, for example as to whether each tax treatment should be considered independently or considered together with other uncertainties, whether reference is made to a likely amount or an expected value and whether any changes have arisen compared with the previous period. Detection risk is irrelevant when accounting for uncertain items. The accounting treatment is based on the assumption that the tax authorities will investigate the item in question and that they will have all relevant material at their disposal. This interpretation has not had any material implications for the consolidated financial statements of q.beyond AG. 5 Changes to accounting policies New, currently valid requirements q.beyond applied “Definition of a Business” (amendments to IFRS 3) and “Interest Rate Benchmark Reform” (amendments to IFRS 9, IAS 39 and IFRS 7) for the first time as of 1 January 2020. Furthermore, a number of other new standards also required firsttime application as of 1 January 2020. However, these did not have any material implications for the consolidated financial statements. q.beyond applied “Definition of a Business” (amendments to IFRS 3) to business combinations with acquisition dates on or after 1 January 2020
88 q.beyond Annual Report 2020 in order to assess whether it acquired a business or a set of assets. Details of the accounting methods are presented in Note 4. Details of subsidiaries acquired by q.beyond during the financial year under report can be found in Note 2. Effective date New or amended standards and interpretations 1 January 2020 Amendments to References to the IFRS Conceptual Framework Amendments to IAS 1 and IAS 8: Definition of Material Amendments to IFRS 3: Definition of a Business Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) 1 June 2020 Covid-19-Related Rent Concessions (Amendments to IFRS 16) Future requirements and new standards not yet applied The table below provides an overview of the latest amendments to IFRS requiring application in financial years beginning after 1 January 2020 for which premature application in financial years beginning on 1 Ja nuary 2020 is permitted. q.beyond has not made premature application of the new or amended standards when preparing these con solidated financial statements. The amended standards and interpretations are not expected to have any material implications for the consolidated financial statements. Effective date New or amended standards and interpretations 1 January 2021 Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, 1 January 2022 1 January 2022 1 January 2022 1 January 2022 1 January 2023 1 January 2023 Outstanding 2 IFRS 4 and IFRS 16) Onerous Contracts – Costs of Fulfilling a Contract (Amendments to IAS 37) Annual Improvements to IFRS, 2018 – 2020 Cycle Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) Reference to the Conceptual Framework (Amendments to IFRS 3) Classification of Liabilities as Current or Non-current (Amendments to IAS 1) IFRS 17 Insurance Contracts 1 and Amendments to IFRS 17 Insurance Contracts Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) 1 Premature application of IFRS 17 is only permitted with simultaneous application of IFRS 9 Financial Instruments. 2 The effective date for these amendments has been postponed indefinitely.
Financial Report Notes to the Consolidated Financial Statements 89 Notes to the Consolidated Income Statement 6 Revenues Revenues from hardware leases in the context of new multiple element arrangements amounted to € 142k in 2020 (2019: € 1,085k). A breakdown of revenues by geographical regions is presented in the tables below. Furthermore, the revenues thereby broken down are reconciled with the segments described in Note 35. € 000s Segments Cloud & IoT SAP Operation disposed of at 30 June 2019 Germany Geographical region Outside Germany Total 2020 2019 2020 2019 2020 2019 98,263 40,052 86,997 34,442 3,738 1,363 3,826 2,165 102,001 41,415 90,823 36,607 - 106,392 - 4,225 - 110,617 Total 138,315 227,831 5,101 10,216 143,416 238,047 Sectors Retail Manufacturing Energy Other Total Revenues in € 000s Revenues in % 2020 2019 2020 2019 54,724 29,485 9,857 49,350 54,414 25,818 12,555 145,260 38.2% 20.5% 6.9% 34.4% 22.9% 10.8% 5.3% 61.0% 143,416 238,047 100.0% 100.0% q.beyond generally draws on the practical expedient provided in IFRS 15.121, which permits outstanding performance obligations for contracts with expected original terms of no longer than one year and revenues recognised in line with their invoicing to be exempted from the disclosure obligation.
90 q.beyond Annual Report 2020 7 Expenses by category Of total research and development expenses of € 6,738k (2019: € 3,625k), an amount of € 0k was capita lised as development expenses in the 2020 financial year (2019: € 410k). € 000s Employee benefit expenses Procured input expenses Depreciation/amortisation of non-current and right-of use assets Maintenance expenses Consulting expenses Other personnel-related expenses Advertising expenses Other expenses 2020 2019 77,985 49,754 16,857 4,850 4,358 2,585 2,126 5,870 97,267 98,100 38,192 10,214 10,349 4,960 2,136 9,108 Cost of revenues, sales and marketing expenses, general and administrative expenses 164,385 270,326 8 Depreciation, amortisation and impairments Depreciation, amortisation and impairments are allocated to individual corporate functions as follows: € 000s Cost of revenues Sales and marketing expenses General and administrative expenses Other operating expenses Depreciation, amortisation and impairments 2020 2019 11,540 142 5,175 - 31,056 781 6,355 14,172 16,857 52,364
Financial Report Notes to the Consolidated Financial Statements 91 9 Other operating income and expenses € 000s 2020 2019 Income from subleases Income from commercial services Non-period income from electricity cost refunds Income from trade receivables previously written down Sundry non-period other income Sundry other operating income Income from insurance compensation Non-period income from payroll and transport taxes Income from disposal of non-current assets Profit on sale of Plusnet companies 1,188 372 304 274 259 142 170 103 38 - 926 2,239 - 1 110 498 - 13 28 135,253 Other operating income 2,850 139,068 € 000s 2020 2019 Non-period expenses for social security payments Sundry other operating expenses Dismantling obligations Negative deposit rates Losses from disposal of non-current assets Property tax Non-period insurance expenses Sundry non-period other operating expenses Disposal costs for Plusnet companies Write-down of goodwill 169 155 125 87 52 60 37 22 - - - 873 - 104 267 60 - 113 3,262 14,172 Other operating expenses 707 18,851 10 Financial result The financial expenses of € 464k (2019: € 6,108k) mainly comprise interest expenses of € 401k for leases recognised in accordance with the IFRS 16 leasing standard (2019: € 2,051k). The net interest charge on pension provisions amounts to € 34k (2019: € 94k). No borrowing costs directly attributable to qualifying assets were incurred.
92 q.beyond Annual Report 2020 11 Income from associates q.beyond owns 25.15% of the shares in aiXbrain GmbH, Aachen, which was founded on 7 June 2019. The company’s annual net deficit for 2020 amounted to € 157k. The associated loss on the investment recog nised at equity therefore amounts to € 40k. The table below presents the key financials of aiXbrain GmbH in summarised form. The table also presents a reconciliation of the summarised key financials with the carrying amount of the investment held by q.beyond in aiXbrain GmbH. € 000s Shareholding Non-current assets Current assets Non-current liabilities Current liabilities Net assets (100%) Carrying amount of investment in associate Revenues Net income q.beyond’s share of comprehensive income 2020 25.15% 15 149 (150) (12) 2 1 88 (157) (40) The shareholding is held as a financial rather than a strategic investment. Earnings at aiXbrain GmbH are attributable to continuing operations. No other income or expenses were incurred. Further information can be found in Note 37. 12 Earnings per share The calculation of basic earnings per share is based on the consolidated net income attributable to ordinary shareholders in the parent company and the weighted average number of shares in circulation in the year under report. A total of 124,316,327 shares were in circulation throughout the 2020 financial year. The calculation of diluted earnings per share is based on the consolidated net income attributable to ordi nary shareholders in the parent company and the weighted average number of shares in circulation in the year under report following adjustment for all dilutive effects of the convertible bonds issued in connection with stock option plans.
Financial Report Notes to the Consolidated Financial Statements 93 € 000s 2020 2019 Consolidated net income attributable to shareholders in the parent company (basic) (19,897) 73,619 Share-based compensation in connection with subscribed convertible bonds - - Consolidated net income attributable to shareholders in the parent company (diluted) (19,897) 73,619 Shares issued Weighted average number of shares issued (basic) Effect of conversion of convertible bonds Weighted average number of shares issued (diluted) 2020 2019 124,316,237 124,172,487 30,500 - 124,346,737 124,172,487 The conversion effects for convertible bonds resulting from stock option plans and the associated share based compensation only account for those convertible bonds for which the conditions for conversion were met at the balance sheet date, even if the respective holding period prior to conversion had not yet expired. 13 Personnel expenses and employees € 000s Wages and salaries Employer social security contributions (pension insurance) Employer social security contributions (other) Pension expenses Non-cash share-based compensation Employee benefit expenses 2020 2019 67,605 4,969 5,203 218 (10) 85,131 5,606 6,183 334 13 77,985 97,267 Wages and salaries include expenses of € 3,942k for the termination of employment contracts (2019: € 7,112k).
94 q.beyond Annual Report 2020 During the 2020 financial year, q.beyond had an average total of 896 employees (2019: 1,091). The following table presents the distribution of employees by key corporate function: Sales and marketing Technology and consulting Administration Head office departments Number of employees by corporate function (average) 2020 2019 95 726 68 7 896 145 836 101 9 1,091 In response to the Covid19 pandemic and its associated impact on the economy and the labour market, in the German Ordinance Facilitating ShortTime Work (KugV), which was dated 25 March 2020 and took retrospective effect as of 1 March 2020, the Federal Government adopted specific temporary measures fa cilitating access to the shorttime allowance and to reimbursements by the Federal Labour office of social security contributions borne by employers upon the submission of the relevant applications. Within this programme, eligible companies were able to apply for a grant amounting to 60% of the net salary per em ployee (and 67% for employees with at least one child) for the first three months of participation in the scheme. This was intended to assist such companies in maintaining their ability to pay monthly salaries to furloughed employees. For the months from May to August, q.beyond received shorttime allowances of € 177k and social security contributions of € 165k from the Federal Labour Office. Disbursements and reimbursements of shorttime allowances represent transitory items. As a result, neither income nor expenses require recognition for these items in the income statement. By contrast, reimburse ments by the Federal Labour office of the social security expenses borne by the employer represent perfor mancebased grants pursuant to IAS 20 and are recognised at q.beyond as a reduction in personnel expenses.
Financial Report Notes to the Consolidated Financial Statements 95 Notes to the Consolidated Balance Sheet 14 Property, plant and equipment € 000s Land and buildings Network and technical equipment Operational and business equipment Total Gross value at 1 Jan. 2019 29,621 256,720 27,437 313,778 Additions Disposals Disposals due to deconsolidation / Plusnet sale Reclassifications Gross value at 31 Dec. 2019 Acquisitions due to business combinations Additions Disposals Reclassifications Gross value at 31 Dec. 2020 Accumulated depreciation and impairments at 1 Jan. 2019 Additions Disposals Disposals due to deconsolidation / Plusnet sale Accumulated depreciation and impairments at 31 Dec. 2019 Additions Disposals Accumulated depreciation and impairments at 31 Dec. 2019 Carrying amounts at 31 Dec. 2019 Carrying amounts at 31 Dec. 2020 11 - - - 29,632 - 48 - - 7,575 (580) 620 (93) 8,206 (673) (177,393) (6,557) (183,950) (170) 86,152 2 4,836 (210) (178) 170 - 21,577 137,361 66 483 (571) 178 68 5,367 (781) - 29,680 90,602 21,733 142,015 7,330 804 - - 8,134 797 - 8,931 21,498 20,749 214,110 9,895 (573) 19,836 1,767 (88) 241,276 12,466 (661) (161,090) (6,469) (167,559) 62,342 6,147 (194) 68,295 23,810 22,307 15,046 1,279 (537) 15,788 6,531 5,945 85,522 8,223 (731) 93,014 51,839 49,001 As of 31 December 2020, the “Network and technical equipment” line item included assets under construc tion of € 346k (2019: € 352k). These related to the replacement of technical equipment at data centres. In the income statement, q.beyond recognises depreciation and amortisation within the cost of revenues, sales and marketing expenses and general and administrative expenses line items.
96 q.beyond Annual Report 2020 15 Goodwill Goodwill amounted to € 20,993k as of 31 December 2020 (2019: € 18,365k). In connection with the acqui sition of Incloud Engineering GmbH, initial consolidation as of 31 July 2020 resulted in the addition of good will amounting to € 2,628k, which was allocated to the Cloud & IoT segment. Consistent with IFRS 8 requirements, the company’s internal organisational structure used by the manage ment for business decisions and performance assessments has been referred to as the basis for delineating segments. Accordingly, segment reporting is aligned to product structures. This has resulted in the seg ments of Cloud & IoT and SAP. The groups of cashgenerating units (CGUs) to which goodwill has been allocated correspond to the operat ing segments determined for the companies included in consolidation pursuant to IFRS 8.5. The operating segments represent the lowest level of reporting at the companies included in consolidation for which good will is systematically monitored. Taking due account of the acquisition of Incloud Engineering GmbH, the carrying amount of goodwill is allo cated to segments as presented below. The redistribution of goodwill in the Consulting segment was based on the relevant values in use of the units within the segment. € 000s Telecom- munications Consulting Cloud Cloud & IoT SAP Carrying amount at 31 Dec. 2019 Reallocation Carrying amount at 1 Jan. 2020 Incloud Engineering Carrying amount at 31 Dec. 2020 894 (894) 10,409 (10,409) 7,062 (7,062) - - - - - - - - - - - 8,822 2,628 11,450 - - 9,543 - 9,543 Due to the amended segmentation from 1 January 2020 onwards, the recoverability of goodwill was reviewed as of this date directly prior to being reallocated. The impairment test as of 1 January 2020 did not identify any indication that goodwill was impaired. q.beyond determines the recoverable amount of the CGUs as their value in use and refers here to the cash flow forecasts from continued use of the CGUs based on the Management Board’s planning for the company for a threeyear period. This planning accounts for management expectations with respect to the future per formance of individual business units and also takes due account of internal assumptions concerning the marketing opportunities for innovative applications, as well as of past experience.
Financial Report Notes to the Consolidated Financial Statements 97 The Cloud & IoT segment pools all IT services and offers a broad range of IoT services. Revenue growth in a doubledigit percentage range has been assumed for the detailed planning period. Assuming that expenses do not rise to the same extent as revenues, a robust increase in EBITDA, and thus also in the EBITDA margin, is expected. The sustainable growth rate is assumed to amount to 1.0%. The revenue growth generated in the SAP segment in 2020 is expected to continue in the detailed planning period. In particular, the need on the part of customers to convert to S/4HANA will lead to substantial re venue growth in the years covered by the planning period. This revenue performance and the increasing deployment of internal rather than external staff will significantly increase EBITDA and the EBITDA margin. A sustainable growth rate of 1.0% has been assumed for the SAP segment. To discount the cash flows expected for the respective CGUs, the segmentspecific weighted average costs of capital (WACC) were determined. Segmentspecific beta factors were derived by reference to peer group data. Segmentspecific pretax discount rates are as follows: Cloud & IoT SAP 2020 9.05% 8.69% The discount rate is a pretax key figure. It has been based on the yield on government bonds issued by the government on relevant markets and denominated in the same currencies as the underlying cash flows. This discount rate is adjusted to account for a risk premium reflecting the higher overall risk involved in an equity investment and the specific risk profiles of individual CGUs. The values in use of the Cloud & IoT CGU groups are € 36,413k higher than the carrying amounts of the assets. The calculation of the CGUs’ value in use is subject to forecasting uncertainties, particularly in respect of the development in prices and market shares, with these uncertainties requiring consideration when planning revenues, gross profit, the capex ratio and the discount rate. Various scenario analyses were performed for the impairment tests. The Management Board has deter mined that one change deemed possible in a material assumption in the Cloud & IoT segment might lead the carrying amount to exceed the recoverable amount. All other factors being equal, an impairment require ment would arise if revenues in the final planning year, and thus in perpetuity, were to fall 12.8% short of the sales of € 169,266k assumed in the plan.
98 q.beyond Annual Report 2020 16 Leases q.beyond as lessee In its capacity as lessee, q.beyond leases data centre space, office space, car parking spaces, dark fibre lines and vehicles. Pursuant to IFRS 16, the company has recognised rightofuse assets and lease liabilities for most of these lease contracts, i.e. the leases are recognised in the balance sheet. Rightofuse assets are initially measured in the amount of the respective lease liabilities, adjusted to ac count for any lease payments made in advance or deferred, and subsequently at amortised cost. Rightof use assets are subject to straightline depreciation over the term of the respective contract. q.beyond tested its rightofuse assets for impairment at the end of the financial year and concluded that there were no indications of impairment. In applying IFRS 16, q.beyond drew on a number of practical expedients. Specifically, the company: • Applied a single discount rate for a portfolio of similarly structured lease contracts (e.g. real estate contracts with similar remaining terms) • Did not recognise any rightofuse assets or lease liabilities for those leases with terms ending within 12 months of the date of initial application • Did not recognise any rightofuse assets or lease liabilities for those leases for which the underlying asset is of low value (e.g. IT equipment) The terms of contracts valid as of 31 December 2020 are presented in the following table: Type of contract Lease contracts for data centre space Lease contracts for office space Lease contracts for car parking spaces Lease contracts for dark fibre lines Lease contracts for cars Term in years 1 – 6 1 – 6 1 – 6 3 1 – 4
Financial Report Notes to the Consolidated Financial Statements 99 A number of lease contracts, mainly for real estate, include extension and termination options. In determin ing the terms of these contracts, due account is taken of all facts and circumstances offering an economic incentive to exercise extension options or not exercise termination options. q.beyond only accounts for amendments to the respective contractual terms due to the exercising or nonexercising of such options when these are reasonably certain to occur. The company estimates that the potential future lease payments resulting from exercising the extension options on significant lease contracts would result in an undiscounted lease liability of € 21.8 million. The opening values, additions, disposals and amounts of depreciation for the rightofuse assets underlying the respective classes are presented in the table below: € 000s Gross value at 1 Jan. 2019 Additions Disposals Real estate Technical equipment Operational and business equipment Total 52,555 4,587 (2,733) 58,224 6,624 (4,529) 1,088 211 (26) (601) - 672 - 457 (132) 997 - 385 (4) 111,867 11,422 (7,288) (92,835) 1,739 24,905 376 1,332 (341) 26,272 - 19,939 (97) Disposals due to deconsolidation / Plusnet sale (31,233) (61,001) Reclassifications Gross value at 31 Dec. 2019 Acquisitions due to business combinations Additions Disposals Gross value at 31 Dec. 2020 Accumulated depreciation and impairments at 1 Jan. 2019 Additions Disposals - 23,176 376 230 (77) 23,705 - 6,857 (85) 1,739 1,057 - 645 (132) 1,570 - 12,697 (8) Disposals due to deconsolidation / Plusnet sale (1,585) (13,166) (120) (14,871) Reclassifications Accumulated depreciation and impairments at 31 Dec. 2019 Additions Disposals Accumulated depreciation and impairments at 31 Dec. 2020 Carrying amounts at 31 Dec. 2019 Carrying amounts at 31 Dec. 2020 - 5,187 4,206 (107) 9,286 17,989 14,419 806 330 425 (50) 705 727 865 - 261 320 (126) 455 411 542 806 5,778 4,951 (283) 10,446 19,127 15,826
100 q.beyond Annual Report 2020 Amounts recognised in the income statement in addition to depreciation: € 000s IFRS 16 leases Interest expenses on lease liabilities Interest income on subleasing of right-of-use assets in finance leases Expenses for short-term leases Expenses for low-value asset leases, except short-term leases of low-value assets Amounts recognised in the statement of cash flows: € 000s Total outflow of cash for leases The terms of the lease liabilities are presented in the table in Note 40. q.beyond as lessor 2020 401 4 35 79 2020 5,651 Operating leases. q.beyond agrees leaselike components with its customers, in this case mainly for data centre space rental. Here, the company concludes part amortisation contracts without purchase options or price adjustment clauses. The lease contracts have average terms of three to five years (and in some cases provide for extension options). In 2020, lease income of € 19,088k was recognised under revenues (2019: € 26,315k). The following table presents a maturity analysis for lease receivables and shows the undiscounted lease payments due to be received after the balance sheet date:
Financial Report Notes to the Consolidated Financial Statements 101 € 000s Operating lease contracts Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Operating lease contracts Finance leases 2020 17,366 12,781 10,648 7,743 7,216 21,326 77,080 q.beyond acts as lessor in some specialised multiple element arrangements and subleases. The following table presents a maturity analysis of the future minimum lease payments from finance leases: € 000s 2021 2022 2023 2024 Total Minimum lease payments receivable in future Lease payments Discounting 2,406 (25) 1,965 (19) Present values 2,381 1,946 30 (1) 29 7 - 7 4,408 (45) 4,363 In 2020, an amount of € 2,736k was recognised as lease payments (2019: € 1,619k).
Financial Report Notes to the Consolidated Financial Statements 103 In its income statement, q.beyond reports depreciation and amortisation within the cost of revenues, sales and marketing expenses and general and administrative expenses line items. 18 Trade receivables In terms of their historic recoverability, receivables that are not more than 180 days past due showed a very low default rate of 0.08% over the past five years. Unless the creditworthiness of the respective customer changes significantly in the first 180 days after performance of the respective service, based on historic em pirical values and with due consideration of materiality factors q.beyond therefore does not recognise any allowance in this period. In response to the Covid19 pandemic, a risk allowance that is almost four times higher has been recognised for these receivables for the first time in the 2020 financial year. This is intended to cover the expected default on these receivables. To assist in the calculation of the default risk, the devel opment in Germany’s gross domestic product (GDP) in real terms between 2015 and 2019 was set in relation to the GDP expected in the 2020 financial year. The resultant factor was multiplied by the historic default rate of 0.08 and led to a default rate of 0.3%. Receivables that are more than 180 days past due are considered on an individual case basis, i.e. all receiv ables more than 180 days past due are individually tested for impairment. As of 31 December 2020, trade receivables amounting to € 585k were impaired (2019: € 213k). The indivi dual allowances schedule and provision for expected credit losses developed as follows: € 000s Allowance at 1 January Added and expensed Utilised Reversed Disposal due to deconsolidation / Plusnet sale Allowance at 31 December 2020 2019 213 441 - (69) - 585 3,689 427 (129) (63) (3,711) 213
104 q.beyond Annual Report 2020 The allowance recognised for trade receivables as of 31 December 2020 is structured as follows: € 000s Receivables Expected credit loss Individual allowance Total Default rate (weighted average) Gross carrying amount Allowance Impaired credit- worthiness 0.3% 81.4% 37,064 585 (109) (476) no yes 37,649 (585) 37,064 Receivables of € 248k were written down in the financial year under report. These mainly (€ 243k) related to a customer that filed for bankruptcy during the financial year. Incoming payments of € 263k were received in the 2020 financial year on previously written down receiv ables with carrying amounts of € 340k. 19 Prepayments Noncurrent prepayments of € 1,664k (2019: € 1,401k) and current prepayments of € 3,214k (2019: € 3,525k) chiefly consist of prepayments for service and maintenance agreements. 20 Inventories The inventories recognised as of 31 December 2020 exclusively relate to consumables of € 57k (2019: € 22k). 21 Other assets The other current assets of € 3,514k (2019: € 12,610k) mainly include receivables of € 1,357k in connection with finance lease contracts (2019: € 1,698k), paid cash deposits of € 885k (2019: € 978k) and receivables of € 855k due from the tax authorities (2019: € 1,004k). The receivables due in connection with finance lea se contracts include receivables of € 730k for multiple element arrangements (2019: € 960k) and receivab les of € 627k for subleases (2019: € 738k). Other noncurrent assets with remaining terms of more than one year amount to € 2,061k (2019: € 4,819k) and mainly comprise receivables in connection with finance lease contracts of € 956k (2019: € 2,455k) and
Financial Report Notes to the Consolidated Financial Statements 105 paid cash deposits of € 895k (2019: € 2,105k). The receivables due in connection with finance lease cont racts include receivables of € 632k for subleases (2019: € 1,507k) and of € 324k for multiple element arran gements (2019: € 948k). Assets include contract acquisition costs of € 199k (2019: € 287k). Of these, € 41k are noncurrent (2019: € 164k) and € 158k current (2019: € 123k). These assets are written down over the terms of the underlying contracts. 22 Cash and cash equivalents Cash and cash equivalents amounted to € 44,925k at the 2020 balance sheet date (2019: € 66,031k) and consisted of cash at banks and cash on hand. 23 Issued capital As of 1 January 2020, issued capital at the company amounted to € 124,172,487 and comprised 124,172,487 nopar registered ordinary shares. Conversion rights relating to stock option plans were exercised during the financial year under report, as a result of which 300,000 convertible bonds were converted into shares. The changes in the number of shares and in issued capital are as follows: No-par ordinary shares € Number of shares at 1 January 2020 Addition due to issue of no-par ordinary shares 124,172,487 300,000 124,172,487 300,000 Number of shares at 31 December 2020 124,472,487 124,472,487 In the 2020 financial year, a dividend of € 0.03 per share with dividend entitlement was distributed for the previous year (€ 3,725k). 24 Capital reserve The capital reserve amounted to € 144,160k as of 31 December 2020 (2019: € 144,132k). This amount also includes the deferred sharebased compensation for the stock option plan. Of the yearonyear change, € 38k is due to the exercising of convertible bonds and € 10k to noncash sharebased compensation.
106 q.beyond Annual Report 2020 25 Authorised and conditional capital Authorised capital. By resolution of the Annual General Meeting on 20 May 2020, the Management Board is authorised, subject to approval by the Supervisory Board, to increase the company’s issued capital by up to a total of € 37,000,000 on one or several occasions up to 19 May 2025 by issuing new nopar registered shares in return for contributions in cash and / or kind (Authorised Capital 2020). As a general rule, subscrip tion rights should be granted to shareholders. Subscription rights may also be granted to shareholders in such way that the new shares are taken over by one or several banks or companies defined in § 186 (5) Sen tence 1 of the German Stock Corporation Act (AktG) with the obligation to offer them to shareholders for subscription (indirect subscription right). When drawing on authorised capital, the Management Board may, subject to approval by the Supervisory Board, exclude shareholders’ subscription rights in five cases: (1) to exclude residual amounts from share holders’ subscription rights; (2) when the new shares are issued in return for contributions in kind in the con text of business combinations or for the purpose of acquiring companies, parts of companies, interests in companies or of other assets or of rights to acquire other assets, including receivables due to the company; (3) if the new shares are issued in return for cash contributions and if, at the time of final stipulation, the is sue price for each new share does not fall materially short of the stock market price of company shares of the same class and furnished with the same rights that are already listed. The number of shares issued to the exclusion of subscription rights in this way may not exceed a total of 10% of issued capital either at the time at which this authorisation takes effect or at the time at which the authorisation is drawn on. Other shares issued or disposed of during the term of this authorisation to the exclusion of subscription rights with direct or corresponding application of § 186 (3) Sentence 4 AktG must be imputed to this 10% limit, as must any shares issued to satisfy option and / or conversion rights or obligations in connection with warrant and / or convertible bonds and / or profit participation rights to the extent that such bonds or profit participa tion rights are issued during the term of this authorisation to the exclusion of subscription rights with corre sponding application of § 186 (3) Sentence 4 AktG; (4) to the extent necessary to issue subscription rights for new shares to the bearers or creditors of warrant and / or convertible bonds with option and / or conversion rights or obligations that were or are still to be issued by the company or an affiliated group company pur suant to § 18 AktG in which the company directly or indirectly holds a majority stake, with such subscription rights for new shares being issued to the extent to which the aforementioned bearers or creditors would be entitled having exercised their option or conversion rights or satisfied their option exercise or conversion obligations; (5) if the new shares are to be issued to employees of the company, employees of a company affiliated with the company, or members of the management of a company affiliated with the company in the context of share participation or other sharebased plans, in which case the employment relationship with the company or, in the case of an affiliated company, the affiliation with the company and the employ ment relationship with such affiliated company must still pertain at the time at which the issue of shares is approved; to the extent permitted by § 204 (3) Sentence 1 AktG, the contribution payable for the new shares may be covered from that portion of the annual net surplus which the Management and Supervisory Boards are permitted to allocate to other revenue reserves pursuant to § 58 (2) AktG. The number of shares issued to the exclusion of subscription rights in this way may not exceed a total of 5% of issued capital either at the time at which this authorisation takes effect or at the time at which the authorisation is drawn on; and only to the extent that the shares issued to the exclusion of shareholders’ subscription rights in return for cash
Financial Report Notes to the Consolidated Financial Statements 107 contributions or contributions in kind on the basis of and during the term of this authorisation or on the basis of another authorised capital do not exceed a total of 20% of issued capital either at the time at which this authorisation takes effect or at the time at which the authorisation is drawn on. Treasury shares disposed of to the exclusion of subscription rights during the term of this authorisation are imputed to the aforemen tioned 20% limit, as are any new shares to be issued to the exclusion of subscription rights during the term of this authorisation as a result of warrant and / or convertible bonds and / or option or conversion rights. Any shares to be issued on the basis of convertible bonds resulting from any stock option plan at q.beyond AG which benefits Management Board members and company employees or members of the management and employees at affiliated companies are exempted from the aforementioned imputation. This authorised capital is intended to enable q.beyond AG to react swiftly and flexibly to opportunities arising on the capital market and where necessary to obtain equity capital on favourable terms. No use was made of authorised capital in the past financial year. Conditional capital. The company had conditional capital totalling € 27,451,500 as of the balance sheet date. This was divided into Conditional Capital IV (€ 25,000,000), Conditional Capital VIII (€ 2,001,500) and Con ditional Capital IX (€ 450,000). Conditional Capitals VIII and IX serve to secure the conversion rights of bearers of convertible bonds that q.beyond AG has issued or may issue within the framework of existing stock option plans to Management Board members (Conditional Capital IX) or to Management Board members, managing directors of affiliated companies, employees of q.beyond AG and affiliated companies (Conditional Capital VIII). Conditional Capital IV may be used by the Management Board to create tradable warrant and / or convertible bonds. The Management Board is authorised by resolution of the Annual General Meeting on 20 May 2020 to issue such instruments in order to access additional attractive financing alternatives on the capital mar ket, depending on market conditions, over and above traditional possibilities of taking up debt and equity capital. The convertible bonds may be issued in return for both cash contributions and contributions in kind. The Management Board is authorised, subject to approval by the Supervisory Board, to exclude shareholders’ subscription rights to these warrant and / or convertible bonds in four cases: (1) to settle residual amounts resulting from the subscription ratio; (2) when the bonds are issued in return for contributions in kind, par ticularly in the context of company acquisitions; (3) if, in the case of bonds being issued in return for cash contributions pursuant to § 186 (3) Sentence 4 AktG, the issue price does not fall materially short of the market value of the bonds; and (4) to the extent necessary to issue subscription rights to the bearers or creditors of warrant and / or convertible bonds previously issued in order to avoid dilution of their respective holdings. To date, the Management Board has not acted on the authorisation to issue tradable warrant and / or convertible bonds. The exclusion of shareholders’ subscription rights pursuant to § 186 (3) Sentence 4 AktG may only apply for the use of treasury stock, for the issue of new shares from authorised capital and for the issue of warrant and / or convertible bonds corresponding up to an aggregate total of no more than 10% of issued capital dur ing the term of the respective authorisation. Apart from this, the exclusion of shareholders’ subscription rights, irrespective of the legal grounds, for the use of treasury stock, for the issue of new shares from authorised capital and for the issue of warrant and / or convertible bonds (including those issued within q.beyond’s stock option plans) may not exceed an aggregate total of 20% of issued capital during the term of the respective authorisation.
108 q.beyond Annual Report 2020 26 Other reserves The development in this item in the 2020 and 2019 financial years is presented in the consolidated statem ent of changes in equity. Other reserves were structured as follows as of 31 December: € 000s Other reserves Actuarial gains / losses on pension plans Deferred taxes Other reserves 27 Other financial liabilities 2020 2019 (3,660) 1,194 (3,186) 1,039 (2,466) (2,147) Other financial liabilities comprise convertible bonds (see Note 36) of € 21k (2019: € 25k) and bank liabilities of € 2k (2019: € 0k). Information about current liabilities under finance lease arrangements can be found in Note 16. 28 Pension provisions q.beyond operates defined benefit pension plans which are partially secured through reinsurance policies that are classified as plan assets in accordance with IAS 19. Pension provisions cover the obligations resulting from pension commitments made to one member of the Supervisory Board during his previous activity as a member of q.beyond’s Management Board and to two former Management Board members at the former INFO AG, as well as obligations resulting from pension commitments made to parts of q.beyond’s workforce in previous years. The pension entitlements relate to defined benefits which depend primarily on the period of service with the company and the relevant level of pensionable salary. These defined benefit plans expose q.beyond to actuarial risks, including longevity and interest rate risks. The pension provisions for defined benefit plans are measured using the projected unit credit method in accordance with the requirements of IAS 19 and take future developments into account. The biometric cal culations were based on the 2018 G biometric tables newly published in 2018 by Prof. Dr. Klaus Heubeck – Lizenz HeubeckRichttafelnGmbH, Cologne. q.beyond recognises actuarial gains and losses directly through other comprehensive income. In 2020, ac cumulated actuarial losses after taxes of € 2,466k were recognised through other comprehensive income (2019: € 2,147k). Total actuarial losses after taxes came to € 319k in the 2020 financial year (2019: € 876k).
Financial Report Notes to the Consolidated Financial Statements 109 € 000s 2020 2019 Present value of defined benefit obligation at 1 January Deconsolidation Interest cost Actuarial losses (gains) Due to changes in financial assumptions Due to experience adjustments Benefits paid Present value of defined benefit obligation at 31 December Fair value of plan assets at 1 January Interest income Income / expenses from plan assets excluding amounts included in net interest income and expenses Amounts paid out Company contributions to plan assets Fair value of plan assets at 31 December Pension provision at 31 December Discount factor Rate of compensation increase Pension indexation 8,423 - 46 400 74 (261) 8,682 (2,130) (12) (4) - (210) (2,356) 7,452 (110) 130 1,263 52 (364) 8,423 (1,907) (36) 1 17 (205) (2,130) 6,326 6,293 0.40% 2.00% 1.00% 0.54% 2.00% 1.00% Expenses for plan assets excluding amounts included in interest income are reported under other compre hensive income. The income and expenses recognised in the income statement for defined benefit plans are structured as follows: € 000s Pension expenses Interest cost Income from plan assets recognized through profit or loss Pension expenses 2020 2019 46 (12) 34 130 (36) 94
110 q.beyond Annual Report 2020 Pension payments of € 368k and funding contributions to plan assets of € 210k are expected in 2021. If the aforementioned material assumptions used to measure pension obligations as of the balance sheet date were to change by half a percentage point in each case, pension obligations would increase / decrease as follows: € 000s Change in interest rate + 0.5% Change in interest rate -0.5% Change in pension obligations Pension obligations (627) 705 8,055 9,387 As of 31 December 2020, the weighted average term of the defined benefit obligation came to 15.3 years (2019: 15.1 years). Employer contributions to defined contribution plans amounted to € 4,969k in the 2020 financial year (2019: € 5,606k). 29 Other provisions and tax provisions (a) Other provisions € 000s Restruc- turing Redundancy payments Dismant- ling Onerous contracts Litigation risks Warranties Total Balance at 1 January 2020 4,565 2,382 440 190 Taken over in a business combination Added Utilised Reversed - - 2,797 1,044 (2,431) (2,309) (12) (41) Balance at 31 December 2020 4,919 1,076 Non-current Current Balance at 31 December 2020 - 4,919 4,919 - 1,076 1,076 - 125 - - 565 565 - 565 - - (83) - 107 - 107 107 1 - 65 - - 66 - 66 66 - 7,578 32 - - (8) 24 - 24 24 32 4,031 (4,823) (61) 6,757 565 6,192 6,757
Financial Report Notes to the Consolidated Financial Statements 111 Restructuring. During 2020, the Management Board decided to further optimise cost structures in its Cloud & IoT segment. q.beyond has recognised a provision of € 2,797k to cover redundancy payments to employees. Work on implementing all restructuring measures, including those initiated in previous years, is expected to be completed by the end of 2021. Redundancy payments. Provisions of € 1,044k were capitalised in 2020 for redundancy payments to em ployees. These provisions will be utilised in 2021. The estimated costs are based on the terms of the relevant agreements. Dismantling. The dismantling obligation of € 565k (2019: € 440k) mainly comprises an amount of € 440k (2019: € 440k) for a rented data centre for which the rental term expires on 30 April 2023, as well as an amount of € 100k (2019: € 0k) for a leased office building whose rental term expires on 31 December 2022. Onerous contracts. These mainly relate to ancillary costs at a rented property where the object of the rental agreement can only be used to a diminished extent. The rental term of the onerous contracts expires as of 31 December 2022. (b) Tax provisions € 000s Balance at 1 January 2020 Added Utilised Reversed Balance at 31 December 2020 Corporate income tax and solidarity surcharge Trade tax Interest as per § 233a of the Fiscal Code (AO) 27 130 - - 157 27 141 - - 168 - 6 - - 6 Total 54 277 - - 331
112 q.beyond Annual Report 2020 30 Trade payables and other liabilities € 000s Current Trade payables Contract liabilities Other liabilities Current 2020 2019 10,392 670 11,374 10,350 488 17,755 22,436 28,593 Other liabilities mainly includes personnel liabilities of € 7,913k (2019: € 7,357k) and liabilities of € 1,815k to the tax authorities (2019: € 1,371k). 31 Deferred income Consideration paid in advance for services that have not yet been performed or goods that have not yet been delivered is deferred on a timeapportioned basis over the term of the contract or over the period for which the customer relationship is expected to last.
Financial Report Notes to the Consolidated Financial Statements 113 Notes to the Consolidated Statement of Cash Flows The statement of cash flows is divided into three sections: operating, investing and financing activities. The cash flow from operating activities has been calculated using the indirect method. The cash flow from financing activities includes outgoing payments for the repayment of lease liabilities. Interest income is recognised in the cash flow from operating activities, while interest payments are ac counted for in the cash flow from financing activities. Tax payments are reported in their full amount in the cash flow from operating activities, as it is not possible to allocate these items to individual segments. 32 Cash flow from operating activities The cash flow from operating activities amounted to € 4,966k in the 2020 financial year and thus improved by € 12,744k compared with the previous year. This was essentially due to the yearonyear improvement in earnings before taxes following adjustment of the previous year’s figure to exclude the profit generated from the sale of subsidiaries and the goodwill im pairments recognised. 33 Cash flows from investing activities and financing activities The cash flow from investing activities amounted to € 7,087k in the 2020 financial year (2019: € 173,193k). The positive cash flow from investing activities reported in the previous year was exclusively attributable to the sale of Plusnet GmbH. Payments for the acquisition of property, plant and equipment and of intangible assets fell yearonyear by € 6,853k. The acquisition of shares in Incloud Engineering GmbH led to an out flow of funds amounting to € 1,515k. The cash flow from financing activities amounted to € 9,053k in the 2020 financial year (2019: € 143,070k). The outflow of funds was primarily due to payments of € 5,651k in connection with lease liabilities (2019: € 18,771k) and dividend payments of € 3,725k to shareholders in q.beyond AG (2019: € 3,725k). € 000s Financial liabilities Lease liabilities Financial liabilities 1 Jan. 2020 Cash-effective changes 31 Dec. 2020 Non-cash- effective changes 22,198 (6,052) 1,722 17,868 22,198 (6,052) 1,722 17,868
114 q.beyond Annual Report 2020 Other Disclosures 34 Subsidiaries The consolidated financial statements include the following companies: € 000s Shareholdings in % Equity 31 Dec. 2020 Net income 2020 Subsidiary, headquarters, country (Disclosures as per HGB annual financial statements) IP Colocation GmbH, Nuremberg, Germany IP Exchange GmbH, Nuremberg, Germany Incloud Engineering GmbH, Darmstadt, Germany Q.BEYOND, SIA, Riga, Latvia 100.00 100.00 100.00 100.00 3,705 465 612 161 364 (35) 457 (91) For all of its subsidiaries, the control exercised by q.beyond is attributable to its share of voting rights. Information about the acquisition of Incloud Engineering GmbH can be found in Note 2. 35 Segment reporting In accordance with the provisions of IFRS 8, the basis for identifying segments consists of the company’s internal organisational structure as used by corporate management for business administration decisions and performance assessments. New segmentation since 1 January 2020. Since the first quarter of 2020, the Colocation business has, to gether with the former Cloud and Outsourcing segments, formed the new “Cloud & IoT” segment. This way, q.beyond has accounted for the amended management of the company following the Plusnet sale, as well as the fact that customers are increasingly combining services from these business fields. This segment is sup plemented by the “SAP” segment. Cloud & IoT. This segment pools all IT services that assist companies in gradually transitioning to the digital age and also includes a broad portfolio of IoT services. Customers are increasingly combining IoT and IT ser vices. All major IT functions can be procured as turnkey cloud modules or as individual outsourcing services. These range from virtual IT workplaces and business applications to flexible IT resources through to compre hensive communications and network services. These activities are supplemented by colocation services involving the provision of data centre capacities.
Financial Report Notes to the Consolidated Financial Statements 115 The IoT business also covers the whole spectrum of relevant services, including software competence, hard ware from sensors through to gateways, and secure data transmission and storage. SAP. The “SAP” segment involves the provision of consulting services to companies to assist them in digi talising and optimising their business processes based on SAP technologies and the operation of corres ponding applications. q.beyond is an SAP fullservice provider and has extensive experience in basis opera tions, application management, implementation, user support and maintenance, as well as in licensing and rental models. The segment contribution is the key segment performance indicator referred to by the management. This is defined as EBITDA before general and administrative expenses and the other operating result. For income statement purposes, the cost of revenues is thus allocated in full to the respective segment, as are sales and marketing expenses. The direct and indirect allocation of costs to individual segments is consistent with in ternal reporting and management structures. Indirect cost allocation is primarily based on resource utilisation by the respective segments. The Manage ment Board does not receive any regular information about segmentspecific assets and liabilities, general and administrative expenses, depreciation and amortisation and other operating income and expenses as components of the respective segment earnings figures. € 000s 2020 financial year Revenues Cost of revenues Gross profit Sales and marketing expenses Segment contribution General and administrative expenses Depreciation and amortisation (including non-cash share-based compensation) Other operating income and expenses Operating earnings (EBIT) Financial income Financial expenses Income from associates Earnings before taxes Income taxes Consolidated net income Cloud & IoT SAP Group 102,001 (85,551) 16,450 (8,696) 7,754 41,415 143,416 (34,703) (120,254) 6,712 (3,866) 2,846 23,162 (12,562) 10,600 (14,721) (16,848) 2,143 (18,826) 52 (464) (39) (19,277) (620) (19,897)
116 q.beyond Annual Report 2020 € 000s Cloud & IoT SAP Operation disposed of at 30 June 2019 Group 2019 financial year Revenues Cost of revenues Gross profit Sales and marketing expenses Segment contribution General and administrative expenses Depreciation and amortisation (including non-cash share-based compensation) Other operating income and expenses Operating earnings (EBIT) Financial income Financial expenses Income from associates Earnings before taxes Income taxes Consolidated net income 90,823 (76,357) 14,466 (11,492) 2,974 36,607 (33,938) 2,669 (1,599) 1,070 110,617 (67,521) 43,096 (8,904) 34,192 238,047 (177,816) 60,231 (21,995) 38,236 (32,311) (52,377) 134,389 87,937 87 (6,108) (16) 81,900 (8,357) 73,543 Revenues include € 3,588k generated with nonGerman EU customers, (mainly UK – part of the EU Single Market and Customers Union until 31 December 2020 [€ 1,232k] and the Netherlands [€ 916k]), as well as € 1,513k with nonEU customers (mainly Switzerland [€ 1,105k]). All other revenues were generated in Germany. In the 2020 financial year, the “Cloud & IoT” and “SAP” segments had two customers who respectively ac counted for 14.3% and 13.5% of total revenues. 36 Stock option plans Since 1999, q.beyond has incepted a total of eight stock option plans providing for the issue of convertible bonds with a nominal amount of € 0.01 each to employees, Management Board members and members of the management at affiliated companies. Convertible bonds are allocated by the Management Board, which additionally required the consent of the Supervisory Board for allocations to advisors and suppliers. The Su pervisory Board alone decides on allocations to members of the Management Board of q.beyond AG.
Financial Report Notes to the Consolidated Financial Statements 117 Participants in these plans are entitled to subscribe convertible bonds in return for payment of the nominal amount of € 0.01 and to convert each convertible bond into a nopar registered share in return for payment of the exercise price. The exercise price for the convertible bond corresponds to the stock market price of the share on the issue date. The convertible bonds have an eightyear term and are subject to a fouryear lockup period following subscription. As of the balance sheet date on 31 December 2020, the SOP 2012 and SOP 2015 plans were active. Convertible bonds allocated within the SOP 2012 plan were eligible for subscription for the last time on 15 May 2017. Allocations and subscriptions within the SOP 2015 plan, which is solely available to Manage ment Board members, were possible until 26 May 2020. No new convertible bonds were allocated or sub scribed in the 2020 financial year. The conversion right provided for by the SOP 2012 and 2015 plans may only be exercised at the earliest after the expiry of a fouryear waiting period and only if at least one of the following two conditions is met: the share price is at least 20% higher than the conversion price or the share has outperformed the TecDAX in relative terms since the subscription date. No personnel expenses have been recognised pursuant to IFRS 2 for the convertible bonds resulting from the 2000, 2000A, 2001 and 2002 SOP plans, none of which is now utilisable. No option values had to be calculated in the 2019 and 2020 financial years for the SOP 2012 and 2015 plans. The distribution of the convertible bonds outstanding under the active plans as of 31 December 2020 and 31 December 2019 is as follows: Outstanding at 31 December 2018 Newly issued in 2019 Lapsed in 2019 Exercised in 2019 Outstanding at 31 December 2019 Newly issued in 2020 Lapsed in 2020 Exercised in 2020 Outstanding at 31 December 2020 Number of convertible bonds Weighted average exer- cise price in € 3,564,329 - (1,062,829) - 2,501,500 - (93,500) (300,000) 2,108,000 2.20 - 2.53 - 2.06 - 2.26 1.13 2.18 The exercise prices of the 2,108,000 convertible bonds outstanding range from € 1.10 to € 4.59, while the remaining term for exercising them ranges from directly exercisable through to 14 May 2025 at the latest. The exercise price is set upon subscription and cannot be changed subsequently. Depending on the de velopment in its share price, the company expects the outstanding convertible bonds to be converted at the latest by 2025.
118 q.beyond Annual Report 2020 As of the balance sheet date on 31 December 2020, the agreed fouryear lockup period had expired for a total of 1,638,400 of the outstanding convertible bonds; however, these bonds could not yet be exercised as the underlying terms had not been fully met. A total of 30,500 stock options were directly exercisable as of the balance sheet date. In the 2020 financial year, income of € 10k was generated in connection with noncash sharebased com pensation (2019: expenses of € 13k). 2020 share matching plan With the approval of the Supervisory Board, in August 2020 the Management Board of q.beyond AG of fered select executives at q.beyond AG and the managing directors of companies affiliated with q.beyond the opportunity to participate on a voluntary basis in a 2020 share matching plan. This plan runs until 31 December 2022. Between 1 September and 9 October 2020, plan participants were able to acquire shares in q.beyond AG on their own behalf and their own account. Subsequent to 31 December 2022, q.beyond will grant matching shares at a predefined ratio to each plan participant if the company’s share price reaches € 2.80 by the end of 2022. The plan is capped at a share price of € 4.00. The number of matching shares granted to each par ticipant is dependent on the number of shares acquired at the beginning of the plan, as well as on the parti cipant remaining at the q.beyond Group during the term of the plan. q.beyond currently plans to service the incentive scheme by way of a cash payment corresponding to the stock market value upon maturity of the matching shares to be granted, but is nevertheless also entitled to satisfy the respective claims by granting actual shares. Plan participants acquired a total of 1,025,369 shares during the acquisition period. The share matching plan was initially recognised at fair value as of the grant date. The fair value of the matching shares commit ted in the past financial year was determined using a calculation model based on a Monte Carlo simulation. q.beyond shares were included in this model with their expected weighted volatility as of the balance sheet date and at a price of € 1.684 per share. The expected volatility was based on the implicit volatilities of traded company options, which were then calibrated to the option data (term and target share price) of the share matching plan. The model used a riskfree interest rate of 0.5% and an expected dividend yield of 0%. The sharebased compensation will be recognised in the income statement on a timeapportioned basis through to 31 December 2022, with expenses of € 25k so far recognised for the 2020 financial year. A pro vision of € 25k was recognised as of 31 December 2020 for obligations in connection with the 2020 share matching plan.
Financial Report Notes to the Consolidated Financial Statements 119 37 Related party transactions Transactions with members of the management in key positions I Remuneration of members of the management in key positions. The remuneration of members of the man agement in key positions comprises: € 000s 2020 2019 Remuneration of management members Short-term benefits Other long-term benefits Termination benefits Share-based compensation Remuneration of management members 728 139 - - 1,244 150 550 30 867 1,974 Remuneration of members of the management in key positions (members of the Management and Super visory Boards) includes salaries, expense reimbursements, settlements, benefits in kind and expenses incurred for stock option plans. Other longterm benefits relate to the claim to variable remuneration resulting from the multiyear targets agreed for the Management Board. The Management Board has remuneration claims totalling € 439k in connection with the multiyear targets agreed for the 2018 to 2020 assessment period. This remuneration is disbursed following expiry of the assessment period. Of this total, two amounts of € 150k (€ 300k in total) were already reported as other longterm benefits in the notes to the consolidated financial statements for the 2018 and 2019 financial years. II Transactions with members of the management in key positions. The company’s Management Board (CEO) held voting rights for 1,000,000 shares at the end of the 2020 financial year (share of voting rights: 0.8%). The company’s Supervisory Board members have a total of 31,607,394 shares, corresponding to around 25.4% of voting rights. In 2020, q.beyond AG maintained business relations with companies in which members of its own Manage ment and Supervisory Boards act as shareholders. IAS 24 states that individuals or companies constitute related parties when one of the parties has the possibility of controlling or exercising significant influence over the other party. All contracts with these companies require Supervisory Board approval and are con cluded on customary market terms.
120 q.beyond Annual Report 2020 Members of q.beyond’s Management and Supervisory Boards are shareholders in the following companies: € 000s 2020 financial year QS Communication Verwaltungs Service GmbH 2019 financial year QS Communication Verwaltungs Service GmbH € 000s 31 December 2020 QS Communication Verwaltungs Service GmbH 31 December 2019 QS Communication Verwaltungs Service GmbH Net revenues Expenses Payments received Payments made - - 177 152 - - 191 181 Receivables Payables - - 33 15 QS Communication Verwaltungs Service GmbH provides q.beyond with advisory services in its IoT business field. Transactions with associates q.beyond has made a commitment to aiXbrain GmbH to provide that company with a subordinated loan of up to € 120k. This loan will be disbursed, possibly in several tranches, if called on by the borrower. The sub ordinate loan has a fixed term until 30 November 2023. An amount of € 67k had been disbursed upon the preparation of these consolidated financial statements. Furthermore, q.beyond has agreed options to acquire further shares in the company (call options), which are linked to the assumption of loan agreements, as well as a put option to sell shares in the company should call options previously have been exercised.
Financial Report Notes to the Consolidated Financial Statements 121 38 Deferred and current taxes q.beyond used an aggregate tax rate of 32.66% to calculate deferred taxes (2019: 32.61%). The deferred tax assets and liabilities recognised as of the balance sheet date relate to the following balance sheet line items and loss carryovers: € 000s Assets Liabilities Assets Liabilities Consolidated income statement 2020 2020 2019 2019 2020 2019 Deferred tax assets and liabilities Intangible assets Property, plant and equipment Other assets Other receivables Inventories Deferred income Accrued pensions and other provisions Change in market price of derivatives Other liabilities Total deferred taxes on temporary differences Total deferred taxes on loss carryovers Total deferred taxes before netting Netting - 879 639 - 15 - 859 - 6,020 8,412 1,229 9,641 9,641 3,400 5,343 - 898 - - - - - 9,641 - 9,641 9,641 - 1,195 639 - - - 957 - 7,018 9,809 2,947 12,756 12,756 5,292 6,196 - 1,892 885 537 (5,932) - 57 1,266 368 (4,124) - - - - 2 12,756 15 - (253) - (996) 1,563 - 160 (81) (116) 10,518 1,367 - (1,718) (10,186) 12,756 12,756 Total deferred taxes - - - - The temporary differences in connection with interests in subsidiaries for which no deferred tax liabilities are recognised amounted to € 172k in the 2020 financial year (2019: € 154k). Pursuant to IAS 12.39, however, this liability has not been recognised as q.beyond controls the dividend poli cies of its subsidiaries and can control reversal of the temporary differences.
122 q.beyond Annual Report 2020 The following table presents the reconciliation of the expected income tax expenses to the actual income tax expenses. The expected income tax expenses are calculated by multiplying earnings before taxes by q.beyond’s tax rate. € 000s Reconciliation Net income before income taxes Tax rate Expected tax expenses Tax effects of Changes in write-downs of deferred taxes recognised for loss carryovers Impairment of goodwill Non-deductible operating expenses Tax-exempt income Non-period income Changes in tax rates Other items Reconciled tax expenses 2020 2019 (19,277) 32.66% 81,900 32.61% (6,296) 26,708 6,772 - 167 - - 4 (27) 620 16,561 4,591 312 (38,399) (665) (21) (730) 8,357 Reconciled tax expenses consist of an amount of € 465k recognised for current tax income expenses (2019: tax income for previous years: € 462k) and deferred tax expenses of € 155k (2019: tax expenses of € 8,819k). In the 2020 financial year, tax expenses of € 155k was recognised directly in other reserves in connection with actuarial gains and losses (2019: tax income of € 438k). As of 31 December 2020, corporate income tax loss carryovers at q.beyond AG came to € 403 million (2019: € 408 million) while trade tax loss carryovers totalled € 388 million (2019: € 393 million). No deferred taxes have been recognised for corporate income tax loss carryovers of € 400 million (2019: € 404 million) and trade tax loss carryovers of € 384 million (2019: € 389 million), both of which may be carried forward for unlimited periods, as it is unlikely that these items can be offset against positive taxable income.
Financial Report Notes to the Consolidated Financial Statements 123 39 Legal disputes EnBW Telekommunikation GmbH, Karlsruhe, initiated legal proceedings against q.beyond by filing a petition for arbitration dated 13 January 2021. In connection with the sale of Plusnet GmbH to EnBW Telekommuni kation GmbH, the plaintiff demands that q.beyond should correct its income tax returns for 2017. q.beyond believes that the proceedings have low prospects of success. There are no other court or arbitration proceed ings in which q.beyond AG or any of its group subsidiaries are involved which could have a material impact on their economic positions. 40 Objectives and methods used in financial risk management and capital management In connection with its business activities, q.beyond is exposed to a number of financial risks that are intrinsi cally linked with entrepreneurial activity. q.beyond combats these risks with a comprehensive risk manage ment system, which is an integral component of its business processes and corporate decisions. The key elements of this system are a Groupwide planning and controlling process, Groupwide policies and re porting systems, as well as Groupwide risk reporting. The Management Board lays down the principles of the company’s financial policies annually and monitors these within the risk management system. Further information about risk management can be found in the Group Management Report. Financial liabilities mainly comprise trade payables and lease liabilities. The main purpose of these financial liabilities is to finance the company’s operating activities. Financial assets directly resulting from business activities relate in particular to trade receivables and cash and cash equivalents. No derivatives were traded in the 2020 financial year. The main risks to which q.beyond is exposed due to its use of financial instruments include credit risk and liquidity risks. Since no material transactions are executed in foreign currencies, there are no material foreign currency risks. There were no material risk clusters in the past financial year. The strategies and procedures used to manage these risks are presented below. Credit risk. q.beyond is exposed to the risk of payment defaults on the part of its customers. The company makes efforts to ensure that it only enters into business dealings with creditworthy customers and thus attempts to exclude this risk from the outset. To this end, creditworthiness checks are performed before the respective contract is concluded. Once business relations have been initiated, receivables balances are moni tored to reduce potential default risks. Maximum default risks are limited to the carrying amounts of the receivables disclosed in Note 18. q.beyond expects nonimpaired receivables to be collectible.
124 q.beyond Annual Report 2020 Liquidity risks. q.beyond monitors its risk of a liquidity shortfall with monthly liquidity planning. This ac counts for the terms of available financial assets and the expected cash flows from operating activities. As of the respective balance sheet date, q.beyond’s current and noncurrent financial liabilities had the following maturities. These disclosures are based on the expected undiscounted payments. € 000s Carrying amount Due by end of 2021 Due by end of 2022 Due by end of 2023 Due by end of 2024 Due by end of 2025 Due after 2025 Total Lease liabilities Trade payables Contractual liabilities Other current and non-cur- 17,868 10,392 670 5,453 10,392 670 rent financial liabilities 1,356 710 636 4,817 2,392 2,108 2,097 1,001 - - - - 3 - - 3 - - 4 - - - 17,868 10,392 670 1,356 At 31 December 2020 30,286 17,225 5,453 2,395 2,111 2,101 1,001 30,286 € 000s Carrying amount Due by end of 2020 Due by end of 2021 Due by end of 2022 Due by end of 2023 Due by end of 2024 Due after 2024 Total Lease liabilities Trade payables Contractual liabilities Other current and non-cur- 22,198 10,350 488 5,501 10,350 488 rent financial liabilities 8,958 8,933 5,050 4,449 2,063 2,043 3,092 - - - - - 7 - - 4 - - 7 - - 7 22,198 10,350 488 8,958 At 31 December 2019 41,994 25,272 5,050 4,456 2,067 2,050 3,099 41,994
Financial Report Notes to the Consolidated Financial Statements 125 41 Financial instruments Disclosures on the balance sheet. Given that the carrying amounts largely correspond to fair values, no se parate disclosures have been made on the respective fair values. € 000s Carrying amount Amortised cost Fair value – in equity Fair value – hedging instruments Fair value – through profit or loss 31 December 2020 Assets not measured at fair value Cash and cash equivalents Receivables from finance leases Current trade receivables Liabilities not measured at fair value Trade payables and other liabilities Contract liabilities Lease liabilities Other financial liabilities 44,925 2,313 37,064 11,727 670 17,868 21 x x x x x x x € 000s Carrying amount Amortised cost Fair value – in equity Fair value – hedging instruments Fair value – through profit or loss 31 December 2019 Assets not measured at fair value Cash and cash equivalents Receivables from finance leases Current trade receivables Liabilities not measured at fair value Trade payables and other liabilities Contract liabilities Lease liabilities Other financial liabilities 66,031 4,153 31,034 19,283 488 22,198 25 x x x x x x x
126 q.beyond Annual Report 2020 Fair value disclosures for instruments with recurring measurement. At the end of each reporting period, q.beyond AG ascertains whether any reclassifications are required between the levels of the measurement hierarchy. No reclassifications were made in the reporting period from 1 January 2020 to 31 December 2020. Disclosures on the consolidated income statement. The following interest income and expenses and the following net gains and losses on financial instruments are included in the consolidated income statement. € 000s Interest in- come / interest expenses Fair value change Impairments Payments received on retired receivables Net result 2020 Net result 2019 Assets valued at amortised cost Liabilities valued at amortised cost Fair value – hedging instruments € 000s Assets valued at amortised cost Liabilities valued at amortised cost Fair value – hedging instruments 37 (401) - - - - (372) 263 (72) (150) - - - - (401) (5,411) - (472) Interest in- come / interest expenses Fair value change Impairments Payments received on retired receivables Net result 2019 Net result 2018 50 (5,411) (472) - - - (235) 35 (150) (335) - - - - (5,411) (3,057) (472) (1,033)
Financial Report Notes to the Consolidated Financial Statements 127 42 Declaration pursuant to § 161 AktG regarding compliance with the German Corporate Governance Code The Management and Supervisory Boards of q.beyond AG submitted their most recent declaration pur suant to § 161 of the German Stock Corporation Act (AktG) on 25 November 2020 and made this available www.qbeyond.de/en/declaration-of-compliance. The company will post any on the company’s website at future amend ments to provisions relevant for compliance with the German Corporate Governance Code on its website without delay. 43 Auditor’s fees The fee paid to KPMG AG Wirtschaftsprüfungsgesellschaft for the audit of financial statements refers above all to the audit of the annual and consolidated financial statements and the dependent company report of q.beyond AG, as well as to audits of the financial statements of subsidiaries. Other certification services relate to the auditing of the internal control system pursuant to ISAE 3402. € 000s Auditor’s fee Audit of financial statements Other certification services Auditor’s fee 2020 2019 213 58 271 267 51 318 44 Remuneration of the Management and Supervisory Boards Total Management Board remuneration for the 2020 financial year came to € 852k, as against € 929k in the previous year. This comprises fixed remuneration of € 300k (2019: € 600k), ancillary benefits of € 32k (2019: € 68k) and variable remuneration of € 520k (2019: € 261k). The breakdown of total remuneration by individual Management Board member can be found in the remu neration tables included in the Remuneration Report within the Group Management Report. This report also includes extensive information about the remuneration system and about payments committed to active Management Board members in the event of the premature termination of their activities.
128 q.beyond Annual Report 2020 Remuneration of former Management Board members totalled € 0k in the 2020 financial year (2019: € 550k). The following table presents individualised information about the number of shares and convertible bonds held by members of the Management Board: Shares Convertible bonds 31 Dec. 2020 31 Dec. 2019 31 Dec. 2020 31 Dec. 2019 Jürgen Hermann Stefan A. Baustert 1,000,000 670,000 150,000 - 40,000 1 - 150,000 200,000 1 1 Holdings at the time of retirement from the Management Board. Jürgen Hermann purchased shares in the company via the stock exchange in the 2020 calendar year (please also see the corresponding directors’ dealings notifications made pursuant to Article 19 of the European Market Abuse Directive on q.beyond’s website). As in the previous year, the Supervisory Board received remuneration totalling € 315k for its activity in the 2020 financial year. The breakdown of overall remuneration by individual Supervisory Board member and further details can be found in the Remuneration Report within the Group Management Report. This report also includes information about the remuneration system and an overview of the shares and convertible bonds held by Supervisory Board members. The actuarial present value of provisions for vested claims to pensions for former Management Board mem bers amounts to € 2,644k prior to the offsetting of asset values of € 2,133k for reinsurance policies. 45 Risks Risks are presented in detail in the Risk Report within the Group Management Report. 46 Directors and officers Management Board. Jürgen Hermann was the sole member of the Management Board in the 2020 financial year.
Financial Report Notes to the Consolidated Financial Statements 129 Supervisory Board. The members of the Supervisory Board in the 2020 financial year were as follows: Supervisory Board member Dr. Bernd Schlobohm Businessman, Supervisory Board Chairman Dr. Frank Zurlino Managing Director at Horn & Company Performance & Restructuring GmbH, Ina Schlie Gerd Eickers Matthias Galler Düsseldorf, Germany, and Managing Director at neuland.digital GmbH, Düsseldorf, Germany; Deputy Supervisory Board Chairman Businesswoman Independent Telecommunications Consultant Senior IT Consultant, Chairman of the Works Council at q.beyond AG, Employee Representative Martina Altheim Head of Corporate Social Responsibility at q.beyond AG, Employee Representative Dr. Frank Zurlino is also a member of the Advisory Board at M2Beauté Cosmetics GmbH, Cologne, Germany, and of the Advisory Board of hasenkamp Holding GmbH, Frechen, Germany. Ina Schlie is also a member of the Advisory Board at Adolf Würth GmbH & Co. KG, Künzelsau, Germany, of the Supervisory Board of Heidelberger Druckmaschinen AG, Heidelberg, Germany, and of the Supervisory Board of Deutschland – Land der Ideen e. V., Berlin, Germany. Gerd Eickers is also Chairman of the Supervisory Board at Contentteam AG, Cologne, Germany. 47 Events after the balance sheet date No events of material significance that would require report here have occurred since the end of the financial year. Cologne, 23 March 2021 q.beyond AG The Management Board Jürgen Hermann
130 q.beyond Annual Report 2020 Statement of Responsibility To the best of our knowledge, and in accordance with the applicable reporting principles, the Consolidated Financial Statements give a true and fair view of the assets, liabilities, financial po sition and profit or loss of the Group, and the Group Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Cologne, 23 March 2021 q.beyond AG The Management Board Jürgen Hermann
Financial Report Statement of Responsibility Independent Auditor’s Report 131 Independent Auditor’s Report To q.beyond AG, Cologne Report on the Audit of the Consolidated Financial Statements and of the Group Management Report Opinions We have audited the consolidated financial statements of q.beyond AG (until 20 September 2020: QSC AG), Cologne, and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 Decem ber 2020, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year from 1 January to 31 December 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of q.beyond AG, Cologne, for the financial year from 1 January to 31 December 2020. In accordance with Ger man legal requirements, we have not audited the content of those components of the group management report specified in the „Other Information“ section of our auditor‘s report. The group management report contains crossreferences that are not required by law and which are marked as unaudited. In accordance with German legal requirements, we have not audited the crossreferences and the information to which the crossreferences refer. In our opinion, on the basis of the knowledge obtained in the audit, • the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Section 315e (1) HGB [Handelsgesetzbuch: German Commercial Code] and, in compliance with these require ments, give a true and fair view of the assets, liabilities, and financial position of the Group as at 31 December 2020, and of its financial performance for the financial year from 1 January to 31 De cember 2020, and • the accompanying group management report as a whole provides an appropriate view of the Group‘s position. In all material respects, this group management report is consistent with the consolidated finan cial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. Our opinion on the group management report does not cover the content
132 q.beyond Annual Report 2020 of those components of the group management report specified in the „Other Information“ section of the auditor‘s report. The group management report contains crossreferences that are not required by law and which are marked as unaudited. Our audit opinion does not extend to the crossreferences and the infor mation to which the crossreferences refer. Pursuant to Section 322 (3) sentence 1 HGB, we declare that our audit has not led to any reservations relat ing to the legal compliance of the consolidated financial statements and of the group management report. Basis for the Opinions We conducted our audit of the consolidated financial statements and of the group management report in accordance with Section 317 HGB and the EU Audit Regulation No 537/2014 (referred to subsequently as „EU Audit Regulation“) and in compliance with German Generally Accepted Standards for Financial State ment Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the „Auditor‘s Respon sibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report“ section of our auditor‘s report. We are independent of the group entities in accordance with the require ments of European law and German commercial and professional law, and we have fulfilled our other Ger man professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2)(f) of the EU Audit Regulation, we declare that we have not provided nonaudit services prohi bited under Article 5 (1) of the EU Audit Regulation. We believe that the evidence we have obtained is suffi cient and appropriate to provide a basis for our opinions on the consolidated financial statements and on the group management report. Key Audit Matters in the Audit of the Consolidated Financial Statements Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters. Impairment testing of recognised goodwill For the accounting policies applied, please refer to the disclosures made by the Company in the notes to the consolidated financial statements in note no. 4. The assumptions underlying the measurement are presented in the notes to the consolidated financial statements under note no. 19.
Financial Report Independent Auditor’s Report 133 The financial statement risk Goodwill of EUR 21 million is recognised in the consolidated balance sheet of q.beyond AG. This corresponds to 11% of total assets. Impairment of goodwill is tested annually at the level of the „Cloud and IoT“ and „SAP“ business segments. For this purpose, the carrying amount of the assets is compared with their recoverable amount for the res pective business segment. If the carrying amount exceeds the recoverable amount, there is a need to recog nise an impairment loss. For the impairment test, the Company determines the value in use. The reporting date for the impairment test is 31 December 2020. The Company modified its internal control system as at 1 January 2020. The previous Telecommunications (Colocation business), Outsourcing and Cloud segments as well as the NonSAP Consulting subsegment of the previous Consulting segment were merged into the new „Cloud & IoT“ segment. The SAP Consulting subsegment of the previous Consulting segment constitutes a second „SAP“ segment since 1 January 2020. The changes in the allocations to segments require a reallocation of goodwill, which had, to date, been tes ted at the level of the Consulting operating segment. Goodwill is allocated using the relative values in use by the segmentrelated units. Impairment testing of goodwill is complex and based on a range of assumptions that require judgement. These include the expected business and earnings performance of the business segments for the next three years, the assumed longterm growth rates and the discount rate used. There is the risk for the financial statements that an impairment loss existing as at the reporting date will not be recognised and, thus, the related disclosures in the notes are not appropriate. Our audit approach With the involvement of our valuation experts, we assessed the appropriateness of significant assumptions and the Company‘s calculation method used for the reallocation of goodwill in the Consulting operating segment and for impairment testing. For this purpose we discussed the expected business and earnings performance and the assumed longterm growth rates with those responsible for operational planning. As impairment testing was carried out at q.beyond by an external independent expert, we also confirmed the competence, professional skills and impartiality of the appointed external independent expert and ob tained an understanding of the nature of their work. Basing our assessment on the valuation model used by the client, we evaluated the methodical approach and computational accuracy. In addition, we also critically evaluated the assessment of the valuation model made by the independent expert and reconciled their results with our own. We also reconciled this with the budget prepared by the Management Board and approved by the Supervi sory Board. We also confirmed the accuracy of the Company‘s previous forecasts by comparing the budgets of previous financial years with actual results and by analysing deviations. We compared the expert‘s assumptions and data underlying the segmentspecific discount rates, in particular the riskfree rate, the market risk premium and the beta factor, with our own assumptions and publicly available data.
134 q.beyond Annual Report 2020 In order to take account of forecast uncertainty, we examined the impact of potential changes in material assumptions related to measurement on value in use (sensitivity analysis) by calculating alternative sce narios and comparing these with the values stated by the Company. The results of the calculation were evaluated overall by comparing the computationally derived value of equity, resulting from the sum of value in use less net financial liabilities, with the market capitalisation of the shares of q.beyond AG (as at 31 December 2020). Finally, we assessed whether the disclosures in the notes regarding impairment testing of goodwill are appropriate. This also included an assessment of the appropriateness of disclosures in the notes according to IAS 36.134(f) on sensitivity in the event of a reasonably possible change in the key assumptions used for measurement. Our observations The calculation method used for the impairment testing of goodwill is appropriate and in line with the ac counting policies to be applied. The Company‘s assumptions and data used for measurement are within an acceptable range and are balan ced as a whole. The related disclosures in the notes are appropriate. Revenue recognition on an accrual basis For the accounting policies applied, we refer to the disclosures made by the Company in the notes to the consolidated financial statements in note no. 4. The financial statement risk The Group‘s revenue amounted to EUR 143.4 million in financial year 2020. q.beyond and its subsidiaries recognise revenue when (or as) they satisfy a performance obligation by trans ferring a promised good or service to a customer. An asset is considered transferred when (or as) the cus tomer obtains control of that asset. In accordance with the transfer of control, revenue is recognised either at a point in time or over time in the amount to which q.beyond AG expects to be entitled. Generally, q.beyond AG satisfies the performance obligation and recognises revenue over time if the criterion is met that the customer receives the benefit from the Group‘s services and simultaneously uses the service while it is performed. Different contractual agreements, containing in part complex contractual provisions, are made with cus tomers. As a result of these complex provisions and the judgements involved in assessing the time at which control in transferred to the customer, there is the risk for the financial statements that revenue is not re cognised in the correct amount as at the reporting date.
Financial Report Independent Auditor’s Report 135 Our audit approach Based on our understanding of the process, we assessed the design, establishment and functionality of the internal controls identified, in particular with regard to the correct revenue recognition cutoff. As part of our audit, we assessed management‘s interpretation of the criteria for the recognition of revenue over time in compliance with the requirements of IFRS 15 and the applicable groupwide accounting policy. For agreements selected on the basis of risk, we assessed the proper implementation of the accounting policy and the revenue recognition in accordance with underlying contractual agreements, as well as most significant instances of judgement such as the selection of the measure of progress and the estimate of the performance progress achieved. Building upon the knowledge previously obtained, we assessed the proper determination of the respective progress towards complete satisfaction of a performance obligation as well as the balance sheet and income statement recognition. Our observations q.beyond AG‘s approach to recognition of revenue over time is appropriate. The assumptions underlying the accounting treatment are appropriate. Other Information Management and/or the Supervisory Board are/is responsible for the other information. The other informati on comprises the following components of the group management report, whose content was not audited: • the separate nonfinancial group report, expected to be provided to us after the date of this auditor‘s report, which is referred to in the group management report, • the corporate governance statement referred to in the group management report, and • information extraneous to the group management report and marked as unaudited. The other information also includes the remaining parts of the annual report. The other information does not include the consolidated financial statements, the group management report information audited for con tent and our auditor‘s report thereon. Our opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an opinion or any other form of assurance con clusion thereon. In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information • is materially inconsistent with the consolidated financial statements, with the group management report information audited for content or our knowledge obtained in the audit, or • otherwise appears to be materially misstated.
136 q.beyond Annual Report 2020 Responsibilities of Management and the Supervisory Board for the Consolidated Financial Statements and the Group Management Report Management is responsible for the preparation of consolidated financial statements that comply, in all ma terial respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Section 315e (1) HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position and financial performance of the Group. In addition, management is responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material miss tatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group‘s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. Furthermore, management is responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group‘s position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, management is responsible for such arrange ments and measures (systems) as they have considered necessary to enable the preparation of a group ma nagement report that is in accordance with the applicable German legal requirements, and to be able to pro vide sufficient appropriate evidence for the assertions in the group management report. The supervisory board is responsible for overseeing the Group‘s financial reporting process for the prepara tion of the consolidated financial statements and of the group management report. Auditor‘s Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group manage ment report as a whole provides an appropriate view of the Group‘s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future de velopment, as well as to issue an auditor‘s report that includes our opinions on the consolidated financial statements and on the group management report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accor dance with Section 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will al ways detect a material misstatement. Misstatements can arise from fraud or error and are considered mate rial if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group management report.
Financial Report Independent Auditor’s Report 137 We exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements and of the group management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opin ions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the over ride of internal controls. • Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems. • Evaluate the appropriateness of accounting policies used by management and the reasonableness of estimates made by management and related disclosures. • Conclude on the appropriateness of management‘s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or condi tions that may cast significant doubt on the Group‘s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor‘s report to the related disclosures in the consolidated financial statements and in the group management report or, if such dis closures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor‘s report. However, future events or conditions may cause the Group to cease to be able to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, includ ing the disclosures, and whether the consolidated financial statements present the underlying transac tions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Section 315e (1) HGB. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions. • Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with [German] law, and the view of the Group‘s position it provides. • Perform audit procedures on the prospective information presented by management in the group ma nagement report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by management as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a sepa rate opinion on the prospective information and on the assumptions used as a basis. There is a substan tial unavoidable risk that future events will differ materially from the prospective information.
138 q.beyond Annual Report 2020 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor‘s report unless law or regulation precludes public disclosure about the matter. Other Legal and Regulatory Requirements Report on the Assurance in accordance with Section 317 (3b) HGB on the Electronic Reproduction of the Consolidated Financial Statements and the Group Management Report Prepared for Publication Purposes We have performed assurance work in accordance with Section 317 (3b) HGB to obtain reasonable assur ance about whether the reproduction of the consolidated financial statements and the group management report (hereinafter the „ESEF documents“) contained in the file that can be downloaded by the issuer from the electronic client portal with access protection, „ESEFqbeyond2020KA.zip“ (SHA256Hashwert: b9f0323750b390b6b31c808d06d2c7dad89b8ffdf2c7b85cbe15da4e28fb74b1) and prepared for publication purposes complies in all material respects with the requirements of Section 328 (1) HGB for the electronic reporting format („ESEF format“). In accordance with German legal require ments, this assurance only extends to the conversion of the information contained in the consolidated fi nancial statements and the group management report into the ESEF format and therefore relates neither to the information contained in this reproduction nor any other information contained in the abovemen tioned electronic file. In our opinion, the reproduction of the consolidated financial statements and the group management report contained in file, which can be downloaded by the issuer from the electronic client portal with access pro tection, and prepared for publication purposes complies in all material respects with the requirements of Section 328 (1) HGB for the electronic reporting format. We do not express any opinion on the information contained in this reproduction nor on any other information contained in the abovementioned file beyond this reasonable assurance conclusion and our audit opinion on the accompanying consolidated financial statements and the accompanying group management report for the financial year from 1 January 2020, to 31 December 2020 contained in the „Report on the Audit of the Consolidated Financial Statements and of the Group Management Report“ above.
Financial Report Independent Auditor’s Report 139 We conducted our assessment of the reproduction of the consolidated financial statements and the group management report contained in the file, which can be downloaded by the issuer from the electronic client portal with access protection, in accordance with Section 317 (3b) HGB and the Exposure Draft of the IDW Assurance Standard: Assurance in accordance with Section 317 (3b) HGB on the Electronic Reproduction of Financial Statements and Management Reports Prepared for Publication Purposes (ED IDW AsS 410). Accordingly, our responsibilities are further described below. Our audit firm has applied the IDW Standard on Quality Management 1: Requirements for Quality Management in Audit Firms (IDW QS 1). The Company‘s management is responsible for the preparation of the ESEF documents including the elec tronic reproduction of the consolidated financial statements and the group management report in accor dance with Section 328 (1) sentence 4 item 1 HGB and for the tagging of the consolidated financial state ments in accordance with Section 328 (1) sentence 4 item 2 HGB. In addition, the Company‘s management is responsible for the internal controls they consider necessary to enable the preparation of ESEF documents that are free from material intentional or unintentional non compliance with the requirements of Section 328 (1) HGB for the electronic reporting format. The Company‘s management is also responsible for the submission of the ESEF documents together with the auditor’s report and the attached audited consolidated financial statements and audited group manage ment report as well as other documents to be published to the operator of the German Federal Gazette [Bundesanzeiger]. The Supervisory Board is responsible for overseeing the preparation of the ESEF documents as part of the financial reporting process. Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material intentional or unintentional noncompliance with the requirements of Section 328 (1) HGB. We exercise pro fessional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material intentional or unintentional noncompliance with the require ments of Section 328 (1) HGB, design and perform assurance procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for our assurance opinion. • Obtain an understanding of internal control relevant to the assurance of the ESEF documents in order to design assurance procedures that are appropriate in the circumstances, but not for the purpose of expres sing an assurance opinion on the effectiveness of these controls. • Evaluate the technical validity of the ESEF documents, i.e. whether the electronic file containing the ESEF documents meets the requirements of Commission Delegated Regulation (EU) 2019/815 on the technical specification for this electronic file. • Evaluate whether the ESEF documents enable an XHTML reproduction with content equivalent to the audited consolidated financial statements and the audited group management report. • Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) enables an appropriate and complete machinereadable XBRL copy of the XHTML reproduction.
140 q.beyond Annual Report 2020 Further Information pursuant to Article 10 of the EU Audit Regulation We were elected as group auditor at the annual general meeting on May 20, 2020. We were engaged by the Chairperson of the Accounting and Audit Committee of the Supervisory Board on 30 November 2020. We have been the group auditor of q.beyond AG, Cologne, without interruption since the financial year 2008. We declare that the opinions expressed in this auditor‘s report are consistent with the additional report to the Audit Committee pursuant to Article 11 of the EU Audit Regulation (longform audit report). German Public Auditor Responsible for the Engagement The German Public Auditor responsible for the engagement is Charlotte Salzmann. Cologne, 23 March 2021 KPMG AG Wirtschaftsprüfungsgesellschaft [Original German version signed by:] Salzmann Wirtschaftsprüferin [German Public Auditor] Gall Wirtschaftsprüfer [German Public Auditor]
Calendar Quarterly Figures 10 May 2021 9 August 2021 8 November 2021 Annual General Meeting 12 May 2021 141 Contact q.beyond AG Arne Thull Head of Investor Relations Mathias-Brüggen-Strasse 55 50829 Cologne, Germany T +49 221 669-8724 email@example.com www.qbeyond.de twitter.com/qbyirde twitter.com/qbyiren blog.qbeyond.de Editorial responsibility q.beyond AG, Cologne Design sitzgruppe, Düsseldorf Photography Jan Northoff, Hamburg (pp. 6, 12 – 13) Marcus Pietrek, Düsseldorf (p. 15) Print das druckhaus, Korschenbroich This translation is provided as a convenience only. Please note that the German-language original of this Annual Report is definitive.