QSC AG

Earnings Release • Aug 15, 2007

News Details

Corporate | 15 August 2007 07:40

QSC revenues and profitability surge in 2nd quarter of 2007

QSC AG / Quarter Results

Release of a Corporate News, transmitted by DGAP - a company of EquityStory
AG.
The issuer / publisher is solely responsible for the content of this announcement.

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QSC revenues and profitability surge in 2nd quarter of 2007

• Revenues advance by 41 percent to € 79.6 million
• Strategic segments rise to account for 84 percent of total revenues
• EBITDA grows by 166 percent to € 10.9 million

Cologne, August 15, 2007. According to preliminary results, QSC AG
sustained its high-margin growth in the second quarter of 2007, increasing
its EBITDA by 166 percent to € 10.9 million on a revenue rise of 41 percent
to € 79.6 million. This strong increase in profitability stemmed from
growth in the company’s strategic segments of Large Accounts, Business
Customers and Wholesale/Resellers; these strategic segments accounted for a
84 percent of total revenues in the second quarter of 2007, as opposed to
77 percent for the same quarter the year before.
QSC recorded its strongest revenue growth in the Wholesale/Reseller
segment, in particular with its wholesale partners; revenues in this
segment rose by 162 percent to € 27.8 million in the second quarter of
2007, although this quarter had seen a delay in new unbundled connections
due to the strike at Deutsche Telekom. QSC also felt the effect of the
strike in connection with processes and new connections for large accounts
and business customers; at the same time, price competition in conventional
voice telephony increased sooner than had been expected as a result of
Voice over IP and flat rate telephony offerings. Nevertheless, QSC
succeeded in increasing revenues with large accounts by 16 percent to €
17.7 million in the second quarter of 2007; the growth rate for business
customers stood at 21 percent, with revenues rising to € 21.5 million.

EBITDA margin doubles to 14 percent
The company’s improved revenue quality, as a result of the higher
percentage of total revenues accounted for by its three strategic segments,
again resulted in a leveraged profitability increase in the second quarter
of 2007. According to preliminary results, gross profit increased by 49
percent to € 29.1 million, as opposed to € 19.5 million in the second
quarter of 2006, while EBITDA grew strongly by 166 percent to € 10.9
million, as opposed to € 4.1 million for the same quarter the year before.
As a result, QSC was already earning an EBITDA margin of 14 percent in the
second quarter of 2007; this figure had stood at only 7 percent in the
second quarter of 2006. 'Our focus on services for enterprise customers on
the basis of our Next Generation Network is paying off,' notes QSC Chief
Executive Officer Dr. Bernd Schlobohm. 'This is enabling us to be highly
efficient in offering premium DSL and VoIP solutions, while simultaneously
countering growing price and substitution pressure in the conventional
voice telephony business.'

Higher capital expenditures in network expansion and new customers
QSC continued to expand its network during the second quarter of 2007,
although the strike at Deutsche Telekom had delayed the provision of
network unbundling services – it is therefore anticipated that expansion of
the network to nearly 2,000 central offices will not be concluded until the
first quarter of 2008. Capital expenditures nevertheless rose to € 18.7
million, as opposed to € 11.7 million for the comparable quarter the year
before, as QSC also has to invest in order to connect the growing number of
new customers, over and above network expansion.
Depreciation expense rose by a total of 51 percent to € 10.4 million in the
second quarter of 2007, since the vast majority of customer-related capital
expenditures are quickly amortized. Consolidated net profitability rose by
€ 3.6 million to a net income of € 0.5 million, as opposed to a net loss in
the amount of € -3.1 million the year before.

Revenues of more than € 350 million anticipated
QSC expects to see strong revenue growth during the second half of 2007,
especially in its wholesale business, where the company was able to win 1&1
Internet AG as strong wholesale partner in early July. In view of the
positive developments during the first half of the year and against the
backdrop of pressure on prices in conventional voice telephony services as
well as higher depreciation expense, QSC is reiterating its full year
revenue forecast of more than € 350 million, its EBITDA target range of €
50 and 60 million and further specifying its net income after taxes
forecast to approximately € 15 million.
Medium-term, QSC anticipates strong and profitable growth: Beginning in
2008, QSC’s nationwide network will be able to directly reach more than 70
percent of all enterprise customers in Germany. 'The trend toward direct
connections is going to be heightening significantly throughout the entire
market. QSC will benefit in three ways from direct connections to its own
network: We can achieve higher margins, increase the loyalty of large
accounts and business customers, and offer additional services,' explains
QSC Chief Executive Officer Dr. Schlobohm.

Preliminary results in mio. € Q2 2007 Q2 2006 H1 2007 H1 2006

Revenues 79.6 59.6 156.5 111.0
- Large Accounts 17.7 15.3 36.4 29.7
- Business Customers 21.5 17.8 42.2 35.3
- Wholesale/Resellers 27.8 10.6 51.3 18.2
- Residential Customers 12.7 12.9 26.6 27.8
Network expenses 50.5 37.1 99.6 75.1
Gross profit +29.1 +19.5 +56.9 +35.9
EBITDA +10.9 +4.1 +19.8 +6.5
Net income (loss) +0.5 -3.1 +1.5 -6.1
Capital expenditures 18.7 11.7 29.3 19.0
Liquid assets as of June 30 93.1 59.4
Employees as of June 30 735 662

Queries to:
QSC AG
Arne Thull
Investor Relations
Fon: +49(0)221-6698-724
Fax: +49(0)221-6698-009
E-mail: invest@qsc.de

Notes:
The complete 6-months report will be available on August 29th 2007, under
http://www.qsc.de/en/investor-relations.html. This corporate news contains
forward-looking statements. These forward-looking statements are based on
current expectations and forecasts of future events by the management of
QSC AG. Due to risks or mistaken assumptions, actual results may deviate
substantially from those made in such forward-looking statements. The
assumptions that may involve material deviations due to unforeseeable
developments include, but are not limited to, the demand for our products
and services, the competitive situation, the development, dissemination and
technical performance of DSL technology and its prices, the development and
dissemination of alternative broadband technologies and their respective
prices, changes in respect of telecommunications regulation, legislation
and adjudication, prices and timely availability of essential third-party
services and products, the timely development of additional marketable
value-added services, the ability to maintain and enlarge upon marketing
and distribution agreements and to conclude new marketing and distribution
agreements, the ability to obtain additional financing in the event that
management's planning targets are not attained, the punctual and full
payment of outstanding debts by sales partners and resellers of QSC AG, and
the availability of sufficient skilled personnel.
DGAP 15.08.2007

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Language: English
Issuer: QSC AG
Mathias-Brüggen-Straße 55
50829 Köln
Deutschland
Phone: +49 (0)221 66 98-112
Fax: +49 (0)221 66 98-009
E-mail: invest@qsc.de
Internet: www.qsc.de
ISIN: DE0005137004
WKN: 513700
Indices: TecDAX
Listed: Geregelter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin, Stuttgart, München, Düsseldorf

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