QSC AG

Earnings Release • May 16, 2007

News Details

Corporate | 16 May 2007 07:48

QSC sustains its high-margin growth in the first 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.

---

QSC sustains its high-margin growth in the first quarter of 2007

• Revenues up by 41 percent to € 76.8 million
• Strategic segments now account for 82 percent of total revenues
• EBITDA surges by 271 percent to € 8.9 million
• Consolidated net income totals € 1.1 million

Cologne, May 16, 2007. Cologne-based QSC AG sustained its high
margin-growth in the first quarter of 2007. While revenues increased by 41
percent to € 76.8 million, EBITDA surged by 271 percent to € 8.9 million.
The company continued to generate particularly high revenue growth in its
three strategic segments of Large Accounts, Business Customers and
Wholesale/Resellers. Consequently, these strategic segments accounted for
82 percent of total revenues in the first quarter of 2007 compared to only
73 percent in the first quarter of 2006.

QSC posted especially high revenue growth in its Wholesale/Reseller
segment, in particular in wholesale business with strong partners like
HanseNet and freenet; revenues in this segment tripled to € 23.5 million by
comparison with the first quarter of 2006. This tripling of revenues
stemmed from a rise in recurring revenues whereas in the fourth quarter of
2006 non-recurring revenues with wholesale partners, as well as seasonal
growth in reseller business with voice carriers, had contributed to
extraordinary high revenues of € 28.9 million. With revenue growth of 30
percent year-on-year to € 18.7 million, business with large accounts also
developed on a positive note.

High-margin growth sparks a surge in EBITDA

QSC’s improved revenue quality produced considerable profitability growth
in the first quarter of 2007: Gross profit advanced by 70 percent to € 27.8
million, as opposed to € 16.4 million for the first three months of 2006;
at 36 percent, the corresponding gross margin reached a new high. And the
company’s EBITDA soared by 271 percent to € 8.9 million, as opposed to €
2.4 million for the first quarter of 2006. Net income improved by € 4.1
million to € 1.1 million in the first quarter of 2007.

Network expansion on schedule

Margins will strengthen even further during the current fiscal year through
Plusnet’s expansion of the network. By mid-year, QSC will already have a
nationwide DSL network with some 1,500 central offices; expansion to nearly
2,000 central offices is planned by year-end. During the first quarter of
2007, this planned network expansion resulted first and foremost in an
increase in capital expenditures to € 10.6 million, as opposed to € 7.3
million for the same quarter the year before. The entire network expansion
has already been fully funded through the cash contribution in the amount
of € 50 million that was made by Plusnet co-shareholder TELE2 in the autumn
of 2006. This cash contribution, as well as a positive cash flow from
operating activities, played a major role in increasing the company’s
liquid assets during the past 12 months by € 60.7 million to € 103.8
million as of March 31, 2007. The rise in the workforce by 238 people over
the year before to a total of 703 people was essentially attributable to
the acquisition of a majority interest in Hamburg-based broadband provider
Broadnet AG in June 2006.

Forecast reiterated

Given the company’s high-margin growth in the first quarter of 2007, QSC is
reiterating its forecast for the full 2007 fiscal year: The company
anticipates an EBITDA of between € 50 and € 60 million as well as a
consolidated net income of between € 15 and € 25 million on revenues of
more than € 350 million. QSC Chief Executive Officer Dr. Bernd Schlobohm
comments as follows: 'Our network expansion and our focus on high-margin
growth will enable us to increase our profitability from quarter to quarter
during the current fiscal year.'

In € million Q1 2007 Q1 2006
Revenues 76.8 54.4
Network expenses 49.1 38.0
Gross profit +27.8 +16.4
EBITDA +8.9 +2.4
Net income (loss) +1.1 -3.0
Earnings per share (in €) +0.01 -0.03
Capital expenditures 10.6 7.3
Liquid assets as of March 31 103.8 43.1
Employees as of March 31 703 465

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 3-months report is available under
http://www.qsc.de/en/investor-relations.html. This corporate news contains
forward-looking statements pursuant to the US 'Private Securities
Litigation Act' of 1995. 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 16.05.2007

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
www: www.qsc.de
ISIN: DE0005137004
WKN: 513700
Indices: TecDAX
Listed: Geregelter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin-Bremen, Stuttgart, München, Düsseldorf

End of News DGAP News-Service

---