Earnings Release • May 13, 2009
Earnings Release
Open in ViewerOpens in native device viewer
Quarterly Report I/ 2009
1st Quarter € + 4.0 million free cash flow + 71 % EBITDA to € 19.5 million equals an 18 % EBITDA margin € 1.4 million net profi t 10 % growth in spite of the recession 2009
| All amounts in € million | 01/01/-31/03/ 2009 |
01/01/-31/03/ 2008 |
|---|---|---|
| Revenues | 107.6 | 97.5 |
| Gross profi t | +36.5 | +31.2 |
| EBITDA | +19.5 | +11.4 |
| EBIT | +2.5 | -3.6 |
| Net profi t (loss) | +1.4 | -4.1 |
| Earnings per share 1 (in €) |
+0.01 | -0.03 |
| Equity | 155.9 2 |
154.4 3 |
| Balance sheet total | 2 344.9 |
3 353.2 |
| Equity ratio (in percent) | 45.2 2 |
43.7 3 |
| Free cash fl ow | +4.0 | -10.2 |
| Capital expenditures | 11.5 | 28.6 |
| Liquidity | 2 44.7 |
3 49.2 |
| Share price as of 31/03/ (in €) | 0.91 | 1.69 |
| Number of shares as of 31/03/ | 136,998,137 | 136,392,132 |
| Market capitalization as of 31/03/ | 124.7 | 230.5 |
| Employees as of 31/03/ | 683 | 770 |
basic and diluted
as of March 31, 2009
as of December 31, 2008
,
In the first quarter of 2009, QSC grew its revenues by 10 percent to € 107.6 mil lion. In the midst of the world's most serious post-war recession, greater demand for cost-efficient voice products on the part of resellers and enterprise customers has proven to be a growth dri v er – the Company's decision to build a Next Generation Network early on is now paying off.
In the first quarter of 2009, QSC earned an EBITDA of € 19.5 million, thus increasing its earnings before interest, taxes, depreciation and amortization by 71 percent year on year. The EBITDA margin stood at 18 percent in the first quarter of 2009.
The Company's operating profit, its EBIT, amoun ted to € 2.5 million in the first quarter of 2009, as opposed to an operating loss of € -3.6 million for the same quarter the year before. QSC recorded an operating profit in all three segments in this connection. Net income amounted to € 1.4 million, as opposed to a net loss of € -4.1 million in the fi rst quarter of 2008.
Even though QSC distributed the surplus liquidity from network operating company Plusnet to its shareholders in the first quarter of 2009, the Company nevertheless earned a po si tive free cash flow of € 4.0 million, thus further reducing its net debt to € -8.2 million.
Joachim Trickl has been moving the operative and sales development of QSC's three business units forward since February 1, 2009, as the Company's Chief Operating Offi cer. Moreover, the Supervisory Board appointed the former head of Finance, Jürgen Hermann, to be the new Chief Financial Officer effective April 1, 2009.
At the CeBIT tradeshow in March 2009, the SME Initiative bestowed its IT INNOVATION AWARD on the IPfonie centraflex networkbased telecommunication solution, thus honoring QSC as the most innovative company in the telecommunications industry.
QSC got off to a good start in the 2009 fi scal year: In spite of the deep recession, we grew our revenues by 10 percent to € 107.6 million during the first three months and our EBITDA by an outstanding 71 percent to € 19.5 million. What is even more important from our standpoint is the fact that QSC has already been able to earn a positive free cash flow of € 4.0 million during this period. Because given the global banking crisis and plummeting capital markets, a company's financial strength is a key success factor.
And QSC is in good financial shape. Our cash flow from operating activities, alone, totaled more than € 20 million in the first quarter. At the same time, capital expenditures decreased sharply to around € 11 million. Following the conclusion of the network expansion project in the summer of 2008, QSC has possessed a powerful, modern infrastructure, and is now making only replacement investments here. Our strong cash influx and low capital expenditures are giving us the latitude to further reduce our indebtedness, which is low by industry comparison. At the end of March, net debt – the difference between liquid assets and interest-bearing liabilities – amount ed to only € -8.2 million, as opposed to € -12.2 million at year-end 2008. So the Company is well on its way toward completely eliminating its moderate net debt during the course of fiscal 2009. And this is precisely what accounts for QSC's financial strength during the world's most severe post-war recession!
Well on the way toward completely eliminating net indebtedness
QSC shines with flexibility, speed and innovative solutions
Undoubtedly, we too are feeling the pinch of the recession in many an area. In our consultancyintensive Managed Services business, for example, it is currently taking somewhat longer to turn an initial contact into an order. And in our Products business, the recession is leading to even greater price sensitivity. Yet as a medium-size company that serves medium-size companies, QSC is well aligned for these challenges. QSC shines when it comes to flexibility, speed and innovative solutions. With our IP-VPN solutions, we can lower the costs for enterprises, while simultaneously boosting their productivity: The result is noticeably rising interest in QSC. And with our highly efficient Next Generation Network, we can score points among both direct customers as well as resellers in especially price-sensitive voice business, without endangering QSC's margin.
The second focus of our work during the current fiscal year is to concentrate on sufficient margins in all products and services. In this connection, QSC is rigorously dropping products and custom ers whose contribution margins are unsatisfactory. Given this background, we most recently decided in early April to discontinue active marketing of our Q-DSL home residential customer product.
Our Management Board colleague of long years' standing, Markus Metyas, played a key role in shaping QSC's focus on strengthening its financial position and profitability. Due to personal rea sons, he decided in late March to leave the Company and address new challenges outside QSC. We would like to take this opportunity to express our sincere thanks to him for his remarkable achievements since the initial public offering in the year 2000.
With its rising financial strength and profitability, QSC sees itself as being well equipped for even a prolonged recession. In spite of the recent withdrawals of predictions, we are therefore reiterating the guidance we had announced in late February 2009. The current course of business gives us the optimism that our forecast positive development will be able to be sustained, even in the face of a significant decline in gross domestic product.
QSC sees itself well equipped for even a prolonged recession
Cologne, May 2009
Dr. Bernd Schlobohm Jürgen Hermann Joachim Trickl Chief Executive Officer
Capital market characterized by fi nancial crisis and recession • In the face of the global fi nancial crisis and deep recession, trading prices continued to plummet on stock exchanges throughout the world, especially at the outset of the first quarter of 2009: During the first three months, the DAX lost 15 percent in value. However initial signs of recovery during the second half of March limited the loss on the TecDAX to 6 percent.
QSC shares were unable to avoid the general trend of negativism. Massive hesitation toward small caps made the performance of the Company's shares during the first three months of 2009 even worse than the market average. Following a high of € 1.28 at the beginning of the year, trading prices had fallen to a low of € 0.75 by the beginning of March. While shares did recover moderately through to the end of March, their trading prices nevertheless suffered a 27-percent decrease during the first quarter of 2009.
Strongly declining trading volumes also documented the difficult situation on capital markets and the skepticism about small caps. During the first quarter of 2009, an average of only 225,000 QSC shares changed hands daily; in the first three months of 2008, the trading volume had been more than twice as high.
Trading prices recover in April 2009 • In spite of the difficult environment, QSC sustained its intensive investor relations work during the first quarter of 2009, explaining the Company's positive business development and its potential in a recessionary environment in numerous conversations and at an analyst conference in Cologne on February 26, 2009. In April, this work bore fruit in a somewhat friendlier market environment: The trading price of QSC shares had risen to € 1.29 as of April 30, 2009, thus at least showing improvement of four percent since the beginning of the year.
QSC's IR website garners fourth place in extensive study
QSC utilizes its own Web presence as its most important investor relations information platform. In an extensive study conducted in April by Cologne-based NetFederation, QSC's investor relations (IR) website garnered fourth place among all TecDAX companies. Early on, the Company had also embraced innovative forms of communication, such as recently the Twitter micro blogging service, numbering QSC among the trailblazers in Germany.
German economy characterized by recession • In the first quarter of 2009, Germany continued to be caught up in the grips of the world's deepest post-war recession. Declining demand both in Germany and in other countries affected virtually all industries and continued to dampen the willingness to invest. It is QSC's conviction that in an environment like this, companies will focus on products and services that can make a swift contribution toward cost reductions while simultaneously increasing productivity – and these include IP-VPN solutions and further IP-based products and services.
It is for this reason, too, that the telecommunications industry in Germany has thus far been affec t ed only relatively little by the recession. However telecommunications providers are benefi ting first and foremost from the fact that telephone and Internet connections have today become "basic utilities" for both enterprises and residential households. In the first quarter of 2009, these standard products continued to be the subject of stiff price competition, which QSC endeavors to largely avoid. Because with its Next Generation Network (NGN), the Company possesses an extremely cost-effi cient infrastructure, especially for voice services; this infrastructure has enabled QSC to continue to expand its market position in recent months, without narrowing its margins.
Moderate decline in local loop fees • The telecommunications industry in Germany is subject to regulation by the German Federal Network Agency, which is mandated with assuring fair competition in a market that was not liberalized until the 1990s. On March 31, 2009, the regulatory authority ruled that the monthly fee that competitors have to pay to Deutsche Telekom (DTAG) for each subscriber line (local loop) should be lowered from € 10.50 to € 10.20; this ruling is applicable for two years, from April 1, 2009, onward. While the German Federal Network Agency did clearly deny DTAG's request for a significant increase, the fee continues to be around two euros higher than in other major European markets.
QSC growing in spite of recession • QSC grew its revenues by 10 percent to € 107.6 million in the first quarter of 2009, as opposed to € 97.5 million for the same quarter the year before. The Company generated its strongest growth in the Wholesale/Reseller segment, although, as expected, Wholesale ADSL2+ business generated only few additional DSL lines. Overall, QSC connected 11,700 DSL lines in the first quarter, raising the total installed base to 567,400.
QI /2009 107.6 QI /2008
Telecommunications industry affected only relatively little by recession
97.5 (in € million)
Revenues
Network expenses, which are recorded under cost of revenues, rose by seven percent to € 71.1 million in the first quarter of 2009, as opposed to € 66.3 million for the comparable period the year before. This disproportionately low increase enabled gross profi t to rise by 17 percent to € 36.5 million, as opposed to € 31.2 million in the first quarter of 2008; gross margin stood at 34 percent.
QI /2009 36.5
Gross Profi t (in € million) 31.2
QI /2008
At € 10.3 million, selling and marketing expenses were down 19 percent from the previous year's level of € 12.7 million. On the one hand, this was attributable to the swift achievement of synergies following the Broadnet merger, which consolidated the nationwide sales offices, for example. On the other hand, this decrease documents the sustained high cost discipline that prevails throughout the entire organization. The percentage of total revenues accounted for by selling and marketing expenses declined to 10 percent year on year, as opposed to 13 percent in the fi rst quarter of 2008. During the same period, general and administrative expenses remained constant at 7 percent, amounting to € 7.5 million in the first quarter of 2009, as opposed to € 7.3 million for the corresponding period the year before.
EBITDA advances by 71 percent to € 19.5 million in first quarter
EBITDA margin reaches 18 percent • QSC's strict cost discipline and profi table growth produced a further signifi cant improvement in EBITDA in the fi rst quarter of 2009, which improved by 71 percent to € 19.5 million, as opposed to € 11.4 million for the same period the year before. QSC defines EBITDA as earnings before interest, taxes, amortization of deferred non-cash share-based payments, as well as depreciation and amortization of fixed assets, intangible assets and goodwill. The EBITDA margin has already reached 18 percent in the first quarter of 2009, by comparison with 12 percent for the first three months of fiscal 2008.
EBITDA (in € million) 11.4 QI /2009 19.5 QI /2008
In the first quarter of 2009, depreciation expense totaled € 17.1 million, up 14 percent from € 15.0 mil lion for the comparable period the year before. This was essentially attributable to strong custo mer growth in ADSL2+ business, especially during the fi rst half of 2008. QSC capita li zes the connection costs incurred in this connection, depreciating them over a period of two years.
QSC earns positive EBIT and net profi t • In the fi rst quarter of 2009, QSC earned an operating profi t after depreciation expense (EBIT) of € 2.5 million; the year before, an operating loss of € -3.6 million had still been incurred. Declining interest rate levels, coupled with the lower amount of mo ney to be invested, reduced financial income, which amounted to € 0.3 million in the first quarter of 2009, as opposed to € 0.7 million for the same quarter the year before. During the same period, fi nancing expenses declined moderately to € -0.9 million, as opposed to € -1.1 million the year before, because QSC reduced its net debt in the first quarter of 2009. Given income taxes in the amount of € -0.5 million, essentially attributable to deferred taxes, which do not impact liquidity, QSC thus earned net income of € 1.4 million; the year before, a net loss of € -4.1 million had been incurred. Earnings per share stood at € 0.01, as opposed to € -0.03 in the first quarter of 2008.
QSC earns net income of € 1.4 million
Net Profi t (Loss)
Wholesale/Reseller segment posts highest growth rates • In the fi rst quarter of 2009, the Wholesale/Reseller segment recorded the highest revenue growth of 24 percent to € 64.3 million, as opposed to € 51.7 million in the first quarter of 2008. Wholesale voice business, i.e. reselling IPbased voice services to providers who do not possess their own nationwide infrastructure, developed on an especially positive note. QSC is benefi ting in this line of business from the extremely competitive cost structure of its NGN. In addition to Wholesale voice business, Wholesale SHDSL business with international carriers continued to sail a growth course in the fi rst quarter of 2009.
| QI /2009 | 64.3 | Wholesale / Resellers Revenues |
|---|---|---|
| QI /2008 | 51.7 | (in € million) |
Wholesale ADSL2+ business, on the other hand, developed on a more restrained note, accounting for 47 percent of segment revenues in the first quarter. As in the fourth quarter of 2008, the number of additional DSL lines remained relatively modest – essentially for three reasons: First, metropolitan areas, in particular, are slowly seeing saturation with respect to the supply of DSL connections. Second, price competition is heightening in this line of business, and QSC is unwilling to forego a sufficient margin in order to achieve further growth. And third, a growing number of potential DSL customers are also using cable TV for their broadband Internet connections, especially in metropolitan areas. However this last point, in turn, is strengthening QSC's Wholesale voice business, as the cable network operators have to depend upon collaboration with telecommunications companies in order to provide voice telephony for their Triple Play connections – and QSC numbers among the preferred partners here.
Wholesale ADSL2+ business and Wholesale voice business, in particular, are making a signifi cant contribution toward assuring the best possible utilization of the nationwide network infrastructure; it is for this reason that the Wholesale/Reseller segment also bears the lion's share of net work expenses, accounting for € 46.8 million of the total, as opposed to € 39.7 million the year before. However due to its strong revenue growth, this segment was nevertheless able to increase its gross profit to € 17.5 million during the past quarter, as opposed to € 12.0 million for the same quarter the year before. During the same period, segment EBITDA rose by 64 percent to € 12.0 million, as opposed to € 7.3 million the year before. At the same time, QSC achieved the highest EBIT of any segment here: € 1.7 million; the year before, a loss of € -1.8 million had been incurred.
Wholesale / Resellers EBIT (in € million) -1.8
QI /2008
QI /2008
Focus on higher-margin products paying off • In the Products segment, QSC generated revenues of € 24.8 million in the first quarter of 2009, as opposed to € 27.9 million for the corresponding quarter the year before; however revenues remained stable by comparison with the preceding quarters. QSC is benefi ting from its successful focus on direct connections for smaller businesses, independent contractors and freelancers, and from its policy of dropping lower-margin products. Consequently, in early April the Company withdrew the remaining Q-DSL home residential custo mer product from marketing.
Products Revenues (in € million) 27.9
utilizing voice services from QSC for their customers
Cable network operators
QI /2009 24.8
Two developments characterized the course of business in the first quarter of 2009: First, there was increased demand for the Q-DSLmax data product as well as its employment in combination with Voice over IP products, the QSC Complete packages. Second, the recession has led to a renewed moderate rise in demand for call-by-call offerings; conventional voice telephony accounted for 47 percent of segment revenues in the first quarter of this fiscal year. Thanks to its Next Generation Network, QSC can be especially efficient in offering these kinds of voice services, thus making the Company cost-effective by industry comparison and enabling additional revenues with attractive margins to be achieved.
Focusing on higher-margin products led to a significant improvement in profitability in the first quarter of 2009. In spite of declining revenues, QSC recorded a gross profit of € 11.0 million in the first quarter of 2009, the same as the year before; during this period, gross margin rose from 39 percent to 44 percent. And segment EBITDA improved strongly to € 4.8 million, as opposed to € 3.2 million the year before; the corresponding margin increased to 19 percent, in contrast to 11 percent in the fi rst quarter of 2008. Segment EBIT stood at € 0.7 million, as opposed to an operating loss of € -0.7 million for the corresponding period the year before.
Profitability in Products segment rises in spite of declining revenues
Products EBIT -0.7 (in € million) QI /2009 0.7 QI /2008
EBITDA margin up sharply in Managed Services • Revenues in the Managed Services segment increased by three percent in the fi rst quarter of 2009 to € 18.5 million, as opposed to € 17.9 million for the corresponding period the year before. In this connection, 70 percent of new business was attributable to the existing customer base, 30 percent to new enterprise customers. In view of the recession, though, interest in cost-effective IP-VPN is rising on the part of small and mediumsize enterprises. While the diffi cult economic environment is delaying many a contract signing, QSC expects to see stronger growth again in Managed Services in the coming quarters on this basis.
| QI /2009 | 18.5 | |
|---|---|---|
| QI /2008 | 17.9 | (in € million) |
Managed Services Revenues
At € 8.1 million, gross profi t in the Managed Services segment was virtually the same as the previous year's level of € 8.2 million. This segment, with its comparatively intensive need for consul tancy, and thus personnel, benefited in particular from cost savings in sales and marketing; this increased segment EBITDA to € 2.7 million, as opposed to € 1.0 million for the same quarter the year before; the EBITDA margin improved signifi cantly to 15 percent, in contrast to six percent in the first quarter of 2008. EBIT reached € 0.1 million, as opposed to € -1.1 million in the first quarter of 2008.
Managed Services EBIT (in € million) -1.1
Operating cash flow rises to € 21.3 million in first quarter of 2009
High operating cash fl ow • The strength of the Company's operative business in the fi rst quarter of 2009 can also be seen from its cash flow statements. Cash flow from operating activities rose to € 21.3 million in the fi rst three months of the current fi scal year, as opposed to € 15.8 million for the corresponding period the year before. At € -10.5 million, on the other hand, cash flow from investing activities was far below the previous year's level of € -33.7 million, since the network expansion project had still been producing a considerable cash burn. Cash fl ow from fi nan cing activities rose signifi cantly to € -15.2 million, as opposed to € -6.5 million the year before, as QSC utilized the positive development of its operative business to further reduce its net debt. Moreover, network operating company Plusnet, which QSC fully consolidates, disbursed € 10.9 million in available liquidity that it had still been holding for the purpose of expanding the network to its shareholders on the basis of their shareholdings following conclusion of the network expansion project and its final financial settlement as of March 31, 2009; € 3.5 million was disbursed to Plusnet co-shareholder TELE2 in this connection.
Cash Flow from Operating Activities (in € million) 15.8
QI /2009 21.3 QI /2008
QI /2008
QI /2009 0.1
Positive free cash flow of € 4.0 million • QSC's liquid assets, which in addition to cash and cash equivalents also include available-for-sale financial assets, thus totaled € 44.7 million as of March 31, 2009, as opposed to € 49.2 million at year-end 2008.
At the same time, QSC reduced its interest-bearing liabilities – which include, in particular, liabilities to financial institutions as well as debt under finance lease contracts – by € 8.4 million. As a result, the Company earned a positive free cash flow of € 4.0 million in the first quarter of 2009, thus reducing its net debt by the same amount. Net indebtedness as of March 31, 2009, stood at € -8.2 million, as opposed to € -12.2 million at the close of the 2008 fiscal year.
Growing financial strength • QSC's growing financial strength and the reduction of its net debt also characterized the Company's balance sheet as of March 31, 2009. Long-term liabilities declined to € 65.4 million, as opposed to € 76.4 million as of December 31, 2008. In this connection, long-term liabilities under fi nance lease contracts, alone, decreased to € 12.5 million, as opposed to € 17.4 million at year-end 2008. Moreover, the reimbursement of liquidity to the Plusnet share holders, in particular, decreased long-term liabilities to other minority shareholders to € 47.6 mil lion, as opposed to € 53.8 million on December 31, 2008.
At € 123.6 million, as opposed to € 122.4 million at year-end 2008, short-term liabilities remained virtually constant. In this connection, QSC is reducing its short-term interest-bearing liabilities under fi nance lease contracts, as well as other short-term liabilities, some of which are interestbearing, while increasing non-interest-bearing trade payables.
The Company's capital stock continued to amount to € 137.0 million as of March 31, 2009. Due to the net profit in the first quarter of 2009, shareholders' equity rose moderately to € 155.9 million in the first quarter of 2009, as opposed to € 154.4 million at year-end 2008. The equity ratio improved to 45 percent, as opposed to 44 percent as of December 31, 2008.
QSC reduces interestbearing liabilities in first quarter of 2009
Equity Ratio
44 %
QI /2009 45 % QIV /2008
60 percent decline in capital expenditures year on year
Capital expenditures down sharply • Capital expenditures totaled € 11.5 million in the fi rst quarter of 2009, down 60 percent from the level of the corresponding quarter the year before; at that time, the network expansion project as well as capital expenses involved in connecting new customers in Wholesale ADSL2+ business had resulted in capital expenditures totaling € 28.6 million. During the first quarter of the current fiscal year, QSC spent 27 percent of capital expenditures on maintenance and ongoing modernization of its nationwide infrastructure, while customerrelated capital expenditures accounted for 71 percent.
Capital Expenditures (in € million) 28.6
QI /2008
On the assets side of the balance sheet, this lower volume of capital expenditures, coupled with scheduled depreciation, reduced the value of long-term assets to € 230.7 million, as opposed to € 236.9 million as of December 31, 2008. Short-term assets declined moderately to € 114.2 million, as opposed to € 116.3 million as of December 31, 2008, as QSC again streamlined its accounts payable management activities, among other things: In spite of higher revenues, trade receivables amounted to only € 53.7 million as of March 31, 2009, as opposed to € 57.9 million at year-end 2008.
QI /2009 11.5
Optimum workforce reached • As of March 31, 2009, QSC employed a workforce of 683 people, five more than at year-end 2008. At this point in time, the Company had concluded its gentle reduction in force. With its present manpower level, QSC sees itself as being very well aligned for its planned growth in 2009 and beyond. On March 31, 60 percent of the Company's employees were working in customer-related operations, 28 percent in engineering and technology operations, and only 12 percent in administration.
New Chief Financial Officer • On March 31, 2009, the Supervisory Board appointed Jürgen Hermann to the QSC Management Board, effective April 1, 2009. A business graduate, Hermann had been heading up Finance since QSC's founding in 1997; in this position, he shared responsibility for building the Company, from pre-IPO financing to the initial public offering and right down to the present. On the Management Board, Hermann has assumed the CFO responsibilities from Markus Metyas, who decided not to seek a further extension of his contract for personal reasons. Joachim Trickl had already been appointed to succeed Bernd Puschendorf on the Management Board effective February 1, 2009; as Chief Operating Offi cer, he is now moving the operative development of the three business units forward.
No material changes in risk position • There were no material changes in the risks presented in the 2008 Annual Report. Nevertheless, the risks presented therein, like other risks or incorrect assumptions, could mean that actual future results would vary materially from QSC's expectations. All statements contained in this unaudited Consolidated Interim Report that are not historical facts are forward-looking statements. They are based upon current expectations and projections of future events, and could therefore change over the course of time.
Focusing on increasing financial strength and profitability • After getting off to a good start in fiscal 2009, QSC will be making every effort during the coming quarters to continue to increase its financial strength and profitability in a very difficult market environment. In this connection, the Company is reiterating the guidance for the full 2009 fiscal year that it announced on Februa ry 26, 2009: QSC is thus planning on a free cash flow of more than € 10 million, as well as on an EBITDA of between € 68 and € 78 million. This will go hand in hand with planned annual revenues of between € 420 and € 440 million, as well as a sustained net profit.
The low level of capital expenditures in the first quarter of 2009 is increasing QSC's financial latitude. New latitude will also be produced by targeted measures aimed at optimizing working capital. These include, in particular, strict accounts receivable management, optimized inventory levels, as well as utilization of pricing latitudes on the part of suppliers. QSC will employ the free cash flow to further reduce its net indebtedness, which is already moderate by industry comparison, over the course of the coming quarters.
QSC reiterates guidance for full 2009 fiscal year
| 01/01/-31/03/ 2009 |
01/01/-31/03/ 2008 |
|
|---|---|---|
| Net revenues | 107,606 | 97,483 |
| Cost of revenues | (71,067) | (66,271) |
| Gross profit | 36,539 | 31,212 |
| Selling and marketing expenses | (10,324) | (12,733) |
| General and administrative expenses | (7,527) | (7,277) |
| Depreciation and non-cash share-based payments | (17,054) | (15,045) |
| Other operating income | 974 | 283 |
| Other operating expenses | (127) | (47) |
| Operating profit (loss) | 2,481 | (3,607) |
| Financial income | 277 | 652 |
| Financial expenses | (925) | (1,050) |
| Net profit (loss) before income taxes | 1,833 | (4,005) |
| Income taxes | (476) | (144) |
| Net profit (loss) | 1,357 | (4,149) |
| Earnings per share (basic) in € | 0.01 | (0.03) |
| Earnings per share (diluted) in € | 0.01 | (0.03) |
| Mar. 31, 2009 | Dec. 31, 2008 | |
|---|---|---|
| ASSETS | ||
| Long-term assets | ||
| Property, plant and equipment | 136,928 | 141,028 |
| Goodwill | 50,014 | 50,014 |
| Other intangible assets | 42,841 | 45,008 |
| Other long-term fi nancial assets | 946 | 828 |
| Long-term assets | 230,729 | 236,878 |
| Short-term assets | ||
| Trade receivables | 53,681 | 57,880 |
| Prepayments | 7,116 | 3,051 |
| Inventories | 3,400 | 3,690 |
| Other short-term fi nancial assets | 5,230 | 2,547 |
| Available-for-sale fi nancial assets | 329 | 327 |
| Cash and short-term deposits | 44,400 | 48,823 |
| Short-term assets | 114,156 | 116,318 |
| TOTAL ASSETS | 344,885 | 353,196 |
| Mar. 31, 2009 | Dec. 31, 2008 | |
|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | ||
| Capital stock | 136,998 | 136,998 |
| Capital surplus | 563,313 | 563,197 |
| Other reserves | (1,141) | (1,141) |
| Consolidated balance sheet loss | (543,269) | (544,626) |
| Shareholders' equity | 155,901 | 154,428 |
| Liabilities | ||
| Long-term liabilities | ||
| Long-term liabilities of other minority shareholders | 47,625 | 53,790 |
| Long-term portion of fi nance lease obligations | 12,549 | 17,381 |
| Convertible bonds | 22 | 22 |
| Accrued pensions | 676 | 678 |
| Other long-term liabilities | 2,394 | 2,774 |
| Deferred tax liabilities | 2,092 | 1,735 |
| Long-term liabilities | 65,358 | 76,380 |
| Short-term liabilities | ||
| Trade payables | 60,262 | 49,954 |
| Short-term portion of fi nance lease obligations | 18,441 | 20,152 |
| Liabilities due to banks | 15,000 | 15,000 |
| Provisions | 1,293 | 1,924 |
| Deferred revenues | 20,154 | 22,200 |
| Other short-term liabilities | 8,476 | 13,158 |
| Short-term liabilities | 123,626 | 122,388 |
| Liabilities | 188,984 | 198,768 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 344,885 | 353,196 |
| 01/01/-31/03/ 2009 |
01/01/-31/03/ 2008 |
|
|---|---|---|
| Cash fl ow from operating activities | ||
| Net profi t (loss) before income taxes | 1,833 | (4,149) |
| Depreciation and amortization | 16,938 | 14,843 |
| Non-cash share-based payments | 118 | 192 |
| Loss from disposal of long-term assets | 489 | - |
| Changes in provisions | (753) | 1,174 |
| Changes in trade receivables | 4,198 | (5,972) |
| Changes in trade payables | 10,306 | 17,852 |
| Changes in other fi nancial assets and liabilities | (11,805) | (8,125) |
| Cash fl ow from operating activities | 21,324 | 15,815 |
| Cash fl ow from investing activities | ||
| Purchase of available-for-sale fi nancial assets | - | (14,996) |
| Disposal of available-for-sale fi nancial assets | - | 1,178 |
| Purchase of intangible assets | (6,360) | (14,441) |
| Purchase of property, plant and equipment | (4,166) | (5,413) |
| Cash fl ow from investing activities | (10,526) | (33,672) |
| Cash fl ow from fi nancing activities | ||
| Changes in convertible bonds | - | 3 |
| Assumption (Repayment) of liabilities due to | ||
| minority interest shareholders | (6,165) | 850 |
| Proceeds from issuance of common stock | - | 34 |
| Repayment of other short- and long-term liabilities | (1,879) | (1,430) |
| Disposal of loans granted | - | (1,091) |
| Repayment of fi nance lease | (7,177) | (4,913) |
| Cash fl ow from fi nancing activities | (15,221) | (6,547) |
| Change in cash and short-term deposits | (4,423) | (24,404) |
| Change in cash and short-term deposits at January 1 | 48,823 | 74,132 |
| Cash and short-term deposits at March 31 | 44,400 | 49,728 |
| Interest paid | 923 | 1,050 |
| Interest received | 275 | 652 |
Euro amounts in thousands (T €)
| 01/01/-31/03/ 2009 |
01/01/-31/03/ 2008 |
|
|---|---|---|
| Comprehensive income | 1,357 | (4,149) |
| Other comprehensive income (loss), net of taxes | - | - |
| Total comprehensive income (loss) 1 | 1,357 | (4,149) |
1 attributable to equity holders of the parent
| Equity attributable to equity holders of the parent | ||||||
|---|---|---|---|---|---|---|
| Capital stock Capital surplus Other capital Consolidated Total share- |
||||||
| reserves | balance sheet loss | holders' equity | ||||
| Balance at January 1, 2009 | 136,998 | 563,197 | (1,141) | (544,626) | 154,428 | |
| Total comprehensive income | 1,357 | 1,357 | ||||
| Non-cash share-based payments | 116 | 116 | ||||
| Balance at March 31, 2009 | 136,998 | 563,313 | (1,141) | (543,269) | 155,901 | |
| Balance at January 1, 2008 | 136,358 | 562,501 | (289) | (544,095) | 154,475 | |
| Total comprehensive loss | (4,149) | (4,149) | ||||
| Conversion of convertible bonds | 34 | 1 | 35 | |||
| Non-cash share-based payments | 201 | 201 | ||||
| Balance at March 31, 2008 | 136,392 | 562,703 | (289) | (548,244) | 150,562 |
QSC AG (QSC, the Company or the Group) is a nationwide telecommunications provider with its own DSL network that offers comprehensive broadband communication to business customers: From leased lines in a variety of bandwidths to voice and data services to networking of enterprise locations (IP-VPN).
QSC is a stock corporation registered in the Federal Republic of Germany whose legal domicile is Mathias-Brüggen-Strasse 55, 50829 Cologne, Germany. The Company is carried on the Register of Companies of the Local Court of Cologne under the number HRB 28281. QSC has been listed on the Deutsche Börse Stock Exchange since April 19, 2000, and on the Prime Standard since the beginning of 2003 following the reorganization of the equity market. On March 22, 2004, QSC was added to the TecDAX index, which includes the 30 largest and most liquid technology issues in the Prime Standard.
The unaudited interim consolidated financial statements of QSC AG and its subsidiaries (interim consolidated fi nancial statements) have been prepared in accordance with the International Financial Reporting Standards (IFRS) and their interpretation by the International Financial Reporting Interpretations Committee (IFRIC) in accordance with International Accounting Standards (IAS) 34, "Interim Financial Reporting." The interim consolidated fi nancial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual consolidated fi nancial statements as of December 31, 2008. It is the opinion of the Management Board that the interim consolidated financial statements contain all adaptations that are necessary for a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of the Group. The fi nancial results presented in the interim consolidated financial statements for the period from January 1 through March 31, 2009, do not necessarily indicate the development of future results.
The accounting principles applied in preparing the interim consolidated statements correspond essentially to the accounting principles that had been used in preparing the Consolidated Financial Statements for the 2008 fiscal year. Following publication of the revised financial reporting pronouncement IAS 1, "Presentation of Financial Statements (revised)", the interim consolidated financial statements contain, for the first time, a separate single statement of comprehensive income. It allows the presentation of net profit and of all directly recognized changes in equity during the reporting period that do not result from owner transactions, where the owners are acting in their capacity as owners.
In fiscal year 2008, after eight years of operating the core net, management performed an inspection of the initially assumed useful lives. It was determined that the actual useful lives are signifi cantly longer than the initially assumed eight years for building improvements and the fi ve years assumed for installed technology. For this reason, the useful lives of building improvements and of installed technology were extended from eight to ten and from fi ve to eight years, respectively. According to IAS 8, the result of those revised assumptions is taken into consideration in the reporting period and subsequent periods. The following table provides the necessary details to be stated in the case of changes in estimates according to IAS 8, and shows the impact on the net results for the corresponding periods.
| in T € | 01/01/-31/03/ 2009 |
01/01/-31/03/ 2008 |
|---|---|---|
| Network equipment and plant | 2,594 | 2,241 |
| Building improvements | 192 | 272 |
| Impact of changes in estimates | 2,786 | 2,513 |
The preparation of the interim consolidated statements according to IFRS requires to a certain extent the use of judgments and estimates regarding recorded assets and liabilities, disclosures on potential trade receivables and payables, as well as presented income and expenses during the reporting period. Actual amounts may differ from those assumptions and estimates. In comparison to the Consolidated Financial Statements as of December 31, 2008, there were no material changes in management's assumptions regarding the use of accounting principles.
The interim consolidated financial statements are rounded, except when otherwise indicated, to the nearest thousand (T €).
The consolidated financial statements comprise the financial statements of QSC AG and its subsidiaries as of March 31, 2009. There has been no change in the number of companies included in the consolidation since December 31, 2008.
The basis for the definition of the segments is the internal organizational structure of the Company, upon which corporate management bases its business decisions and performance assessments. QSC conducted an extensive restructuring in the fourth quarter of 2007, consolidating its major lines of business into three business units. This also resulted in a change in the segment reporting effective January 1, 2008, with the comparison numbers from the previous year being correspondingly adjusted.
The Managed Services segment covers custom-tailored solutions for voice and data commu nication at major corporates and small and medium-size enterprises. This includes, in particular, building and operating virtual private networks (IP-VPN), as well as a broad portfolio of networkrelated services.
QSC consolidates is product business in the Products segment. The needs of smaller businesses, professionals, independent contractors and residential customers for modern voice and data communication are fully satisfi ed by means of predominantly standardized products and processes. The Wholesale/Reseller segment covers QSC's business with Internet service providers and network operators who do not possess their own infrastructure. They market DSL lines as well as voice and value-added services from QSC under their own name and for their own account.
| 107,606 |
|---|
| (71,067) |
| 36,539 |
| (10,324) |
| (7,527) |
| (16,938) |
| (116) |
| 847 |
| 2,481 |
| 344,885 |
| 188,984 |
| 11,535 |
| in T € | Managed Services |
Products | Wholesale / Resellers |
Reconciliation | Consolidated |
|---|---|---|---|---|---|
| 01/01/-31/03/2008 | |||||
| Net revenues | 17,860 | 27,928 | 51,695 | 97,483 | |
| Cost of revenues | (9,639) | (16,900) | (39,732) | (66,271) | |
| Gross profi t | 8,221 | 11,028 | 11,963 | - | 31,212 |
| Selling and marketing expenses | (4,457) | (5,626) | (2,650) | (12,733) | |
| General and administrative expenses | (2,868) | (2,315) | (2,094) | (7,277) | |
| Depreciation and amortization | (2,092) | (3,792) | (8,959) | (14,843) | |
| Non-cash share-based payments | (32) | (59) | (111) | (202) | |
| Other operating income | 79 | 79 | 78 | 236 | |
| Operating profi t (loss) | (1,148) | (686) | (1,773) | - | (3,607) |
| Assets | 82,158 | 110,624 | 192,509 | 8,099 | 393,390 |
| Liabilities | 38,658 | 48,048 | 149,589 | 6,533 | 242,828 |
| Capital expenditures | 3,457 | 4,472 | 20,684 | - | 28,613 |
Both the direct and indirect attribution of costs to the individual segments corresponds to the Company's internal reporting system and steering logic. With regard to assets and liabilities, there were also directly and indirectly attributable items. Assets and liabilities that are indirectly attributable (with the exception of deferred tax assets and liabilities) are allocated according to financial viability based on contribution margins.
As in the corresponding quarter the year before, no intersegment revenues were generated during the first quarter of the current fiscal year.
During the first quarter of 2009, QSC participated in transactions with companies affiliated with members of the management. According to IAS 24 related parties are individuals or companies with the possibility of infl uencing or even controlling the other party. All contracts with these companies require approval of the Supervisory Board and are concluded under normal market conditions.
| in T € | Net revenues | Expenses | Cash received | Cash paid |
|---|---|---|---|---|
| 01/01/-31/03/2009 | ||||
| IN-telegence GmbH & Co. KG | - | 38 | 160 | 24 |
| Teleport Köln GmbH | 4 | 29 | 2 | 33 |
| QS Communication Verwaltungs | ||||
| Service GmbH | 170 | 11 | - | 21 |
| 01/01/-31/03/2008 | ||||
| IN-telegence GmbH & Co. KG | 13 | (7) | 38 | - |
| Teleport Köln GmbH | 4 | 17 | 3 | 22 |
| QS Communication Verwaltungs | ||||
| Service GmbH | - | 28 | - | 46 |
| in T € | Trade receivables | Trade payables |
|---|---|---|
| At March 31, 2009 | ||
| IN-telegence GmbH & Co. KG | 119 | (21) |
| Teleport Köln GmbH | 4 | (8) |
| QS Communication Verwaltungs Service GmbH | - | - |
| At December 31, 2008 | ||
| IN-telegence GmbH & Co. KG | 75 | - |
| Teleport Köln GmbH | 1 | (6) |
| QS Communication Verwaltungs Service GmbH | - | (9) |
IN-telegence GmbH & Co. KG provides value-added telecommunications services. Teleport Köln GmbH operates and maintains QSC's private branch exchange. QS Communication Verwaltungs Service GmbH provides consultancy on product management of voice products.
In the fi rst quarter of 2009, there were no signifi cant cases of litigation settled on which disclosures had been provided in the Consolidated Financial Statements for fiscal year 2008.
| in T € | Shares | Convertible bonds | ||
|---|---|---|---|---|
| Mar. 31, 2009 | Mar. 31, 2008 | Mar. 31, 2009 | Mar. 31, 2008 | |
| Dr. Bernd Schlobohm | 13,818,372 | 13,818,372 | 350,000 | 350,000 |
| Jürgen Hermann | 145,000 | 89,840 | 47,000 | 47,000 |
| Joachim Trickl | 5,000 | - | 250,000 | - |
On November 18, 2008, the Supervisory Board appointed Joachim Trickl to QSC's Management Board effective February 1, 2009. He succeeds Bernd Puschendorf.
On March 31, 2009, the Supervisory Board appointed Jürgen Hermann to QSC's Management Board effective April 1, 2009. He succeeds Markus Metyas.
| in T € | Shares | Convertible bonds | ||
|---|---|---|---|---|
| Mar. 31, 2009 | Mar. 31, 2008 | Mar. 31, 2009 | Mar. 31, 2008 | |
| John C. Baker | 10,000 | 10,000 | - | - |
| Herbert Brenke | 187,820 | 187,820 | - | 10,000 |
| Gerd Eickers | 13,877,484 | 13,877,484 | - | - |
| David Ruberg | 14,563 | 14,563 | - | - |
| Klaus-Theo Ernst * | 500 | 500 | 3,258 | 3,258 |
| Jörg Mügge * | - | - | 6,000 | 6,000 |
* Employee representative
Cologne, May 2009
Dr. Bernd Schlobohm Jürgen Hermann Joachim Trickl Chief Executive Officer
Annual Shareholders Meeting May 20, 2009
Quarterly Reports August 12, 2009 November 12, 2009
Conferences/Events June 24, 2009 German & Austrian Corporate Conference Deutsche Bank, Frankfurt
August 25, 2009 9th German Technology & Telecoms Conference Commerzbank, Frankfurt
November 9–11, 2009 German Equity Forum Fall 2009 Deutsche Börse, Frankfurt
QSC AG Investor Relations Mathias-Brüggen-Strasse 55 50829 Cologne, Germany Phone +49-(0)221-6698-724 Fax +49-(0)221-6698-009 E-mail [email protected] Internet www.qsc.de
Overall Responsibility QSC AG, Cologne
Art Direction sitzgruppe, Düsseldorf
Photography Nils Hendrik Müller, Peine
This translation is provided as a convenience only. Please note that the German-language original of this Quarterly Report is definitive.
Further information under www.qsc.de
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.