QSC AG

Earnings Release • Feb 15, 2017

Oddo Seydler - 11th German Conference Frankfurt, 15 February 2017

THE DIGITISER OF THE GERMAN SME SECTOR

Disclaimer

This presentation contains forward-looking statements based on management estimates and reflects the current views of QSC AG's ("QSC's") management board with respect to future events. These forward-looking statements correspond to the situation at the time this presentation was prepared. Such statements are subject to risks and uncertainties, which often fall outside the sphere of influence of QSC. These risks and uncertainties are covered in detail within the Risk Report section in our financial statements.

Although the forward-looking statements are made with great care, their correctness cannot be guaranteed. Therefore the actual results may deviate from the expected results described herein. QSC does not intend to update or adjust any forward-looking statements after the publication of the presentation.

1. Business overview

>30,000 SME customers

Revenues of > €380m in 2016

years of experience 30

Proprietary TÜV and ISO-certified data centres on 20,000 m²

Proprietary nationwide All-IP-based network

Awards

Experton Industrie 4.0/IoT Rising Star 2017

~1,350

• Experton Security Leader 2016
• Experton Cloud Leader 2016

Key figures at a glance

employees in 12 locations

On the way to digitizing the German SME Sector

QSC AG is the digitiser of the German SME sector.

With decades of experience and expertise in the areas of Cloud, Internet of Things, Consulting and Telecommunications, QSC accompanies its customers securely into the digital age.

Secure. Innovative. At your side.

QSC is driving and being driven by digitisation

Comprehensive portfolio

• Customers appreciate combined offers, e.g. IoT + SAP HANA, PEC including consulting, when it comes to digitisation
• ITIL-based process organisation facilitates digitisation
• Ongoing transformation of QSC's organisation with a focus on recruiting digitisation experts (Cloud, Consulting)

Portfolio covers the key digital technologies

Excellent position in the competitive environment

Highly efficient business model SECURITY SERVICES END-TO-END-RESPONSIBILITY NETWORK AND CLIENT SERVICES Headquarter Branch office Home office Mobile representatives CLOUD PLATFORM Public Cloud Services QSC data centers CLOUD SERVICES Customers Virtual Desktops IP Telephony Industry Software Collaboration Legacy Software ERP Software Public SaaS/IaaS All-IP network LAN/WAN LAN/WAN WAN Mobility Internet of Things PURE ENTERPRISE CLOUD

From Cloud to Multi Cloud

• QSC's PEC is able to integrate numerous public cloud solutions
• PEC is therefore the perfect base for Multi Cloud solutions
• Multi Cloud solutions will be a key growth driver in the years to come as customers are looking for connected, service-oriented and shared cloud scenarios
• Multi Cloud will be the dominant IT architecture in the next 10 years

Focus on the German SME Sector

Providers

Our competitive advantages at a glance

• 1. Full-service Cloud/ICT portfolio including proprietary infrastructure and software development
• 2. Respected partner within the SME sector
• 3. Real end-to-end quality

2. Key financials and outlook

Q3 2016 in line with expectations

• Further improvement in revenue mix
• Cost-cutting programme on the way to meeting all targets:
• Workforce of 1,350 by year-end 2016
• Savings of > € 20 million already achieved
• Positive EBIT for the third consecutive quarter
• Positive FCF despite higher investments in Cloud business

15

Raised FCF guidance for 2016 (FCF: > € 7 million)

QSC is growing in areas where the future is

Drivers in Q3 2016		Revenue development in 2016
Cloud	Initial PEC projects/considerable IoT revenues
Outsourcing	Starting the migration to the PEC; no new customers in 1:1 outsourcing
Consulting	High demand for SAP projects
TC for corporate customers	Growing demand for All-IP solutions	E)
TC for resellers	Fierce price competition

Cloud: Accelerated growth

• Revenues grew by 40% within a quarter (Q2 2016: € 4.0 million)
• PEC and IoT are gaining speed
• Significantly improved segment contributions thanks to the business model's scalability

Segment margin

Consulting: On growth course

• High demand for SAP consulting is driving the segment

• Segment margin of 15% at the same level as in H1 2016

• SAP

• Microsoft and SAP Segment margin

Microsoft

Outsourcing: Visible effect of the migration to PEC

• Two factors are influencing revenues:
• Start of migration to the PEC
• No new customers in 1:1 outsourcing
• Segment margin of 22% still underlines the cost-cutting programme's success

Segment margin

Telecoms: Growing revenues with corporate customers

• In a stagnating market, QSC managed to increase its B2B2B revenues by another 4%
• Positive impact of migration to All-IP solutions
• Business with resellers impacted by fierce price competition
• Regulation will lead to a negative revenue impact of approx. € 15 million next year; no effect on earnings

TC revenues with resellers

• TC revenues with corporate customers
• TC revenues (total)
• Segment margin

Significant improvement in EBIT and net income

in $\epsilon$ million	Q3 2015	Q3 2016	Δ	$\Delta$ in %
Revenues	100.0	95.9	$-4.1$	$-4.1%$
Cost of revenues	72.4	70.5	$-1.9$	$-2.6%$
Gross profit	27.6	25.4	$-2.2$	$-8.0%$
Sales and marketing expenses	8.1	8.1	٠
General and admin expenses	7.6	7.3	$-0.3$	$-3.9%$
Other operating income	0.1	(0.6)	$-0.7$	nm
EBITDA	12.0	9.3	$-2.7$	$-22.5%$
Depreciation	12.6	8.3	$-4.3$	$-34.1%$
EBIT	(0.6)	1.0	$+1.6$	$+266.7%$
Financial result	(1.5)	(1.3)	$+0.2$	$+13.3%$
Income taxes	0.4	0.2	$-0.2$	$-50.0%$
Net income	(1.7)	(0.1)	$+1.6$	$+94.1%$

Revenues

Ongoing two-track development: Growth in Cloud, Consulting and TC for corporate customers vs. decrease in TC for resellers and in traditional Outsourcing

Earnings

• Cost-cutting programme impacting positively
• One-offs due to completion of the programme as previously announced

QSC is nearing its targeted workforce size of 1,350

Two-track development

• Recruitment of Cloud experts for sales and operations of the Pure Enterprise Cloud
• Staff cuts necessary in order to achieve the targeted workforce size of 1,350 by year-end 2016
• Staff reorganisation leads to one-off costs

More than 100 further experts this year so far

Almost all cost-cutting targets have been met

• Since February 2015, a company-wide cost-cutting programme has been in place
• Key aspects of the programme
• Reduction in headcount by around 350 employees
• Reduction in number of external consultants
• Reduction in number of locations
• Streamlining administration
• Optimisation of purchasing processes
• Standardisation/Industrialisation of IT operations
• Savings achieved by 31 December 2016: approx. € 24 million
• Finalisation of cost-cutting programme with one-off depreciations in December 2016

One-offs influenced EBITDA in Q3 2016 already

• Staff cuts require one-off costs in Q3 2016
• Effects of these one-offs will largely be felt in Q4 2016, also with regard to the 2016 annual financial statements

EBITDA margin

Declining current depreciation

• 2016 was characterised by a significant decrease in depreciation on the TC infrastructure
• Two one-off depreciations in Q4 2016
• A write-down of goodwill and intangible assets of declining Outsourcing business: € 13.9 million
• A write-down of FTAPI in connection with the sale of the subsidiary: € 1.5 million

CAPEX in 2016 mainly for cloud business

Focus of CAPEX in 2016

• Extension of the Pure Enterprise Cloud
• Customer projects
• Infrastructure

Focus in Q4 2016

• Extension of the Pure Enterprise Cloud
• CAPEX will increase to up to € 15 million
• CAPEX for 2016 in line with the budget (€ 25 — € 30 million)

FCF: Strong growth in 2016 so far

• Positive FCF development in the first nine months of 2016
• Q4 2016 will be characterised by higher CAPEX and lower earnings

QSC now expects a FCF of > € 7 million for FY 2016

For full-year 2016 QSC is still planning on

• Revenues of € 380 390 million and
• EBITDA of € 34 38 million
• Raised forecast: A positive FCF of more than € 7 million

Q4 2016 will be characterised by

• Further improvement in the revenue mix
• Completion of the cost-cutting programme and corresponding one-off effects

4. Appendix

Stable shareholder structure

Founders never sold a single share since the IPO in 2000

12.55% Gerd Eickers¹ 12.50% Dr. Bernd Schlobohm² 74.95% Free float

• ¹ Founder and Member of the Supervisory Board
• ² Founder and Chairman of the Supervisory Board

As of 31 December 2016

Financial calendar

6 March 2017 Publication of preliminary results for fiscal year 2016 Publication of outlook for fiscal year 2017 Analyst conference

30 March 2017 Publication of the 2016 Annual Report

8 May 2017 Publication of the I/2017 Quarterly Statement

24 May 2017 Annual Shareholders Meeting

7 August 2017 Publication of the II/2017 Quarterly Report

6 November 2017 Publication of the III/2017 Quarterly Statement

Contact

QSC AG Arne Thull Head of Investor Relations

T +49 221 669 -8724 M +49 221 669 -8009 invest@qsc.de www.qsc.de

Twitter.com/QSCIRde Twitter.com/QSCIRen blog.qsc.de xing.com/companies/QSC AG slideshare.net/QSCAG

QSC AG QSC AG Mathias-Brueggen-Str. 55 50829 Cologne