QSC AG

Investor Presentation • May 30, 2012

QSC AG

Company Presentation

Results Q1 2012

1

Cologne, May 7, 2012

AGENDA

• 1. Highlights Q1 2012
• 1. Financial results Q1 2012
• 3.Financial outlook 2012
• 1. Strategic outlook 2012 ²⁰¹⁶
• 1. Questions & Answers

MAJOR ACHIEVEMENTS IN Q1 2012

• • New contracts in Direct Sales with a total contract value (TCV) of € 36.4 million
• •New products: cospace, QSC-Housing
• •New IT Sales Partners: +22 partners since the start of 2012
• •Progress in the integration process: Merger agreement with INFO AG
• • Transformation process according to plan:
• •Mainly TC revenues in Wholesale down by 15%
• •ICT revenues in Direct Sales up by 78% (consolidation effect)

GROWING IMPORTANCE OF DIRECT SALES

4

Growth drivers

• •Consolidation of INFO AG
• •New clients in Direct Sales

Growth restraints

• • Fierce price competition especially in ADSL2+ business
• •Lower termination fees
• • Traditionally, lower revenuesin IT Consulting in Q1

NEW CUSTOMERS:A VERY SUCCESSFUL QUARTER FOR THE QSC GROUP

Industry	Total contract value (Q1 2012)
Consumer Electronics	€ 26,804,000
Retail	€ 3,116,000
Industry/Oil & Chemistry	€ 1,854,000
Food & Beverages (Tobacco)	€ 1,027,000
Gas/Energy	€ 838,000
Insurance/Healthcare	€ 378,000
Logistics/Shipping	€ 149,000
Others	€ 2,251,000
Total contract value (INFO AG only)	€ 36,417,000

Highlights

•

•

• KIND Hörgeräte (market leader in hearing devices):Fixed-line and mobile technology for more than 600 locations + IPfonie centraflex
• Olympus Europe (optical and digital products):5-year IT outsourcing contractwith a total contract volume of € 27 million

5

⇒

Revenue impact from H2 2012 onward

OUR BASIS OF SUCCESS IN DIRECT SALES: DATA CENTERS IN THE MAJOR REGIONS

• • In Q1 2012, QSC opened a new data center in Munich, one of southern Germany's most modern and energy efficient data centers
• • On 5,000 sqm of floor space, QSC provides the entire data center portfolio: from housing to managed services
• • The QSC group now runs data centers with a total capacity of ~15,000 sqm

QSC HAS LAUNCHED TWO NEW CLOUD PRODUCTS

QSC-Housing: a modular toolbox for data center services

• • QSC transfered a solution from IP Partner into a marketable product for sales channels
• • QSC-Housing offers a standardized and cost-effective solution for SMEs to take advantage of Cloud computing

cospace: a fully self-developed Cloud application

• • Web 2.0 app using state-of-the-art browser technology to integrate ICT features (voicebox / fax / conferencing)
• •A "true" Cloud application: sky-high scalability with minimal production costs
• 7⇒Major revenue impact from 2013 onward

QSC HAS ALREADY WON 22 NEW IT SALES PARTNERS

Partner Sales focuses on companies with 10 to 500 employees

⇒Major revenue impact from 2013 onward

PROGRESS IN THE INTEGRATION PROCESS

Joint sales forces

• •Growing number of leads are won by joint teams
• • Employees of all companies worked closely together at CeBITMerger
• •INFO AG signed merger agreement on March 20, 2012
• • Next steps:
• • General Annual Meeting of QSC on May 16, 2012: Profit transfer agreement with INFO Holding (formerly IP Partner)
• • General Annual Meeting of INFO AG on May 24, 2012: Decision on squeeze out

TRANSFORMATION AND INTEGRATIONPROCESS ACCORDING TO PLAN

Milestone	Progress in Q1 2012	Goal for 2012
Integration	Merger agreement	Complete merger process by Oct 2012
New customers	Total contract value of $\epsilon$ 36.4 million Direct sales revenues up by 78%	Achieve faster-than-market revenue growth in Direct Sales
New products	Launched cospace and QSC-housing	Launch 4-6 new products
Intellectual property	Launched the first self- developed SaaS product	Launch several self- developed SaaS products
New sales partners	Won 22 more IT sales partners	Win 50 IT sales partners; 350 sales partners in total

• 1. Highlights Q1 2012
• 1. Financial results Q1 2012
• 1. Financial outlook 2012
• 1. Strategic outlook 2012 ²⁰¹⁶
• 1. Questions & Answers

QSC STARTED IN 2012 AS PLANNED

I i l l i	Q 1 2 0 1 1	Q 1 2 0 1 2
€ n m o n R • e v e n u e s	1 0 5 1	1 1 6 0	1 0 4 % +
( ) C f 1 t • o s o r e v e n u e s	6 8 2	7 8 1	1 4 5 % +
G f i t • r o s s p r o	3 6. 9 +	3 8. 0 +	3. 0 % +
( 1 ) O t h t i • e r o p e r a n g e x p e n s e s	1 6 4	2 0 5	% 2 5 0 +
E B I T D A f i t • p r o	2 0. 5 +	1 7. 5 +	1 4. 6 % -
D i i t • e p r e c a o n	1 2 4	1 3 5	8 9 % +
f E B I T i t • p r o	8. 1 +	4. 1 +	% 4 9. 4 -
F i i l l t • n a n c a r e s u s	0 3 -	0 9 -	n m
I t • n c o m e a x e s	1. 3 -	0 9 -	3 0 8 % -
f N t i t • e p r o	6. 5 +	2. 3 +	% 6 4. 6 -

(1) Excluding depreciation and non-cash share-based payments

CONSOLIDATION OF INFO AG CHANGESSTRUCTURE OF COST OF REVENUES

HIGHER ADMINISTRATION COSTS IN 2012

Cost drivers

• •Consolidation of INFO AG
• • QSC is maintaining two headquarters for publicly traded companies

HIGHER LEVEL OF INCOMING ORDERS INDIRECT SALES NECESSITATES HIRING NEW STAFF

Growing importance ofpersonnel costs

• • In total, personnel costs roseby 102% to € 22.6 million
• • In Direct Sales, personnel costs quadrupled to € 12.0 million
• • Two drivers
• • Doubling the number of employees
• • Employment of external consultants(€ 3.3 million in Q1 2012)

CAPEX IMPACTED BY COMPLETIONOF NEW DATA CENTER IN MUNICH

Main CAPEX components

• • Customer driven investments(e.g. routers, servers)
• • Maintenance investmentsfor existing infrastructure
• • Extension of capacity(e.g. data centers)

QSC EARNED A FREE CASH FLOW OF € 5.8 MILLION

(in $\epsilon$ million)	Dec 31, 2011	March 31, 2012
Cash and cash equivalents	23.8	29.0
Available-for-sale assets	0.3	0.3
Liquidity	24.1	29.3
Liabilities under financing arrangements	$-13.6$	$-12.4$
Liabilties due to banks	$-43.6$	$-44.2$
Interest-bearing liabilities	$-57.2$	$-56.6$
Net debts	$-33.1$	$-27.3$

OPERATING BUSINESS IS GENERATINGA SUSTAINABLE FREE CASH FLOW IN 2012

• 1. Highlights Q1 2012
• 1. Financial results Q1 2012
• 1. Financial outlook 2012
• 1. Strategic outlook 2012 ²⁰¹⁶
• 1. Questions & Answers

2012: PREPARING FOR FUTURE GROWTH

QSC confirms its guidance

• • Revenues of € 480 – € 510 million
• •Rise in Direct Sales above market average
• •Steady development in Indirect Sales
• • Decline in Wholesale due to lower CbC and ADSL2+ revenues
• •An EBITDA margin of at least 16%
• •Free cash flow of € 22 – € 32 million

The Board aims to pay a dividend of at least€ 0.08 per share for 2012 as well

2012 CHARACTERIZED BY A TWOFOLD DEVELOPMENT

+

• • Strong demand for Consulting and Outsourcing services
• • Growing revenues with Cloudbased products and services
• • Positive consolidation effect of nearly € 31 million compared to 2011

• Decline of CbC / ADSL2+ business of € 25 million

−

• • Negative impact of regulation of € 6 million
• • Higher cost base due to maintaining two headquarters and investment in growth

The transformation process will be largely concluded by year-end 2012

AGENDA

• 1. Highlights Q1 2012
• 1. Financial results Q1 2012
• 1. Financial outlook 2012
• 1. Strategic outlook 2012 ²⁰¹⁶
• 1. Questions & Answers

2012 IS A YEAR OF PREPARATION CHARACTERIZEDBY INVESTMENTS IN EXPECTED GROWTH

Main areas of investments

• •Integration
• •More IT experts
• •More sales partners
• •New products with own Intellectual Property (IP)

INVESTMENTS WILL HELP TO SEIZE NEW MARKET OPPORTUNITIES IN THE COMING YEARS

•Leveraging the ICT portfolio in the Cloud

The entire ICT sector is at the beginning of a paradigm shift –and QSC is perfectly positioned for this new market

•Scaling the Cloud

The Cloud is the answer for energy management and e-mobility –and QSC is working on products for these verticals

•Up- and Cross-Selling

The QSC group has nearly 30,000 business customers

COMPANIES HAVE ONLY JUST BEGUNTO INVEST IN CLOUD COMPUTING

Cloud Monitor 2012

• 28% of German companies are already using some features of Cloud computing; 22% are considering doing so
• 47% of large companies have already begun using private clouds

CLOUD COMPUTING IS A MAJOR DRIVERFOR DOUBLING REVENUES BY 2016

In 2016, QSC will be a company with

• •Revenues of € 0.8 – € 1.0 billion
• •An EBITDA margin of 25%
• • Free cash flow of
• € ¹²⁰ €150 million

AGENDA

• 1. Highlights Q1 2012
• 1. Financial results Q1 2012
• 3.Financial outlook 2012
• 1. Strategic outlook 2012 ²⁰¹⁶
• 1. Questions & Answers

CONTACT

QSC AGArne ThullHead of Investor RelationsMathias-Brüggen-Strasse ⁵⁵ 50829 Cologne

Phone +49-221-6698-724 Fax +49-221-6698-009E-mail invest@qsc.de Web www.qsc.de

twitter.com/QSCIRdetwitter.com/QSCIRenblog.qsc.dexing.com/companies/QSCAGslideshare.net/QSCAG

paulrobertloyd.com/2009/06/social_media_icons

SAFE HARBOR STATEMENT

This presentation includes forward-looking statements as such term is defined in the U.S. Private Securities Litigation Act of 1995. These forward-looking statements are based on management's current expectations and projections of future events and are subject to risks and uncertainties. Many factors could cause actual results to vary materially from future results expressed or implied by such forward-looking statements, including, but not limited to, changes in the competitive environment, changes in the rate of development and expansion of the technical capabilities of DSL technology, changes in prices of DSL technology and market share of our competitors, changes in the rate of development and expansion of alternative broadband technologies and changes in prices of such alternative broadband technologies, changes in government regulation, legal precedents or court decisions relating, among other things, to line sharing, rent for co location and unbundled local loops, the pricing and timely availability of leased lines, and other matters that might have an effect on our business, the timely development of value-added services, our ability to maintain and expand current marketing and distribution agreements and enter into new marketing and distribution agreements, our ability to receive additional financing if management planning targets are not met, the timely and complete payment of outstanding receivables from our distribution partners and resellers of QSC services and products, as well as the availability of sufficiently qualified employees. A complete list of the risks, uncertainties and other factors facing us can be found in our public reports and filings with the U.S. Securities and Exchange Commission.

DISCLAIMER

• • This document has been produced by QSC AG (the "Company") and is furnished to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person
• • No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein and, accordingly, none of the Company or any of its parent or subsidiary undertakings or any of such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document
• • The information contained in this document does not constitute or form a part of, and should not be construed as, an offer of securities for sale or invitation to subscribe for or purchase any securities and neither this document nor any information contained herein shall form the basis of, or be relied on in connection with, any offer of securities for sale or commitment whatsoever

FREE FLOAT NOW STANDS AT 79.8%