Bankhaus Lampe Deutschlandkonferenz Baden-Baden, 28 March 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

Key figures at a glance

>30,000 SME customers

Revenues of €386m 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

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.

Customer view: consistent end-to-end responsibility

Portfolio covers the key digital technologies

Excellent position in the competitive environment

Focus on the German SME Sector

Providers

2. Milestones 2016

From cloud to multi-cloud: state-of-the art solution

The digital age requires "breathing" platforms and networked, service-oriented and well-distributed cloud scenarios!
Customers will demand absolute freedom to select their cloud strategies ... and will also make use of this freedom!
Multi-cloud as the dominant "architecture" blueprint for the next 10 years!
Yet: SME players are completely out of depth when it comes to "cloud orchestration"!
QSC with end-to-end service responsibility for customers' entire cloud-based IT!

QSC AG

Milestones with IoT/Q-loud: New customers on board

Milestones in 2016
Spin-off to standalone company
Management team boosted
Major new customers (such as Schüco) acquired and expansion in partner eco-system
Great market opportunities IoT not only optimises existing production and business models, but also creates new models
Q-loud's strengths
Full-stack service offering (consulting, hardware, software, front end, high-performing back-end technologies)
Longstanding projects/solution experience
Compliance with high security/data protection standards

SAP milestones: More than 40 successful HANA projects

Significant increase in visibility as SAP partner
Designation as "Partner of Excellence" by SAP SE
Experton: QSC's SAP HANA portfolio stands out on account of its end-to-end approach
Consistent growth achieved
QSC now has more than 210 in-house consultants
Revenue growth of 9.6% CAGR (2013-2016)
Greater competitiveness & expanded expertise
More than 40 successful HANA projects (14 customers)
Proprietary HANA laboratory
First joint IoT projects with Q-loud subsidiary

All-IP milestones: Huge opportunity due to end of ISDN

Greatest All-IP experience in market (>10 years)
250,000 active SIP voiceover IP connections
4,000,000 active dial numbers
1,000,000,000 minutes mediated per month
"Boom" due to switching off of DTAG's ISDN network by 2018
Potential for 3 million corporate customer connections
All connections without exception have to be migrated
All-IP products already account for 30% of total new orders in Indirect Sales
Opportunities during overall market consolidation ( "easybell migrates DSL connections to QSC", 02.02.16)

2. Key financials and outlook

QSC reaches its targets in 2016

	Goals 2016	Results 2016
Revenues	€ 380 - 390 million	€ 386.0 million
EBITDA	€ 34 - 38 million	€ 37.1 million
Free Cash Flow	> 0 / > $\epsilon$ 7.1 million	€ 8.4 million
Cost-cutting programme	€ 20 million	€ 24 million
Employees	1,350	1,360

Operating business performs as planned

in $\epsilon$ million	2015	2016	Δ	$\Delta$ in %
Revenues	402.4	386.0	$-16.4$	$-4.1%$
Cost of revenues	292.3	282.9	$-9.4$	$-3.2%$
Gross profit	110.1	103.1	$-7.0$	$-6.4%$
Sales and marketing expenses	34.9	33.0	$-1.9$	$-5.4%$
General and admin. expenses	32.1	31.8	$-0.3$	$-0.9%$
Other operating income	(1.0)	(1.2)	$-0.2$	N/A
EBITDA	42.2	37.1	$-5.1$	$-12.1%$
Depreciation	53.3	35.0	$-18.3$	$-34.3%$
EBIT before one-off depreciations	(11.1)	2.1	13.2	N/A
One-off depreciations	٠	15.2	15.2	N/A
EBIT	(11.1)	(13.1)	$-2.0$	$-18.0%$
Financial Result	(6.0)	(5.8)	0.2	$+3.3%$
Income Taxes	3.8	(6.1)	$-9.9$	N/A
Net Income	(13.2)	(25.1)	$-11.9$	$-90.2%$

Revenues

High growth in Cloud business; as planned, substantial decrease in TC reseller business and in Outsourcing

Earnings

Positive impact of cost-cutting programme
Charge on earnings due to oneoff write-downs in Q4 2016

Cloud: revenues more than double

Cloud business driven by Pure Enterprise Cloud and IoT
2016 revenues rise quarter by quarter from € 2.4 million (Q1) to € 6.1 million (Q4)

Segment margin

Consulting: continued growth with SAP consulting

SAP-related revenues rise by 12% in 2016
Growing share of cloud projects (SAP HANA)
High demand necessitates deployment of external experts
Segment margin in this personnel-intensive business remains in double-digit territory
Microsoft SAP
Microsoft & SAP
Segment margin

Outsourcing: migration to Cloud business begins

Far-reaching change in traditional Outsourcing business:
Initial customers migrate to the Pure Enterprise Cloud
For new customers, QSC focuses on standardised cloud-based outsourcing
Stable segment margin thanks to focus on highmargin revenues and substantial cost savings

Segment margin

TC: revenue growth with corporate customers

Among corporate customers, QSC is benefiting from its All-IP expertise and is attracting additional customers
Ongoing tough price competition among resellers
Strong corporate customer business generates attractive segment margin
TC revenues with resellers
TC revenues with corporate customers
TC revenues (total)
Segment margin

Growth where QSC expects it

	Drivers in 2016	Revenue development in 2016

Cloud	Pure Enterprise Cloud and IoT

Consulting	SAP HANA projects
Outsourcing	Starting the migration to the Pure Enterprise
	Cloud/no new customers in 1:1 outsourcing

TC for corporates	Growing demand for All-IP solutions	$\Rightarrow$

TC for resellers	Fierce price competition

Marked growth in forward-looking business fields

Double-digit growth in those business fields in which QSC expects growth: organisational restructuring now bearing fruit
Since 2014, the share of total revenues generated in the three major strategic business fields has risen by 10 percentage points
Further increase expected in 2017 and beyond

Cloud

Consulting

TC business with corporate customers

Operating margins unchanged despite lower revenues

Substantial reduction in depreciation and amortisation

Depreciation and amortisation in 2016 at just € 35.0 million (2015: € 53.3 million)
One-off write-downs in Q4 2016 on:
Goodwill and intangible assets in Outsourcing business: € 13.9 million
Investment in FTAPI: € 1.3 million

EBIT affected by one-off write-downs

One-off write-downs lead to lower EBIT in 2016
Based on its operating business, QSC generated EBIT of € 2.1 million in 2016

Savings of more than € 20 million achieved

QSC launched a cost-cutting programme in February 2015
Core elements

Target by end of 2016: total savings of around € 20 million

Result by end of 2016: savings of around € 24 million in total

Workforce reaches target size

QSC succeeds in adjusting number of employees to revenues within two years
=> Rise in revenues per employee since 2015
QSC manages to downsize workforce despite hiring numerous cloud experts for operations and sales
=> Organisational restructuring progressing as planned

QSC presses ahead with organisational restructuring

Capital expenditure remains moderate

Two key focuses

Infrastructure and technology (56%)
Customer projects (36%)

Infrastructure expansion at data centres mainly focused on market launch of Pure Enterprise Cloud

Capital expenditure within planned framework of up to € 30 million

Free cash flow rises for second consecutive year

FCF of € 8.4 million exceeds raised forecast of > € 7.1 million
Positive FCF enables QSC to distribute a dividend for 2016
As in the previous year, Management Board proposes a dividend of 3 cents per share

2017 at a glance: Further rise in FCF

For the current year, QSC has budgeted:

Revenues of € 355 365 million
EBITDA of € 36 40 million
Free cash flow ahead of the previous year's figure (€ 8.4 million)

Cloud to achieve substantial revenues growth in 2017 too

2017: growth where QSC expects it

	Drivers in 2017	Revenue development in 2017

Cloud	Pure Enterprise Cloud and IoT

Consulting	SAP HANA projects

Outsourcing	Starting the migration to the Pure Enterprise Cloud/no new customers in 1:1 outsourcing

TC for corporates	Growing demand for All-IP solutions

TC for resellers	Fierce price competition; tighter regulation

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

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 [email protected] 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

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