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QSC improves profitability and free cash flow in first quarter of 2010

  • Free cash flow advances to € 4.6 million
  • Net income more than doubles to € 3.2 million
  • EBITDA rises to € 19.6 million
  • 2010 guidance reiterated

Cologne, May 10, 2010. QSC AG's focus on strengthening its financial position and profitability paid off again in the first quarter of 2010. EBITDA rose from € 19.5 million to € 19.6 million and net income from € 1.4 million to € 3.2 million on revenues of € 105.9 million, as opposed to € 107.6 million in the extremely strong first quarter of 2009.
This development was based upon QSC's intentional focus on high-margin IP-based revenues and the resulting transformation from a network operator to a services provider for small and mid-size customers. As a result, revenues in the first quarter of 2010 declined in the classical lines of business of a network operator, such as call-by-call and the provision of ADSL2+ lines, while revenues with IP-based products and services were up.

EBIT margin doubles to 4 percent
QSC's focus on higher-margin revenues, as well as strict cost management, increased EBITDA to € 19.6 million in the first quarter of 2010, while the EBITDA margin improved to 19 percent from 18 percent the year before. During this period, QSC was able to grow its operating profit, its EBIT, to € 3.9 million, as opposed to € 2.5 million the year before. The EBIT margin doubled to 4 percent from 2 percent for the same quarter one year earlier. Net income increased to € 3.2 million in the first quarter of 2010, as opposed to € 1.4 million for the same quarter the year before.

Net liquidity rises to € 5.3 million
In the first quarter of 2010, QSC earned a positive free cash flow of € 4.6 million. In this connection, liquid assets decreased by € 0.3 million to € 41.0 million as of March 31, 2010, as opposed to € 41.3 million on December 31, 2009. During the same period, QSC further reduced its interest-bearing liabilities by € 4.8 million to € 35.7 million. This increased net liquidity to € 5.3 million as of March 31, 2010, as opposed to € 0.7 million on December 31, 2009; on March 31, 2009, QSC's net debts had still stood at € -8.2 million.

QSC's sights set on free cash flow of more than € 22 million
Both the course of business in the first quarter of 2010 as well as the sluggish pace of economic development are strengthening QSC's commitment to the strategy for the current year that it had announced in early March. The company will be focusing on lines of business that offer a sufficiently high contribution margin, thus further strengthening its financial position and profitability, and will be continuing its transformation from a network operator to a services provider. At the same time, the company is reiterating the guidance for the full fiscal year that it had first announced on March 3, 2010: QSC thus plans to improve its free cash flow to more than € 22 million from € 12.9 million in fiscal 2009, while simultaneously anticipating a further rise in revenues, EBITDA and net income. During the past fiscal year, the company had earned an EBITDA of € 76.9 million and net income of € 5.5 million on revenues of € 420.5 million.

In € millions Q1 2010 Q1 2009
Revenues 105.9 107.6
Gross profit 37.6 36.5
EBITDA 19.6 19.5
EBIT 3.9 2.5
Net income 3.2 1.4
Free cash flow 4.6 4.0
Net liquidity 5.3 0.7*
Liquidity 41.0 41.3*
CAPEX 7.3 11.5
Workforce 651 664*

* As of December 31, 2009

Queries to:
QSC AG
Arne Thull
Investor Relations
Phone: +49 221 6698-724
Fax: +49 221 6698-009
E-mail: invest@qsc.de
Internet: www.qsc.de

Notes:
The 3-month report is available for download at www.qsc.de/en/qsc-ag/investor-relations.html. This corporate news contains forward-looking statements. 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.


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