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QSC plans to triple net income and double free cash flow in 2010

  • IP-based revenues grow by 12 percent to € 70.8 million in second quarter of 2010; total revenues advance to € 104.9 million
  • Net income rises from € 1.1 million to € 4.3 million
  • Free cash flow increases from € 2.6 million to € 7.6 million

2010 guidance

  • Net income to triple to more than € 16 million
  • Free cash flow forecast raised to more than € 25 million

Cologne, August 9, 2010. In the second quarter of 2010, Cologne-based QSC AG continued its transformation process from a network operator to a service provider, increasing all key metrics. Revenues rose to € 104.9 million, as opposed to € 103.7 million for the same quarter one year earlier. While revenues with such classical network operator products as Call by Call and ADSL2+ declined by € 6.4 million to € 34.1 million, revenues with IP-based products and services rose by € 7.6 million to € 70.8 million. In the second quarter of 2010, QSC was thus generating two thirds of its revenues in these higher-margin lines of business.

QSC's profitability up sharply
As a result, gross profit for the past quarter rose to € 38.0 million, as opposed to € 35.7 million for the same quarter the year before; gross margin improved from 34 percent to 36 percent. EBITDA increased to € 19.7 million, as opposed to € 19.0 million in the second quarter of 2009; the EBITDA margin rose by one percentage point to 19 percent. As a result of depreciation expense declining as scheduled, in addition to other factors, QSC was able to more than double its operating profit, its EBIT, to € 5.1 million in the second quarter of 2010, as opposed to € 2.3 million for the same period one year earlier. Net income growth was even higher, nearly quadrupling to € 4.3 million within the space of a year, as opposed to € 1.1 million in the second quarter of 2009.

Net liquidity rises to € 12.9 million
In the second quarter of 2010, QSC earned a free cash flow of € 7.6 million, nearly tripling this key steering parameter within the space of a year; in the second quarter of 2009, free cash flow had amounted to € 2.6 million. During the first six months of the current fiscal year, QSC earned a free cash flow of € 12.1 million, as opposed to € 6.6 million for the same period one year earlier. In this connection, liquid assets rose by € 2.7 million to € 44.0 million as of June 30, 2010, as opposed to € 41.3 million as of December 31, 2009. During the same period, QSC further reduced its interest-bearing liabilities by € 9.4 million to € 31.1 million. This increased net liquidity to € 12.9 million as of June 30, 2010, as opposed to € 0.7 million as of December 31, 2009.

Guidance raised
Given its successes in the transformation process, QSC is raising its guidance for the current fiscal year: The company now anticipates a free cash flow of more than € 25 million, instead of more than € 22 million; in 2009, QSC earned a free cash flow of € 12.9 million. In addition, the company plans to grow its revenues and EBITDA and to triple net income to more than € 16 million, as opposed to € 5.5 million in fiscal 2009. During the past fiscal year, QSC earned an EBITDA of € 76.9 million on revenues of € 420.5 million.

In € millions Q2 2010 Q2 2009
Revenues 104.9 103.7
Gross profit 38.0 35.7
EBITDA 19.7 19.0
EBIT 5.1 2.3
Net income 4.3 1.1
Free cash flow 7.6 2.6
Net liquidity 12.9 0.7*
Liquidity 44.0 41.3*
CAPEX 6.5 12.9
Workforce 633 665

* As of December 31, 2009

Further information is available from:

QSC AG
Claudia Isringhaus
Head of Corporate Communications
Mathias-Brüggen-Str. 55
D-50829 Cologne
Fon: 0221 6698-235
Fax: 0221 6698-289
E-Mail: presse@qsc.de

Notes:
The 6-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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