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QSC: Strong growth in all high-margin, strategic segments

Cologne, November 27, 2006. Cologne-based QSC AG today published its report for the third quarter of 2006. There were no material deviations from the preliminary results that were reported on November 15, 2006.

Fueled by the sustained strong growth in its three strategic segments of Large Accounts, Business Customers and Wholesale/Resellers, QSC grew its revenues by 34 percent in the third quarter of 2006 to € 68.4 million, as opposed to € 51.1 million for the comparable quarter the year before. The company generated its strongest growth in business with wholesale partners and resellers, where revenues rose by 113 percent to € 18.3 million, as opposed to € 8.6 million for the third quarter of 2005. In the third quarter of 2006 QSC, for the first time, generated more than 80 percent of its total revenues in its strategic segments; in the comparable quarter the year before, these three segments had accounted for only around 70 percent of total revenues.
This significant improvement in the quality of the company's revenues towards revenues with enterprise customers produced disproportionately high profitability in the third quarter of 2006. With revenues rising by 34 percent, QSC's gross profit advanced by 82 percent to € 22.4 million, as opposed to € 12.3 million for the third quarter of 2005. The company's EBITDA, in fact, rose by a strong 148 percent to € 5.2 million, as opposed to € 2.1 million for the same quarter the year before.
This strong rise in the respective segment EBITDAs demonstrates the central importance of QSC's three strategic segments. The company earned a margin of at least 50 percent each in its business with large accounts, business customers and wholesale partners/resellers. "Our focus on enterprise customers early on is starting to show its positive effect on profitability," explains QSC Chief Executive Officer Dr. Bernd Schlobohm. He also sees an indication of the company's decision to offer only products with sufficient contribution margins in the highly competitive residential customer market: "While we are foregoing revenues in this low-margin business, we are sustainably improving QSC's profitability."
Given the highly positive development of its profitability in the third quarter of 2006, QSC had raised its EBITDA forecast for the current fiscal year when announcing its preliminary results on November 15, 2006: The company now anticipates an annual EBITDA of between € 17 and 22 million on revenues of nearly € 265 million. Moreover, QSC expects to record its first consolidated net income for the entire fourth quarter of 2006.

In millions of euros (€)Q3 2006Q3 2005Q1-Q3 2006Q1-Q3 2005
Network expenses46.038.8121.1105.9
Gross profit+22.4+12.3+58.3+35.4
Other operating expenses17.210.246.630.4
Consolidated net loss-2.0-4.1-8.1-13.8
Earnings per share (€)-0.02-0.04-0.07-0.13
Capital expenditures7.45.826.413.9
Liquid assets as of September 30108.631.5
Workforce as of September 30673446

The complete 9-months report is available at

Queries to:
Arne Thull
Investor Relations
Fon: +49(0)221-6698-724
Fax: +49(0)221-6698-009

This corporate news contains forward-looking statements pursuant to the US "Private Securities Litigation Act" of 1995. 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.