08/26/2003

QSC posts strong growth in business customer and project business

Cologne, August 26, 2003. Despite of an extremely weak economy in Germany, Cologne-based QSC AG grew its revenues for the second quarter of 2003 by 136 percent to EUR 28.3 million (Q2 2002: EUR 12.0 million). Year on year, revenues for the first half of the year rose by 160 percent from EUR 21.5 million to EUR 55.8 million. In addition to the consolidation effect stemming from the Ventelo acquisition, strong order growth from business and project customers played the major role in this revenue growth. The share of total revenues accounted for by business customers reached 52 percent in the second quarter of 2003, as opposed to 32 percent in 2002 and 25 percent in 2001. "The market is rewarding our positioning as an integrated telecommunication provider for business customers," explains CEO Dr. Bernd Schlobohm.
In spite of the continued rise in revenues, network expenses declined from EUR 27.1 million the previous quarter to EUR 26.7 million for the second quarter of 2003, a development that underscores the scalability of the QSC business model. As a result of this development, gross profit tripled to EUR 1.6 million, as opposed to EUR 0.5 million for the first quarter of 2003 (Q2 2002: EUR -2.3 million). QSC earned a gross profit of EUR 2.1 million for the first six months of the current fiscal year, as opposed to EUR -9.8 million gross loss during the first half of 2002.
Synergy effects from the Ventelo acquisition, as well as successes in the company´s policy of strict cost management produced considerable cost reductions. At EUR 5.1 million, for example, selling and marketing expenses were significantly lower both year-on-year (Q2 2002: EUR 8.2 million) as well as in relation to the first quarter of 2003 (Q1 2003: EUR 6.0 million). "Today, we are highly specific in addressing potential customers and we increasingly execute a joint approach to marketing our voice and data solutions," comments CEO Schlobohm. Above and beyond sales activities and a common network infrastructure, Ventelo and QSC are integrating their respective organizations faster than had originally been planned.
Rising revenues and lower operating expenses led to a strong improvement in EBITDA. At EUR -7.2 million, it had improved by more than fifty percent from the second quarter of 2002 (Q2 2002: EUR -14.9 million). Year-on-year, EBITDA improved from EUR -31.2 million to EUR -17.2 million. QSC´s cash burn was down for the ninth time in a row, from EUR -10.9 million for the first quarter of 2003 to EUR -8.6 million in the second quarter of 2003. On June 30, 2003, the company´s liquid assets totaled EUR 68.1 million.

Positive trend of business enables guidance to be revised upward

In mid August, successes in the high-margin business customer segment prompted QSC to raise the full year guidance it had announced in February 2003. In recent months, QSC has succeeded in winning numerous new project business customers, most recently TÜV Rheinland Berlin Brandenburg. The successful implementation of these project orders will begin to translate into additional revenues in the second half of 2003.
QSC is now forecasting annual revenues of over EUR 115 million for the entire year 2003 (February 2003 forecast: EUR 105 to 115 million) and an EBITDA loss of better than EUR -25 million (February 2003 forecast: EUR -25 to -30 million). "We plan to reach the EBITDA breakeven point during the course of the fourth quarter of 2003," stresses CEO Schlobohm. QSC expects to reach the cash flow breakeven point ahead of schedule, during the course of the first half of 2004.

The complete semiannual report can be downloaded from www.qsc.de/en/investor_relations

Queries to:
QSC AG
Claudia Zimmermann
Corporate Spokeswoman
Fon: +49(0)221/6698-235
Fax: +49(0)221/6698-289
E-Mail: presse@qsc.de

Arne Thull
Investor Relations
Fon: +49(0)221/6698-112
Fax: +49(0)221/6698-009
E-Mail: invest@qsc.de

Notes :
This ad hoc announcement 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.