05/30/2006

QSC: Strong growth in all segments

Cologne, May 30, 2006. QSC AG has published its quarterly report for the first quarter of 2006. There were no material deviations from the preliminary results that were published on May 15, 2006.

QSC grew its revenues by 31 percent in the first quarter of 2006 to € 54.4 million, as opposed to € 41.5 million for the same quarter the year before. All four segments contributed to this revenue growth. Revenues with business customers rose by 43 percent in the first quarter of 2006 to € 17.5 million. At € 14.4 million, revenues with large accounts were up 14 percent over the first quarter of 2005. Unusually high, non-recurring service revenues in connection with new projects during the first quarter 2005 partially obscured the company's progress in its underlying business during the first quarter of 2006. Revenues with resellers in the Wholesale/Resellers segment rose by 49 percent to € 7.6 million in the first quarter of 2006. "QSC continues to grow strongly in all strategic lines of business," notes QSC Chief Executive Officer Dr. Bernd Schlobohm.

With revenues rising by 31 percent, QSC succeeded in sustaining its disproportionate growth in profitability during the first quarter of 2006: Gross profit rose by 52 percent to € 16.4 million, while EBITDA increased by a strong 85 percent to € 2.4 million. During the first quarter of 2006, the company also made progress in its segment results: Its EBITDA margin, the crucial performance indicator in gauging profitability, stood at over 50 percent in the three strategic segments of Large Accounts, Business Customers and Wholesale/Resellers.
As a result of the targeted expansion and upgrade of its network, capital expenditures rose to € 7.3 million for the first quarter of 2006, as opposed to € 4.7 million in the same quarter the year before. During the coming quarters, as well, QSC will continue the demand-driven connection of further cities to its DSL network and the upgrade of this network with ADSL2+ technology. Overall, the company is planning on capital expenditures totaling between € 20 and 25 million for the current fiscal year.

During the first quarter of 2006, the company's workforce rose to 465 people; this increase of around 75 employees over the year before was essentially attributable to the acquisition of Bonn-based DSL service provider celox with a workforce of nearly 60 people.

Given the very good development of its operating business in the first quarter of 2006, QSC is reiterating its forecasts for the full fiscal year: The company anticipates revenues of over € 240 million and an EBITDA of between € 15 and 20 million. QSC plans to cross the profitability threshold and move from a net loss to a net income position by year-end. "QSC got off to a good start in 2006," says Chief Executive Officer Dr. Schlobohm. "In particular, the strong growth in our strategic lines of business will again lead to corresponding revenue and even stronger profitability growth in the coming quarters."

In millions of euros (€)    Q1 2006    Q1 2005    Change
Revenues    54.4    41.5    +31%
Network expenses    38.0    30.7    +24%
Gross profit    +16.4    +10.8    +52%
Other operating expenses    14.0    9.5    +47%
EBITDA    +2.4    +1.3    +85%
Net loss    -3.0    -5.1    +41%
Capital expenditures    7.3    4.7    +55%
Liquid assets as of March 31    43.1    31.3    +38%
Workforce as of March 31    465    389    +20%

The complete 3-months report is available at www.qsc.de/en/investor_relations/index.html

Queries to:
QSC AG
Arne Thull
Investor Relations
T: +49(0)221-6698-724
F: +49(0)221-6698-009
E: invest@qsc.de

Notes:
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 proliferation of alternative broadband technologies and their respective prices, changes in respect of telecommunications regulation, legislation and current rulings, 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 leverage and expand existing marketing and distribution agreements and to conclude new marketing and distribution agreements, the ability to obtain additional financing in the event that management´s planned targets are not attained, the punctual and full payment of outstanding debts by sales partners and resellers of QSC AG, and the availability of sufficiently skilled personnel.