08/11/2014

QSC generates revenues of € 109.4 million in second quarter of 2014

• EBITDA of € 10.5 million
• Free cash flow of € 5.0 million
• Guidance narrowed
• Minimum dividend reiterated

Cologne, August 11, 2014. In the second quarter of 2014, QSC generated revenues of € 109.4 million, as opposed to € 113.5 million for the same quarter one year earlier. While there was less of a decline in low-margin TC revenues than had been planned, higher-margin ITC business, especially IT consulting as well as sales of new ICT products, developed on a weaker note than anticipated.

Unfavorable revenue mix hurts results
Results were hurt by the unfavorable revenue mix as well as by unplanned non-recurring expenses in the amount of some 2 million euros to stabilize and optimize IT operations. As had been expected, moreover, higher investments in future fields of growth as well as the elimination of a deferred income line item in the amount of some € 5 million per quarter, could be seen on the profitability side; until the end of 2013, QSC had been deferring as income the payment it had received in 2011 in connection with premature termination of collaboration with TELE2 in network operating company Plusnet. Consequently, EBITDA stood at € 10.5 million in the past quarter, in contrast to € 19.2 million for the same period the year before. Given virtually unchanged depreciation expense, there was an operating loss of € -2.0 million, as opposed to an operating profit of € 6.6 million in the second quarter of 2013. The consolidated net loss stood at € -3.9 million, in contrast to a consolidated net profit of € 5.2 million for the same period one year earlier. Since the return of the deferred income line item did not impact liquidity, free cash flow totaled € 5.0 million in the second quarter of 2014, as opposed to € 6.5 million for the same quarter the year before.

QSC planning dividend of at least € 0.10 per share
Following the weaker-than-anticipated second quarter of 2014, QSC is now narrowing the guidance for the full 2014 fiscal year that it had announced in late February 2014 to the lower end of the originally indicated ranges. As explained at the outset of the year, revenues of around € 450 million, an EBITDA of around € 60 million and a free cash flow of around € 26 million will necessitate a sharp rise in sales of innovative ICT products during the second half of 2014 and, moreover, a recovery of IT Consulting business. At the same time, the company is reiterating its plans to pay a dividend of at least the previous year's level of € 0.10 per share for the current fiscal year.

QSC launches efficiency program
In view of unsatisfactory profitability in the past quarter, QSC is launching a program aimed at increased efficiency. The company wants to exploit its existing potential for greater efficiency across all locations throughout the entire organization, thus enhancing its strength and power. The same objective is being pursued by a change management program that includes the reallocation of professionals and executives. In the future, QSC intends to respond to stronger demand in individual lines of business primarily by making use of already existing internal human resources. It was already in the second quarter of 2014 that the workforce increased by only seven people to a total of 1,712 employees as of June 30, 2014.
At the same time, the company is again scrutinizing its processes in innovation management. The objective is to accelerate the processes of bringing innovations to market and to assure that keen customer interest is translated more than before into corresponding revenues. QSC Chief Executive Officer Jürgen Hermann notes: "We have to do a much better job of translating our development strengths into market strength." Only so, he goes on to say, can QSC correctly utilize the opportunities that present themselves in the Cloud market and in transitioning the economy to the Industry 4.0 Age. Nor is Hermann counting solely on internal resources in this connection: "We want to acquire one or two more technology companies in 2014." Most recently, in February 2014, QSC acquired the majority interest in encryption specialist FTAPI and in subsequent months has integrated its products into its own portfolio.
In summary, Hermann stresses: "2014 will continue to be a year of investing in future fields of growth. The awards honoring QSC as a Cloud Leader, numerous development partnerships as well as customer inquiries show one thing: We're on the right track! QSC is unquestionably evolving into a leading provider of Cloud services and a partner of choice for German small and mid-size enterprises in the Industry 4.0 Age."

*As of June 30

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.

Queries to:
QSC AG
Arne Thull
Head of Investor Relations
Phone: +49 221 669-8724
Fax: +49 221 669-8009
E-mail: invest@qsc.de