02/27/2019

QSC grows in 2018 thanks to strong Cloud and Telecommunications businesses

• Revenues based on preliminary calculations up 2% to € 366.8 million
• Cloud business as key growth driver: Revenues surge 31% to € 36.5 million
• Telecommunications (TC) revenues increase 6% to € 200.9 million
• Stable dividend of 3 cents per share planned
• QSC expects revenues of more than € 350 million in 2019

Cologne, 27 February 2019. The cloud and ICT provider QSC benefited from substantial growth in its Cloud and TC businesses and, based on preliminary calculations, increased its revenues to € 366.8 million in 2018, up from € 357.9 million in the previous year. Revenues were significantly ahead of the original forecast range of between € 345 million and € 355 million. Not only that, QSC comfortably exceeded the raised revenue forecast of at least € 360 million as published in November 2018. In terms of its EBITDA and free cash flow, QSC met the targets published at the beginning of 2018. At € 35.4 million, EBITDA was within the forecast range of € 35 million to € 40 million, while the free cash flow came to € 12.2 million, exceeding the forecast of more than € 10 million.

Scalable Cloud business generates second-highest margin

The Cloud segment, with its two areas of Cloud Services and Internet of Things (IoT), posted particularly dynamic developments once again in 2018. Revenues here surged by 31% to € 36.5 million. The segment margin in the scalable Cloud business rose in just one year from 2% to 16% and thus fell only slightly short of the margin of 20% reported in the TC business. TC revenues rose by 6% to € 200.9 million in 2018, with a temporary rise in demand, mainly in the first half of the year, from resellers in the international voice termination business, an area which traditionally has lower margins. With a stable segment margin, QSC’s Consulting business generated revenues of € 38.4 million, slightly less than the previous year’s figure of € 39.4 million. In QSC’s fourth segment, Outsourcing, revenues decreased as expected to € 91.0 million, down from € 102.0 million, while the margin also declined.

Based on preliminary calculations, QSC’s EBITDA for the past financial year came to € 35.4 million, as against € 38.3 million in the previous year. This was due above all to the higher share of revenues generated in the lower-margin reseller business. Given significantly lower depreciation and amortisation, EBIT for the same period rose to € 8.5 million, up from € 7.1 million in the previous year. Unlike in 2017, deferred taxes only had a minor positive impact. As a result, QSC’s consolidated net income came to € 3.3 million, as against € 5.1 million one year earlier. The free cash flow remained stable at € 12.2 million, compared with € 12.6 million in 2017. Against this backdrop, the Management Board plans to propose a dividend of 3 cents per share once again for approval by the Annual General Meeting on 29 May 2019.

Cloud business growth set to accelerate in 2019

Based on an initial cautious forecast, in the current financial year QSC expects to generate revenues of more than € 350 million, EBITDA of more than € 65 million and a positive free cash flow once again. First-time application of the IFRS 16 standard (“Leases”) will significantly increase the EBITDA reported for 2019; based on current assessments, QSC quantifies the impact of first-time application of IFRS 16 at € 30 million to € 35 million.

In terms of revenues, QSC expects the pace of growth in its Cloud segment to accelerate and has a target of around € 50 million. However, this continued dynamic growth will not yet be sufficient to offset the reductions in revenues in the traditional Outsourcing business – due to the loss already announced of two major customers – and the normalisation of the TC business with resellers.

Irrespective of these developments, QSC is currently reviewing several strategic options for its TC business. These include the potential sale of a majority or all of the shares in its TC subsidiary Plusnet, independently developing the business further or entering into cooperations. The Company aims to take a decision on this by the end of May 2019 at the latest and will then update its cautious outlook to account for the strategic option selected.

Notes:
QSC will publish its 2018 Annual Report on 29 March 2019. This Corporate News includes forward-looking statements. These are based on current expectations and forecasts as to future events made by the management of QSC AG. Due to risks or erroneous assumptions, actual results may deviate substantially from these forward-looking statements.

Contact for enquiries:
QSC AG
Arne Thull
Head of Investor Relations
T +49 221 669-8724
F +49 221 669-8009
invest@qsc.de
www.qsc.de