08/30/2005

QSC: Strong growth in all segments in second quarter of 2005

Cologne, August 30, 2005. QSC AG has published its quarterly report for the second quarter of 2005. There were no material changes to the preliminary numbers announced on August 8, 2005.
In the second quarter of 2005, QSC grew its revenues by 37 percent to € 48.7 million, as opposed to € 35.6 million for the same quarter the year before. Excluding revenues from acquisitions during the second quarter of 2005, QSC´s revenues grew by 33 percent to € 47.3 million and thus grew faster than in any of the preceding five quarters. € 1.4 million in additional revenues came from the initial consolidation of DSL provider celox, which was acquired on May 12, 2005.

"Again, we were able to significantly accelerate our growth during the past quarter, with revenues rising in all segments," says QSC Chief Executive Officer Dr. Bernd Schlobohm. In the second quarter of 2005, for example, QSC´s solutions business revenues with large accounts rose to € 11.7 million, as opposed to € 7.7 million in the second quarter of 2004. Revenues with value added resellers rose by a strong 75 percent to € 8.4 million.

The company´s fast-growing revenues, the upgrade of the QSC network to a Voice over IP-capable Next Generation Network as well as starting migration of the celox network all resulted in a 32-percent increase in network expenses to € 36.4 million, as opposed to € 27.5 million in the second quarter of 2004. Nevertheless, QSC continued to grow its gross profit steeply by 53 percent to € 12.4 million, as opposed to € 8.1 million for the same quarter the year before.

As planned, QSC expanded its sales and marketing activities in the second quarter of 2005; in recent months, the company had hired some 40 new employees. Consequently, sales and marketing expenses rose to € 7.2 million, as opposed to € 5.6 million in the second quarter of 2004. The company´s operating profit before depreciation, its EBITDA, advanced to € 0.7 million in the second quarter of 2005, as opposed to € 0.3 million for the same quarter in the year before.
In the second quarter of 2005, QSC generated an operating cash flow of € 3.7 million, representing a quarter-to-quarter improvement of € 8.6 million. Free cash flow rose by € 2.5 million in the second quarter. As of June 30, 2005, liquid assets totaled € 33.8 million.
Due to the expansion of the sales and marketing team as well as the inclusion of celox for the first time, QSC´s workforce rose to 446 people. celox, which continues to remain an autonomously operating DSL provider, employed a workforce of 55 people as of June 30 of this year.

"We are seeing dynamic development of our operating business, and the technical integration of celox is going smoothly," says QSC Chief Executive Officer Dr. Schlobohm. "On this basis, we anticipate sustained profitable growth in the coming quarters, as well." QSC is therefore reiterating its forecasts for 2005. The company anticipates revenue growth of at least 25 percent to more than € 183 million, a positive EBITDA of between € 4 and 8 million, as well as an operating cash flow of at least € 10 million.

The complete 6-months report is available at
www.qsc.de/en/investor_relations/index.html

Queries to:
QSC AG
Arne Thull
Investor Relations
Fon: +49(0)221-6698-112
Fax: +49(0)221-6698-109
E-mail: 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 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.