NFON AG

Investor Presentation • Apr 1, 2020

Financial Statements 2019 Berlin, Munich, Mainz | 1 April 2020

Disclaimer NFON AG

This publication contains forward-looking statements regarding NFON AG ("NFON") or the NFON Group and its subsidiaries, including assessments, estimates and forecasts regarding the financial position, business strategy, plans and objectives of management and future operations of NFON and the NFON Group. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the results of operations, profitability, performance or results of NFON or the NFON Group to differ materially from those expressed or implied by such forwardlooking statements. These forward-looking statements are made as of the date of this press release and are based on numerous assumptions that may prove to be incorrect.

NFON makes no representations and assumes no liability with regard to the proper presentation, completeness, correctness, appropriateness or accuracy of the information and assessments contained herein. The information contained in this press release is subject to change without notice. They may be incomplete or abbreviated and may not contain all material information relating to NFON or the NFON Group. NFON assumes no obligation to publicly update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise. This press release is not an offer to buy or subscribe for securities and should not be construed as a basis for investment decisions in NFON or the NFON Group, in whole or in part.

We want to dominate the European Cloud telephony market by delivering freedom of business communication.

3

KPI development

Continued growth 2019

	2017	2018	2019 adjusted guidance	Results*
Number of seats	253k 32%	321k 27%	We expect to increase our customer base between 39% and 41%	450k 40%
Recurring revenue growth	29%	25%	We expect recurring revenue to grow between 38% and 40%	39%
Revenue growth	17%	21%	We expect a revenue growth rate in a range between 30% and 33%	33%
Recurring revenue share	78%	80%	We expect the resulting recurring revenues in 2019 to be in the range between 80% and 85% of total revenues	84%

* Including M&A effects due to the acquisition of DTS

Business communication

Wind of change – Fundamental Market Trends

Our way to become the No 1 in Europe

Business Highlights

Financial Statements 2019

of massive growth and sustainable recurring revenue

Business model

Recurring revenues 84% Non-recurring revenues 16%

Strong business model resulting in unique combination

Significant increase of recurring revenues

Development total recurring/ non-recurring revenues

Comments

• Total revenues grow by 32.7% to €57.1m in comparison to €43.0m in 2018
• Q4 2019 total revenues on a growth rate of 32.9% compared to Q4 2018 (€15.7m vs. €11.8m)
• Non-recurring revenues 2019 show slight increase of 7.3% compared to 2018
• Significant increase of recurring revenues by 38.9% compared to 2018 (Q4 2019 compared to Q4 2018: 39.7%)
• Cumulative effect quarter by quarter due to steadily growing total number of seats
• High share of recurring revenue (84.1%) due to strong and sustainable growing customer base

1 including extraordinary effect from R&D project amounting to €1.5m 2First time consolidation of DTS in March 2019

Financial Statements 2019 - 1 April 2020

Seat base

Strong growth of seats

Comments

• Increase of total number of seats by 40.2%
• Very low gross churn rate of <0.5% per month underlines quality of product and service and guarantees continuous recurring revenues
• Share of DTS business (CentrexX) selling more in the mid-price segment leads to expected decrease of total blended ARPU as well as successful business with wholesale partners
• Additional premium solutions represent upside potential for ARPU development in the medium term

Gross Margin

Consistently increasing gross margin emphasizes scalability of the business model

Cost of materials and gross margin development

€m, % of revenue

Comments

• Cost of materials are largely variable in nature and mainly comprise of costs for hardware sold, costs for airtime sold and data centre housing costs
• Cost of materials rose disproportionately low in relation to revenue by 23.0% in 2019 compared to 2018
• Gross margin continues to show a positive development and increases to 76.1%

Securing tomorrow's growth by investing in today's workforce

Comments

• Personnel expenses as reported amount to €24.2m (2018: €22.1m) increase by 9.8% including DTS workforce
• Adjustments personnel expenses: €1.1m for Stock Option Plan and Retention Bonus (2018: €5.0m for Share-Base Payments, Retention Bonus, Exit Bonus)
• Personnel costs relieved for the first time by capitalization of development costs (NFON AG) in 2019 by €2.0m
• Increase of adj. personnel expenses by 35.5% compared to 2018

1 Personnel expenses adjusted for et.al. Stock Option Plan, Retention Bonus, Share-Base Payments, Exit Bonus

Marketing expenses

Gaining partners, customers and seats through intensified marketing activities

Comments

Marketing expense increases as planned by 65.9% building a strong brand that drives sales and growth of partner network

• 2,500 partners across Europe

  • New partners in UK, Italy, Spain et al.

• 40,000 customers across Europe

• Introduction of Nvoice for Microsoft Teams and NCTI Pro
• Accelerating marketing activities in new subsidiaries Italy and France as well as UK and Austria

Adjusted other operating expenses

Other operating expenses grow due to increase in headcounts and regional expansion

Other expenses development without marketing expenses and sales commissions

€m, % of revenue

Comments

• Other operating expenses as reported (e.g. sales commissions, marketing costs, supporting cost, general administration expenses and consulting fees) amount to €26.8m in total (2018: €18.9m) and increases by 41.8%
• NFON adjusts other operating expenses by one-off expenses (e.g. acquisition DTS) and does not include marketing cost and sales commissions
  • Marketing costs 2019 amount to €9.0m (2018: €5.5m)
  • Sales commissions 2019 amount to €6.7m (2018: €4.3m)
• Increase of adj. other operating expenses from €6.8m to €10.3m (51.4%) due to various reasons (amongst others: start in Italy, France and consolidation of DTS)
• IFRS 16 leads to lower OPEX of €1.4m

¹ Adjusted by one-off effects like IPO-costs, acquisition costs

EBITDA reflects investments to execute growth strategy

Detailed reconciliation of one-off items Comments 1 1 Reconciliation from EBITDA to adjusted EBITDA ^{2019 2018} €m EBITDA -7.0 -7.8 Stock Options/ESOP 0.6 3.61 Retention bonus 0.5 0.8 IPO costs 0 2.4 Expenses related to DTS acquistion/ Other one-off expenses2 0.7 -0.2 Total EBITDA adjustments 1.9 6.6 Adjusted EBITDA -5.1 -1.2

• EBITDA as reported amounts to approx. €-7.0m
• In accordance with strategy, personnel costs, marketing and sales commissions continue to increase
• One-off effects in connection with the consistent implementation of the M&A strategy (DTS) in the amount of €0.6m burdened plus €0.1m others
• Adj. EBITDA at €-5.1m

1 Including equity and cash settled share-based payment programmes 2Expenses related to tax and social security matters (2018: reversals)

2020 - Financial year under special circumstances

COVID19 – General statements

• Not yet fully taking into account the effects of the spread of COVID-19, as these cannot yet be quantified.
• It cannot be assumed that there will be no impact on the business development of NFON AG.
• Both negative and positive effects are possible.
• In principle, the business model still has a certain robustness to market fluctuations due to the high proportion of recurring revenues.

COVID19 – Possible downside

• Should there be a recession, combined with insolvencies or reduction of seats, this could nevertheless lead to a loss of sales for the NFON Group.
• In addition, it is to be expected that decisions by customers will be delayed and new Seat profits could fall short of the expectations.

COVID19 – Possible upside

• Additional demand impulses may arise as customers increasingly switch to home offices.
• Existing customers are shifting their activities to the home office and are therefore increasingly requesting not only telephony but also the possibility of telephone conferences.
• NFON is also receiving enquiries from interested parties who do not yet have a solution with which they can flexibly set up home office workstations.

Outlook 2020

Continued growth course

In line with our vision of becoming the no. 1 in the European market for cloud telephony, we will continue to invest significantly in gaining market share. Therefore, assuming a stable overall economic development and a cloud communications market in Europe that is expanding rapidly as expected, NFON expects a continuation of its dynamic revenue growth with possible additional impulses from further M&A activities. The EBITDA breakeven point could be reached in the medium term if the current investment intensity is maintained. This does not include investments to take advantage of additional growth opportunities that arise in the short term.

* Including M&A effects due to the acquisition of DTS

Key investment highlights

Huge addressable business communication market being disrupted by structural shift to Cloud PBX solutions 1

Only true Pan-European Cloud PBX company best positioned to become the dominant European player 2

Strong business model resulting in unique combination of massive growth and sustainable recurring revenue 3

State-of-the-art "German Engineering" Cloud PBX solution tailored to European customer needs 4

5 Proven track record of scalable growth

6 Proven growth strategy leveraging multi dimensional layers of growth

Appendix

Further information about NFON

Management Board NFON AG

Hans Szymanski CEO/CFO

• 20 years of C-Level experience

• Previous experience includes
  • − CEO/CFO Francotyp-Postalia
  • − President Jenoptik LOS
  • − Klöckner & Co

Jan-Peter Koopmann CTO

• 20 years of experience in the IT/Telco industry

• Previous experience includes
  • − Founder Seceidos
  • − Tiscali
  • − Telenor Group

• 10 years of C-Level experience

• Previous experience includes
  • − Aconex
  • − Co-founder conject Group
  • − Mercer Management Consulting

Financial calendar

Date	Event
1 April 2020	Presentation Final Financial Results 2019
Web- and Telephone Conference
3 May 2020	NFON - Roadshow
Virtual Roadshow
18 May 2020	Interim Report 1st Quarter 2020
Web- and Telephone Conference
28 May 2020	Annual General Meeting
Online Meeting
20 Aug 2020	Presentation Half-year Financial Report 2020
Web- and Telephone Conference
16 – 17 Nov 2020	Preliminary Figures 3rd Quarter 2020/ Equity Forum
Presentation and Conference with 1on1

Share at a glance NFON AG

Segment Prime Standard/ Shares 15.1 million Designated Baader Bank sponsor ODDO Seydler First day of trading 11 May 2018 Coverage Berenberg Bank,

ISIN DE000A0N4N52 Telecommunication (21 October 2019) Baader Bank, Hauck & Aufhäuser, Mainfirst

Shareholder structure

1 voting rights based on 13.8 million shares 2 voting rights based on 14.1 million shares

Investor Relations

Contact

Sabina Prüser Head of Investor Relations

NFON AG

Machtlfinger Straße 7 81379 Munich Germany

Telephone

Fon +49 (0) 89 453 00 134 Fax + 49 (0) 89 453 00 33 134 sabina.prueser@nfon.com

Blog https://www.nfon.com/blog/de/

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Twitter https://twitter.com/NFONcom

Thanks

@NFONcom #cloud #telephony #allip