NFON AG

Earnings Release • Apr 11, 2019

Results 2018 and Outlook 2019 Munich | 11 April 2019

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.

Successful business development and implementation of growth strategy

11 months after IPO

Key Figures

Successful strategy implementation underpined by figures

Business highlights since IPO

1 Successful acquisition of Deutsche Telefon Standard AG

Strengthened leading position in Germany, opened Italian branch, and starting in France shortly 2

Creation of a unique cloud portfolio through a SIP trunk solution, a dedicated proposition for the mid-market segment, and Cloudya in the premium market 3

4 Addressable customer market in PBX segment expanded

Increase customer base to more than 30,000 customers, e.g. Fressnapf with more than 4,500 seats in Europe 5

6 Extended partner network to more than 2,000 partners in Europe

Sustainable and scalable business model

Consolidated financial statements 2018 (excl. Deutsche Standard AG)

of massive growth and sustainable recurring revenue

Business model

Recurring revenues 80% Non-recurring revenues 20%

Strong business model resulting in unique combination

Share of recurring revenue at top end of targeted range

Development total recurring vs. non-recurring revenues

Comments

• Significant increase of total revenues by 20.7%
• Increase of non-recurring revenues to €8.4m (+7.0%)
• Recurring revenues are strong growth drivers with 24.6% to around €35m
• − Cumulative effect quarter by quarter due to steadily growing total number of seats (around 321,000)
• − Increasing y-o-y customer wins

1 including extraordinary effect from R&D project amounting to €1.5m

Sustainable recurring revenues

Steady growth of seats underlines sustainable attractiveness of products and services

Comments

• Increase of total number of seats by 27%
• Very low gross churn rate of <0.5% per month underlines quality of product and service and guarantees continuous recurring revenues
• Increasing share of wholesale partner business selling their own airtime leads to expected decrease of total blended ARPU
• 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 14.2%
• Gross margin continues to show a positive development and increases to 74.2%

1cost of materials adjusted for changes in inventories of finished goods 2gross margin defined as (revenue - adj. cost of materials)/ revenue

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

Comments

• Personnel expenses as reported amount to €22.1m
• Adjustments of €5.0m
• One-off effect out of share-based payments of €3.6m established as a share appreciation right program (non cash)
• Retention bonus (IPO) of €0.8m
• Exit bonus2 (IPO) of €0.7m
• Adj. Personnel expenses of €17.1m in line with expectations
• Increase of adj. personnel expenses by 29.3% primarily impacted by growing work force (245 headcounts 31 Dec 2018, 195 headcounts 31 Dec 2017)

1 Personnel expenses adjusted for share-based payments amounting to €0.1m, €0.3m, €0.4m and €3.6m in 2015, 2016, 2017 and 2018 2 Exit bonus of €0.7m reimbursed by former shareholders and recognised in other income €0.7m

Gaining market shares through intensified marketing activities

Comments

• Marketing expenses increase by 49.9%
• Start of big marketing campaign in Austria and Germany to raise awareness of NFON with multichannel approach
• Gaining new partners >2,0002
• Introduction of Cloudya the new core product of NFON
• Increase of customer base since year end 2017 from >15,000 to >30,0002

¹ The decline in financial year 2016 was mainly due to a temporary reduction in marketing activities as result of re-allocations of internal budgets 2 Incl. DTS AG

Adjusted other operating expenses

Operational leverage leads to disproportionately high margin improvement

Other expenses development without marketing expenses and sales commissions

Comments

• In general other expenses comprise of sales commissions, supporting cost, general administration expenses and consulting fees amongst others and amount to €18.9m in total as reported
• NFON adjusts other expenses by marketing cost, sales commissions and one-off effects (e.g. IPO costs 2018 of €2.4m)
• Sales commissions amount to €4.3m in 2018 (2017: €3.6m)
• Adj. other expenses developed slower than revenue growth, furthermore emphasising the operating leverage of NFON business model

12017: Adjusted for expenses for the introduction of a transfer pricing model, additions to provisions related to potential value-added tax repayments, social security contributions and payroll taxes, as well as fees for professional advisors related to those topics in 2017 in total amounting to €0.6m, in addition IPO related expenses in the amount of €0.2m; 2018: adjusted for IPO related one-off expenses €2.4m and €0.2m for social security contributions

EBITDA reflects investments in growth strategy

Detailed reconciliation of one-off items Comments Reconciliation from EBITDA to adjusted EBITDA ^{2018 2017} €m EBITDA -7.8 -1.0 Share-based payments1 3.6 0.4 Retention bonus 0.8 0 IPO costs 2.4 0.2 Other one-off expenses2 -0.2 0.6 Total EBITDA adjustments 6.6 1.2 Adjusted EBITDA -1.2 0.2

• EBITDA as reported amounts to approx. €-7.8m
• In accordance with strategy, personnel costs, marketing and sales commissions further increased
• One-off effects in the amount of €6.6m burdened EBITDA
• Adj. EBITDA as planned at €-1.2m

1 Including equity and cash settled share-based payment programmes (non cash) 2Expenses related to tax and social security matters (2017: accruals, 2018: reversals)

Today and tomorrow: We count on our coherent growth strategy

Milestones 2018 and Outlook 2019

Delivering on our growth strategy

Outlook 2018

NFON delivers on guidance 2018

Outlook 2019

Accelerating growth in 2019

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 Outstanding track record of scalable growth

6 Proven growth strategy leveraging multi dimensional layers of growth

Financial calendar

Date	Event
14 May 2019	Equity Forum – Spring Conference
Presentation and 1-on-1s
21 May 2019	Interim Report 1st Quarter 2019
Web- and Telephone Conference
22-23 May 2019	Berenberg USA Conference, New York
Presentation and 1-on-1s
5 June 2019	Annual General Meeting
Munich
20 Sep 2019	Half-year financial report 2019
Web- and Telephone Conference

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

Consolidated Financial Statement 11 April 2019 24

Share at a glance NFON AG

Facts

ISIN DE000A0N4N52 Segment Prime Standard/ Telecommunication Shares 14.1 million (as per 22 March 2019) Designated Baader Bank sponsor ODDO Seydler

First day of trading 11 May 2018 Coverage Berenberg Bank, Baader Bank, Oddo BHF, Hauck & Aufhäuser

Shareholder structure1

1 voting rights based on 13,8 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/

Facebook https://facebook.com/NFONcom

Twitter https://twitter.com/NFONcom

Thanks

@NFONcom #cloud #telephony #allip