NFON AG

Earnings Release • Nov 22, 2018

THE NEW FREEDOM IN BUSINESS COMMUNICATION

Financial Report as of 30 September 2018 Munich | 22 November 2018

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

Introduction & Strategy

NFON – The only true Pan-European Cloud PBX company

4

Shift to cloud communication creates unique opportunity

Source: MZA (2017)

5

¹calculated as respective number of total extensions/installed base based on MZA estimates multiplied with NFON's 2017 ARPU of €10.32 per seat per month Note: Cloud business telephony seats including public multi-tenant, public multi-instance and public single-instance technology

Coherent multi vector growth strategy

Business Highlights

NFON continues successful development

THE NEW NFON CORE

CLOUDYA MORE THAN A PRODUCT UNIQUE, TRANSPARENT, CLEAR

CLOUDYA ANY DEVICE ANYWHERE

CLOUDYAANY BROWSER

TARIFF CLEAR STRUCTUR FOR OUR CUSTOMERS

PRICE BASED

Mobility Option*

Business Standard

• NEW App Suite
• 1 desktop phone
• SRTP encryption

Business Premium

• NEW App Suite
• Mobility Option
• 9 destop phones
• SRTP encryption
• Neorecording basic

VALUE BASED

CLOUDYA

OUTLOOKNFON STRATEGY – UCAAS

Phase 1

OUTLOOKNFON STRATEGY – UCAAS

Business Model & Financial Overview

3

NFON's top line mechanics are centred around recurring revenue

Share of recurring revenue above target range

Development total recurring vs. non-recurring revenues

• Significant increase of total revenue by 20.2%
• Lower hardware sales led to a decrease of nonrecurring revenue by -4.0%
• Recurring revenues are strong growth drivers with +27.9% to €25.3m
• − Cumulative effect quarter by quarter of new seat wins
• − Increasing y-o-y customer wins (>20,000) and steadily growing total number of seats (>305,000)

Sustainable recurring revenues based on continuous growth in total number of seats

• Increase of total number of seats by 28%
• 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

Consistently increasing gross margin

Cost of materials and gross margin development

€m, % of revenue

• 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 approx. 8.5%
• Gross margin is positively influenced by
• − higher share of recurring revenue
• − lower hardware sales
• − revenue share generated through wholesale partners

Increase of adj. personnel expenses due to growing work force

Adj. personnel expense development

• Personnel expenses as reported amount to €17.4m
• Adjustments unchanged compared to half-year 2018 of €5.0m
• One-off effect out of share-based payments of €3.7m established as a share appreciation right program
• Retention bonus (IPO) of €0.6m
• Exit bonus² (IPO) of €0.7m
• Adj. Personnel expenses of €12.4m in line with expectations
• Increase of adj. personnel expenses by 25.3% primarily impacted by growing work force (227 headcounts 30 Sep 2018, 175 headcounts 30 Sep 2017)

Marketing expenses increase as expected due to higher marketing activities

Marketing expense development

€m, % of revenue

• Marketing expenses increase by 50.1%
• Start of big marketing campaign in Austria to raise awareness of NFON
• Gaining new partners
• Introduction of Cloudya the new NFON client
• Start of sales November 1, 2018 with new marketing initiatives
• Increase of customer base since year end 2017 from >15,000 to >20,000

Consistent decrease of adj. other expenses as % of revenue demonstrates high operating leverage

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 €13.5m in total as reported
• NFON adjusts other expenses by marketing cost, sales commissions and one-off effects (e.g. IPO costs first half 2018 of €2.4m)
• Sales commissions amount to €3.2m 9M 2018 (9M 2017: €2.8m)
• 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; HY 2018: adjusted for IPO related one-off expenses €2.4m

NFON continue to show break even in adjusted EBITDA despite higher costs

Detailed reconciliation of one-off items

Reconciliation from EBITDA to adjusted EBITDA	9M 2018	9M 2017
€m
EBITDA	-6.5 1	-0.5
payments1 Share-based	3.7	0
Retention bonus	0.6	0
IPO costs	2.4	0
Total EBITDA adjustments	6.7	0
Adjusted EBITDA	0.1	-0.5
Consolidated net loss	1 -7.1	-1.2
Adjusted consolidated net loss	-0.5	-1.2
EPS in €	-0.74	4.59

• EBITDA as reported amounts to €-6.5m stable on half-year 2018 level
• In accordance with strategy, only personnel costs and marketing and sales commissions further increased in Q3 2018
• One-off effects in the amount of €6.7m burdened EBITDA
• Adjusted EBITDA proves ability to profitability

9 months underline positive development of NFON

€31.2m revenues with 81% recurring revenues

305,000+ seats

Blended ARPU development as expected <0.5% gross churn rate per month

Adj. EBITDA break even

Launch of Cloudya Setting up new company in Italy

NFON confirms guidance for 2018

Clear focus on implementation of growth strategy

Key Investment Highlights and Q&A

4

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

Outstanding track record of scalable growth underpinned by break-even profitability at Group level 5

6 Proven growth strategy leveraging multi dimensional layers of growth

Thanks @NFONcom #cloud #telephony #allip

Management Board of 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

NFON share at a glance

Facts

ISIN	DE000A0N4N52
Segment	Prime Standard/ Telecommunication
Shares	13.8 million
Designated sponsor	Baader Bank ODDO Seydler
First day of trading	11 May 2018
Coverage	Berenberg Bank, Baader Bank, Oddo BHF, Hauck & Aufhäuser

Shareholder structure¹

Financial calendar

Date	Event
22 Nov 2018	Interim Report 3rd Quarter 2018
Web- and Telephone Conference
27 Nov 2018	German Equity Forum Frankfurt
Analyst Presentation and 1-on-1
Beginning March 2019	Preliminary results 2018
Web- and Telephone Conference
11 April 2019	Annual Report 2018
Web- and Telephone Conference

Contact

Sabina Prüser Head of Investor Relations

NFON AG

Machtlfinger Straße 7 81379 München

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