NFON AG

Quarterly Report • May 25, 2023

Facts and figures Q1/23

NFON AG QUARTERLY REPORT FOR 1/2023

Who we are

NFON AG, with its headquarters in Munich, is a European provider of integrated business communications from the cloud. The listed company (Frankfurt Stock Exchange, Prime Standard) with more than 3,000 partners in 15 European countries and seven branches counts more than 50,000 companies among its customers. With its core product Cloudya, the smart cloud communications platform, NFON offers hassle-free voice calls, simple video conferencing and seamless integration of CRM and collaboration tools for small and mediumsized companies. The NFON portfolio comprises four areas: Business Communications with Cloudya, Customer Contact, Integration and Enablement. All of NFON's cloud services are operated in certified data centers in Germany, with 100% of their energy needs covered by renewable sources. NFON accompanies companies into the future of business communication by offering intuitive communication solutions.

Facts and figures Key performance indicators Q1/23

in EUR million	3M 2023	3M 2022	Change in %
Total revenue	20.8	20.3	2.6
Recurring revenue	19.3	18.4	5.3
Recurring revenue as a percentage of total revenue (in %)	93.1	90.7	n/a
Non-recurring revenue	1.4	1.9	−23.6
Non-recurring revenue as a percentage of total revenue (in %)	6.9	9.3	n/a
ARPU blended (in EUR)	9.80	9.98	−1.8
Seats (reporting date)	645,582	605,651	6.6
Adjusted EBITDA	2.0	0.5	n/a

NAVIGATION

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Facts and figures Q1/23

TABLE OF CONTENT

01	Company	4
	Letter from the Management Board	4
02	Interim Group
	Management Report	5
	Development of revenue	5
	Development of seats	6
	Development of blended ARPU
	(Average revenue per user)	6
	Cost of materials	7
	Personnel expenses	7
	Other operating expenses	8
	EBITDA, EBIT, consolidated net income	9
	Financial and asset position	9
	Supplementary Report	10
	Forecast Report	10

03	Consolidated interim
	financial Statement	11
	Consolidated Statement of
	Financial Position	11
	Consolidated Statement of Income and
	Consolidated Statement of
	Comprehensive Income	12
	Consolidated Statement of Cash Flows	13
	Consolidated Statement of Changes
	in Equity	14
04	SERVICE	16

Financial Calendar 16 Imprint 16

Interactive table of contents You can click on the individual topics to go to the respective page.

LETTER FROM THE MANAGEMENT BOARD

Dear shareholders and readers!

We look back on a first quarter of 2023 that was successful overall, a quarter in which NFON continued to grow and the measures aimed at increasing profitability already borne fruit.

The foundation of our continuous growth was once again the successful acquisition of new customers, while we were also able to increase the number of installed extensions (seats) within our existing customer base. At the same time, the strategic expansion of the product portfolio, both with new and current customers, contributed to the positive development of revenue. As a result, recurring revenue increased by 5.3% year-on-year to EUR 19.3 million in the first quarter of 2023. We managed to increase the share of recurring revenue in total revenue to 93.1%. The high share of recurring revenue underscores the loyalty of our customers and forms a very strong basis for further revenue planning. The high level of satisfaction with our solutions for integrated business communications is also confirmed by the development of seats in the first quarter. We were able to increase the number of seats by 6.6% to 645,582 compared to the previous year. The average revenue per user (blended ARPU) remained stable at a high level of EUR 9.80. This trend was further supported by the increasing sale of premium solutions.

In line with our strategic focus on profitable growth, we have set ourselves the goal for 2023 of profitably monetising the investments we made in our product portfolio and partner network in the past year. Our successes in this regard are reflected in a very positive earnings trend. Earnings before interest, taxes, depreciation and amortisation (EBITDA) recorded a significant increase to EUR 1.9 million in the reporting period (previous year: EUR -0.4 million). EBITDA adjusted improved from EUR 0.5 million in the first quarter of 2022 to EUR 2.0 million.

We are proud of the progress we made in the first quarter of 2023, but see this as only the beginning of a sustainably profitable development of the company under the leadership of our new CEO Patrik Heider. With Patrik Heider, NFON has gained an experienced manager for the second quarter of 2023 who will build on a strong foundation to define the further strategic direction and lead the Group into the next phase of growth and innovation. We are convinced that NFON is well on its way to becoming a leading provider of integrated business communications in Europe. Please continue to accompany us on this exciting path!

Your Management Board,

Dr. Klaus von Rottkay Jan-Peter Koopmann

COMPANY

Letter from the Management Board

INTERIM GROUP MANAGEMENT REPORT

Development of revenue

Overall, revenue developed positively compared to the previous year due to the increase in recurring revenue. Revenue growth in the first three months of 2023 was mainly based on the acquisition of new customers and an increase in installed extensions (seats) within the existing customer base. Furthermore, part of the revenue growth resulted from increased sales of the expanded product portfolio to new customers as well as to the existing customer base.

in EUR million	3M 2023	3M 2022	Change in %
Revenue	20.8	20.3	2.6
Cost of materials	3.4	3.8	−10.3
Gross profit	17.4	16.5	5.5
Other operating income	0.2	0.2	n/a
Personnel expenses	8.8	9.2	−4.4
Other operating expenses	6.9	7.9	−12.8
EBITDA	1.9	−0.4	n/a
Adjusted EBITDA	2.0	0.5	n/a
Depreciation, amortization and impairment losses	1.7	1.3	32.9
EBIT	0.1	−1.7	n/a
Net interest expense	0.1	0.0	n/a
Net tax expense	0.1	0.1	n/a
Consolidated net income	0.0	−1.8	n/a

NFON distinguishes between recurring and non-recurring revenue. Recurring revenue includes monthly fees for all products and solutions as well as ongoing call charges and SDSL monthly fees.1 Non-recurring revenue, on the other hand, comprises one-time revenue from the sale of hardware, setup fees for the cloud PBX and other products, setup fees for SDSL, and consulting services.

The cumulative effect typical of the development of revenue, in terms of the extensions (seats) still to be gained over the course of the year, is reflected in the development of recurring revenue generated in the individual quarters. Recurring revenue rose by 5.3% compared to the first quarter of the previous year.

With a 93.1% share of total revenue (previous year: 90.7%), the share of recurring revenue is in line with the forecast published for the full year 2023 (at least 88%).

1 Symmetric Digital Subscriber Line is a DSL access technology to a public digital network

Development of seats

The development of seats testifies to the growing demand for cloud telephone systems in the business customer segment. At the same time, it underscores the high level of satisfaction of the very loyal NFON customers, as the newly acquired extensions are offset by very few terminations.

Development of blended ARPU (Average revenue per user)

NFON records the average recurring revenue across all services, sales channels and countries per user (seat), so-called ARPU, in order to measure the operating performance per extension. Due primarily to the continued high volume of voice minutes, ARPU has been stable overall over the last few years. This trend is further supported by the increasing sale of premium solutions, which enable NFON to generate additional ARPU revenue.

Blended ARPU stabilizes

Cost of materials

In the reporting period, cost of materials was below the level of the comparable period of the previous year. As a result of the increase in revenue, the cost of materials ratio in the 3-month reporting period was lower than in the comparable period of the previous year at 16.19% (3M 2022: 18.53%). The year-on-year change in the ratio is within the normal range of fluctuation. The positive development resulted on the one hand from realized economies of scale and on the other hand from the increased share of recurring revenue, which shows a significantly higher margin compared to non-recurring revenue.

Lower cost of materials

Personnel expenses

In line with the decrease in the average number of employees, personnel expenses also declined in the reporting period compared to the first quarter of 2022. The decline is mainly due to the measures implemented to increase the profitability of the NFON Group, particularly in the fourth quarter of the previous year. Where necessary, personnel expenses are adjusted for non-recurring effects. In the reporting period, EUR 0.1 million had to be adjusted due to the focus on the company's core sales markets. In the previous year, personnel expenses were adjusted by EUR 0.2 million for expenses from the stock option program (adjustments).

Average number of employees

Cost/income ratio adjusted 41.8% (3M 2022: 44.5%) 0 1 2 3 4 5 6 7 8 9 10 11 12 +1,8%

+6,6%

Personnel expenses

Other operating expenses

Other operating expenses in the reporting period were below the level of the previous year. The decrease in other operating expenses in the first three months of 2023 compared to the first quarter of 2022 is primarily the result of lower marketing expenses of EUR 0.9 million (previous year: EUR 1.9 million) and EUR 0.4 million lower consulting expenses of EUR 0.5 million in the first three months of 2023. By contrast, selling expenses increased by EUR 0.4million to EUR 3.0 million in the reporting period. Overall, the cost/income ratio of adjusted other operating expenses (as a percentage of revenue) decreased from 35.8% to 33.1% in the first quarter of 2023 compared to the first quarter of 2022. This development is in line with the strategy of growing profitably.

Other operating expenses

Other operating expenses adjusted for non-recurring effects

Expense ratio adjusted: 33.1% (3M 2022: 35.8%)

Marketing expenses were as follows:

Significantly lower marketing expenses

The increased selling expenses resulting from the higher volume of revenue showed the following development:

The ratio of selling expenses to revenue was 14.2% in the first three months of 2023, higher than the ratio of selling expenses to revenue of 12.9% in the same period of the previous year. This is mainly the result of the higher volume of partner sales.

EBITDA, EBIT, consolidated net income

As a result of the implementation of measures to increase profitability, which began in the second half of 2022, NFON was able to significantly improve adjusted EBITDA by EUR 1.5 million year-on-year to EUR 2.0 million in the reporting period.

in EUR million	3M 2023	3M 2022
EBITDA	1.9	−0.4
Adjustments to personnel expenses:
Focusing on core sales markets	0.1	0.0
Stock options	0.0	0.2
Adjustments to other operating expenses:
M&A activities	0.0	0.6
Total adjustments	0.0	0.9
Adjusted EBITDA	2.0	0.5
EBIT	0.1	−1.7
Consolidated net income	0.0	−1.8
Adjusted consolidated net income	0.2	−0.9

Financial and asset position

At EUR 1.6 million, cash flow from operating activities in the first quarter of 2023 was significantly higher than in the same period of the previous year (EUR 0.4 million). In the reporting period, investments were made in particular in capitalized development costs and the implementation and customizing of the new business support system. The capitalized development costs are related to new products and new features for existing products.

Supplementary Report

There were no events after 31 March 2023 that could have a significant impact on the asset, financial and earnings position of the Group.

Forecast Report

Forecast for 2023

Growth rate of recurring revenue	In the mid to upper single-digit percentage range
Recurring revenue as a percentage of total revenue	At least 88 percent
Adjusted EBITDA	Above EUR 4 million

The planning is based on the state of knowledge up to 24 May 2023, taking the opportunities and risks presented for the NFON Group into account. This means that there may be a deviation between the planning data published together with the Annual Report as of 31 December 2022 and the figures that will actually be achieved at the end of 2023. This also applies to the assump tions made for the macroeconomic environment. In this context, we refer to the statements in the Risk and Opportunity Report and in the Forecast Report in the Financial Report as of 31 December 2022, which continue to apply unchanged as of 31 March 2023.

CONSOLIDATED INTERIM FINANCIAL STATEMENT

Consolidated Statement of Financial Position

as of 31 March 2023

EUR thousand	31 March 2023	31 December 2022	EUR thousand	31 March 2023	31 December 2022
Non-current assets			Equity
Property, plant and equipment	8,457	8,736	Subscribed capital	16,561	16,561
Intangible assets	34,735	34,045	Capital reserve	109,092	109,086
Shares in associates	672	672	Net loss	−78,376	−78,404
Deferred tax assets	263	262	Currency translation reserve	605	558
Other non-financial assets	359	420	Total equity	47,882	47,801
Total non-current assets	44,487	44,135	Non-current liabilities
Current assets			Non-current financial liabilities	4,098	4,051
Inventories	107	87	Other non-current liabilities	682	693
Trade receivables	10,121	9,276	Deferred tax liabilities	2,480	2,476
Other financial assets	390	390	Total non-current liabilities	7,261	7,220
Other non-financial assets	2,623	2,314
Cash and cash equivalents	12,457	13,218	Current liabilities
Total current assets	25,699	25,285	Trade payables	4,708	4,205
			Current provisions	2,464	2,310
			Current income tax liabilities	255	259
			Current financial liabilities	1,655	1,811
			Other non-financial liabilities	5,961	5,814
			Total current liabilities	15,042	14,400
Total assets	70,185	69,420	Total equity and liabilities	70,185	69,420

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income

for the period 01.01. to 31.03.2023

EUR thousand	3M 2023	3M 2022
Revenue	20,786	20,263
Other operating income	172	236
Cost of materials	−3,366	−3,754
Personnel expenses	−8,824	−9,233
Depreciation and amortization	−1,748	−1,316
Other operating expenses	−6,890	−7,903
Write-downs on receivables	−23	13
Other tax expense	−3	−5
Result from continuing operations before net interest income and income taxes	104	−1,700
Interest and similar income	6	0
Interest and similar expenses	−58	−28
Net interest expense	−52	−28
Earnings before income taxes	53	−1,727
Income tax expense	−24	−193
Deferred tax expense	0	117
Net profit (loss)	28	−1,803

EUR thousand	3M 2023	3M 2022
Attributable to:
Shareholders of the parent company	28	−1,803
Non-controlling interests	0	0
Other comprehensive income	47	−32
Taxes on other comprehensive income	0	0
Other comprehensive income after taxes	47	−32
Total comprehensive income	75	−1,835
Attributable to:
Shareholders of the parent company	75	−1,835
Non-controlling interests	0	0
Net loss per share, undiluted	0.00	−0.11
Net loss per share, diluted	0.00	−0.11

Consolidated Statement of Cash Flows

for the period 01.01. to 31.03.2023

EUR thousand	3M 2023	3M 2022	EUR thousand	3M 2023	3M 2022
1. Cash flow from operating activities			2. Cash flow from investing activities
Result after taxes	28	−1,803	Cash outflows for investments in property, plant
Adjustments to reconcile profit to cash inflow			and equipment	−111	−264
Income taxes	24	75	Cash outflows for investments in intangible assets	−1,710	−1,972
Interest expense (income), net	52	28	Cash flow from investing activities	−1,821	−2,236
Amortization of intangible assets and depreciation			3. Cash flow from financing activities
of property, plant and equipment	1,748	1,316	Proceeds from the capital increase	0	0
Allowance for doubtful accounts	23	−13	Payments for leases (IFRS 16)	−491	−539
Equity-settled share-based payment transactions	6	188	Repayments of bank loans, bonds and similar liabilities	0	0
Other non-cash items	14	−58	Other cash outflows/inflows	−1	2
Changes in:			Cash flow from financing activities	−492	−537
Inventories	−20	−1	Change in cash and cash equivalents	−768	−2,382
Trade and other receivables	−1,116	1,302	Effects of changes in exchange rates on liquidity	7	11
Trade payables and other liabilities	625	−158	Cash and cash equivalents at the beginning of the period	13,218	27,670
Accrued expenses and employee benefits	154	−436	Cash and cash equivalents at the end of the period	12,457	25,300
Effects of changes in exchange rates	47	−32
Interest paid	−14	0
Income tax refunds/payments	−26	−17	Cash and cash equivalents as of 31 March 2023 include bank balances of EUR 397 thousand (31 March 2022:
Cash flow from operating activities	1,545	391	EUR 316 thousand) that NFON cannot access freely as they are collateral from customers with poor credit rat ings that must be deposited. All restrictions are classified as current with regard to the time component.		-

Consolidated Statement of Changes in Equity

as of 31 March 2023

EUR thousand	Subscribed capital	Capital reserve	Currency translation reserve	Retained earnings	Total equity	Non-controlling interests	Total
Balance as of 1 January 2023	16,561	109,086	558	−78,404	47,801	0	47,801
Total comprehensive income (loss) for the period
Loss (gain) for the period	0	0	0	28	28	0	28
Other comprehensive income (loss) for the period	0	0	47	0	47	0	47
Total comprehensive income for the period	0	0	47	28	75	0	75
Transactions with owners of the parent company
Equity-settled share-based payment transactions	0	6	0	0	6	0	6
Total transactions with owners of the company	0	6	0	0	6	0	6
Balance as of 31 March 2023	16,561	109,092	604	−78,376	47,882	0	47,882

Consolidated Statement of Changes in Equity

as of 31 March 2022

EUR thousand	Subscribed capital	Capital reserve	Currency translation reserve	Retained earnings	Total equity	Non-controlling interests	Total
Balance as of 1 January 2022	16,561	108,600	891	−62,822	63,231	0	63,231
Total comprehensive income (loss) for the period
Loss (gain) for the period	0	0	0	−1,803	−1,803	0	−1,803
Other comprehensive income (loss) for the period	0	0	−32	0	−32	0	−32
Total comprehensive income for the period	0	0	−32	−1,803	−1,835	0	−1,835
Transactions with owners of the parent company
Equity-settled share-based payment transactions	0	188	0	0	188	0	188
Total transactions with owners of the company	0	188	0	0	188	0	188
Balance as of 31 March 2022	16,561	108,788	860	−64,625	61,584	0	61,584

Financial Calendar 2023

SERVICE

Financial Calendar

Imprint

27 April 2023 Q2

Presentation Group Annual Report 2022

25 May 2023

Presentation Financial result as at 31 March 2023

30 June 2023

Annual Shareholder Meeting of NFON AG

24 August 2023 Q3

Presentation Half-year report 2023

23 November 2023

Presentation Financial result as at 30 September 2023

Imprint

Petra Boss Machtlfinger Str. 7 81379 München Phone: +49 89 45300-198 Fax: +49 30 45300-33198 petra.boss@nfon.com https://corporate.nfon.com

Concept and Design IR-ONE AG &Co. KG, Hamburg

www.ir-one.de

Machtlfinger Str. 7 81379 München

Telefon: +49 89 453 00 0 Telefax: +49 89 453 00 100

https://corporate.nfon.com