NFON AG

Earnings Release • Aug 23, 2019

Half year results 2019 Munich | 23 August 2019

Disclaimer NFON AG

This communication is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities of the Company. The securities discussed herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act. There will be no public offering of the securities discussed in this release in the United States of America and the information contained in this release does not constitute an offer of securities for sale. This announcement is not for distribution, publication or transmission, directly or indirectly, to or within the United States of America, Australia, Canada, Japan or any other jurisdiction in which such distribution is unlawful, or to U.S. persons.

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

3

Delivering on our growth strategy

Milestones Completed 2018/2019

Strong market position

Only pan-European Cloud PBX provider

European Cloud PBX providers with own technology

Source: European Commission Regulation (EU) 2016/679 (2016), Allen & Overy (2017)

NFON AG is developing along guidance 2019 Key Figures

Half Year Results 2019 7

1 First time consolidation of DTS in March 2019 2Compared to H1 2018

Business model

Proportion of recurring revenues well above guidance

Significant increase of recurring revenues

Development total recurring vs. non-recurring revenues

Comments

• Total revenues grow by 27.7% to €26.3m in comparison to €20.6m in half year 2018
  • Revenue first time with Deutsche Telefon Standard (since March 2019)
• Q2 even higher growth rate of 33.8% Q2 2019: €14.3m vs. Q2 2018: €10.6m
• Non-recurring revenues H1 2019 show a decrease of 5.7% compared to H1 2018 due to lower hardware sales
• Significant increase of recurring revenues by 36.1% compared to H1 2018
• Cumulative effect quarter by quarter due to steadily growing total number of seats

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

Strong growth of seat base

Very strong development of seat base and ARPU stabilization

Comments

• Increase of total number of seats by 42%
• Stable development of ARPU1 since acquisition of DTS:
  • ARPU Q1 2019: 9.74€
  • ARPU H1 2019: 9.76€
• Influencing factors for ARPU development YoY
  • Very successful development of business with wholesale partners selling their own airtime
  • Lower licence fees for DTS AG seats (mid market segment), but including higher proportion of total airtime
  • Expected increase of premium solutions
• Very low gross churn rate of <0.5% per month underlines quality of product and service and guarantees continuous recurring revenues

¹ Definition ARPU: Total recurring revenues minus revenues out of SIP-trunk-channel licence fees divided by total seat base

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 12% in H1 2019 compared to H1 2018
• Gross margin continues to show a positive development and increases to 77.0%

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

Employees

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

Comments

• Number of employees rose by 68% from 216 to 362 as of June 30, 2019 compared to June 30, 2018
• Acquisition of DTS with additional employees
• Increase mainly in Sales, Marketing and Support
• New subsidiaries in Italy and France

Increase of personnel expenses as expected

Comments

• Personnel expenses as reported amount to €12.0m (H1 2018: €13.1m)
  • Personnel expenses H1 2019 include €0.5m for Stock Option Plan and retention bonus
• Personnel costs relieved for the first time by capitalization of development costs (NFON AG) in H1 2019 by €0.6m
• Increase of adj. personnel expenses by 42.0%
• Despite higher headcount for future growth only slight increase of personnel expenses ratio due to scalability of the business model

1 Personnel expenses adjusted for share-based payments amounting to €0.3m (2016), €0.4m (2017), €3.6m (H1 2018/FY 2018) and €0.3m (H1 2019). Exit bonus of €0.7m (2018) reimbursed by former shareholders and recognised in other income €0.7m

Gaining market shares through intensified marketing activities

Marketing expense development €m 2.7 3.6 2.3 5.5 3.9 2016 2017 H1 2018 2018 H1 2019 17.6 10.2 11.1 12.7 15.0 Marketing expenses % of revenue

Comments

Marketing expense increases as planned by 71.6% building a strong brand that drives sales and partner growth

• Starting marketing activities in Italy and France
• Partner roadshows
• Fairs and exhibitions
• Marketing campaigns (i.e. TV-spots, radio)
• NFON with more than 2,000 partners across Europe

Adjusted other operating expenses

Increase of other operating expenses due to ongoing European expansion

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 €12.2m in total as reported (H1 2018: €9.6m)
• NFON adjusts other expenses by one-off expenses (e.g. acquisition DTS) marketing cost and sales commissions
  • Sales commissions amount to €3.0m in H1 2019 (H1 2018: €2.1m)
• Increase of other operating expenses from adjusted €2.2m to €4.7m due to various reasons (amongst others: start in Italy and France)
• IFRS 16 leads to lower Opex of €0.6m

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; H1 2018: adjusted for IPO related one-off expenses of €2.4m, 2018: adjusted for IPO related one-off expenses €2.4m and reversal of other provisions social security contributions €0.2m, H1 2019 adjusted for DTS

€m

EBITDA mirrows successful strategy implementation

Detailed reconciliation of one-off items Comments 1 1 Reconciliation from EBITDA to adjusted EBITDA H1 2019 H1 2018 €m EBITDA -3.8 -6.6 Stock options/ESOP 0.3 3.71 Retention bonus 0.2 0.6 IPO costs 0 2.4 One-off expenses related to DTS acquisition 0.6 0 Total EBITDA adjustments 1.2 6.7 Adjusted EBITDA -2.6 0.1

• EBITDA as reported amounts to approx. €-3.8m
• 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 EBITDA
• Adj. EBITDA as planned at €-2.6m

1 Including equity and cash settled share-based payment programmes (non cash)

Outlook 2019

Accelerating growth in 2019

Successfully implemented strategy with accelerating growth

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

Thanks

@NFONcom #cloud #telephony #allip

Appendix

Further information about NFON

One year after IPO

Preliminiary figures & Business highlights

Wind of change Business communication

NFON at a glance

Cloud PBX solutions tailored to the needs of today's business communication

Shift to cloud communication creates unique opportunity

Source: MZA (2017) and Cavell 2018/ 1 calculated 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

Market penetration and expected development

Penetration in Continental Europe is following the United Kingdom and North America

Source: Cavell 2018/ Note: Penetration based on cloud business telephony seats including public multi-tenant, public multi-instance and public single-instance technology

Competitive environment in a fast changing business

Sales channels

Flexible go-to-market model

Transform product

Introduction of Cloudya – More than a product

Leading position in Germany fuels accelerated growth

Acquisition of DTS in Feb/March 2019

• › Founded 2007, headquartered in Germany (Mainz)
• › Strong and focussed partner network in Germany
• › Complementary product portfolio

50,000 Cloud-PBX-Seats and >35,000 SIP trunk channels (bridge technology)

• › Active in Germany with 65 skilled employees
• › Attract additional and adaption of new customers
• › Up- and cross-selling into the extended customer and partner base
• › Harmonisation of investment programmes and product development roadmaps
• › Realisation of economies of scale, e.g. in purchasing

Complementary product portfolio – Attract additional customers

NFON accompanies entire customer development

Drive market penetration – Adoption of new customer

NFON wants to dominate the European cloud telephony market

In view of the fact that European carriers have already started to switch to All-IP, customers can look forward to a smooth transition to future-proof cloud PBX technology.

Situation PBX market TODAY

Expected situation PBX market in 2022

On-premise & hosted PBX solutions Cloud PBX

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

Half Year Results 2019 33

Facts

Share at a glance NFON AG

ISIN DE000A0N4N52

Designated Baader Bank

Segment Prime Standard/ Telecommunication Shares 14.1 million (as per 22 March 2019)

Shareholder structure

1 voting rights based on 13,8 million shares

Financial calendar

Date	Event
23 Aug 2019	Half Year Results0 2019
Web- and Telephone Conference
Sep 2019	Conference citi Bank, London Berenberg and Baader, Munich
Presentations and 1-on-1
14 Nov 2019	3rd quarter results 2019
Web- and Telephone Conference
Nov 2019	Equity Forum Frankfurt a. M.
Presentation and 1-on-1

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