NFON AG

Earnings Release • May 18, 2020

Financial Results Q1 2020 Berlin, Munich, Mainz | 18 May 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.

Wind of change

Assessments confirmed - Corona speeds up development

Key Figures

Very successful start in a challenging environment

1 The sales of DTS were not consolidated in the NFON Group in January and February 2019. To show the organic growth on a comparable basis, the Group's revenue figures in the first two months of 2020 are therefore reduced by the amount generated by DTS in the same month of 2019.

Financial Results Q1 2020 5

Milestones Completed

Onwerk GmbH

Strengthening M&A activities

Capital increase Active Ownership

clients

15 countries

France

Total number of seat on the balance sheet date

253,360

Financial Results

First Quarter 2020

of massive growth and sustainable recurring revenue

Business model

Recurring revenues 86% Non-recurring revenues 14%

Strong business model resulting in unique combination

Seat base

Continuing growth of seat base

Comments

• Increase of total number of seats by 20%
• Influencing factors for ARPU development
• Huge increase of air time volume in March 2020 due to lockdown and move to home offices
• Very successful development of business with wholesale partners selling their own airtime
• Very low gross churn rate of <0.5% per month underlines quality of product and service and guarantees continuous recurring revenues
• Additional premium solutions represent upside potential for ARPU development in the medium term

Significant increase of recurring revenues

Comments

• Recurring revenues grow by 35.6% compared to first quarter 2019
• Recurring revenues excluding inorganic growth (DTS)1 grow by 22.3% means €12.7m (Q1 2020) compared to €10.4m (Q1 2019)
• Non-recurring revenues grow by 35.0% compared to previous year
• Total revenue grow by 35.5% or excluding inorganic growth by 22.9%
• Cumulative effect quarter by quarter as expected due to steadily growing total number of seats
• High share of recurring revenue (85.8%) due to strong and sustainable growing customer base

1 Revenues of DTS were not consolidated in the NFON Group in January and February 2019. To show the organic growth on a comparable basis, the Group's revenue figures in the first two months of 2020 are therefore reduced by the amount generated by DTS in the same month of 2019.

Gross Margin

Consistently high gross margin

Cost of materials (adj.) and gross margin development

€ million

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 grow by 36.8% in proportion to revenues with a material cost ratio of 22.4%
• High gross margin continues to show a constantly positive development

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

A strong employee base is the future of NFON

Comments

• Personnel expenses as reported amount to €7.2m (Q1 2019: €5.6m)
• Adjustments of €0.3m for retention bonus and stock options
• Increase of adj. personnel expenses by 29.7% including DTS effect
• Adj. personnel expenses amount to €6.8m due to increase in workforce by 38.8%
• Q1 2019: Ø 286 employees Q1 2020: Ø 397 employees

1 Personnel expenses adjusted for Stock Option Plan, Retention Bonus

Comments

Marketing expense (in €) on previous year's level with clear improvement of ratio

• Clear separation of central marketing and local market activities
• Focus on brand awareness
• High attention on onboarding of new partners especially in markets like Spain, France and Italy
• 2,700 partners across Europe sell successfully NFON products and services to customers

Adjusted other operating expenses

Development of adj. other operating expenses shows scalibility of business

Adj. other expenses development without marketing expenses and sales commissions

€ million

Comments

• In general, other expenses comprise of sales commissions, supporting cost, general administration expenses and consulting fees amongst others and amount to €6.0m in total as reported (Q1 2019: €5.6m)
• NFON adjusts other expenses by marketing cost and sales commissions
• Sales commissions stable in relation to revenue: Q1 2020: €2.0m Q1 2019: €1.4m
• Slight increase of adj. other operating expenses from €2.0m to €2.3m (17.1%) due to DTS, but significantly improved ratio

1 2017, 2018, 2019 und Q1 2019 adjusted by one-off effects like IPO-costs, acquisition costs

Positive adj. EBITDA reflects strong Q1 2020 development

Detailed reconciliation of one-off items			Comments
Reconciliation from EBITDA to adjusted EBITDA	Q1 2020	Q1 2019
€m
EBITDA	1 -0.1	-1.7
Retention bonus	0.1	0.1
Stock Options	0.2	0.2
Expenses related to DTS acquistion	0.0	0.5
Total EBITDA adjustments	0.3 1	0.8
Adjusted EBITDA	0.2	-0.9

• Strong development of Q1 2020 leads to an positive development of EBITDA as reported of €-0.1m
• Smaller adjustments for retention bonus and stock options of €0.3m
• Adjusted EBITDA of €0.2m

Outlook 2020

NFON expressly confirms guidance - taking Corona effects into account

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

Thanks

@NFONcom #cloud #telephony #allip

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

César Flores Rodríguez CSO

• 10 years of C-Level experience

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

Financial calendar

Date	Event
18 May 2020	Interim Report 1st Quarter 2020
Web- and Telephone Conference
19 May 2020	Berenberg Conference USA 2020 Tarrytown
Virtual Meetings
28 May 2020	Annual General Meeting
Online Meeting
10/16 June 2020	Roadshow Days with Baader/ Berenberg
Virtual Meeting
18 June 2020	Quirin Champions Conference
Virtual Meetings
20 Aug 2020	Presentation Half-year Financial Report 2020
Web- and Telephone Conference

Share at a glance NFON AG

Facts

ISIN DE000A0N4N52 Segment Prime Standard/ Telecommunication Shares 15.1 million (21 October 2019) Designated Baader Bank sponsor ODDO Seydler First day of trading 11 May 2018 Coverage Berenberg Bank, Baader Bank, Hauck & Aufhäuser, Mainfirst

Shareholder structure Others 4.94% 3.18%2 7.74%1 11.43% 33.90% 14.05% 21.35%

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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