NFON AG — Interim / Quarterly Report 2021

May 20, 2020

Financial Results Q1 2021 Munich | 20 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.

Our Mission NFON Growth Strategy 2024

NFON aims to be the leading provider of voice-centric business communications in Europe

Our Differentiators NFON Growth Strategy 2024

Focus on key differentiators to stand out against competition in the market

Integrated Business Communications (UCaaS and beyond)

NFON will offer a full UCaaS suite (PBX, video, chat, presence) complemented by open APIs and further omni-channel customer engagement/ workflow solutions.

NFON will differentiate through an outstanding user experience and app design that simplifies business communications and workflows, with a special focus on mobile/remote/hybrid working and usage scenarios.

Outstanding UX and UI Leading Channel Provider

NFON will continue to expand its strong partner network in Europe. With a best-in-class partner experience / management and the partner at the core of all business processes, NFON targets to be the number one channel provider in Europe.

Our Path to Growth 2024 NFON Growth Strategy 2024

NFON will enhance its portfolio to serve customers' business communications demands even better and will further grow its partner network in Europe

Target

Targeting clear differentiators NFON will optimize its product portfolio approach and go-tomarket accordingly. This model will allow NFON to execute and scale more effectively

growth drivers

Continue to enhance the NFON offering towards "smarter workflow" voicecentric communication with UCaaS, CCaaS, iPaaS as

Scale

Building on more than 2,700 partners in 15 European markets, NFON will massively invest to grow that network with the aim of being THE channel provider for voicecentric business services

Key Measures Target. Enhance. Scale.

To implement the NFON growth strategy, dedicated key measures will be implemented

Financial Results

First Quarter 2021

Key Figures

First quarter development in line with expectations

of massive growth and sustainable recurring revenue

Business model

Recurring revenues 89% Non-recurring revenues 11%

Strong business model resulting in unique combination

Seat base

Continuing growth of seat base

Comments

• Increase of total number of seats by 16%
• Various influencing factors for ARPU development
• Still high usage of air time
• Positive development of DTS
• At the same time increasing development of business with wholesale partners selling their own airtime
• Low gross churn rate of ~0.5% per month underlines quality of product and service and guarantees continuous recurring revenues

Sustained growth in recurring revenues

Development total recurring vs. non-recurring revenues

Comments

• Total revenue growth of 15.2% in comparison to Q1 2020
• Recurring revenue grows by 19.6% compared to first quarter 2020 due to high usage of airtime and positive seat growth
• Non-recurring revenues on previous year's level
• Steadily increasing share of recurring revenue in total revenue (89.1%)

Consistently high and increasing gross margin

Comments

• High gross margin (adj.) continues to show a constantly positive development
• Cost of materials on previous year's level. This results in a lower cost of materials ratio of 19.3% in the 3-month reporting period compared to the same period of the previous year (Q1 2020: 22.4%)
• 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

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

NFON further invest in staff

Comments

• Personnel expenses as reported amount to €8.0m (Q1 2020: €7.2m)
• Adjustments of €0.2m for retention bonus and stock options
• Adj. personnel expenses amount to €7.8m (Q1 2020: €6.8m) due to increase in workforce by 11.5%
• Q1 2021: Ø 435 employees
• Q1 2020: Ø 390 employees
• NFON plans a significant ramp-up of technical resources (FTE>50%yoy) until end of 2021

1 Personnel expenses adjusted for Stock Option Plan, Retention Bonus

Marketing expenses will rise again in 2021

Comments

• Marketing expenses of €1.1m were still below prioryear costs (-32.1%)
• With a focus on channel marketing NFON intends to increase marketing invests by more than >50%yoy
• Focus on partner activations in all markets, especially in younger markets and gaining new partners
• Product marketing builds on lifecycle communication and increase up- and cross-selling to customer base

Development of sales commission

Selling expenses development €m, % of revenue 4.3 6.7 2.0 8.0 2.3 2018 2019 Q1 2020 2020 Q1 2021 10.0 11.9 12.1 11.8 12.4 % of revenue

Comments

• NFON has a partner network of more than 2,700 partners including wholesale partners
• Selling expenses mainly include sales commissions to dealers and distributors (excl. wholesale partners)
• Dealers and distributors receive a percentage share of revenues per seat provided the customer is still a customer and the partner is still a partner of NFON
• Increase of sales commissions by 18.3%

Development of earnings

Strong improvement in EBITDA demonstrates that NFON can be profitable in the short term

Detailed reconciliation of one-off items				Comments
Reconciliation from EBITDA	Q1 2021	Q1 2020
to adjusted EBITDA				EBITDA
€m	1
EBITDA	1.6	-0.1
Stock Options/ESOP/ Retention bonus/ M&A	0.2	0.1
Total EBITDA adjustments	0.2	0.3
Adjusted EBITDA	1.8	0.2

• EBITDA of €1.6m reflects still lower investments
• Adjustments leads to further improvements of EBITDA

Adjusted EBITDA of €1.8m

• This development has a temporary character
• NFON aims to significantly increase the investment ratio again in 2021.

Outlook 2021

NFON guidance takes Corona effects into account

In line with our mission to lead 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 market being disrupted by structural shift to cloud integrated business communications 1

Strong business model resulting in attractive combination of massive growth, low churn rate and sustainable recurring revenue 2

State-of-the-art "German Engineering" business communications solution on own tech stack tailored to European customer needs 3

4 Proven growth strategy leveraging multi-dimensional layers of growth

5 Leading European channel partner network as basis for scalable growth

Thanks

@NFONcom #cloud #telephony #allip

Appendix

Further information about NFON

NFON AG

Management Board

• 10 years of C-Level experience in the IT industry

• Previous experience includes
• − McKinsey & Company
• − Microsoft
• − Planet Home

Jan-Peter Koopmann CTO

• 10 years of C-Level experience in the IT/Telco industry

• Previous experience includes
• − Founder Seceidos
• − Tiscali
• − Telenor Group

Financial calendar 2021

Date	Event
24 June	Annual Shareholder Meeting
Virtual Meeting
19 Aug	Half-year Financial Results 2021
Web- and Telephone Conference
18 Nov	Financial Results Nine Months 2021
Web- and Telephone Conference

Share at a glance NFON AG

Facts

DE000A0N4N52 DE000A2TSA41
Prime Standard/ Telecommunication
16.6 million (29 March 2021)
Baader Bank ODDO Seydler
11 May 2018
Berenberg Bank, Baader Bank, Hauck & Aufhäuser, Stifel

1voting rights bases on 15.6 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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Twitter https://twitter.com/NFONcom