Financial Results HY 2020 Berlin, Munich, Mainz | 20 August 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

A market full of opportunities for NFON

Key Figures

Seizing opportunities for growth in a challenging environment

Milestones completed 31/12/2017 31/12/2018 30/06/2019 31/12/2019 31/03/2020 30/06/2020 CLOUDYA New core product Takeover DTS AG 253,360 320,728 88% Recurring Revenue Share 408,393 449,711 467,253 494,132 >30,000 clients 14 countries Italy NCTI Pro & Nvoice New products Takeover Onwerk GmbH >40,000 clients 2,700 Partners 15 countries Strengthening M&A activities Expanding R&D Capacity New R&D center in Portugal

Capital increase Active Ownership

Total number of seats on the balance sheet date

France

Financial Results

Half-year 2020

of massive growth and sustainable recurring revenue

Business model

Recurring revenues 88% Non-recurring revenues 12%

Strong business model resulting in unique combination

Financial Results HY 2020

Seat base

Seat growth in line expectations

Comments

Increase of total number of seats by 21% in comparison to HY 2019
Increase of total number of seats by 9.9% in comparison to year-end 2019
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

Outstanding performance realising momentum in first Half-year

Comments

Recurring revenues Half-year 2020 grow by 28.0% compared to Half-year 2019
Non-recurring revenues grow by 4.3% compared to previous year
Cumulative effect quarter by quarter as expected due to steadily growing total number of seats
- Gaining new big customers and projects in HY 2020, e.g. big insurance company
High share of recurring revenues (87.6%) due to strong and sustainable growing customer base

¹ Revenues of DTS were not consolidated in the NFON Group in January and February 2019.

Gross Margin

Increasing gross margin proves potential for sustainable profitability

Cost of materials (adj.) and gross margin development

1Cost of materials adjusted for changes in inventories of finished goods 2gross margin defined as (revenue - adj. cost of materials)/ 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 grow by 12.8% in proportion to revenues with a material cost ratio of 20.8%
High gross margin continues to show a constantly positive development also driven by a high proportion of recurring revenues

Personnel expenses

Highly professional and committed employees are the basis for further growth

Comments

Personnel expenses as reported amount to €14.3m (HY 2019: €12.0m)
- Adjustments of €0.5m for retention bonus and stock options
Increase of adj. personnel expenses by 20.4% including DTS effect
Adj. personnel expenses amount to €13.8m due to increase in workforce by 14.4%
- HY 2019: Ø 348 employees HY 2020: Ø 398 employees

1 Personnel expenses adjusted for Stock Option Plan, Retention Bonus

Marketing activities will be increased to use opportunities

Comments

Marketing expenses of €3.2m significantly below prioryear costs (-19.0%) mainly due to COVID-19 lockdown effects.

In general marketing activities are focused on

Change from direct to indirect marketing with focus towards channel activities
Focus on performance channels in direct communication
Product marketing builds on lifecycle communication and increase up- and cross-selling to customer base
Focus on partner activations in all markets, especially in younger markets

We expect marketing expenses for the full year 2020

Adjusted other operating expenses

Development of adj. other operating expenses shows scalibility of business

Adj. other operating expenses development without marketing expenses and sales commissions

€ million 5.5 6.8 4.6 10.3 4.1 2017 2018 HY 2019 2019 HY 2020 15.5 15.8 17.6 18.0 12.5 Adj. other expenses1 % of revenue

Comments

In general, other expenses comprise of sales commissions, supporting cost, general administration expenses and consulting fees amongst others and amount to €11.3m in total as reported (HY 2019: €12.2m)
NFON adjusts other expenses by marketing cost and sales commissions
- Sales commissions increased in relation to revenue: HY 2020: €4.0m HY 2019: €3.0m
Less costs, e.g. travelling costs, additionally push the scalability of the NFON business

1 2017, 2018, 2019 und HY 2019 and HY 2020 adjusted by one-off effects like IPO-costs and acquisition costs

Strong improvement in adj. EBITDA reflects outstanding performance of recurring revenues

Detailed reconciliation of one-off items
Reconciliation from EBITDA to adjusted EBITDA €m	HY 2020	HY 2019
EBITDA	1 0.8	-3.8
Retention bonus	0.2	0.2
Stock Options	0.4	0.3
Expenses related to DTS acquistion	0.0	0.6
Total EBITDA adjustments	0.5 1	1.2
EBITDA1 Adjusted	1.4	-2.7

Described positive development:
- Seat growth and recurring revenues, e.g. gaining new big customers
- Lower personnel expenses
- Lower other operating expenses, e.g. marketing expenses
leads to a positive development of reported EBITDA of €0.8m in HY 2020
Smaller adjustments for retention bonus and stock options of €0.5m
Adjusted EBITDA of €1.4m

1Rounding differences may occur in the tables

Outlook 2020

NFON confirms positive 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