NFON AG — Investor Presentation 2021

Aug 19, 2021

Financial Results HY 2021 Munich | 19 August 2021

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

NFON at a Glance

The only true pan-european Cloud PBX provider

Voice centric solutions tailored to the needs of today's business communication

Flexible go-to-market model with over 3,000 partners

Financial Results Half-year 2021 6

sustainable recurring revenue

Business model

Licence fee per extension Airtime Premium solutions Seats ARPU

Attractive business model combining strong growth with

Activation fee Hardware Professional services

The market is moving

Growing intersection of Business Communications Market Analysis

The cloud PBX market is growing together with adjacent markets such as Contact Center and Unified Communications to one large "Business Communications / Workflows" market

• Prerequisite: an integrated business communication solution combining voice and video (enhanced with Chat & Presence)
• All players in the market try to close gaps to provide customers with a fully integrated offering
• Business Communications expands into formerly separate areas such as Contact Center, Analytics and Workflow Management
• Integration of processes and tools via APIs therefore become more and more important

European UCaaS Market

Massive addressable market in Europe

Data cover industry, construction, trade, and services, but not enterprises in the primary sector and largely non-market services such as education	Enterprises 2019 (Thousand)	Persons employed 2019 (million)
Micro (0-9)	23,323 (93.0%)	43.5 (29.7%)
Small (10-49)	1,472 (5.9%)	29.5 (20.1%)
Medium (50-249)	236 (0.9%)	24.7 (16.8%)
SMEs	25,032 (99.8%)	97.7 (66.6%)
Large	47 (0.2%)	49.0 (33.4%)
Total	25,079 (100%)	146.8 (100%)

Approximately 100 million employees in our NFON sweet spot

Overall broadband penetration behind leading industrial countries

Over 350 players competing in the UCaaS market

Covid-19 accelerated up-take of UCaaS

European companies seek for European solutions

NFON Growth Strategy 2024

The leading provider for voice centric business communication 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 3,000 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

Business Highlights

Financial Results

Half-year 2021

Seat base

High usage of airtime while some customers still hesitant

Comments

• Further positive development of ARPU
• Still high usage of airtime
• Positive development of DTS
• Increase of total number of seats by 13%. The Corona effects and the associated delay in customer decisions mainly influenced the second half of 2020 and first half of 2021. This effect is evident in the growth of our seat base
• Continuously 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

€ million

Comments

• Total revenue growth of 15.6% in comparison to HY 2020
• Recurring revenues grow by 17.3% compared to first half-year 2020 due to high usage of airtime and ongoing seat growth
• Non-recurring revenues on previous year's level, with a significant increase in Q2 2021 compared to previous year (+24.3%)
• Steadily increasing share of recurring revenue in

Consistently high and increasing gross margin

Cost of materials (adj.) and gross margin development € million 11.1 13.7 6.8 14.9 7.4 2018 2019 HY 2020 2020 HY 2021 Cost of materials (adj.)1 Gross margin2 in % from revenues 74.2 76.1 79.1 79.3 80.6

Comments

• High gross margin (adj.) continues to show a constantly positive development in HY 2021
• Cost of materials slightly higher. This results in a lower cost of materials ratio of 19.4% in the 3-month reporting period compared to the same period of the previous year (HY 2020: 20.9%)
• 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

Personnel expenses

NFON further invest in staff

Comments

• Personnel expenses as reported amount to €16.0m (HY 2020: €14.3m)
• Adjustments of €0.3m for stock options
• Adj. personnel expenses amount to €15.6m (HY 2020: €13.8m) due to increase in workforce by 13.1%
• HY 2021: Ø 450 employees
• HY 2020: Ø 398 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 activities accelerating

Comments

• Marketing expenses increased by 12.9%
• 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
• Total number of partners increased to >3,000 partners
• Start of business in Poland

Increase in sales commission relates to increase in revenues

Selling expenses development €m, % of revenue 4.3 6.7 3.9 8.0 4.7 2018 2019 HY 2020 2020 HY 2021 10.0 11.9 12.1 11.8 12.4 Selling expenses % of revenue

Comments

• 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 18.6% compared to previous year due to increased volume and higher share of scalable partner business

Development of earnings

Positive adj. EBITDA in H1 but investments accelerating towards H2 2021

Detailed reconciliation of one-off items			Comments
Reconciliation from EBITDA to adjusted EBITDA	HY 2021	HY 2020
€m	1		EBITDA
EBITDA	1.8	0.8
Retention bonus	0.0	0.2
Stock Options	0.3	0.4
M&A expenses and others	0.2	-0.1
Total EBITDA adjustments	0.5 1	0.5
EBITDA1 Adjusted	2.3	1.4

• EBITDA of €1.8m reflects still lower investments
• Adjustments leads to further improvements of EBITDA
• Adjusted EBITDA of €2.3m
• This development has a temporary character
• NFON still aims to significantly increase the investment ratio again in 2021

1Rounding differences may occur in the tables

Outlook 2021

NFON on guidance 2021

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

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

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

Jan-Peter Koopmann CTO

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

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

Share at a glance NFON AG

Facts

1voting rights bases on 15.6 million shares 2 voting rights based on 14.1 million share. Rounding differences may occurs

Financial calendar 2021

Date	Event
19 Aug	Half-year Financial Results 2021
Web- and Telephone Conference
6 September	Equity Forum Herbstkonferenz (Autumn Conference)
Virtual Meeting
17 September	Citi Global Markets – Virtual Small, Mid-Cap & Growth Conference 2021
Virtual Meeting
20 September	Baader Investment Conference
Virtual Meeting
22 September	Sachs Berenberg and Goldman Sachs Tenth German Corporate Conference
Virtual Meeting
18 Nov	Financial Results Nine Months 2021
Web- and Telephone Conference

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