NFON AG — Investor Presentation 2020

Apr 15, 2021

Financial Statements 2020 Munich | 15 April 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.

Initial Observations NFON Group

• Pandemic affecting project business in most European countries and resulting in too cautious investment approach
• New opportunities from IT players entering the communication space
• Need for focus on quality of growth / technology
• Passionate and motivated team inside NFON

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

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

Continue to enhance the NFON offering beyond SIP / PBX business towards "smarter workflow" voicecentric communication with UCaaS, CCaaS, iPaaS as growth drivers

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

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.

Financial Statements 2020 - 15 April 2021 7

Key Measures

Target. Enhance. Scale.

Market Analysis

Competitive Environment: Business Communications

Business Highlights

Key Financials 2020

Strong business model leads to further growth

* Including M&A effects due to the acquisition of DTS

Financial Statements 2020

Business model

Strong business model resulting in unique combination of massive growth and sustainable recurring revenue

Recurring revenues 88% Non-recurring revenues 12%

Base for sustainable growing recurring revenues

Continuous and sustainable growing seatbase

Comments

• Increase of total number of seats by 16.7%
• Milestone of over 500,000 seats was clearly exceeded: 524,791 (plus 75,080 seats)
• Very low gross churn rate of ~0.5% per month underlines quality of product and service and guarantees continuous recurring revenues
• General economic uncertainty due to the pandemic crisis in 2020 caused investment restraints; development of seatbase slowed down slightly in the second half of the year
• Slight increase of blended Average Revenue per User
• Continuous growing total number of seats is the base for future recurring revenues

Revenue development

Significant increase of recurring revenues

Development total recurring/ non-recurring revenues

Comments

73

75

77

79

81

83

85

87

89

91

• Total revenues grow by 18.4% to €67.6m in comparison to €57.1m in 2019
• Non-recurring revenues 2020 show decrease to €8.2m compared to €9.1m in 2019 (-9.4%) mainly due to seat related less hardware sales
• Significant increase of recurring revenues by 23.6% in 2020 compared to 2019 incl. 2 month M&A effects
• High share of recurring revenue (87.8%)

1First time consolidation of DTS in March 2019. Effect from anorganic growth in the first two months of 2020

Gross Margin

Further growth proves potential for sustainable profitability

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 2.8% in 2020 yoy with a lower ratio at 20.7% (2019: 23.9%) mainly due to lower hardware sales
• Gross profit grew by €10.1m from €43.5m to €53.6m (+23,2%)
• High gross margin continues to show a constantly positive development also driven by a high proportion of recurring revenues

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

Personnel costs

NFON further invest in staff

Comments

• Personnel expenses as reported amount to €28.5m (2019: €24.2m)
  • Adjustments of €1.2m (2019:€1.1m) for retention bonus and stock options
• Increase of adj. personnel expenses by 18.2% including DTS effect
  • 2020: Ø 406 employees
  • 2019: Ø 360 employees
• Capitalisation of personnel costs for the development of products (IAS38) in the amount of €3.0m (2019: €2.2m)
• Personnel cost ratio of 40.4% on the same level as previous year

1 Personnel expenses adjusted for et.al. Stock Option Plan, Retention Bonus, Share-Base Payments, Exit Bonus

Marketing expenses

Marketing expenses will rise again in 2021

Comments

• Marketing expenses of €6.7m significantly below prior-year costs (-25.7%) mainly due to COVID-19 lockdown effects
• For the current business year, we plan to significantly increase marketing costs again
• 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

Selling expenses

Development of sales commission

Comments

• NFON has a partner network of over 2,700 partners
• Dealers and distributors receive a percentage share of the revenues
• Selling expenses mainly include sales commissions to Dealers and Distributors
• Increase of sales commissions by 19.3%

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

Detailed reconciliation of one-off items Comments

Reconciliation from EBITDA to adjusted EBITDA	2020	2019
€m
EBITDA	1 2.3	-7.0
Stock Options/ESOP	0.9	0.6
Retention bonus	0.2	0.5
Expenses related to DTS acquistion/ Other one-off expenses1	0	0.7
Total EBITDA adjustments	1.2 1	1.9
Adjusted EBITDA	3.5	-5.1

• EBITDA of €2.3m in 2020 compared to €-7.0m in 2019 means an improvement of €9.3m
• Main factors for positive development
  • Lower other operating expenses, e.g. marketing expenses
  • Slightly increasing ARPU
• Adjustments for retention bonus and stock options of €1.2m
• Adjusted EBITDA of €3.5m

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

Appendix

Further information about NFON

NFON AG Management Board

Klaus von Rottkay CEO

• 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
15 April	Group Financial Results 2020/ Capital Market Day 2021
Web- and Telephone Conference/ Virtual Meetings
20 May	Financial Results First Quarter 2021
Web- and Telephone Conference
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

ISIN	DE000A0N4N52 DE000A2TSA41
Segment	Prime Standard/ Telecommunication
Shares	16.6 million (29 March 2021)
Designated sponsor	Baader Bank ODDO Seydler
First day of trading	11 May 2018
Coverage	Berenberg Bank, Baader Bank, Hauck & Aufhäuser,

Freefloat: 43% (according to Frankfurt Stock Exchange)

1voting rights bases on 15.6 million shares 2 voting rights based on 14.1 million shares

Stifel

A market full of opportunities for NFON Wind of change

24/7

Flexible working is seen as the new normality

Increase in mobile work and remote work

Telephony is still the most frequently used communication channel The importance of communication and collaboration tools

The way we work keeps changing

75%

of employees worldwide consider flexible working to be normal4

54% of companies in Germany want to

implement remote working on a permanent basis2

4% of respondents employees want to go back3 Proliferation of SaaS

84%

of medium size companies use telephony to contact their customers1

70% of large organisations use advanced collaboration and UC, e.g. document sharing, audio conferencing, team collaboration, but

smaller ones are even less likely to use these methods internally than with customers5

Carriers are moving from ISDN to All IP

References can be found in appendix

delivery models

Business communication

E-Mail and telephony are still the main contact points

Studies used for market trends Sources

• 1 Cavell Group: Enterprise Insight Report DE 2019
• 2 https://www.ifo.de/node/56686
• 1. https://blog.perceptyx.com/employees-become-more-productive-working-from-home
• 4 https://de.statista.com/statistik/daten/studie/1067502/umfrage/umfrage-zur-flexibilitaet-im-arbeitsleben-inausgewaehlten-laendern-weltweit/
• 5 Cavell Group: Enterprise Insight Report DE 2019

Contact Investor Relations

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

Thanks

@NFONcom #cloud #telephony #allip