paragon GmbH & Co. KGaA — Call Transcript 2022

Aug 31, 2022

paragon GmbH & Co. KGaA Earnings Call H1 August 31, 2022

Agenda

• 1. Robust Business Model
• Financial Results 2.
• 1. Bonds

4.

• Spotlight Business Unit Kinematics
• 1. Business Update

Agenda

• 1. Robust Business Model
• Financial Results 2.
• 1. Bonds

4.

• Spotlight Business Unit Kinematics
• 1. Business Update

Technology Provider for more than Three Decades

_ Year of foundation: 1988

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_ Corporate form: GmbH & Co. KGaA (limited partnership) _ General Partner: paragon GmbH (unlimited liability) _ Management: Klaus Dieter Frers, founder and CEO Dr. Martin Esser, CFO _ Stock exchange: Listed in Frankfurt/Main since 2000 ISIN DE0005558696 _ Shareholders: Klaus Dieter Frers 49.3 % Freefloat 50.7%

paragon addresses Global Megatrends

paragon GmbH & Co. KGaA H1, Earnings Call | August 31, 2022

paragon ´ s Premium Automotive Customers H1/2022

The Future of the Automotive Industry

The Future of the Automotive Industry

paragon's Business Model proves as Robust

H1/2022

• _ Revenues up to EUR 86.4m (H1/2021: EUR 75.7m)
• _ H1 growth rate +14.1% (IHS: market in 2022 +0.7%)
• _ Q2/2022 +22.5% compared with Q2/2021
• _ Growth drivers were adaptive spoilers and instruments
• _ Operational EBITDA EUR 12.0m burdened by noncash effects (EUR 3.1m)
• _ Minor influence of Corona-lockdowns, Ukraine-war, chip shortages und supply chain issues
• _ Higher costs of material, logistics and energy mostly compensated due to improvements along the value chain
• _ Orders received in H1/2022: EUR 100m
• _ Booked business until Dec 2026 up 17% to EUR 630m

H2/2022

• _ paragon's customers globally successful
• _ paragon's product portfolio in sweet spot
• _ Order releases remain strong
• _ Sourcing of material secured
• _ Measures improving profitabilty show effect
• _ Outlook positive including 2023
• _ Upgrade of revenue target to EUR 170m (was EUR 165m)
• _ Operational EBITDA margin expected at 15+%

Agenda

• 1. Robust Business Model
• Financial Results 2.
• 1. Bonds

4.

• Spotlight Business Unit Kinematics
• 1. Business Update

H1/2022: Financial Highlights in a Nutshell

Focus on Automotive

Revenue increase by 35.1% compared to pre-Corona year 2019

Revenues increased to EUR 86.4m in the first six months 2022

• Increase of 14.1% compared to H1 2021
• Increase in Q2/2022 of 22.5% compared to Q2/2021
• Increase of 35.1% compared to H1/2019

Organic growth in all business units despite challenging headwinds in the last 2 years

Robust business model due to innovative products and solid customer base

P&L Development

Income Statement in EURm	2021	Q1 2022	Q2 2022	H1 2022
Revenues	146.9	41.7	44.7	86.4
Other own work capitalized	7.4	2.7	2.2	4.9
Change of finished goods	0.4	0.7	2.9	3.6
Other operating income	4.8	1	0.9	1.9
Total operating performance	159.5	46.1	50.7	96.8
Costs of materials	-72.9	-22.8	-23.8	-46.6
Personnel expenses	-44.6	-12.4	-13.4	-25.8
Other operating expenses	-22	-5.9	-9.6	-15.5
EBITDA	20	5	3.9	8.9
Depreciation & amortization	-19.2	-4.1	-3.6	-7.7
EBIT	0.8	0.9	0.3	1.2

Revenues increased by 14.1% to EUR 86.4m in the first six months

EBITDA of EUR 8.9m despite noncash one time effects:

Sale of Aachen-activities in first quarter 2022 (book loss of EUR 0.45m)

Unrealized currency losses due to weaker EUR to CHF (book loss EUR 0.9m)

Sale of vacant production hall (book loss EUR 1.75m)

Operational EBITDA at EUR 12.0m (13.9%)

Headwinds in H1/2022

General wage and salary development:

paragon adjusted wage and salaries in H1/2022 to reflect higher cost of living

On the other hand paragon was able to achieve efficiency increases in direct and indirect area next to higher revenues

As a result:

Average headcount increased only by 4.5% (from 889 in H1 2021 to 929 in H1 2022) compared revenue increase of 14.1% => This enabled paragon to overcome this headwind

Electricity and heating costs:

paragon's energy costs increased in accordance with the market by 67% in H1/2022 compared to H1/2021

Of course paragon initiated activities to reduce the energy consumption

However, more important is that paragon does not maintain an energy intensive production. Total energy costs increased therefore "only" from 0.5% to 0.8% of total revenues

Supply chain issues:

paragon is also confronted with recent supply chain challenges

The purchasing department was able to get all necessary components (esp. chips) delivered on time to ensure deliveries to our automotive customers

paragon increased for various components the safety stock (see also next page).

Due to generally higher transportation costs logistic costs increased in H1/2022 from 1.9% of total revenues to 3.1% => expected to be at 2.5% in 2022

Focus on Working Capital Management

Inventories

• _ 14.1% higher revenues (H1/2022 compared to H1/2021) but inventories up 9.6% only
• _ + EUR 2.5m compared to Q2/2021
• _ Still influence from China lockdowns and supply chain issues
• _ Negative impact on free cashflow (see later slide)
• _ Area for improvement in H2/2022

Accounts Receivable

• _ + EUR 2.5m compared to H1/2021
• _ Increase mainly related to increased revenues compared to 2021 in combination with delayed reimbursements from customers

2022: Cost Reductions and Efficiency Increases show Effect

Free Cash Flow not suffering from one-time effects

Actual Gearing at 5.3

Agenda

• 1. Robust Business Model
• Financial Results 2.
• 1. Bonds

4.

• Spotlight Business Unit Kinematics
• 1. Business Update

Bond Report

Prolongation of EUR-bond

• _ Prolongation as alternative to sale of subsidiary
• _ 2020/2021 was not suitable for achieving adequate prices on M&A-market
• _ 99.9% vote for prolongation until July 2027 reached
• _ Terms and conditions improved for the bondholders Planning certainty achieved for paragon
• _ Next repayment of EUR 5.0m due on April 23, 2023

CHF-bond already repaid by 40%

• _ Webcast for bondholders on September 20, 2022 (meeting on September 27, 2022
• _ Proposal for prolongation by 5 years as non-binding condition of EUR-bondholders
• _ Uncertain result of voting due to high quorum of 66%
• _ Final repayment of CHF 21m due on April 23, 2023
• _ Alternative plans for repayment/refinancing are progressing
• _ Information to the market in fall 2022 only as paragon is bound to MAR

Agenda

• 1. Robust Business Model
• Financial Results 2.
• 1. Bonds
• 1. Spotlight Business Unit Kinematics
• 1. Business Update

paragon's Products are Independent of Drive Type

AQS: Rising production figures and new development based on artificial intelligence AQI: Increasing sales through China business Electronic filters: Great potential for worldwide roll-out several major orders secured Sensors Interior Digital Assistance Geni:OS: Next generation AI with proactivity and empathic interaction Major order for infotainment platform Edwin: Roll-out at various OEMs in Europe and USA Business Unit Business Unit

Business Unit

Kinematics

Spoiler: Growing premium segment business with new products and new customers in China

Actuators: Significant potential in the growth market of sunroof actuators/LIDAR

Seating components: Great opportunities for significant market share

Business Unit

Business Unit

Microphones: New generations secure follow-up orders

Loudspeakers and sound systems: Sustainable growth through exterior loudspeakers for electric vehicles

Instruments: Robust sales driver for the business unit and new opportunities in the display sector

Wireless charging: New products

Power

Starter batteries: Disruptive technology shift from lead-acid batteries to environmentally friendly, durable and lightweight Li-ion batteries offers significant market opportunities

Buffer batteries: 12-volt buffer batteries for electric cars as an attractive market opportunity

Traction batteries: Focus on motorcycles and scooters

paragon's Products are Independent of Drive Type

Microphones: New generations secure follow-up orders Loudspeakers and sound systems: Sustainable growth through exterior loudspeakers for electric vehicles Instruments: Robust sales driver for the business unit and new opportunities in the display sector Wireless charging: New products 24 AQS: Rising production figures and new development based on artificial intelligence AQI: Increasing sales through China business Electronic filters: Great potential for worldwide roll-out several major orders secured Sensors Interior Digital Assistance Kinematics Spoiler: Growing premium segment business with new products and new customers in China Actuators: Significant potential in the growth market of sunroof actuators/LIDAR Seating components: Great opportunities for significant market share Geni:OS: Next generation AI with proactivity and empathic interaction Major order for infotainment platform Edwin: Roll-out at various OEMs in Europe and USA Power Starter batteries: Disruptive technology shift from lead-acid batteries to environmentally friendly, durable and lightweight Li-ion batteries offers significant market opportunities Buffer batteries: 12-volt buffer batteries for electric cars as an attractive market opportunity Traction batteries: Focus on motorcycles and scooters Business Unit Business Unit Business Unit Business Unit Business Unit paragon GmbH & Co. KGaA H1, Earnings Call | August 31, 2022

Spoilers Systems

• _ Spoilers, sunroofs or loading space covers: The number of moving, electrically driven parts in and on a vehicle is constantly growing
• _ They are used for convenience but also improve handling. That's because front and rear spoilers, grill shutters, wind screens and wind deflectors reduce the air resistance and thus reduce the CO² emissions on combustion engine vehicles and help electric cars achieve a greater range
• _ We have a unique competitive edge: we build on our expertise in production technology and the superior acoustics knowledge - this way, we cater for even the highest demands quickly and flexibly

• Spoiler system for high variety of applications Sports Cars, E-Vehicles, Trucks, etc.
• Global market leader thanks to high innovation and realization competence

USPs History/Status/Timeline:

2012	Foundation of the Business unit
2017	1st million spoiler produced
9.2022	1 st SOP spoiler in china

Spoiler Systems: modular Spoiler Architecture

• _ Motor as standard part, with customer-specific EE interface
• _ Kinematics with multi-bearings with same interfaces, same materials and connecting elements for different wind loads
• _ Standard crimp connections with variable length
• _ Flexible tooling and assembling procedure using scale-effect
• _ Automotive-standard surface protection
• _ Foam seals from own-production for seal interface to the vehicle body

• Low development cost
• High quality due to use of modular systems with high degree of standardization
• Fast time to market

USPs History/Status/Timeline:

2020/Q3 Definition of modular system 2021/Q2 Application to series project 9.2022 1 st SOP on Asian market

Kinematics

Seat Components: Electrical Driven Seat Adjustment

• _ Electric seat cushion depth adjuster
• _ Electric seat backrest adjustment
• _ Electric seat movement
• _ Electric seat height adjuster
• _ Intelligent drives for seat backrest adjustment
• _ Intelligent drives for neck recline height adjustment
• _ Meets various crash requirements (front, side, back)

Series production for premium cars.

USPs History/Status/Timeline: 2008 First project 10/2009 First SOP

Special Kinematics: Foldable Tables

• _ Resists the head impact regulations
• _ Meets various crash requirements (front, back side)
• _ Protection against overload
• _ Lightweight through use of magnesium and aluminum possible
• _ Special folding system to minimize installation space
• _ Class-A surface in different colors possible
• _ 2017 Concept study incl. wireless charging, USB-options

Series production for premium cars

USPs History/Status/Timeline: 2010 First project 03/2013 First SOP

LiDAR Kinematics for Roof and Side

• _ Kinematics to drive inside & outside new LiDAR sensors
• _ The sensor needs to be protected from weather
• _ In the outside position, a cleaning function is foreseen
• _ Different possibility of installation in the roof and on the side of the vehicle

• Compact modular construction
• Drive, cleaning function and control integrated
• High precision in the positioning

USPs History/Status/Timeline:

07/2021	Basic development kinematics
08/2021	Calculation components
08/2021	Concept of module assembly

INNOVATION

Special Kinematics: Advanced Central Drive (ACD)

• _ Central drive system for active spoilers and seat adjustments
• _ Integrated electronics suitable for advanced vehicle architecture
• _ Integrated angle measurement no external sensor necessary
• _ Very fast operation (1s) / Supports heavy loads (650N Wind load)
• _ Target: 25 % cheaper than DSG
• _ Multi-stage gear reduction with powerful DC-Motor and PWM control
• _ About 20 Nm torque

• Fast operating times
• Optimized drive efficiency with self-locking through external loads
• Integrated control unit

USPs History/Status/Timeline: Q1/2022 C-Samples available 2023 SOP

Special Kinematics: Smart Worm Drive (SWD)

• _ Smart drive for general automotive applications
• _ Possible applications for sunroof, power windows (wet side), seats, etc. About 10 Nm torque
• _ Integrated electronics suitable for advanced vehicle architecture
• _ Integrated angle measurement no external sensor necessary
• _ Rated IP53 (possible until IP6x9k)
• _ Acoustic Management following customers specifications for the interior

• _ Drive with DC or BLDC motor and motor controller

• Integrated control unit

• Bus system
• BLCD or DC Motor

USPs History/Status/Timeline: Q1/2022 C-Samples available Q1/2023 SOP

Special Kinematics: Mini Actuator

• _ A small and powerful drive for automotive applications
• _ Possible application: electric tailgate or comfort fuctions like active belt feeder or seat adjustments
• _ Integrated electronics suitable for advanced vehicle architecture
• _ Integrated angle measurement no external sensor necessary
• _ Very low noise level developed for future standards
• _ Drive with DC or BLDC motor and motor controller
• _ About 5 Nm torque

• _ IP rating possible until IP6x9k

• Integrated control unit

• Bus system
• BLCD or DC Motor

USPs History/Status/Timeline:

Q1/2022 A-Samples available Q1/2023 C-Samples available Q1/2024 SOP

INNOVATION

Agenda

• 1. Robust Business Model
• Financial Results 2.
• 1. Bonds
• 1. Spotlight Business Unit Kinematics
• 1. Business Update

Share Performance

Capital Market

• Bear market (Dax 40: -20%)
• Rising inflation rate
• Spread of the Omicron Covid-variant
• War against Ukraine

Actual Research Reports show High Upside Potential

Target: EUR 19.6/share Target: EUR 15.2/share

Booked Business

paragon stays Decoupled from Overall Market

• _ Revenues up 14.1% vs. market +0.7%
• _ High level of order releases for H2/2022 and 2023
• _ Revenue Forecast 2022 upgraded to EUR 170m (expected growth rate of 15.7% compared to 2021)
• _ Strong order income in H1/2022 Booked Business EUR 630m until Dec 2026 increased by 17%
• _ Customer and product portfolio focussed on today's and tomorrow's sweet spots Range extension, wellbeing in the cabin and battery solutions
• _ No dependancy on type of drive but beneficiary of transformation
• _ paragon outperforming the automotive sector since years
• _ Analysts forsee Upside potential for paragon's share by factor 3…4

Financial Calendar

September 5, 2022 Equity Forum, Frankfurt a.M. September 19-23, 2022 Baader Investment Conference, Munich September 27, 2022 CHF-bondholder meeting November 22, 2022 Consolidated Interim Report first nine months 2022 November 28-30, 2022 Equity Forum, Frankfurt a. M.

Thank you for your attention.

Please do not hesitate to directly contact Dr. Martin Esser or Klaus Frers in case of further questions.

Founder and CEO Chief Financial Officer

Klaus Dieter Frers Dr. Martin Esser +49 5250 9762-100 +49 5250 9762-200

klaus.frers@paragon.ag martin.esser@paragon.ag

paragon GmbH & Co. KGaA

Bösendamm 11 33129 Delbrück Tel.: +49 (0) 5250 9762 - 0 E-Mail: info@paragon.ag