Munich, 12 April 2018 – NFON AG (“NFON” or the “Company” and together with its subsidiaries, “NFON” or the “Group”) is preparing an Initial Public Offering (IPO) of new and existing ordinary bearer shares to be admitted for trading on the regulated market segment (Prime Standard) of the Frankfurt Stock Exchange. The listing is expected to take place in the second quarter of 2018, subject to market conditions.

Hans Szymanski, CEO and CFO of NFON AG, said:

“NFON has been on an impressive growth track ever since its founding. We are the only pan-European service provider of Cloud Telephone Systems. The market for business communication is facing disruptive changes, which offers further massive growth potential. The planned IPO will support us with our continued expansion in Europe and provide us with additional financial flexibility to successfully pursue our rapid growth strategy.”

NFON is the new freedom of business communications

NFON is the only true pan-European service provider of Cloud Telephone Systems. Headquartered in Munich, the Company was founded in 2007 and offers solutions made in Germany. NFON has a market-leading position in the German cloud telephony market, with a current market share of over 25%.^[1] The Company serves more than 15,000 business customers in 13 European countries. TÜV-certified voice quality and highest reliability as well as compliance with German and European data-protection and data-privacy regulations are a central part of NFON’s value proposition. All NFON services are run from completely redundant high-performance data centers in Germany, allowing the Company to fulfil the strictest enterprise requirements on reliability, safety and data protection.

Excellent value proposition and maximum flexibility

Cloud based telephony solutions are the core business. Complementary offering includes premium solutions, e.g. for MiFID II compliant voice recordings, call centers or the hospitality industry to meet increasing customer needs.

NFON offers more than 150 different features to streamline telecoms processes of companies of all sizes, from small offices and home offices to large enterprises. Due to the way NFON offers its products and services, customers have a high degree of flexibility – pay what you need. Short contract periods allow customers to scale their business up or down as they need it. Product development is key for our value proposition. The Company has one guiding principle: Ease of use at superior reliability.

Impressive growth track record and clear proof of concept through first time break-even on Group level in 2017

Since its foundation in 2007, NFON has rapidly grown organically. Between 2015 and 2017, total revenue increased at a CAGR of 30%. The extraordinary growth over the past years underscores NFON’s excellent value proposition and strong business model. The latter is based on a unique combination of strong growth, sustainable recurring revenues (77.9% recurring revenues in 2017) and high customer loyalty.

Between 2015 and 2017, the customer base has grown at a compound annual growth rate (CAGR) of 37%. Over the same period the average monthly gross churn rate remained at a constantly low level of 0.4% per month in 2017, after 0.4% in 2016 and 0.3% in 2015. In 2017, the Company registered record revenue of EUR 35.7 million and surpassed the break-even point with an adjusted EBITDA margin of 0.5% (2016: -1.3%).^[2]

Unique opportunities in a disrupted market driven by multiple structural tailwinds

The market for business communication is undergoing a historic transformation. NFON is benefiting from the structural shift to cloud telephony solutions, which permanently changes the business communication market. The European cloud telephony market alone is expected to grow at a CAGR of 16% between 2017 and 2022.^[3] Therefore, NFON sees particularly strong growth opportunities in this market.

Incumbent European carriers (e.g. Deutsche Telekom, Orange or KPN) have announced the switch-off of ISDN and the move towards All-IP networks. Together with the growing proliferation of cloud delivery models, this is expected to result in growth in the cloud PBX segment that is expected to benefit NFON. Driven by these developments, current penetration rates of around 9% in Continental Europe are expected to follow more mature markets such as the UK with around 13% penetration rate and the US with around 19% penetration rate.^[4]

The upcoming EU General Data Protection Regulation (GDPR) provides additional advantages for European cloud communication providers such as NFON: By design, US competitors are not able to prevent the exchange of customer data between the European branch and its US headquarters.

This has just been exacerbated by the US passing the CLOUD Act. GDPR imposes personal liability for customers and employees using such solutions with severely increased penalties.

NFON’s technology platform and cloud services are specifically designed for the strict requirements of the European market in terms of data protection. The Company has unlimited access to its technology infrastructure and can therefore respond to new regulatory requirements directly and immediately.

Offer Summary

In connection with the IPO, the Company is currently anticipating a primary offer size of EUR 50 million and the sale of ordinary shares by existing shareholders, the amount of which is yet to be decided. Further ordinary shares will be made available by the selling shareholders pursuant to a customary over-allotment option (greenshoe). The ultimate free float post IPO will depend on the number of new shares issued by the Company and the number of existing shares sold to new investors in connection with the Offering and is targeted to be around 50% post IPO. Lock-up periods for the Company and selling shareholders will be in line with market standards.

The Company plans to use the majority of the net primary proceeds that it receives from the Offering to invest in continued regional expansion in Europe as well as in research and development activities with the aim of being able to offer additional features and solutions. Moreover, the Company plans to intensify its marketing and sales activities to drive penetration of existing customers and attract new customers in the markets, in which NFON is already present.

As of the date of this release, 35.77% of the current share capital of NFON AG are held by Milestone Venture Capital GmbH. Additional 34.48% are held by Earlybird Verwaltungs GmbH. MIG GmbH & Co. Fonds 9 KG holds a 12% stake and BayernLB Private Equity GmbH 6.40%. Further shareholders are: High-Tech Gründerfonds GmbH & Co. KG (4.88%), BayBG Bayerische Beteiligungsgesellschaft mbH (4.84%), MIG GmbH & Co. Fonds 11 KG (1.29%) and ASC Technologies AG (0.34%).

The Offering will consist of initial public offerings in Germany and Luxembourg, and will comprise an offer of shares to certain institutional investors in Germany and elsewhere outside of the United States in reliance on Regulation S under the Securities Act of 1933 as amended (the “Securities Act”) and to qualified institutional buyers in the United States in reliance on Rule 144A under the Securities Act.

Berenberg acts as a Sole Global Coordinator and Joint Bookrunner. Baader Bank and ODDO BHF have been mandated as additional Joint Bookrunners.

About NFON AG
Headquartered in Munich, NFON AG is the only pan-European cloud PBX provider – counting more than 15,000 companies across 13 European countries as customers. NFON, the cloud telephone system, offers over 150 functions as well as a seamless integration of premium solutions. With our intuitive communications solutions, we enable European companies to improve their work a little, every single day. NFON is the new freedom of business communication. www.nfon.com

Media contacts
CNC Communications & Network Consulting AG
Knut Engelmann
+49 174 234 2808
knut.engelmann@cnc-communications.com 

NFON AG
Thorsten Wehner
+49 89 45300 121
thorsten.wehner@nfon.com

Investor Relations contact
NFON AG
Sabina Prüser
+49 89 45300 134
sabina.prueser@nfon.com

Disclaimer
This announcement is not an offer of securities for sale in the United States of America. The securities discussed herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act“) and may not be offered or sold in the United States of America ab-sent registration or an exemption from registration under the U.S. Securities Act. No public offering of the securities discussed herein is being made in the United States of America and the information contained herein does not constitute an offering of securities for sale in the United States of America, Canada, Australia, Japan or any other jurisdiction in which such offering would be unlawful. This announcement is not for release, publication or distribution directly or indirectly in or into the United States of America, Australia, Canada, Japan or any other jurisdiction in which the distribution or release would be unlawful or to U.S. persons.

In the United Kingdom, this information is directed at and/or for distribution only to (i) investment professionals falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order“), or (ii) high net worth companies falling within article 49(2)(a) to (d) of the Order (each such person hereinafter a “relevant person”). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this information or any of its contents.

This release is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. The offer will be made solely by means of, and on the basis of, a securities prospectus to be approved by the German Federal Financial Supervisory Authority (BaFin). After the approval, the securities prospectus will be available free of charge at the Company’s office, as well as, for viewing in electronic form, on the Company’s website (www.nfon.com). An investment decision regarding the publicly offered securities of the Company should only be made on the basis of the securities prospectus.

^[1] Source: MZA (2017), on the basis of cloud business telephony seats using public multi-tenant technology.
^[2] Adjusted EBITDA margin for one-off costs mainly in connection with the introduction of a transfer pricing model and share based compensation in total amounting to EUR 1.2 million.
^[3] Source: MZA (2017).
^[4] As of 2017, on the basis of cloud business telephony seats including public multi-tenant, public multi-instance and public single-instance technology. Source: MZA (2017).