Good morning everyone and welcome to NFON's Q1 2026 earnings call. Thank you for joining us today.

My name is Friederike Thyssen, Vice President Corporate Affairs and Investor Relations, and I'll be your host for this session, which we are holding together with NuWays. As usual, we published our quarterly statement and presentation earlier this morning on our website under Investor Relations.

Today's presentation will be led by our management team, Andreas Wesselmann and Alexander Beck. Let me guide you briefly through our today's presentation.

Andreas Wesselmann, our CEO, will give you a short general business overview. He will then hand over to Andreas Alexander Beck, who will present the financial performance in detail.

Afterwards, we will open the floor for your questions. Please note that questions can only be asked live during the Q&A session at the end of the presentation.

If you'd like to ask a question, please use the raise your hand button. Once unmuted, say your name and your organization before asking your question.

Written questions in the chat or Q&A function will not be accepted. For that, I hand over now to Andreas to start the presentation.

Over to you.

Thank you, Friederike, and also from my side, hello everyone and thank you for joining us in the call today. The beginning of '26 was challenging.

The overall market environment remains demanding, with continued macroeconomic uncertainty, cautious customer spending, and slower decision-making processes across many customer segments. At the same time, we are seeing that this is not only a temporary cyclical slowdown.

The software and communications market is currently undergoing a broader structural transformation, driven by the fast-evolving AI technology progress, the growing importance of action-driven AI agents, and the increasing importance of digital sovereignty in Europe. In the recent weeks, this structural shift has clearly speeded up.

As a consequence, we are accelerating our transformation into an AI-first company with a clear focus on AI-driven growth across our entire portfolio, spanning intelligent assistants, customer engagement, and business telephony, while also capitalizing on the increasing relevance of digital sovereignty. We deliver AI-powered solutions that solve real customer problems.

For example, human-speaking voicebots acting as 24/7 AI receptionists with integration into existing business systems and communications solutions; or AI agents structuring and delegating inbound customer traffic, as well as initiating follow-up actions; or AI services doing relevant call summaries with automatic language detection; or, to the point, AI knowledge bots answering all kind of content questions. These examples illustrate the business value of the AI-based solutions we offer today.

We deliver these AI innovations combined with trusted European cloud communications expertise and EU-based data processing. We see this combination as an increasingly important competitive advantage for customers and partners.

A great example of our focused innovation strength is the productive release of our own developed text-to-speech AI model, based on the in-depth and long-standing experience of the Botario team. This solution delivers differentiating high voice quality combined with flexible deployment models, cloud and on-premises, and EU-only data processing.

It confirms our innovation speed, strengthens the technological and commercial independence, and opens up additional growth opportunities across customer interactions and agentic AI use cases. At the same time, we are continuously expanding the partner and customer enablement around the AI solutions portfolio.

We believe people need to experience how the solutions work themselves. Therefore, and following the successful launch of the NFON Hands-on format during our Nexus Partner Day, we are now extending this concept into a so-called hackathon roadshow, starting with Germany, as also announced in our press release mid-May.

During a complete day, our partners implement AI solutions for their specific customer use cases, leveraging our AI solution portfolio. To conclude, the driving objective is clear: accelerate the AI transformation, drive adoption, strengthen our partner ecosystem, and translate AI-driven innovations into scalable commercial opportunities.

With this, let me hand over to you, Alexander, taking us through the financial performance of the first quarter.

Yes, thank you, Andreas. Hello everyone, and also from me, a very warm welcome and thank you for joining today.

Let me walk you through our financial performance for the first quarter of 2026, and I will start with a brief overview. As already mentioned, the market environment remained challenging, which was reflected in our revenue development.

Total revenue declined by 2.3% year-on-year to 21.6 million, while adjusted EBITDA came in at 1.8 million. At the same time, the quality and resilience of our revenue base remains strong.

Recurring revenues accounted for 93.8% of total revenues, underlining the predictability, stability of our business model. Our seat base declined by 3.1% year-on-year to around 641,000 seats, reflecting the muted market environment on the one side and slower customer investment decisions.

However, blended ARPU increased slightly to 10.04, supported by pricing measures and a higher share of premium and AI-based solutions. Looking at the revenue development in more detail, total revenue amounted to 21.6 million.

Business telephony continued to represent the core of our business, accounting for more than 90% of total revenues. At the same time, our newer growth areas continued to gain traction, with customer engagement and intelligent assistant together contributing around both 5% of revenues.

Both customer engagement and intelligent assistant achieved a year-on-year growth of more than 10%. Recurring revenues in Q1 declined by 2.5% year-on-year to 20.2 million, mainly reflecting the softer market environment and lower seat development in our business telephony portfolio.

At the same time, nonrecurring revenues remained stable at 1.3 million, supported by continued project business. Overall, our revenue mix remained highly resilient, with recurring revenues continuing to account for around 94% of the total revenues.

Moving to profitability and cost development. Material expenses increased slightly by 3.5% year-on-year, resulting in a material cost ratio of 14.8% compared with 14.0% in the prior year period.

This was mainly driven by lower recurring revenues combined with somewhat higher hardware-related business. Despite the softer revenue development, gross margin remained at a strong level of 85.2% compared with 86.0% in Q1 2025, underlying the scalability and resilience of our platform business.

Other operating expenses decreased slightly year-on-year to 7.3 million, reflecting disciplined cost management, lower commissions, and reduced consulting expenses. At the same time, we continued to invest selectively in our growth initiatives, particularly in AI positioning, in product marketing, and in partner enablement activities.

Looking to personnel costs, our personnel expenses increased by 3.9% year-on-year to 9.5 million compared with 9.1 in the prior year period. This development mainly reflects targeted investments in strategic growth areas, particularly artificial intelligence and product development capabilities.

The average number of employees increased slightly to 429 employees compared with 425 in Q1 the year before. At the same time, we maintained disciplined personnel cost management, and after adjustments of around 0.1 million -- these were mainly related to stock option programs and harmonization measures -- personnel expenses came in at 9.4 million and remained broadly in line with our strategic priorities and our plans.

Looking to adjusted EBITDA, adjusted EBITDA amounted to 1.8 million in the first quarter compared with 2.6 million in the prior year period. EBITDA amounted to 1.7 versus 2.5 million in Q1 '25.

The decline primarily reflects the lower revenue base, combined with continued investments into strategic growth areas, especially AI and product innovation. At the same time, our adjusted EBITDA margin remained positive at 8.3% compared with 11.8% in the year before, demonstrating ongoing financial discipline despite of the more challenging environment.

Adjustments remained low at 0.1 million and were mainly related, again, to stock option programs and harmonization measures. Turning to cash flow and liquidity.

Our operating cash flow amounted to 1.6 million in Q1 and therefore remained only slightly below the prior year level of 1.8 million despite lower earnings. This development was supported by high-disciplined working capital management.

Investing cash flow amounted to -0.8 million compared with -0.7 in the prior year period, mainly reflecting capitalized developments related to new products and enhanced functionalities. Financing cash flow totaled -0.8 million versus -0.5 in Q1 2025, primarily reflecting lease and loan repayments.

With this, cash and cash equivalents remained solid at 12.9 million at the end of the quarter one compared with 13.6 million in the prior year period, providing a strong liquidity base to fund operations and strategic initiatives. Our free cash flow reached 0.8 million, underlining disciplined cash management and our ability to continue funding investments from operating performance.

Looking ahead, the overall market environment remains demanding and visibility continues to be limited in parts of the market. At the same time, we continue to see strong structural growth opportunities driven by AI adoption, automation, and digital sovereignty requirements.

Against this backdrop, we confirm our outlook for the full year 2026. We continue to expect total revenue growth in the low to mid-single digit percent range and an adjusted EBITDA of slightly above €12 million.

This follows total revenues of 89.1 million and adjusted EBITDA of 12.6 achieved in the financial year 2025. At the same time, we continue to closely monitor market developments and the pace of recovery, while remaining focused on disciplined execution and the further expansion of our AI-driven growth areas.

Our focus remains on balancing disciplined execution in the current environment with continued investment into the strategic growth areas that will drive NFON's next phase of development. With this, thank you very much.

I will hand back to Friederike to open up the Q&A session.

Yes, thank you very much, Alexander, and also Andreas, for the detailed insights. We will now open the line for questions.

Just a quick reminder: if you'd like to ask a question, please use the raise your hand button on the platform. I'll then call on you, and when asking your question, please say your name and the institution or organization you represent, and let us know who your question is directed to.

Please note, again, that questions via chat and Q&A tool cannot be considered. We're now looking forward to the first questions.

Ross Jobber, Edison. Hi.

Hi. Good morning.

Morning everyone. Thank you for the invite.

I wonder if you can talk a little bit about how the business that you're moving into, if I can use that expression, differs from your classic business telephony. As you move more into intelligent assistants and AI.

The sort of things I'm thinking about is the level of investment required to grow that business compared to your traditional one, the level of the organization that you sell into, selling intelligent assistant and AI solutions as opposed to, say, more simple business telephony. Just if you could just help to characterize the challenges, not just muted business telephony, but the challenges associated with this new business and how it differs from your old one.

Thank you.

Thanks a lot for your for your question, Ross. Let me start with a with a bigger picture.

I think what we are currently seeing is not specific for for the business communications area. If you take a a broader perspective on all the current relevant Software-as-a-Service players, you have one one consistent theme, namely that going forward, there will be a transition from user-based licenses and pricing towards more, I would say it, consumption- or value-based pricing.

If you map that to our industry, that means then that there will be a transformation from what is classical user licenses -- in our terms it's called then seats -- towards other revenue streams. We are clearly seeing that as well.

For example, by monetizing the AI agents that I see, that has nothing to do then with seats any longer. It's then by the service, it's then by the minute, it's by the traffic that is created, it's by the integration in the business systems, etc., etc.

For us, as you -- and maybe maybe I stop there as a as a general overview. That's the structural dimension, and this is where we with our portfolio, and I outlined several examples, have a coverage along our specifics in the business communications area, where we address all these new things, where it's also a playing together of, you could say, human agents with virtual agents.

This is exactly where our core competence lies in that combination, in playing that together, and also by keeping a certain core expertise -- and I mentioned our own developed new AI service for the to speech service -- because that's absolutely essential, also as a differentiator, and also on the commercial side, because currently if you take a look at the LLM market, you see a lot about -- and this is also true for coding -- that the more tokens you consume, the more exponential the price points grow. Therefore, from our perspective, it's absolutely core that we own part of our value story with core AI services we own and operate ourselves.

Maybe as a last point, to also do this in a sovereign environment. We are really operating that under EU boundary conditions.

There is no call-out to US vendors for these capabilities, and this is something where we feel that's, as a third component, gets also more and more relevant. Maybe that gives you a holistic approach on how the structural information and structural transformation looks like and how we are seeing that.

No, absolutely. Thank you.

I suppose if I can sum it up in one little thing: do you think that in the future, let's say five or 10 years in the future, there'll be a requirement for NFON to understand their customers' business deeper because they're providing more value-added solutions than perhaps five or 10 years ago when they were providing a business telephony solution which maybe didn't require them to quite understand the business in the same way?

Yes, I would say a clear yes. It comes by nature, because the more in the communication you interact between humans and then voice and virtual agents, the deeper you get into the core business processes.

We already see it now that in all our new AI solutions that we sell, all of them are integrated in existing or newly defined business processes. The topic of communication, from my perspective, strategically and that long term that you mentioned, will be more important than it has been maybe in the past, where quote-unquote it was just a call.

That's kind. Thank you very much.

Good. Next in line, Philipp Sennewald, NuWays.

Thank you, Friederike. This is Philipp from NuWays.

Thanks, guys, for the presentation. First question is on the confirmed guidance, especially the bottom line.

Can you help us building the bridge there? Is it purely hope for H2 recovery based on AI or how much visibility do you have on improvements that help you reach that bottom-line guidance?

Thank you, Philipp, for your question. Yes, we have implemented a clear defined package of revenue and efficiency measures.

Revenue, sales on the one side and costs on the other side, and that is already reflected in our forecast now. This includes, on the one side, targeted revenue initiatives and on the other side, also structural cost adjustments.

Important: the majority of the impact is expected in the second half of the year. The initiatives scale progressively.

We therefore expect a visible improvement over the course of the year, with revenue growth turning positive from Q3 on and accelerating further in Q4 as AI monetization and commercial initiatives gain traction.

Understood. Regarding expenses, we see revenues down, but personnel costs up.

You've more employees than a year ago. Do you continue to hire into AI and product development, and where do you see efficiency potential on that end?

You are right. We have slightly increased our head count from 425 to 429 while the revenues were declining.

As we said before several times, we have the strong plan and the strong idea to go on investing into our growth areas, and this we also will continue, but obviously we will also adapt our plans to the reality and we will adapt also our cost plannings to the reality, and we will slightly adjust. This is what I said before: so we have cost and efficiency measures on the one side, but it's important to state we also have a package of measures on the revenue side on the other side in order to drive revenue growth from half year two on.

Maybe, Philipp, to add the picture. We see one is, as Alex said, the dedicated investments still in our growth areas.

The other topic is internal shifts on the growth-related areas. The third topic is, of course, using also ourselves the AI technology to increase productivity massively.

It's a combination of those things that give us, from our perspective, the right investment in the growth areas as we needed to have on our outline plan.

Fair enough. Thanks for the addition, Andreas.

One last is on general AI strategy, maybe. Can you give us a better picture on how you approach your client base?

Maybe I don't know if you can provide that figure, but out of your round about 640k seats, what percentage already has some kind of AI solutions embedded?

If we start with maybe the latter one, as we have our AI Knowledge Bot, which we call the NFON Intelligent Assistant, think about of intelligent knowledge bot that you can ask any kind of product question. It's part of every deployed solution already.

In that sense, everyone that uses our cloud telephony has access to that knowledge bot. We decided consciously that this is not priced separately, but that this is an entry point to all further things.

We have already a good entry point as you said there. Then, maybe you have to quickly help me, what was the first part of the question that I don't miss it?

In general, how do you approach customers precisely and how many of your partners, for example, are actively promoting those products to their clients?

I think coming to this question, I think what is a key approach and key learning is to break it down to the dedicated challenges and use cases that they have. What we're currently doing is, if you want, a transitioning from a more product-focused, feature-like roll-out to a solution and problem-solving approach.

If you take it very very simplistic, you can, on the one hand side, talk about you have a call summary and then you get it, or you talk about you have an incoming call and after that you get the core assets out, you get if you, for example, buy something, you have the buyer name, you have the duration of the call, you have the interaction, you have the value, etc. You really get structured value out of that.

Or take the example of the receptionist we call Nea Frontdesk, which is then a 24/7 available, which is a very easy pitch to sell, because most of, especially the mid-sized customers, have no capacity and no person to do that, and then they can answer customer calls and don't lose on the opportunity, and you can easy do calculations how this is done. It's a combination of what is a concrete problem that you solve with very fast showing the benefit, and then also calculating the positive business impact that it's worth that investment.

It's a different go-to-market, and therefore also the partner education, which I mentioned, is extremely important. We work very very closely together with our partner ecosystem to enable them also in that way, because they see the same demands from their customers as well.

Yes, it's also a transition on the way how we sell. I think this is not specific for us either.

I think it's a phenomenon that you see across the whole industry.

Okay. Fair enough.

Thank you. All right.

That's basically it from my side. Thank you.

Thank you guys for covering my questions.

Thank you, Philipp.

Thank you. Next in line is then John Karidis.

You can speak. Yeah.

Good morning. It's John Karidis from Deutsche Bank.

I just have a numbers question, please. Notwithstanding what you said up until now, a lot of the revenue still comes from seats.

May I please know how many seats you had at the end of the first quarter, specifically in Germany and separately in the UK?

Yes, first of all, thank you for your question, John. We can.

Overall, we had in Germany, I'm rounding, more or less 470,000 seats end of quarter one, and in the UK we had roughly 70,000 seats.

Right. That's great.

Thank you. Sorry, go ahead.

Sorry.

No, this was the concrete answer of the questions concerning the seats. Overall, yeah, your question was if the bigger part of the revenue is still coming from the telephony business.

You are right. I think I said it during the presentation, roughly 90%, 9-0%, is coming from business telephony, coming out of the seat and so on.

Then we have our two growing pillars, which are growing, one customer engagement and the other one is intelligent assistant around AI, around the bots, and so on. In these two growing areas, we achieve both together roughly 10% of the business.

Both of them are also growing double-digit-wise. This is a development what we expected and where we are actually happy with.

Fair enough. Thank you very much.

Mhm.

Okay. Next in line, Maximilien Pasquay.

You're free to speak. We can hear you, Maximilien.

Perfect.

Maximilien

from Bader. I have two question a bit related to the installed base.

First, on the current situation, you mention a selective customer loses. Are these loses concentrated in a specific segment, geographies, or partner channels?

The second, on what the expected payback period on the incremental marketing spend, and from which quarter should we expect to see a tangible impact on order intake, seat growth, and ARPU expansion? Thank you very much.

Thank you very much, Maximilien, for your questions. I start with the seat development.

The current decline in seats is mainly driven by two factors: firstly, a still-cautious market environment on the one side, with restrained customer investment behavior; and secondly, on the other side, also ongoing harmonization measures and portfolio optimization. When we talk about geographically countries, what I said right now, this counts largely for Germany, also for the UK.

When we take a look to our portfolio in other countries, the situation is slightly different, even more positive. For instance, in Austria and also in Italy, two of our biggest markets, we see significantly increasing trends in our customer base, also in seats, and also in revenues.

Much to the seats. The second question was expected payback and when will we see tangible inputs.

Our marketing invests were higher in Q1. This is right, but this has several reasons.

On the one side, yeah, Andreas mentioned it before, we had several initiatives like hackathons where we wanted or where we still want to enable our partner base in order to, yeah, better understand and to better sell at the end of the day our new functionalities. What we have seen last year in 2025, NFON has increased significantly its speed in terms of innovation and in terms of release of new products and new functionalities.

This higher innovation speed also required different formats in enabling our partners to sell them. Therefore, we had, yeah, several initiatives in Q1 which led at the end of the day to higher marketing costs.

Your question, when will we see tangible output in terms of profitability, in terms of revenues? Clearly, we have planned a forecast, a current actualized forecast, and yeah, we see quarter two still complicated, but we expect significant trend from Q3 on.

I hope this answers your questions, Maximilien. If not, please go ahead.

Yes, Maximilien.

Totally. Thank you very much.

Okay. Good.

Are there any final questions from your side? Because so far, I do not see any or some questions.

No. That seems to be it.

Thank you again for your time, your interest, and your continued engagement with NFON. I'll hand over to Andreas for a short closing statement.

Also

thank you to everyone joining the call. Thanks for the question.

Thanks for the attention. I think we clearly and transparently laid out where we are, with a clear plan going forward.

We are very confident to execute on that plan and to leverage the growth opportunities related to this structural transformation and AI innovation-driven companies, with our ambition to transform then NFON really to an AI-first company. With that, I wish you all a great day.

Thanks for attending, and talk to you soon.