Good morning and welcome to NFON AG's Half-Year 2025 Earnings Call. We appreciate you taking the time to join us. My name is Friederike Thyssen, VP Investor Relations & Sustainability, and I will be your host for this session, which is being conducted in collaboration with NuWays. Today's presentation will be led by our CEO and CFO, Patrik Heider, who will walk you through the operational, strategic, and our financial developments of the first half-year of 2025. As usual, we published our interim financial statement and the full Investor Relations presentation earlier this morning on our website. The presentation will be structured as follows: business highlights, financials, guidance, and Q&A session. Please note that questions can only be asked live during the Q&A session at the end of the presentation. If you would like to ask a question, please use the raise hand function. I will then unmute you. After unmuting yourself, I would ask you kindly to state your name and your institution before posing your question. Written questions via chat or Q&A function will not be accepted. Thank you for your understanding, and thank you in advance for your contribution. With that, I will hand over to Patrik to begin the presentation. Over to you. Yeah, thank you very much, Friederike. Also, from my side, a warm welcome to the earnings call H1 2025. After a year of focusing mainly on platform stability, we've returned back on delivering product innovations. Our customers already benefit from Nia, our AI-featured endpoint intelligence assistant, as well as from unlimited voicemail transcription. Additionally, we finally enhanced full security features with single sign-on and multi-factor authentication and optimized web app and CarPlay support. These features are live and in daily use today. We are building on that momentum. In the pipeline for the next release are full call transcription and summaries, automatic action item creation, integration with desk phones, and further AI features for conferencing. This roadmap reflects our clear intent to continuously embed intelligence into our core product, making communication smarter, faster, and easier. We also launched this month something that customers and partners have longed for, namely our new modular licensing model, designed from the ground up based on partner and market feedback. It simplifies quoting and billing through self-services, improves transparency for customers, and enables target cross and upselling. Customers can freely mix packages such as S, M, L, and XL per extension, adapting on different roles and needs and locations, while partners benefit from a clearer value story and shorter sales cycles. Finally, with NEXUS, we are introducing currently a modern partner program with a structured growth-oriented framework. It includes role-based and performance-based levels from advanced to enterprise, giving traditional telco partners and AI or solution-focused partners a clear growth path and tangible benefits. We have received excellent feedback from the community for those developments. One special piece of feedback comes straight to the point: now we can do new business again with NFON. Let's turn to the key financial figures for H1 2025. In the first half-year of 2025, we achieved solid top-line growth and an improvement in profitability. Total revenue increased by 3.9% to €44.2 million, and adjusted EBITDA rose by 3.4% to €5.7 million compared to the same period last year. This EBITDA improvement shows that we can enhance profitability while continuing to invest into strategic priorities such as AI and product innovation, partner enablement, and sales effectiveness. At the same time, we will recognize that the pace of growth in our core business has been slower than anticipated. Let's now turn to the breakdown of our financial development to take a closer look at the figures in the upcoming slides. Looking at our revenue development in the first half of 2025, we achieved total revenue growth of 3.9% year-on-year, reaching €44.2 million. Recurring revenues increased by 2.9% to €41.3 million and remain the backbone of our business, accounting for over 93% of total revenue. In our core business, recurring revenue was up by 1%, showing resilience despite selective customer investment. At the same time, total revenue in the cloud telephony core segment declined slightly by 0.7%, reflecting the combination of a more cautious investment climate in our markets, lower hardware sales, and reduced voice minute usage. Non-recurring revenue rose by 19.9% to €2.9 million, mainly driven by botario's project business, which accounts for nearly half of botario 's total revenue. The strategic expansion of our AI portfolio has already delivered results in the first year after the acquisition. The significant increase in non-recurring revenue reflects the successful rollout of new solutions and service offerings, particularly the growing adoption of AI-based automation tools with our existing partner network, which is generating additional sales momentum and clearly demonstrates the tangible growth contribution from our AI-driven portfolio expansion. Our seat base declined by 1.1% compared to H1 2024 to 657,584, as the normal churn over the first half-year could not be fully compensated by new customer acquisitions. Nevertheless, churn levels remain stable, which underlines the resilience of our installed base in a competitive market environment. Finally, our blended RPU held steady at €9.90, which is the result of target price adjustments implemented in 2022, 2024, and again in the second quarter of 2025 for selected products and customer cohorts. These actions have helped offset inflation-driven cost increases and maintained RPU levels above last year's first half, despite lower voice minute usage. Overall, H1 showed stable recurring revenues and initial growth contribution from strategic initiatives, providing a solid base for pursuing further opportunities in the coming periods. Our gross margin improved further in the first half-year of 2025, reaching 86.1% compared to 84.5% in H1 2024. This increase was driven by the continued growth of high margin recurring revenue, lower hardware sales, and the strong contribution from botario 's AI-driven project business, which requires significantly fewer external resources and therefore delivers a highly scalable margin contribution. Cost of material decreased by 6.7% to €6.2 million, reflecting the ongoing decline in hardware demand, a trend also visible in non-recurring revenue. As a result, our material cost ratio dropped to 13.9% from 15.6% last year. Let's turn to the personnel expenses. In the first half of 2025, total personnel expenses came in at €19.1 million compared to €17.5 million in the same period last year. The increase was mainly driven by the integration of botario, targeted hires to strengthen our AI capabilities, and other strategic priorities. Wages and salaries rose to €15.4 million, up from €13.8 million, reflecting a 5.1% increase in the average headcount of 412 employees, and more importantly, our focus on building capabilities in the areas that matter most for our long-term growth. We also had one-off effects of €0.7 million, primarily related to the reorganization of top management, the harmonization of our system landscape, and our employee stock option program. On an adjusted basis, personnel expenses totaled €18.4 million, resulting in a personnel expense ratio of 41.6%, slightly above the 40.9% recorded a year ago. As already discussed in Q1, this reflects our continued investment in strategic areas. Looking ahead, we expect this ratio to gradually decline as we stabilize the workforce and make even better use of the resources we have in place. Turning to our profitability, our adjusted EBITDA remained solid. In the first half-year of 2025, EBITDA reached €4.9 million, almost matching last year's level of €5 million. On an adjusted basis, EBITDA came in at €5.7 million, slightly above the €5.5 million recorded in H1 2024. EBIT remained stable at €1.1 million, while our consolidated net result improved to €0.73 million compared to €0.54 million last year. What's important here is that we achieved this stability in profitability, despite a softer revenue dynamic in parts of our core business and a generally cautious investment climate. The result reflects both the quality of recurring revenue and our ability to manage costs effectively, even as we continue to invest in strategic initiatives to capture future growth. Let's turn to our cash flow, which reflects both our operating performance and our commitment to strategic investments. Operating cash flow came in at €2.5 million compared to €3.7 million in the first half of last year. This decline was mainly due to a reporting date-related reduction in trade payables. Free cash flow decreased to €0.7 million versus €2 million a year ago. The main driver here was our continued investment into growth: €1.5 million in intangible assets, primarily for product development, €0.3 million in property, land, and equipment, mainly into IT infrastructure and hardware, and €1.9 million for the first earnout payment from the botario acquisition. Financing cash flow stood at €1 million, slightly below last year's €0.8 million, driven mainly by lease liability repayments. As a result, cash and cash equivalents at the end of June were €10.7 million, giving us the financial flexibility to continue executing our strategy. After a first half-year with solid earnings, but lower than expected revenue in parts of our core business, it's important to take a step back and look to the broader environment and also what we have delivered to position NFON for sustainable growth in the future. Macroeconomic volatility remains. Inflation, geopolitical uncertainty, and cautious IT budgets, particularly among the SMEs, continue to influence on demand and delay investment decisions. Decision-making cycles are still extended, especially for communication infrastructure upgrades and emerging technologies such as artificial intelligence. Many companies are still in the process of evaluating how AI can be integrated into their business models. This adds complexity to investment planning, but it also opens up a window for clear differentiation. At the same time, stricter regulation is turning into a structural tailwind. Demand for secure GDPR-compliant solutions is rising across Europe, and the debate around data sovereignty is gaining momentum. This is an area where NFON has a strong, credible position as an independent European provider with infrastructure, development, and hosting based entirely in Europe. We have acted early, leveraging our existing strengths and continuously implementing measures to address these challenges and capture opportunities. The initiatives we launched in the first half-year fit directly into this approach, such as AI Essentials, the NEXUS Partner Programme, and our modular licensing model, as introduced in the beginning of this presentation today. Beyond that, we continue to build on these foundations, accelerated AI-powered innovations, expanding partner enablement and automation, optimizing pricing and cost structure, and driving customer-focused execution to reduce churn and increase renewal rates. As we can already see, this approach is starting to have an impact, as momentum in new business has begun to recover, giving us additional confidence as we execute on our priorities for the second half of the year. However, the combination of the current market conditions, extended decision-making cycles, and the softer than expected revenue development in parts of our core business means that we will be adjusting our guidance for 2025. Let's turn to the next and last slide to look at these changes in detail. While our strategic direction remains unchanged, the combination of a softer than expected revenue trends in parts of our core business, extended decision-making cycles, and selected delays in realizing individual growth drivers has led us to adjust our 2025 guidance. We now expect total revenue to grow in the range of 3%- 5% compared to the original guidance of 8%- 10%. This reflects a more cautious investment climate in some markets and the fact that parts of available market potential in H1 could be not yet fully captured. At the same time, we are seeing positive momentum returning to new business, supported by initiatives such as AI Essentials, the NEXUS Partner Programme, and our modular licensing model. On profitability, we anticipate adjusted EBITDA in the range of €12.5 million- €14 million, slightly below the previous forecast of €13.5 million- €15.5 million, while maintaining our strict cost discipline and focusing on operational efficiency. Looking ahead to 2027, our midterm targets remain intact. Thank you very much for your interest. I'm now opening up for your questions. Yeah, thank you very much, Patrik, for the presentation and for the more detailed insights. We will now open the line for questions. As a quick reminder, if you would like to ask a question, please use the raise hand function in the platform. I will then call on you and unmute you. When you are asking your question, please state your name and the organization you represent. Please note that questions via chat and the Q&A tool will not be considered. Looking forward to the first questions. Knut Voller. Yeah, hi, and thanks for taking my questions. Actually, a couple, and I will do them one by one. Patrik, when we look at the cash flow target, I know it's not part of your official guidance. However, you have given an indication where you expect the cash flow to be in 2025. Can you update us whether the reduced EBITDA target has an impact on your cash flow target? Yes, I can do that. Let me do this. Obviously, the lower revenue we are guiding obviously has also an impact on the cash flow part, and we are now guiding operational cash flow in the range of €8 million- €10 million, free cash flow in the range of €4.5 million- €6.5 million, and the total cash flow in the range of €0.5 million- €1.5 million. The last one was € 0.5 million- € 1.5 million? Yeah, exactly. Okay, thank you. The other question is, Patrik, you confirmed your midterm targets despite the weaker momentum in 2025. Can you give us some reasons for the optimism you have to confirm the targets, and should we expect NFON already to return to seed growth in 2026? Yeah, of course. The first two quarters, that means the first half-year of 2025, we obviously did not go back to the growth and the gaining the seats we needed to have in order to achieve the guidance. In the SaaS business, you know that you are always running behind if you're not going to achieve the first H1 targets, what you need to have. This is why we lost factually two quarters. July was the first month where we returned back to our original seats forecasts, and this is a good signal. With the initiatives we are planning for the second half-year, we are positive, and also for 2026 in the outlook, what we have in product innovations in the product portfolio, what events we are driving, which gives us the optimism that we do not need to change 2026 and 2027 guidance. In fact, the calendar year for 2025, this is not going to be achieved at 8%- 10%. This is why we adapted the guidance, but for the further outlook, we remain positive. Okay, thank you. If I remember correctly, you mentioned in the Q1 call that you plan to introduce a price hike in May. Can you give us an update here to which extent this helped the growth momentum? When should we expect a more pronounced tailwind for growth from the price hike in 2025? Yeah, the price hike was implemented in May, and here we had around €250,000- €300,000 in impact in euros. Obviously, we are also planning this one for next year in a regular, as we also indicated that we want to do different things in pricing as well, as we now install the pricing area also within NFON. Given all the AI features we are running in the product, on the product side, we are definitely positive to have a much stronger pricing power as well in the future. It obviously helped us also to keep the growth in H1 2025. This is the positive side. If it was implemented in May, it also helps us for the second half-year. Thank you. Maybe just a final one, Patrik. From an outside perspective, it looks like you're doing what you can do in such an environment. You're focusing on profitability. You're protecting your cash flow. Still, I think the lag that's currently missing to the equity story is the acceleration of growth, which of course is only partly in your hands, particularly looking at the SME focus you have and the currently tough macro-economic environment. From an outside perspective, what data points would you advise to focus on to track that growth should accelerate at some point in time? I definitely, I was always very open and transparent that not only the market environment but also our own homework was the reason why we did not accelerate the growth as we should have done the last couple of years. We were below market growth, which is in the traditional cloud PBX UCaaS area, a 5%- 7% area growth, what I would name. Bringing us to a double-digit growth, what we need to have also for the upcoming periods in 2026 and 2027, obviously, is AI momentum is helping us. The AI market is boosting, what you can already see in our portfolio, seeing botario growing year -on -year at the moment, actually 70%, 70%, which obviously also gives you an indication that this is helping us when we also increase the size of this AI business within NFON. Still, it's on a small size, but it's growing very strong. This momentum is obviously everyone is looking at that. You also saw a bigger acquisition into the German AI market from a U.S. player, and you see a lot of M&A targets going around. Obviously, we met it very early. We integrate this one into our product portfolio, and here we really gain momentum. In NFON, for the first half-year, the whole growth is obviously coming from the AI side. This is what I would take a look. We need to see how we're going to integrate that one into our traditional core business, and we did already. This is what I can give you as a response. 5%- 7% in the traditional core business, but much stronger in the AI business. Thank you very much, Patrik. Thank you, Knut. Hey, next one in line, John Karidis. Thank you. It's John Karidis here from Deutsche Bank. Thank you for taking my questions. The first question is, looking back to the first half of 2025, it would be really valuable if you could give us a few sentences about your assessment of the competitiveness of your main rivals. Gamma, of course, but also any other changes in the competitor behavior in the first half would be very useful, please. Of course. Thank you, Patrik. My second and final question is, looking forward specifically to the second half of 2025, and specifically in Germany, do you expect on a net basis to lose seats again in the second half? If not, why not, please? Yes, of course. First of all, thank you for the question, John. The first one is the competitive environment. The first message is it didn't change at all. The main competitors we are seeing in all three brands of the Gamma, Universum, I would say, that is Gamma directly, that's Placetel and also STARFACE. As you know, Gamma bought Placetel and also STARFACE. We do see that they are in most of the, let's say, tenders we are in competition with them. There's also, let's say, a price war in the traditional core business in cloud PBX we don't want to go into. One thing which definitely helps us to differentiate ourselves compared to other solutions is our AI capabilities, which are definitely stronger than any other in the German market. This is really helping us for H2 as well in order to stabilize our core business. That led me to your second question. No, we are not planning, and this is why I also indicated in July, we first time achieved our forecasted seats growth again. We need to be much stronger in core business again and gaining growth in seats in core business. There won't be an equity story and a successful NFON in the future without core business, and the other way around, the same to AI. We need to go and accelerate the seats again, doing so in H2 and 2025, and we will continue in 2026. Why? Definitely, the main focus we still have in Germany, 80% of our revenues are still in Germany. There's huge potential still in Germany. We are discussing still 80% of the seats are going to transfer to cloud business. There's also the switch off of ISDN and all that stuff, which is definitely, this is why Gamma also, as an indicator for you, invested into the German market. The German market is one of the most interesting European markets when it comes to potential, given the investment environment we are in at the moment. Everybody is searching, and everyone is hesitant in order to invest into something because of their top-line issues. This is why I remain positive for the German market, especially because potential is high. Thank you, Patrik. If I could, just a clarification on the first one. Thank you, sir. If the competitiveness hasn't changed in the first half, the sort of natural, I think, conclusion of that is that when Gamma stands up to talk about their interims, we should expect them to have lost seats as well, year on year, the same way that NFON has. Is that what you're communicating? I hope you understand that I'm a representative of NFON, and I can't talk to Gamma, and I don't know when they're going to announce. I think in a couple of days, but I'm headed to you to listen to their announcements. I just can't comment on the NFON environment. Right. No, I totally understand that, Patrik. Thank you. I just want to sort of add, if I may test a little bit the point that you said, that there hasn't been a change in competitiveness at all in the first half. Right? That's why I was making that comment. Yeah, absolutely. What I always communicated in one of the last calls as well, always open on every conference, is that there is always a side from the market perspective, but also an own side. NFON had the last two or three years, lost two or three years in order to get it really where we should have been. I was always open and transparent and honest about that. We were not as innovative as we should have been. We were not as stable as we were used to be. This is why we had last year the focus investments into platform stability. My colleague, Andreas Wesselmann, did a great job to ensure that again. Since one year, we had no incident at all again. Last year, there was a year where we had a couple of incidents. In an indirect business where you indirectly have 99% running indirect, you need to have the trust of your partners. We don't have those partners exclusive, strong difficult German word, on our side. This is why we regained now those partner communities to our side. This is why also it was a kind of our own homework to accelerate growth again. I don't want to push everything on the markets only, but now we are in a completely different shape since one year. The market environment is not playing for us, but those are the things we need to strengthen and the own homework we have executed already. Now we are looking forward positively to also getting improvement in the markets. Thank you. Good luck. Thank you, John. Okay, next one, Ross Jobber. Yeah, thanks very much. Can you hear me okay? Yes, I can hear you. Perfect. Ross Jobber from Edison. I'm interested in your comments about the modular licensing model and a couple of questions on that. First of all, what was wrong with the old model? Secondly, is the new modular licensing model aimed at trying to reduce churn? I mean, one of the things that strikes me about any modular model is it's a great opportunity to pay less. If that's better than walking away completely, then perhaps that's the aim of it. Could I start with that? Yeah, absolutely. What was wrong with the old model? We were not able, technical-wise, from our platforms to offer such a modular licensing model. If a customer bought seats with us, for example, he had 100 contracted seats, it was really complicated or almost manual to get different tariffs for the 100 seats. This is what we worked for. This is what also my colleague, the CTO, Andreas Wesselmann, and his teams made now possible. This is now standard in the markets that you need to offer this to your customers. Our partners were really insistent to offer, sometimes if the customer wanted to have this modular licensing, that he really offered NFON. Now he can do it again. That's a great opportunity in order to win new seats. This is something, obviously, we are also working on, different avoiding churn programs. What we really see is that we really gain new seats with that. We have some positive feedback from customers already who were searching and get that from competition. Now, with the more innovative solutions we are offering with the AI features nobody can offer in the market, plus the additional licensing model we offer now, we are really positive on that. To answer your question, it's more new winning seats. What was wrong in the past was really the technical capability within NFON to offer this. That's great. Thank you, Patrik. I'm going to ask the same question again, if I may, but this time about the Nexus Partner Program initiative. What was wrong with the old one? It's clearly aimed at growing your partner base. If you just expand a bit more on that as to how you think that'll happen. Yeah, the wrong part of the old partner program was that it was not focused on growth. What we don't want to do in the future is to really pay more on maintaining seats in order to grow seats. We want to really benefit partners if they grow with us together. The German market is, as always, a very special market. We are working with 3,000 partners. There's a strong consolidation in the markets. Those quarters were not really growth-oriented. This is really the benefit from the new program. It benefits, and it also compensates partners who strongly grow in the future much more than before. That's the new part of this. This is why we also remain confident. It's focusing more on growth. That's very clear. Thank you very much. Thank you, Ross. Okay, the next in line is Philip Sennewald. Thank you very much. This is Philip from NuWays. Patrik, I have a question on botario. As you said, they increased revenues 70% year -on -year and now to €1.9 million, of which 48% was project-based. Can you explain to us how this translates into ARR? What is the current ARR level of botario? We are not yet working with ARR levels, but what I can give you is a little bit more of details and context about the growth. All in all, the business case for the acquisition was done, and the earnout is also strived on that, that we want to grow the business 30% in revenue year -on -year with a stable operating EBITDA margin level of 30%. In the first half year, they obviously went into a higher growth, which is almost 60% of growth, which led us to a higher also earnout part for the 2024 figures. In 2025, we are trying to keep that momentum, and it's now obviously also highly project-driven. 52% of their business is project-driven. The rest, so it's almost 50-50, is recurring-driven. We keep the guidance of we want to achieve 70%-30%, 70% recurring, 30% into non-recurring project-oriented, non-recurring business. The future business should really bring us also to a level of 30% year -on -year, also for 2026 and onwards. Because it's still a smaller size, and it's not really, it's still a non-recurring project-oriented, we are not capable, or we are not into the world of ARR yet. That will be one part in the future we are working on. All right, thank you very much. Maybe a follow-up there. You mentioned once it's in full swing, you are targeting 30% growth. Once it is in full swing, what would be a recurring revenue ratio target? You now achieve the contribution margin of slightly above 40% with botario in the first half. Is that a level you can maintain once you go into that full swing stage? The EBITDA margin level between 30% and 40% is realistic. The growth for the next couple of years in the recurring revenue parts is also 30% realistic, with a ratio of 70% recurring and 30% non-recurring. All right, thank you very much. To another topic, a follow-up on the price increases. You mentioned a €200,000 effect. This was referring to May and June. To make an easy calculation, the full year effect would be €1.2 million. Did I get that right? Yeah, into this direction. You can slightly below, but into this direction. Okay, perfect. One last question from my side. I don't know if you said it or if I maybe missed it, but the € 0.5 million adjustments for top management. Can you elaborate quickly on that? Yeah, we did also a reorganization on the top management level as well. We have found out that it doesn't work together. We now have a group of four, let's say, senior executives. That's myself, that's the CTO, that is Alex Wettjen, and that's Jana Richter for the core business and for the AI. That was the action we took in the first half year. That was the main part. We also took a look on more efficiencies on the top management level. This is our permanent task to do so. This is why we did a kind of restructuring program here within NFON again to keep up the efficiency levels as well. Yeah, understood. Was this a one-off now, this $0.5 million, or can we expect? Yeah. All right, perfect. Maybe one last question, if I may. You mentioned already that you see an easement of sales processes in the third quarter now. Can you, in general, elaborate on the development of sales cycles over the past quarters? Do you see a general easement there? Oh, no, it's really difficult. It's completely different in the AI business versus the core business. Also, within core business, it's depending on the size of the business. We see longer sales cycles, the bigger the deals could be. In the AI sales, we still have a longer sales cycle because people still don't know how to implement AI into their businesses. This is why we also came out with different bots and different AI-based solutions for different industries. We are working on that. Sales cycles in general for NFON remain a topic. I see a positive momentum in July, but we need to stabilize that. Overall in Germany, the climate, and we just adapted the guidance. I can't say that now everything is going to the better way. Still, the environment, the investment environment in Germany remains tough. This will hold on for this year. We do see an improvement, yes, but I don't want to make it artificially positive. The remaining cycle still keeps the pressure, is a topic within our business, but we try to reduce them. Also, for example, the modular licensing model is helping us to reduce sales cycles and such things. We are working on this. A general message, how long a sales cycle could be for overall NFON is difficult to say. Okay, that's fair. Thank you very much, Patrik. Yeah, thank you for the questions, Philip. Good. Thank you so far. Before we close the session, let me briefly ask you if there are any questions from your side. I see no hands raised. That seemed to be our last questions. Thank you for your interest and your contributions. Handing over to Patrik for a brief closing statement. Yes, thank you very much, especially for the very interesting questions. Also, talking about our future, second half here and also 2026, very interesting. Thank you very much for your interest. I wish you all the very best and see you at the next opportunity on a conference or in any other calls and discussions we have. Thank you very much. All the best to you.