Paragon : Continues Growing in Third Quarter

• Consolidated revenue up 9.4 percent to € 73.7 million (prior year: € 67.4 million)
• Electromobility continues as greatest driver of growth with a 9.3 percent share of revenue (prior year: 5.2 percent)
• EBITDA increases 11.5 percent to € 10.2 million (prior year: € 9.1 million)
• EBIT margin rises slightly to 6.9 percent (prior year: 6.8 percent)
• Investments decrease 34.3 percent to € 16.7 million (prior year: € 25.5 million)
• Revenue and earnings forecast for the current fiscal year confirmed

In the first nine months of this year, the company generated consolidated revenue of € 73.7 million (prior year: € 67.4 million). Growth in the third quarter was again primarily driven by the dynamic performance of the Electromobility division. The cost of material developed subproportionally, increasing 8.4 percent to € 40.8 million (prior year: € 37.6 million). The material input ratio amounted to 55.3 percent (prior year: 55.9 percent). Gross profit rose to

€ 43.2 million (prior year: € 40.2 million), which corresponds to a gross profit margin of

51.4 percent (prior year: 51.7 percent).

"Electromobility is clearly our current largest driver of growth," says Klaus Dieter Frers, founder and Chief Executive Officer of paragon AG. "With the ongoing developments and existing orders for new products in the automotive industry, we will see a significant atmosphere of growth in the other divisions starting in 2018."

With a revenue growth for the first nine months of 96.8 percent, totaling € 6.9 million (prior year: € 3.5 million), production at the Voltabox subsidiaries in Delbrück, Germany, and Austin,

Texas, USA, largely focused on battery modules for forklift trucks. The gradual launch of a new highly automated production line in Delbrück at the end of the year was a key operational focus in the third quarter. The delivery of battery systems for trolleybuses in Lucerne, Switzerland, was also completed. At the same time, more orders for battery systems, also for use in hybrid buses, came in from Linz, Austria, and Dayton, Ohio, USA.

Revenue in the Sensors division rose to € 26.4 million (prior year: € 25.1 million), mainly due to growth in how many paragon products are used in current vehicle models. Revenue in the Acoustics division increased to € 12.9 million (prior year: € 11.9 million). This was primarily due to the boost in output quantity for the current version of the premium hands-free microphone. In the Cockpit division, revenue grew to € 25.2 million (prior year: € 24.0 million) as serial production of a new generation of cockpit instruments was launched for a long- standing customer. With a decrease in revenue to € 2.3 million (prior year: € 2.9 million), the Body Kinematics division continued to be strongly influenced by a number of series production developments for the 2017 fiscal year that ran parallel to each other. Prominent among the development activities were freely adjustable rear spoilers for optimized aerodynamics, which will enter pre-serial production in the fourth quarter.

"Our technological innovations serve the increasing demand for modern solutions in the areas of health, connectivity, safety, comfort and electrification," says Dr. Stefan Schwehr, Chief Technology Officer. "Here, we are adapting to the constantly shrinking innovation cycles in the automotive sector with the intensification of our agile project management."

Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) increased 11.5 percent to € 10.2 million in the first nine months (prior year: € 9.1 million), despite a rise in personnel expenses resulting from the expansion of the business, which corresponds to an EBITDA margin of 13.8 percent (prior year: 13.5 percent).

With increased depreciation and amortization of € 5.0 million (prior year: € 4.5 million) and other operating expenses remaining on par with the prior year, consolidated EBIT (earnings before interest and taxes) amounted to € 5.1 million (prior year: € 4.6 million). This corresponds to an EBIT margin of 6.9 percent (prior year: 6.8 percent).

With net finance costs of € -2.4 million (prior year: € -1.7 million) and a higher income tax burden of € 1.9 million (prior year: € 1.0 million), consolidated net income dropped to € 0.8 million (prior year: € 1.8 million). This corresponds to earnings per share of € 0.20 (prior year:

€ 0.45).

Total assets increased to € 99.9 million (prior year: € 86.4 million) due to the prior year's substantial investments in property, plant and equipment and due to capitalized development costs.

Equity increased to € 19.1 million (prior year: € 17.9 million), which corresponds to an equity ratio of 19.1 percent as of the end of the reporting period, September 30, 2016 (prior year:

20.7 percent). Following the reporting period, there was a significant cash inflow of € 13.4 million, generated by an increase in the company's share capital from authorized capital, which resulted in an equity ratio of 28.8 percent after the capital transaction (as of October 5, 2016).

Cash flow from operating activities increased in the period under review to € 8.4 million (prior year: € 6.6 million), mainly due to a much smaller increase in inventories. Cash flow from investment activity decreased to € 16.5 million (prior year: € 25.3 million).

Cash and cash equivalents fell to € 4.2 million as of the end of the reporting period (prior year:

€ 6.6 million). Free liquidity decreased to € 8.1 million (prior year: € 10.0 million).

paragon's Managing Board now expects to see an investment volume of around € 20 million in the current year. The investment volume is being raised beyond what previous planning had allotted for (€ 14 million) to make the most of current business opportunities, which can now be explored due to the successfully carried-out capital increase. New products will be ready for the market sooner, for example, the particle sensor that meets a strong customer demand. New technical ideas will reduce the costs of conversion for battery systems and microphones. Construction costs for the building on Artegastrasse, Delbrück, have risen due to environmental and security aspects, as well as an expansion of the surface area.

Based on the results for the first nine months, the Managing Board confirms its earlier revenue and earnings forecast for the current fiscal year. This states that consolidated revenue is expected to grow by around 8 percent in the current fiscal year and thus to exceed the € 100 million mark. This is expected to be accompanied by above-average earnings growth with an EBIT margin of around 9 percent. The main growth drivers in the current fiscal year are likely to be the Electromobility division (Voltabox), as well as the Sensors and Acoustics divisions in the medium term.

The interim report with the condensed interim consolidated financial statements as of September 30, 2016, can be downloaded from www.paragon.ag/en/investors.

Listed in the regulated market (Prime Standard) of Deutsche Börse AG in Frankfurt am Main, paragon AG (ISIN DE0005558696) develops, produces, and sells innovative automotive electronics solutions. The portfolio of this direct supplier to the automotive industry includes products in the business segments of Sensors, Acoustics, Cockpit, E-mobility and Body Kinematics. In addition to its headquarters in Delbrück (North Rhine-Westphalia), paragon AG and its subsidiaries have locations in Suhl (Thuringia), Nuremberg (Bavaria), St. Georgen (Baden- Württemberg), and Bexbach (Saarland), as well as in Kunshan (China) and Austin (Texas, USA).