Paragon GmbH : Group Interim Report as of March 31, 2024 / 1. Quarter

Share

Closing price Xetra in €

Number of shares issued

Market capitalization in million euros

Mar. 31, 2024

3.29

4,526,266

14.9

Dec. 31, 2023

3.84

4,526,266

17.4

Change

-14.3%

0.0%

-2.5

Dear shareholders

Dear customers and business part- ners, dear employees,

"Departure" - like every year, the title of our 2023 Annual Report is a word that both characterizes a phase in the com- pany's history and provides an outlook for our future actions. On the one hand, departure stands for leaving behind the "savings policy ", which has led us back into a level of debt that is appropriate for the size of our company. Only then do we have the opportunity to set out for new shores, to try something new, to dare to try something new. Breaking new ground - that is in our DNA.

The new year will continue the initiatives started in 2023. We have now expanded our product range in China to include the entire European product portfolio and have held initial talks with Chinese customers. We will have our own sales office in the USA in the coming months. A cooperation with an interesting Indian automotive supplier has been initiated. The next products to be produced at our plant in Croatia, which already has all the necessary quality certifi- cates, have been determined.

A concept for expanding the sites has been drawn up for each of the plants worldwide. The state-of-the-art new building in Kunshan, China, has already been occupied. The further development of the plants' management structure is also making progress.

A large number of new products and product variants are currently in the development process. A number of proof- of-concept orders testify to the high level of customer interest in our new products from all business areas. Our sales department's quotation activity in the first quarter of 2024 in particular is record-breaking.

At the same time, we launched our first web store. In future, we will also be offering products from our Acoustics division to end customers. The range is to be gradually extended to other business areas.

So there is a lot going on at paragon. And we will not be deterred if the current call-off level of the automotive industry does not yet correspond to what customers have announced. Even paragon cannot completely ignore the fact that fewer cars are being built at the moment. In our case, however, this has nothing to do with the weakness of the market for electric vehicles; as we know, paragon's prod-

paragon in the capital market

The paragon share lost value in the first quarter. Starting from a price of EUR 3.84 at the end of 2023, the share price reached a low of EUR 2.21 on March 4, 2024. On March 15, 2024, the share price was already back at EUR 4.08. At the end of the reporting period, the share was quoted at EUR 3.29, a loss of 14.3%. The market capitalization thus fell from EUR 17.4 million to EUR 14.9 million.

Corporate bond 2017/27

The corporate bond placed in June 2017 (ISIN DE000A2GSB86; WKN A2GSB8) with an original total volume (framework nominal) of EUR 50 million is listed on the Open Market (OTC) of the Frankfurt Stock Exchange in the Scale segment for corporate bonds of Deutsche Börse AG.

In March 2022, a bondholders' meeting resolved to amend the terms and conditions of the bond. In addition to a semi-annual interest payment and a higher interest cou- pon, the final maturity date was postponed by 5 years to July 5, 2027. In 2023, paragon reduced the nominal amount of the bond from EUR 50.0 million to EUR 45.2 million through buybacks.

The interest rate on the bond depends on the paragon Group's net gearing ratio. The interest rate in the 2024 financial year is 7.5%.

On November 6, 2023, paragon started to buy back the bond on the stock exchange in a total nominal amount of up to EUR 20.2 million. The program will run until July 5, 2025 at the latest. The buyback will be carried out by an independent securities service provider. With regard to the purchase price and purchase volume, the service provider must comply with the ban on market abuse (so-called "safe harbor rules"). As a result, no more than 25% of the average daily

turnover (20-day average) in the bonds may be purchased on the stock exchange on any one day. The bond buyback is carried out via the regional stock exchanges in Stutt- gart, Frankfurt and Tradegate Exchange. By March 31, 2024, bonds with a nominal value of EUR 435,000.00 had been repurchased.

At the end of the quarter, the bond closed at a price of 58.1 %.

Investment in paragon semvox GmbH

paragon GmbH & Co. KGaA has sold all of its shares in paragon semvox GmbH to CARIAD SE, a wholly owned subsidiary of the VW Group, by notarized agreement dated December 1, 2022. The closing was completed on May 12, 2023. As a result of the sale, paragon GmbH & Co. KGaA lost control over the subsidiary paragon semvox GmbH. For this reason, paragon semvox GmbH will be recognized and deconsolidated in 2023 as a discontinued operation in accordance with IFRS 5.

Business performance

The majority of international automotive markets developed positively in the first quarter of 2024 compared to the previous year, although momentum has weakened recently. In the first quarter of 2024, new registrations in Europe and the United States rose by 5%. The Chinese market developed very strongly. 13% more cars were registered than in the same period of the previous year. The call-off behavior of paragon customers has been restrained so far; it is not yet clear when the positive market development will also affect paragon's customers.

As expected, paragon's business performance in the first three months of the 2024 financial year was characterized by a planned decline in revenue compared to the same quarter of the previous year. This is due, among other things, to the sale of the low-voltage starter battery business to Clarios SE and the scheduled discontinuation of a sensor product in 2023. Sales development in the two business segments was as follows:

Business segment

€'000 or as stated

Sales revenues with third parties

Intersegment sales

Turnover

EBITDA

EBITDA margin

As expected, the largest segment, Electronics, dominated Group activities with segment sales of EUR 27.4 million (pre- vious year: EUR 28.4 million). Of this, EUR 27.2 million (pre- vious year: EUR 28.2 million) was attributable to sales with third parties in the Sensors, Interiors and Power divisions, which corresponds to 66.5% of consolidated sales (previous year: 63.0%). Segment EBITDA amounted to around EUR 3.0 million (previous year: EUR 3.8 million).

The Mechanics segment generated segment sales of EUR

16.6 million in the same quarter of the previous year. This was an increase of 36.6% compared to the first quarter of 2022

(sales Q1 2022: EUR 12.1 million). Due to weaker demand for adaptive rear spoilers for German sports car manufacturers, folding tables for rear passengers in premium and luxury models and seat adjusters in volume and premium mod- els, sales fell to EUR 13.7 million in the first quarter of 2024. Segment revenue with third parties is reported via paragon movasys GmbH in the Kinematics division and accounted for 33.5% of Group revenue in the first quarter (previous year: 37.0%). Segment EBITDA for the first quarter amounted to EUR 1.1 million (previous year: EUR 0 million).

Sales development in the individual divisions was as follows:

Earnings situation

In the first three months of the current financial year, paragon generated revenue of around EUR 40.9 million (previous year: EUR 44.7 million). With an increase in finished goods and work in progress of EUR 0.5 million (previous year: minus EUR 0.7 million) and own work capitalized of EUR 0.8 million (previous year: EUR 0.1 million), total operating performance amounted to EUR 42.9 million (previous year: EUR 45.7 million).

The cost of materials amounted to 23.6 million euros (pre- vious year: 25.4 million euros). This results in a cost of materials ratio (calculated from the ratio of cost of materials to sales and changes in inventories) of 57.0% (previous year: 57.9%).

With a financial result of EUR -1.6 million (previous year: EUR -3.0 million) and positive income taxes of EUR 0.2 million (previous year: EUR 0.2 million), the paragon Group generated earnings of EUR -0.5 million in the reporting period (previous year from continuing operations: EUR -1.7 mil- lion). This corresponds to earnings per share of EUR -0.11 (previous year: EUR -0.51).

The reduction in the financial result is due on the one hand to the reduced interest rate on the EUR bond (currently 7.5% compared to 9.25% in the first quarter of 2023) and the high interest rate on the interim financing to secure the bond repayments in April 2023 included in the previous year's figure.

This results in gross profit of EUR 19.3 million for the first three months (previous year: EUR 20.3 million), which corresponds to a gross profit margin of 47.1% (previous year: 45.4%). Personnel expenses amounted to EUR 10.7 million in the first quarter of 2024, a year-on-year decrease of 3.5% (previous year: EUR 11.1 million). The personnel expense ratio amounts to 26.1% (previous year: 24.7%).

Taking into account other operating expenses of EUR 4.5 million (previous year: EUR 5.4 million), earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR 4.1 million (previous year: EUR 3.8 million), which corresponds to an EBITDA margin of 10.1% (previous year: 8.6%). After depreciation and amortization of EUR 3.1 million (pre- vious year: EUR 3.3 million), earnings before interest and taxes (EBIT) amounted to EUR 0.9 million (previous year: EUR

0.5 million). The EBIT margin doubled accordingly from 1.1% in the previous year to 2.3%.

Financial position

Total assets decreased slightly to EUR 105.6 million as at March 31, 2024 (December 31, 2023: EUR 108.5 million).

Intangible assets and property, plant and equipment fell slightly, as scheduled depreciation and amortization exceeded investments in the first quarter.

The reduction in inventories to EUR 19.8 million (December 31, 2023: EUR 20.6 million) is the result of working capital management. Other current financial assets in the amount of EUR 4.1 million decreased by EUR 1.0 million compared to December 31, 2023. The reduction is partly due to the payment of the final purchase price installment of EUR 0.5 million from Clarios SE.

Equity decreased to EUR -4.5 million as at the reporting date (December 31, 2023: EUR -4.1 million) due to the negative overall Group result. As a result, the equity ratio fell to -4.3% (December 31, 2023: -3.8%).

Non-current provisions and liabilities decreased slightly to EUR 43.2 million (December 31, 2023: EUR 43.9 million), mainly due to the scheduled repayment of loans.

Current provisions and liabilities decreased to EUR 67.0 million (December 31, 2023: EUR 68.7 million).

the CHF and EUR bonds that were made in the previous year. Cash and cash equivalents amounted to EUR 1.1 million as at the reporting date (December 31, 2023: EUR 3.2 million).

Opportunity and risk report

In the first quarter of 2024, there were no significant changes to the opportunities and risks described in detail in the combined management report for the Group and paragon GmbH

• Co. KGaA under "Opportunity and risk report". The annual report is available on the Internet at https://ir.paragon.ag

Cash flow from investing activities increased to EUR -1.5 million in the reporting period (previous year: EUR -0.5 mil- lion). Payments for investments in intangible assets mainly consist of own work capitalized in accordance with IAS 38.

Despite the increased investments in the first quarter of 2023, free cash flow improved from EUR -2.8 million in the same period of the previous year to EUR - 1.1 million in the quarter under review.

Forecast report

The forecast for the current financial year and the underlying assumptions are explained in detail in the combined management report for the 2023 financial year. Accord- ingly, the management expects sales of between EUR 160 million and EUR 165 million with EBITDA of between EUR 18 million and EUR 20 million for the 2024 financial year.

Cash flow from financing activities increased to EUR -0.9 million in the reporting period (previous year: EUR -10.7 million), in particular as a result of the partial repayments of

Development of the

key performance indicators:

In million euros

2023

Since the beginning of the year 3M/2024

Forecast 2024

1. million euros

1. million euros

160 to 165 million euros

18 to 20 million euros