Original-Research: NFON AG - from NuWays AG

Classification of NuWays AG to NFON AG

Company Name: NFON AG
ISIN: DE000A0N4N52

Reason for the research: Update
Recommendation: Kaufen
from: 24.05.2024
Target price: EUR 11.70
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Philipp Sennewald

Strong Q1 displays ongoing operational improvements; chg.

NFON released Q1 results, showing a continuously strong recurring revenue
ratio as well as further profitability improvements. In detail:

Q1 recurring revenues increased by 2.8% yoy to EUR 19.9m (eNuW: EUR 20.4m) and
remained at a continuously strong ratio of 93.6% as total sales came in at
EUR 21.1m. Sales growth was predominantly driven by an increased seat base
(+2% to 659k) as well as the cross-selling referring to the company's
premiums solutions. This also becomes visible in the blended ARPU (adjusted
for SIP-Trunk sales), which improved to EUR 9.82 vs EUR 9.80 in Q1'23.

While we expect seat growth to remain at a stable pace throughout the year,
ARPU is seen to further improve driven by (1) premium solutions like CC
Hub, where ARPU levels of EUR 30-40 can be achieved, as well as (2) price
indexation effects which came into effect in April.

Profitability further improved, as adjusted EBITDA increased
disproportionately by 43% yoy to EUR 2.8m (eNuW: EUR 2.6m; reported EBITDA at EUR
2.7m). This was partly driven by a slightly improved gross margin of 84.1%
(+0.3pp yoy) but more importantly by ongoing improvements on the personnel
(-2pp yoy sales ratio) and other OpEx (-1.5pp yoy; mostly sales &
marketing) level. Q1 EBIT came in at EUR 0.7m while FCF was slightly positive
with EUR 0.2m.

Going forward, we expect continuous improvements based on the mentioned
development of the salesmix as well as further efficiency gains, especially
in connection with the integration of DTS, which is seen to crease
significant synergies from H2 onwards.

On this basis, management confirmed the FY guidance, targeting recurring
revenue growth in the midto upper-single-digit-% range (eNuW new: +5.3%) at
a recurring revenue ratio of >90% (eNuW new: 93.9%) as well as an adjusted
EBITDA in the range of EUR 10-12m (eNuW new: EUR 11.5m).

That said, valuation remains attractive, in our view, as shares are trading
on a mere 1.2 EV/Sales '24e (9.9x EV/EBITDA). We therefore reiterate BUY
with an unchanged PT of EUR 11.70 based on DCF. NFON remains part of our
NuWays Alpha List.

You can download the research here:
http://www.more-ir.de/d/29883.pdf
For additional information visit our website
www.nuways-ag.com/research.

Contact for questions
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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