Original-Research: NFON AG - from NuWays AG

Classification of NuWays AG to NFON AG

Company Name: NFON AG

ISIN: DE000A0N4N52

Reason for the research:

Recommendation: Kaufen

from: 26.04.2024

Target price: EUR 11.70

Target price on sight of: 12 Monaten

Last rating change:

Analyst: Philipp Sennewald

Final FY no surprise after strong prelims / chg.

NFON published final FY 2023 figures, which were in line with the

preliminary results published in early March. FY recurring revenues stood

at EUR 77.1m, up 4.8% yoy at a continuously strong recurring revenue ratio of

93.7%. This was particularly driven by further key account gains as well as

cross and upselling at existing clients. Total seats stood at 656k at YE,

up 3.4% yoy. Despite the disproportionate increase in recurring revenues,

the blended ARPU, which is adjusted for recurring sales from SIP-Trunks,

remained stable at EUR 9.71, which was caused by a decline in voice minutes

sold resulting from the fading out of Covid effects. Going forward, we

expect ARPU to rise again driven by (1) price increase, which the company

started to impose at the end of last year, and (2) from selling premium

solutions like CC Hub, were ARPU levels are seen at EUR 30-40, eNuW.

FY profitability significantly improved yoy, visible in an adjusted EBITDA

of EUR 8.4m (2022: EUR -1.0m; reported EBITDA of EUR 6.8m vs EUR -5.3m). Main

drivers for this have been an improved gross margin (+2pp yoy) resulting

from the higher recurring ratio, but more importantly the imposed

efficiency measures in relation to personnel (personnel ratio -3.9pp yoy)

as well as marketing (marketing ratio -5.2pp yoy), which already beard

fruit. A further highlight was clearly FCF, which came in at EUR 1m (2022: EUR

-12.4m), thus being positive for the first time since the IPO in 2018.

In FY '24, management aims to achieve recurring revenue growth in the mid-

to upper-single-digit-% range paired with an adjusted EBITDA improvement to

EUR 10-12m. This looks achievable in our view, driven by several effects like

an improved sales-mix as well as further efficiency improvements,

particularly the integration of DTS, which is seen to create significant

synergies from H2 onwards.

M&A as possible further catalyst. CEO Heider indicated in yesterday's

earnings call that inorganic growth climbed up the agenda and that the

company is already screening the market for possible targets. Here, the

focus should be on strengthening existing markets or tapping new ones, on

our view. Yet, given the ongoing organizational transformation, newsflow in

this regard seems unlikely during FY '24e.

Although NFON shares slightly recovered recently after a sluggish start to

the year, valuation remains attractive, as the stock is trading at only

1.1x EV/Sales '24e. We hence continue to recommend to BUY at with an

unchanged PT of EUR 11.70 based on DCF and keep the stock in our Alpha List.

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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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