Original-Research: NFON AG (von NuWays AG): Buy

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Original-Research: NFON AG - from NuWays AG

22.11.2024 / 09:05 CET/CEST

Dissemination of a Research, transmitted by EQS News - a service of EQS

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Classification of NuWays AG to NFON AG

Company Name: NFON AG

ISIN: DE000A0N4N52

Reason for the research: Update

Recommendation: Buy

from: 22.11.2024

Target price: EUR 11.70

Target price on sight of: 12 months

Last rating change:

Analyst: Philipp Sennewald

Strongly improved Q3 beats profitability estimates; chg.

Q3 sales came in at EUR 21.7m (eNuW: EUR 21.6m), implying a 5.9% yoy increase.

This was mainly based on an improved seat base of 666k (+3.1% yoy) as well

as up-selling effects leading to an improved blended ARPU (ex SIP trunk) of

EUR 9.88 (vs EUR 9.73 in 9M '23). Further, we saw a first improvement of

nonrecurring hardware sales, which increased 6.1% yoy to EUR 1.2m (vs -12.1%

in H1 '24). Recurring sales increased by 5.9% yoy to EUR 20.5m, implying a

recurring revenue ratio of 94.9%.

Q3 adj. EBITDA improved disproportionately to EUR 3.5m (+35% yoy; eNuW: EUR

2.9m), implying a margin of 16.3% (+3.6pp yoy). This should have been partly

driven by the improved gross margin (+1.1pp yoy to 85.6%) as well as the

imposed efficiency measures in personnel (cost ratio -1.4pp yoy) and other

OpEx (-0.6pp yoy). Unadjusted EBITDA came in at EUR 3.1m, up from EUR 2.3m in

the same period last year. Despite this, FCF came in weaker than expected at

EUR 0.7m, which was mainly caused by an unfavorable WC swing in Q3. Yet FCF at

9M significantly improved yoy to EUR 2.7m (vs EUR 0.8m at 9M '23).

Against this backdrop management confirmed the FY guidance of mid-to-upper

SD-% recurring revenue growth, although specifying it to the lower end

(eNuW: +5.2% yoy), adjusted EBITDA of EUR 10-12m (eNuW: EUR 12.0m) as well as a

recurring revenue ratio of 90+%, which should be easily achieved given the

9M ratio of 94.3%. Our recurring revenue estimate hereby implies 6.1% growth

in Q4 as well as an adjusted EBITDA of EUR 2.9m, which should be in the cards

given the strong Q3 figure. Mind you, the guidance does not include the

acquisition of botario, which was closed at the end of Q3.

Speaking of which, management provided more detail on the deal, disclosing a

purchase price of EUR 18.1m implying a 34x EV/EBITDA, whereby EUR 10.9m were

paid at closing with the remainder being subject to earn-outs. While this

does not look cheap at first glance, mind you that botario is projected to

achieve 40+% top-line growth with EBITDA margins north of 30% going forward.

Moreover, it significantly enhances NFON's AI capabilities and creates

valuable cross-selling opportunities. We therefore regard the deal as

strategically highly reasonable.

Valuation continues to be attractive given that shares are trading at 7.1x

EV/adj. EBITDA '24e (5.1x '25e) and an adj. FCFY25e of 13.7%. We hence

reiterate BUY with an unchanged EUR 11.70 PT based on DCF and confirm the

stock as one of our top-picks in our NuWays Alpha List.

You can download the research here: http://www.more-ir.de/d/31415.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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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss

bestimmter Börsengeschäfte.

Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben

analysierten Unternehmen befinden sich in der vollständigen Analyse.

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2036127 22.11.2024 CET/CEST

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