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

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Original-Research: NFON AG - from NuWays AG

23.05.2025 / 09:00 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:                        23.05.2025
     Target price:                EUR 12.30
     Target price on sight of:    12 months
     Last rating change:
     Analyst:                     Philipp Sennewald

More to come after solid start into the year; chg.

Q1'25 sales increased by 4.0% yoy to EUR 22.1m (eNuW: EUR 22.4m), of which EUR
20.8m were of recurring nature, implying a 94.0% recurring revenue ratio.
Main driver of the increasing top-line was botario, which was acquired at
the end of Q3'24. With EUR 0.8m sales in Q1 (+52% yoy), botario explained
about 90% of Q1 growth, thus implying organic growth of only 0.4%. The
reasons for the flattish organic sales development are as follows. (1) As
planned, non-recurring (especially hardware) sales further decreased by 0.9%
yoy to EUR 1.3m. (2) The migration of DTS clients to the NFON platform was
binding resources at partners, that could not be used for seat growth. The
good thing is, that 40% of clients were already migrated in the first
quarter and the remaining 60% are expected to be so until YE.

Improving ARPU. For the first time since Covid, NFON achieved a Q1 blended
ARPU of above EUR 10 with EUR 10.02, clearly reflecting the increasing focus on
premium solutions, which is seen to drive ARPU and thus margins further
going forward.

Despite an improved gross margin (+1.9pp to 86%), adj. EBITDA slightly
decreased yoy to EUR 2.6m (Q1:24: EUR 2.8m), implying a margin of 11.8%. Main
reason for the decline were planned investments in personnel and other OpEx
related to AI initiatives. Nevertheless, NFON was able to improve FCF
significantly from EUR 0.2m in Q1'24 to EUR 1.1m on the back of favorable WC
swings.

Guidance confirmed. After a solid start to the year, management confirmed
the FY25 guidance of 8-10% sales growth and EUR 13.5-15.5m adj. EBITDA.
Reaching the mid-point would require 10.6% sales growth on average in the
coming quarters as well as a 16.3% adj. EBITDA margin. Despite the, top-line
wise, slow start this looks absolutely achievable in our view, as (1) the
DTS migration is proceeding well, which should already become visible in Q2,
(2) lead-times in the core business are already normalizing (3) strategic
price increases starting in May as well as new AI products (e.g. voicemail
transcription, NIA) gaining traction. Moreover, the tune of quarterly
investments into AI and personnel should normalize, thus benefitting
margins.

We keep our conviction in the case, which has the potential to become one of
the key-players in AI supported communication services, backed by a strong
core business. We hence reiterate BUY with a EUR 12.30 PT and keep the stock
in our NuWays Alpha List.

You can download the research here: http://www.more-ir.de/d/32708.pdf
For additional information visit our website:
https://www.nuways-ag.com/research-feed

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
++++++++++
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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2144074 23.05.2025 CET/CEST

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