Märkte & Kurse

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Original-Research: NFON AG - from NuWays AG

23.08.2024 / 09:07 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group AG.
The issuer is solely responsible for the content of this research. The
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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:                       23.08.2024
     Target price:               EUR 11.70
     Last rating change:
     Analyst:                    Philipp Sennewald

Strongly improved Q2 in line with est. + promising AI acquisition

Yesterday, NFON released its Q2/H1 report, which displays strongly improved
profitability as well as a sequential acceleration in growth. Moreover, the
company announced the takeover of botario GmbH, a specialist in AI-based
communication solutions.

Q2 sales increased by 4.4% to EUR 21.3m (eNuW: EUR 21.6m), based on an increased
seat base of 665k (+3.8% yoy, eNuW: 666k) as well as up-selling effects in
connection with NFON's premium solutions, which led to an improved blended
ARPU of EUR 9.87 at H1 (+2% yoy; eNuW: EUR 9.92 in Q2). While non-recurring
hardware sales continued to decrease (-19% to EUR 1.1m), recurring revenues
grew disproportionately by 6% yoy to EUR 20.2m, implying a strong recurring
revenue ratio of 94.9%.

Adj. EBITDA improved again strongly with yoy growth of 88% to EUR 2.7m (eNuW:
EUR 2.9m; reported EBITDA of EUR 2.3m), implying a margin of 12.7%. Main reasons
for this were an improved gross margin of 84.9% (+0.8pp yoy) as well as
continuous efficiency gains on the personnel (-5pp yoy) and other OpEx
(-4.5pp yoy) level. Another highlight of the release was the strong FCF of EUR
1.8m, a significant advancement compared to the EUR 1.1m in H1 '23, following
the improved operating performance.

Guidance confirmed. On this basis, management reiterated its FY guidance of
recurring sales growth in the mid- to upper-single-digit-%-range with a
recurring sales ratio of >90% as well as adj. EBITDA of EUR 10-12m. Given that
the lower end only requires 3.4% recurring sales growth (eNuW: 6.1%) at a
11.1% margin in H2 (eNuW: 13.3%).

Promising acquisition. On Wednesday, NFON announced the acquisition of
botario GmbH. The company specializes in the development of advanced AI
solutions for business communication, i.e. voiceand phonebots as well as
livechats. In our view, botario, which is already boasting a strong client
portfolio (Cewe, AXA, Remondis), is seen to be an excellent addition
especially to NFON's contact center solutions, thus creating additional
value for customers and partners. Moreover, the low penetration among the
NFON client base should allow for meaningful synergies coming into effect.
Importantly: botario is highly profitable with an FY '23 EBITDA margin of
30% and sales of EUR 2.1m. Going forward, management predicts 40% annual sales
growth, which appears in reach following a 100+% CAGR over the past years,
with at least stable margins, thus accelerating growth and simultaneously
promoting margin expansion at NFON. While the acquistion price was not
disclosed, it is said to be in the 'lower double-digit EURm' range (eNuW: EUR
15-20m, 24-32x EBITDA). whereby a partial cash payment (60%) and a three
year earn-out period were agreed upon. The cash component will be partially
financed via debt (EUR 5m undrawn credit line) and existing funds (EUR 13.5m
liquid assets as of H1 '24). Further detail on the strategic integration of
botario will be provided during the company's CMD on 11 September. Mind you,
that until closing we are not including the acquisiton into our model.

Besides this, the operational integration of Deutsche Telefon Standard (DTS)
should offer further optimization potential from H2 onwards. Management aims
to fully integrate DTS in H2 '24e, resulting in the elimination of duplicate
structures (i.e. sales, HR, accounting, product development) and hence
creating significant margin upside going forward.

Valuation continues to appear attractive, as shares are trading at only 1.1x
EV/Sales '24e (9.6x EV/EBITDA) despite the significant operating
improvements over the past quarters. The stock hence remains part of our
NuWays Alpha List. BUY with an unchanged EUR 11.70 PT based on DCF

You can download the research here: http://www.more-ir.de/d/30597.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
++++++++++
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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1973557 23.08.2024 CET/CEST

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