On Wednesday, NFON held a virtual Capital Markets Day, where management provided investors with insights into the recent botario acquisition and the associated upcoming AI roadmap as well as a financial mid-term guidance. Here are the key takeaways:

Well-filled AI pipeline: CTO Andreas Wesselmann gave a sneak preview into NFON’s upcoming AI projects. This includes among others a comprehensive AI customer assistant, which is able to provide tailor-made solutions based on customer needs as well as a chat bot solution with live sentiment analysis, categorization and summarization, which is seen to be a perfect fit for NFON’s contact center solutions. Regarding the go-to-market, the botario resources should  speed-up the development process, which is why we expect the new solutions to be available over the course of 2025e. In our view, this should serve as a competitive edge in the highly fragmented market for integrated business communication and thus drive ARPU’s and top-line growth going forward.

Up- and cross-selling potential from botario acquisition, especially for larger customers in NFON’s partner portfolio. Moreover, botario’s is opening new customer segments to NFON, given its strong position in highly regulated industries like health or insurance.

DTS integration in full swing. Management confirmed that the synergies arising from the integration of Deutsche Telefon Standard should become visible soon, as the company is currently eliminating duplicate structures in sales, marketing, HR, etc., which should allow for further profitability improvements going forward.

Mid-term outlook: While the FY ‘24e guidance was confirmed, CEO Heider also provided a mid-term outlook. Until 2027, the company aims to achieve a double-digit top-line CAGR with recurring revenues accounting for >90% of sales as well as an EBITDA margin of >15%. In our view, this should be well achievable given the existing optimization potential as well as an improved sales mix in connection with the new AI products. Moreover, management also provided targets for botario, which is seen to grow at a >40% CAGR going forward and achieve EBITDA margins of >30%.

Reiterate BUY with an unchanged € 11.70 PT based on DCF.