NFON will release Q3 figures on 21^st November. Overall, we expect a solid release including further sequential improvements on top- and bottom-line. In detail:

Q3 sales are seen to increase 5.4% yoy to € 21.6m on the back of imposed prices increases as well as continuous seat growth. Again, we expect an increasing share of recurring revenues of 94.6%, implying recurring revenues of € 20.4m. On the other hand, non-recurring hardware sales are seen to remain muted in Q3 with € 1.2m. With this, we expect the ARPU to come in at a solid level of € 9.94. Yet, we expect a further ARPU improvement going forward, driven by (1) the up-selling of premium solutions as well as (2) the consolidation of botario effective with Q4.

On this basis, Q3 adj. EBITDA is expected to come in at € 2.9m (+10.3% yoy), implying a 13.3% margin. This should be partly driven by an improved gross margin but mainly by the imposed efficiency measures in personnel (eNuW: cost ratio down 1.9pp vs FY ’23) and especially sales & marketing (eNuW: other OpEx -1.7pp vs FY ’23). Also, FCF should again come in strong with € 1.5m (eNuW).

Against this backdrop, management should confirm the FY ’24 guidance, targeting recurring revenue growth in the mid- to upper single-digit range (eNuW: +5.3% yoy), adj. EBITDA of € 10-12m (eNuW: € 11.3m) as well as a recurring revenue ratio of 90+% (eNuW: 94.3%). This should be easily achieved, in our view, given 9M ‘24e adj. EBITDA of € 8.5m as well as sequentially improving recurring revenue growth so far in 2024.

Going forward, we expect the integration of DTS to offer further upside as well as the consolidation of newly acquired AI-subsidiary botario. Here, we also expect strong synergies to arise in the form of cross- and up-selling.

Overall, the company remains excellently positioned to grasp the highly promising opportunities in the European market for integrated business communication, in our view. 

As valuation remains attractive at 8.4x EV/EBITDA ‘24e (5.5x ‘25e), wer reiterate BUY with an unchanged PT of € 11.70 based on DCF. NFON also remains one of our top-picks as part of the NuWays Alphalist.