NFON — Benefits of strategic plan seen in FY24 results

NFON (NFN)

Last close As at 18/04/2025

EUR6.85

−0.10 (−1.44%)

Market capitalisation

EUR114m

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Research: TMT

NFON — Benefits of strategic plan seen in FY24 results

Consensus expectations of a new phase of meaningful returns at NFON are supported not only by the attractions of an under-penetrated European market but also by the potential boost that AI functionality promises. Consensus forecasts are further underpinned by management’s robust FY25 guidance. The key to unlocking this potential will be management’s continued focus on efficiency and new product implementation. If executed well, the medium-term upside for the shares could be meaningful.

Written by

Dan Ridsdale

Head of Technology

Telecoms

QuickView

17 April 2025

Price €6.95
Market cap €115m
Net cash/(debt) (m) €(9.8)m
Price Performance
Share details
Code NFN
Listing XETRA

Shares in issue

16.6m

Net cash/(debt) as at 31 December 2024

€(9.8)m

Business description

NFON is a Germany-based company providing cloud-based voice solutions (cloud private branch exchange) to both domestic and international customers principally in Germany, Austria and the UK.

Bull points

  • Modest unified communications as a service adoption to date in the German market suggests robust demand.
  • Significant high-margin recurring revenue streams.
  • Growth outlook enhanced by investments in AI capability.

Bear points

  • Price pressure in cloud PBX market.
  • Potential competition from larger technology vendors.
  • Modest organic cloud PBX seat growth.

Analysts

Dan Ridsdale
+44 (0)20 3077 5700
Ross Jobber
+44 (0)20 3077 5700

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Financials

NFON released full FY24 results following the preliminary announcement in February. Total revenue was up 6.1% (5.2% organic) to €87.3m, of which 92.9% was recurring revenue. The total number of seats increased by 1.4% to 665,449. The average number of employees fell by 6.8%, reflecting efficiency gains. Adjusted EBITDA increased 48% to €12.3m (guidance: €10–12m) and FY24 free cash flow was €6.5m (FY23: €1.0m, FY25e €7.5–8.5m). FY25 guidance for revenue growth is 8–10% (double digits in the medium term) and FY25 adjusted EBITDA guidance was €13.5–15.5m, with a medium-term margin target of more than 15%. Operating cash flow increased to €9.4m (2023: €6.8m).

Strategy

The German cloud private branch exchange (PBX) sector is promising given the current low levels of penetration (only 21.1% of German PBX), although growth rates remain modest (mid-single digit) and average revenue per user trends are challenging. That said, growth will continue to be driven by an ever-present customer focus on efficiency and by using business communications as a driver of positive customer experience. Positioning AI at the centre of its offering allows NFON to play an important role in satisfying both of these key customer requirements.

Valuation

Peer group multiple analysis suggests that the shares could be up with events in the short term. However, there is significant potential upside from the enhanced margins that should come from NFON’s stable of in-house developed solutions, particularly those harnessing the potential of AI functionality. For this reason, the shares could appreciate over the next 12 months as the results of current investments continue to feed through into the P&L.

Source: NFON, LSEG Data & Analytics. Note: EBITDA and EPS stated after adjustment for amortisation of acquired goodwill and extraordinary items.

Consensus forecasts

Year end Revenue (€m) EBITDA (€m) EPS (€) DPS (€) EV/EBITDA (x) P/E (x) Yield (%)
12/23 82.3 8.4 (0.05) 0.00 14.9 N/A N/A
12/24 87.3 12.3 0.06 0.00 10.2 115.8 N/A
12/25e 94.4 14.1 0.24 0.00 8.9 29.0 N/A
12/26e 103.4 17.0 0.32 0.01 7.3 21.7 0.1

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