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

Classification of NuWays AG to NFON AG

Company Name: NFON AG

ISIN: DE000A0N4N52

Reason for the research: Update

Recommendation: BUY

Target price: EUR 8.3

Target price on sight of: 12 months

Last rating change:

Analyst: Philipp Sennewald

Q1 in line with muted expectations

Yesterday, NFON published its Q1'26 figures. Revenue and profitability came

in soft, as widely expected given the subdued macro backdrop. In detail:

Another transitional quarter. Q1 sales were down 2.3% yoy to EUR 21.6m (eNuW:

EUR 22.4m). This was primarily attributable to continued seat erosion, with

the base declining 3.1% yoy to 641k, as weak order intake and selective

customer losses in the legacy PBX segment more than offset growth in AI

solution. Importantly, the revenue mix held up well with recurring revenues

remaining strong at 93.8% of total, and blended ARPU edged up to EUR 10.04

(Q1'25: EUR 10.02), reflecting the positive mix shift towards premium and

AI-based solutions as well as prior pricing measures. What is particularly

notable from the earnings call are the geographic differences: while Germany

and the UK remain under pressure, Austria and Italy are showing

significantly positive trends in both seats and revenues, suggesting the

weakness is not broad-based.

Margin compression is a deliberate investment, not a cost control failure.

Adj. EBITDA of EUR 1.8m (eNuW: EUR 2.6m) was down 32% yoy, with the margin

compressing to 8.3% (-3.5pp yoy). The gap is explained by two concurrent

forces. One being the declining top line and the other an intentional

step-up in personnel costs (+3.9% yoy) as NFON continues to build out its AI

and product development capabilities under the NFON Next 2027 programme. In

our view however, the company is well equipped to absorb this investment

phase given a solid liquidity base and continued FCF generation (EUR 1.6m in

Q1). Further, we expect communicated cost measures to become increasingly

visible from H2 onwards.

AI traction is building. Customer Engagement and Intelligent Assistant

together now account for c. 10% of sales, both growing at more than 10% yoy.

This is a meaningful step up yet underappreciated by the market given the

headline seat decline. The productive release of NFON's own Text-to-Speech

AI service, built on the botario team's expertise and featuring EU-only data

processing, is a further tangible proof of innovation speed and

technological independence. While management was explicit on yesterday's

call that growth is expected to return from Q3, a broader monetisation of AI

solutions remains challenging, which is however not NFON specific but

observed across the industry. Q2 is expected to remain muted, with H2 likely

showing first tangible effects. We view FY26 as transitionary year, with the

commercial and financial payoff of the AI build-out to materialise

meaningfully from 2027 onwards.

FY guidance confirmed at low-to-mid single-digit growth and >EUR 12m adj.

EBITDA. Growth looks reasonable despite the weak Q1 based on an expected

normalisation of order intake in the partner channel, and the progressive

contribution from AI-driven upsell as penetration of the existing customer

base deepens. The EBITDA target requires a meaningful H2 step-up, which we

regard as ambitious, yet achievable.

Valuation remains attractive at 5.3x FY26e EV/adj. EBITDA for a cash

generating business with strong recurring revenues.

BUY, EUR 8.30 PT.

You can download the research here:

https://eqs-cockpit.com/c/fncls.ssp?u=66dc0278595cc51e25f7bea0e4a6bc15

For additional information visit our website:

https://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

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