Q1’25 sales increased by 4.0% yoy to € 22.1m (eNuW: € 22.4m), of which € 20.8m were of recurring nature, implying a 94.0% recurring revenue ratio. Main driver of the increasing top-line was botario, which was acquired at the end of Q3’24. With € 0.8m sales in Q1 (+52% yoy), botario explained about 90% of Q1 growth, thus implying organic growth of only 0.4%. The reasons for the flattish organic sales development are as follows. (1) As planned, non-recurring (especially hardware) sales further decreased by 0.9% yoy to € 1.3m. (2) The migration of DTS clients to the NFON platform was binding resources at partners, that could not be used for seat growth. The good thing is, that 40% of clients were already migrated in the first quarter and the remaining 60% are expected to be so until YE.

Improving ARPU. For the first time since Covid, NFON achieved a Q1 blended ARPU of above € 10 with € 10.02, clearly reflecting the increasing focus on premium solutions, which is seen to drive ARPU and thus margins further going forward.

Despite an improved gross margin (+1.9pp to 86%), adj. EBITDA slightly decreased yoy to € 2.6m (Q1:24: € 2.8m), implying a margin of 11.8%. Main reason for the decline were planned investments in personnel and other OpEx related to AI initiatives. Nevertheless, NFON was able to improve FCF significantly from € 0.2m in Q1’24 to € 1.1m on the back of favorable WC swings.

Guidance confirmed. After a solid start to the year, management confirmed the FY25 guidance of 8-10% sales growth and € 13.5-15.5m adj. EBITDA. Reaching the mid-point would require 10.6% sales growth on average in the coming quarters as well as a 16.3% adj. EBITDA margin. Despite the, top-line wise, slow start this looks absolutely achievable in our view, as (1) the DTS migration is proceeding well, which should already become visible in Q2, (2) lead-times in the core business are already normalizing (3) strategic price increases starting in May as well as new AI products (e.g. voicemail transcription, NIA) gaining traction. Moreover, the tune of quarterly investments into AI and personnel should normalize, thus benefitting margins.

We keep our conviction in the case, which has the potential to become one of the key-players in AI supported communication services, backed by a strong core business. We hence reiterate BUY with a € 12.30 PT and keep the stock in our NuWays Alpha List.