On 19 November, NFON will publish its Q3 report. We expect another decline on the top line, while profitability should continue its sequential recovery. In detail:
Top line still declining, but at a slower pace. Q3 sales should come in at € 21.1m (eNuW), down 3.4% yoy, marking a sequential improvement vs Q2's -5.2%. The seat base should have shrunk faster than sales (eNuW: -4% to 622k), reflecting the ongoing simplification of the product portfolio and still muted order intake in the legacy PBX business. Blended ARPU should hold above € 10 (eNuW: € 10.03), as price increases and premium solutions cushion the volume decline. In H1, botario's recurring revenues grew 24% to € 1.0m, while project revenues nearly halved. We expect this shift towards recurring to have continued in Q3, supported by the further productisation of the AI suite, keeping the recurring ratio at a strong 94%.
Q3 adj. EBITDA is seen to come in at € 2.5m (eNuW), implying a 11.8% margin vs 10.3% in H1. Main drivers are first savings from the support restructuring as well as continued other opex discipline. Yet, those cannot fully offset the ongoing sales decline, reflected in the yoy comparison (Q3'25: € 3.0m, 13.6% margin).
With our implied 9M at € 63.6m sales and € 6.9m adj. EBITDA, the FY guidance (€ 84.5-86.0m sales & € 9.5-10.5m adj. EBITDA) is well in reach, although we regard the lower ends of both ranges as the likely outcome, in line with 9M trendsImplied Q4 performance to reach the mid-points would be € 21.7m sales (-6.1% yoy) and € 3.1m adj. EBITDA (14.4% margin or -2.8pp yoy).
Demand appears intact. X-reading the operating performance of Gamma, NFON's most direct listed peer in Germany via Plactel and Starface, shows organic top-line growth in of 5% in H1 with a stated demand acceleration across partner and direct channels. We read that as follows: While demand is intact, NFON's decline is largely self-inflicted, driven by the portfolio simplification and a weaker UK (H1: -12.3% yoy), where Gamma also reports pricing pressure. In our view, the base should hence stabilize once the portfolio clean-up fades, allowing AI-driven ARPU growth to reaccelerate top line growth. Here, NFON should benefit from first-mover effects as most German peers are only now launching AI voice agents (Placetel AI in 2026, sipgate's sona and Pascom's Pia in September), while NFON has been building its stack since the botario acquisition in 2024 and released its own Text-to-Speech service in April. The head start also shows in the numbers, with botarios's recurring run rate of € 2m sales comparing to Gamma's € 600k AI run rate. This makes AI progress the key metric to track, which is why we would welcome dedicated AI KPIs in the company's reporting going forward.
Reiterate BUY, unchanged € 5.00 PT based on DCF.
ISIN: DE000A0N4N52