Fonix Mobile has to date, been a solid performer for me since my opening position, the shares at a current £1.61p well ahead of my first purchase.
Whilst it may be tempting to elect to take some of that profit off the table in what are uncertain times, Fonix continues to be one for me to hold on to and indeed, add on any weakness.
The company, as I have explained here in previous coverage operates its own platform in the carrier billing space which effectively enables customers to make payments on a mobile along with interaction via texting or SMS (short messaging service).
Although there are other UK quoted businesses in the space such as Bango and Boku the nature of Fonix services, markets and end customers differ, so the aforementioned should really not be considered as rivals.
Rather, Fonix enjoys strongly cemented relationships with major names such as ITV, BT, BBC and Bauer Media, where it has an extremely high level of repeat income and a highly impressive level of customer retention.
Since coming to the market in 2020, the company has, under CEO Rob Weisz’s stewardship, continued to make positive progress and in keeping with that, delivered an upbeat Trading Update last week.
This led me to catch up with Weisz again yesterday to hear more on the current picture and the plans ahead which look set to see the company continuing to further and extend its reach and offerings.
In the update, Fonix stated that full year 2022 gross profit and adjusted EBITDA are slightly ahead of broker forecasts with organic gross profit of £13.2m representing impressive 16% growth.
Broker FinnCap, is now expecting the reporting in September of full year revenues at £53m with adjusted pre-tax profits of £9.7m giving adjusted EPS of 8.1p.
Additionally, Fonix is committed to paying a progressive dividend as a chunk of positive earnings and to this end FinnCap has pencilled in a dividend of 6.1p rising to 6.6p
next year.
For what is essentially a growth tech play, Fonix pleasingly has that added attraction of what is already a reasonable yield, which is something that eludes others in the sector.
Sure, there are risks, in that with a heavy concentration of some major customers, the loss of one or more would no doubt impact on the business.
However, the company has an enviable track record in that it has never lost a customer and is doing more and more business with these and others, so there seems to be no logic for those to switch to another platform provider, since Fonix appears to be embedded and an integral partner.
Additionally, it is winning plenty of new business and customers too in order to continue on its impressive growth path.
Weisz certainly sounds positive on prospects and with an increased focus on business beyond the UK, Fonix appears to offer plenty of upside to come in subsequent years.
One area we immediately touched upon on speaking was some news released just last Friday 22nd June concerning Fonix, but which did not constitute the company releasing its own RNS.
This relates to Nasdaq quoted Nuvei which is a global payment technology company based in Canada that operates in over 200 different markets.
As the release was made by Nuvei, the importance of the deal has perhaps remained under the radar for Fonix investors or even those keeping a close eye on the company.
Commenting on the deal, Weisz says that Nuvei is one of the biggest payment players in the gaming market and Fonix had been integrating into them over the last six months.
This he says, now enables them to do a number of deals moving forward and provides access to a huge plethora of customers which can only prove positive for the business.
The release was also focused on Eyas Gaming which now, as a result of the Nuvei tie up, sees Fonix enabling Eyas Gaming players to bill deposits directly to their mobile.
Eyas is backed by the Gauselmann Group in Germany which is a leading slots and arcade manufacturer alongside other interests, so the connection for Fonix could provide further opportunities or openings across Europe in due course.
With no RNS on this from Fonix, Wiesz explained to me as to why this didn’t materialise.
He says that doing such deals can be long and protracted and even when the deal is done such as the Nuvei announcement, it then takes time for revenues to build.
To this end, he appears to prefer to opt for the policy of announcing positive news and outcomes on the back of the delivery on numbers and meaningful progress, such as last year with the Children In Need performance.
To emphasise the point, he says that there have been one or two deals in the past that haven’t progressed as quickly as initially hoped for, whilst in contrast, recently they have done a deal that has doubled in terms of their expectations which he says is fantastic.
So, given the nature of such deals and tie-ups, it is understandable that caution and conservatism is the order of the day and Weisz acknowledges that whilst they are perhaps a bit quiet on the RNS and news front, he would rather surprise and delight.
Further news aside the Nuvei agreement has also emerged relating to expansion into the Republic of Ireland, which Weisz says they had been working on for about a year.
This concerns a deal with the media giant Bauer which will see Fonix running all of that company’s interactive services across their radio portfolio in that country.
The CEO adds that the technical work is a tough one, but they have now concluded putting in the connection with all of the mobile operators in Ireland.
They actually went live with that about a month ago he says and it is great as it is something of a blue print for how the company can go International.
And in terms of the International expansion, we touch upon Austria which was mentioned last year as the first European opportunity for the business.
Weisz says that they are live there with a couple of clients and integrated the connectivity, but that they then have to rely on the ramping up from those customers which he says are in two completely different sectors.
Although he says that this is perhaps an example of things taking longer than at first envisaged, he is expecting one of those customers to now ramp up in the next six months.
Aside Austria, Fonix is also in the first throws of getting connectivity sorted in Germany as they have a couple of clients that are interested in that market, so progress is being made there too.
The UK does however remain high on the agenda says Weisz and they are continuing to win new business here and the trading direction remains good he says. But, Internationally his vision is to see 20%-30% of business being generated from overseas in the next three years or so, which will help them diversify and operate in a much bigger addressable market.
One question that has to be asked though is whether lower discretionary spend in the current economic climate could impact in terms of charities and the likes of Children In Need.
Weisz accepts that they would be foolish not to be wary of this as people across the space are naturally concerned. However, he adds that at present he hasn’t seen any change at all and points out that with donations, people do have options on the amount they wish to commit which still all needs transacting and alongside this, Fonix is he says, pretty historically resilient to that kind of thing.
Another area worthy of a mention for the company is ticketing and e- Mobility where the CEO says that they now have a channel into transportation.
A couple of deals have already been done across transportation and he sees this as a growth market over the next five years or so. Expanding, he adds that busses, tolls and car parking are all ripe for carrier billing with the ease to pay and it is another area they
continue to focus on.
I should be catching up with Rob Weisz again when the results are announced in September and will add more at that time.
For now though, FinnCap is already forecasting numbers for next year which sees revenue expected to increase to £58.4m with adjusted pre-tax profit of £10.6m giving EPS of 8.8p.
With net cash on the balance sheet and a dividend as an added attraction the forward PER of 18 does not look expensive, particularly as the 2023 forecasts do look on the conservative side.