Vertiseit AB (publ)

technical delay. Welcome to this presentation of Vertisit's Q2 interim report for 2024. My name is Jonas Lagerqvist. I'm the deputy CEO and CFO of the company.

And I am Johan Lind. I'm the CEO of Vertisit.

So very welcome to this summer session or presentation of the interim report. We will. Today we will go to go through the quarter highlights in the report, we will have a briefing from the grass fish summit, which was performing in Vienna during the spring. And we will also look into look into the company's growth strategies and long term targets. During the presentation, you can use the Q&A function to submit questions. And you can also use the raise hand function if you would like to speak. And we will let you in during the Q&A session at the end of the presentation. But today's key report, we can report the 50th straight growth quarter in ARR. So we've been growing sequentially for the last 50 quarters, which is a performance of which we are very proud and happy. So since 2012 in this diagram, we have an annual growth rate exceeding 50%. Yeah, and the dotted line in the diagram illustrates the current long-term goal, which is ending in this year end, the end of 2024. where we are to reach 200 million Swedish crowns in ARR. As we can see, we are in line and on track reaching this, even though it will be a close call during Q4.

Great, Jonas. Looking into some highlights from the Q2, I think one of the highlights from a strategic perspective is that we have had a lot of growth outside the core territories like the Nordics and the dark region. So we have had a really nice deal flow or opportunities from partners both in Middle East, in North America, UK. So that's really, really nice. We have also landed customers actually in both North America and Middle East. An important strategic investment that we do right now is the IXM grid. It's the unified backend for GrassFish and Dice. And Lisa who's heading the IXM grid has done a really nice job mapping out the full picture to cover and to prioritize among the needs between GrassFish and Dice. And we are they are really showing a really strong momentum in the product development. We have also had a capital markets day where we present the new long-term goals, which I think most of you are aware of, and we will get back to that. But I think they've been perceived really well from the market and look forward to aiming for those after this year. And we have also done a director chair issue to Current and the new investors. And I've had the opportunity to welcome Andra AP Fonden, Bonnier Capital, Nya Partners, alongside with existing investors that have been with us for a while, like Alkur, Grenspecialisten, Coal Capital, and Nordea Funds. So we are in a really strong position now, and I think Jonas can tell us a little bit how that has affected our balance sheet.

Yeah. So during the quarter, we somewhat ramp up the ARR growth, coming out at 4.9% during the quarter, meaning that we grow compared to last year, just above 21%, which is somewhat more than last quarter. We're also happy to report an EBITDA profitability of 22%, which is a little bit lower than the last quarter, but Q2 is also traditionally a more cost-heavy quarter. So the directed share issue that Johan mentioned did contribute with around 87 million in liquidity, taking the company to a net cash position. And that we now at the end of the quarter have around 140 million Swedish crowns in available liquidity, bringing us into a very beneficial position considering opportunities going forward. And the really important qualitative measure, revenue retention for the year, the net revenue retention, basically meaning at what rate we grow on existing customers, is 113% annualized. So now when we've for a little more than a year have been reported the full SAS metrics for the group, we can now start to actually look at the development and draw conclusions out of the historic performance. So we're illustrating this in the report and highlighting some of the most important SaaS metrics, being the ARR development, the net revenue retention, and the average revenue per brand. So in the ARR development, we can actually see, okay, what's the gross growth of the ARR? What's the churn during each and every quarter? And what is the net growth? Which is great to actually analyze the growth the development of our SaaS revenue. And the net revenue retention, of course, it is like a very important qualitative measure due to the fact that it only looks at our existing customers and does not take any new customers into account. So by that we can evaluate how we take care of our customer, how we bring value to our customers and give them incentives to actually grow with us. And the average revenue per brand is a good indication of us pursuing our strategy, growing on large customers, making more revenues on large customers. And in terms of our churn, it is concentrated on the smaller customers in our customer base.

Great. And I think that also shows how we align with our strategies, our priorities. So looking into priorities for the year, one of the key priorities is to strengthen the partner network. And as we said, we see an increased share in the opportunities flow. from partners, both in core regions like Dutch and Nordics, but also in North America, for example. We expand with existing brands into new markets and focus on on actually building a partner ecosystem that can support that growth when there is no, on those brands where there is no global concept is really important. And of course, as I mentioned, with DXM Grid and the big focus we have there to realize synergies that we have within the group to unify the platforms between GrassFish and Dice is, of course, really important on the backend side. And financial priorities is quite clear. I think we all have seen that we have focused a lot on cash flow profitability since last year, and we see significant improvements on those priorities as well. So altogether, I think we have a strong position, but we also develop according to our priorities. One of the key activities that we perform in the group every year is the GrassFish Summit. Actually, in April, we had the summit this year in Vienna. We gathered 200 partners and customers for three days at Könbrunn. Why do we prioritize to arrange such an event? It's basically to put GrassFish as the thought leader in the industry. build a really strong partner ecosystem around that. And it's really cool to see that OnStage is some of the best integrators we have in the world together with really strong brands. And next year, we actually already have booked the World of Volvos. It will be in Gothenburg in Sweden next year. We also have communicated that Anne has asked to step down as the CEO of GrassFish to pursue new external assignments. And Alma said that we have been really impressed by Anne. She has done a tremendous job for the two and a half year that she's been with the company. We hope it will be longer actually. And especially impressive have been the work with the integration of MultiQ and the improvements that we have seen on efficiency and operational excellence in GrassFish the last year, where she had been one of the key contributors. And we have now initiated a new process to find the next CEO for the next part of the journey to expand GrassFish in line with our strategies and new goals. And that process is open and we hope to appoint a new CEO during Q3. That's the ambition. And in the Capital Markets Day, I think most of you listening to this call actually follow the Capital Markets Day. If you don't, you can find it on the website. It's recorded. I think it's really... For those of you who want to deep dive into our strategies or into our operations or get the flavor of grass fish versus dice, etc. It's really nice content altogether there. But of course, the key... message that we wanted to send during the capital markets day was to communicate the new goals for the new goal period. So the current goals are valid until the end of this year and the new goals represent the goal period 2025 to 2032. And it's quite straightforward. We want to continue to grow in the pace that we do, meaning that we will reach 1 billion in ARR by 2032. We want to improve the profitability and start to measure profitability, not only as EBTA, we want to measure it as cash EBTA so that it actually reflects the cash generation of the business. So 35%. And so the financial target is like the goals that we need to fulfill, not in 2032, or it's the targets that we want to fulfill all the time. And it's to grow more than 20% per year, to grow profitability even more per share, because in the end of the day, that's what deliver shareholder value. and that we continue to have really happy customers so that we can have revenue retention exceeding 100%, which is really the quality mark of our business. We think this is possible due to that the market is huge. So if you look into the 250 top brands in the world in the five core segments that we have, they operate 1.5 million stores. It's 50 million licenses if you have an average of 10 licenses per store. And that means that our 150 plus licenses is approximately 1% of the core addressable market. And that's only like the tip of the iceberg. So that's not the problem. But to be able to achieve this, we also need to follow on our growth strategies. So we need to... focus more on scalability, meaning that be even better in go-to-market strategy when it comes to partnerships. We need to align on one backend so that we actually build one platform instead of two or even more in the future when we acquire more companies. And we also build like one management system, one ERP. And To be able to have a better global penetration, we of course focus on the partner community, but also going upstream. So we have good partnerships with technology partners, integrating partners, but the next step is to be much, much closer to the consultancy partners that are on the more strategic level when it comes to the customer journey, but also to implement the platform into the digital ecosystem of the customer. We focus on top-tier customers. As Jonas said, we also follow that really closely. What is the average revenue per brand, for example, so that we know that we grow on large brands that can deliver scalability. And we will also evaluate, of course, acquisitions. And I think the majority of the growth will come from organic growth, but it will be fueled by acquisitions. And what we can see now is that there have never been a better deal flow. So we evaluate currently. potential acquisitions in both nordic and in north america and in south of europe so hopefully hopefully we can land something in in during the year but we have no no rush as you see the company is growing growing on We have a net cash position. We are profitable. We grow organically by 20%. I think we are in a really good position and can be picky about what we choose to go forward with. And that's basically the update for now. So we are really happy that you checked in to this earnings call. I hope you enjoyed the report and glad that you're on this journey together with us with the vision to connect the world of retail and to become the global number one IXM platform company. And that's for today, right?

Yeah, so now we open up for Q&A. So we've had some questions submitted that we will do our best to answer. So a question, could you explain the seasonability in cost of staff and why is it sequentially higher in Q2 versus Q1? And I would say that that's a that's That's partly a consequence of that like normal salary revisions take part during the second quarter and there are some retroactive payments done in the quarter depending on like labor law for different geographical markets and so on. So that's the main reason for the cost of staff being a bit higher in Q2 than Q1.

But normally the big shift is towards Q3 where it normally is lower.

Yes, yeah. Is the cost of share issue recognized in the income statement? In that case, in which row? Yes, the cost of the directed share issue can actually most easily be found in the cash flow statement or in the equity statement, where it is separately reported. So you can find it in the statement. And it was about 3.8 million. And... Okay, a profitability question. Profitability increase compared to last year, but lower than last quarter. What can we expect for the coming quarters?

Good question. Yeah, normally Q2 tend to be a little bit cost-heavy quarter. For example, in this quarter, we had the Grass-Fish Summit as an example. And if you look at the trends, you can say that, so I don't say too much, that Q3 normally is a stronger quarter. And the goal for the year is still to reach 30% EBITDA. So I think that's all I can say for now. But as you're all aware, we have focused a lot and continue to focus on improving profitability in line with the current goals. And it's also the path to deliver on the coming goal period.

And we have a question from Fredrik Nilsson, analyst at Redeye. See if you could join the call.

Hi, thank you. Hi, Fredrik. I want to start with the consulting revenue, perhaps coming in a bit soft and declined somewhat relative to last quarter. What is your take on that? Any implications on growth going forward?

Yeah, and that's correct. I think it was... This was not a really strong quarter when it comes to the consultancy revenue. And it's basically that we have a limited set of resources. And during this quarter, we had a lot of initiatives on on potential new customers and POCs, et cetera, and some internal migrations from platforms that has been acquired to new platforms. So that was basically the answer to that question that a lot of resources have went into both sales initiatives and activities that is on our own expense okay i see so so there's like no doesn't tell anything about the market demand which you talked about i think it was one year ago actually actually there has been more demand that we have been able to fulfill in consulting during the quarter okay i see and

The next question. I mean, you have had a lot of interesting things going on in the quarter. So I understand why you focused on them in the CEO letter. But I mean, I'm interested in the market outlook, which you typically talk about in the CEO letter. So perhaps you could give us.

I think it's really stable. As you said, the growth pace that we are in right now is actually on record high. So we are above 20%. And usually I say that that's when we perform good. We grow at 20%. I think we basically think that we are on a stable level to continue to develop in line with what we delivered in this quarter. The pipeline looks promising. There is more tenders than we have seen before, especially compared to last year. That's all I can say.

Okay, interesting. And last question from me. Could you remind us of your initiatives in the US market? And are there any news there?

Yeah, actually, there are some news. We have had some customer events together with partners in the US market with GrassFish. We have done a lot of We'll start to roll out very heavily with dice on the scientific games deal that we signed last year. And basically there is more and more a higher and higher deal flow. And we are in some POC projects now on the GrassFish side. Hopefully we can start telling a little bit about in next quarter. At least that's our ambition.

That's all for me. Thank you very much. Thank you, Fredrik. Thank you, Fredrik. And a question regarding acquisitions. You mentioned that you are now ready for acquisitions. Can you tell us where you are in this process and when to expect acquisitions to be announced?

Of course, I can't give a straight answer, even if I would like to. But what we have done is obvious. We have done a direct and share issue to strengthen our financial position so that we are actually now in a net cash position. And that gives us a lot of room to perform acquisition. And of course, that was the purpose with the direct share issue. Why did we do that in front of an acquisition? And it's actually that the number of opportunities that we see in the market now is really ramping up. And we want to be in a position to act quick if needed. And if we see an acquisition the coming like six months or 12 months, I think the likelihood is pretty much the same on a six month period to a 12 month period, I would say.

Yeah. I think that was all the questions for today. It's holiday season and many people are maybe enjoying their time off at this time of year. So we will meet in this forum again during the autumn when we publish our Q3 report. And thank you very much for taking the time to listen to us today. Have a great summer. Thank you so much. Bye-bye.