Vertiseit AB (publ)

And welcome to this earnings call from Vertisit. We have today, yesterday we have published the company's interim report for the first quarter in 2025. My name is Jonas Lagergigvist, I'm Deputy CEO and CFO of the company. And my name

is Johan Lind, I'm CEO of Vertisit.

So yesterday, in addition to holding the annual general meeting for 2025, we also published the company's Q1 report. So here's the first page of the report and we can report an ARR of 281 million Swedish crowns for the quarter. And more on that topic in a few minutes. The agenda for this earnings call is that we will first browse through the financials for the quarter. We will highlight some events during the quarter. We will also give an update on where we are in terms of the integration of the visual art acquisition. We will give some more flavor to the IXM grid, the group's joint platform backend. And in the end, we will open up for a Q&A session. So please use the function in the webinar to post your questions and we will answer them at the end of the webinar.

Great, thanks Jonas. And for those of you who are new to the company Vertisit, we are a SaaS company offering an in-store experience management platform to leading brands and retailers. And the aim of the platform is to orchestrate all digital touch points in store to bridge the gap between the customer journey online and offline or digital and in personal interactions. Looking into the financials, as Jonas said, we reported 281 million in ARR. And if you look at the chart here, the latest two quarters, of course, in Q4, we added the ARR from the visual art acquisition. And I'm really proud that we have managed to keep the pace of organic growth, even during this process. So what we can see is in the report is that the growth rate is 19%, right? Yes,

compared to last year in constant exchange rates.

Yeah, and of course we have a little bit headwind when it comes to the Swedish Krantz that will strengthen quite heavily, like 10 percentage points in a quarter. And as more than half of our revenue is from non-SEC currencies.

And compared to last year, when expressed in constant exchange rates, we grow our ARR by approximately 67%, including acquired ARR. And out of this growth, 19% is organic. So we close the quarter at 281 million. Yeah, as we can see on the profitability levels, both EBITDA and cash EBITDA is lower than Q4. And just as we have guided for previously, this is all according to our plan and is affected by visual arts. Different revenue mix and different profitability profile basically. So, and during the quarter, we have also welcomed a new investor, AFEL investment group, French institutional investor, which affects our net debt. So we decrease our net debt to 140 million compared to just about 200 in the last quarter. So, and both the profitability, of course, and the cash flow for the quarter is somewhat affected by both the currency headwind and also the integration of visual art. If we go into the sauce metrics, we have quite strong ARR growth during the quarter. And if you annualize the growth during the quarter, we see that we are like above 20% on yearly basis. And we can also see that we have a stable development of the net revenue retention and also growing the average revenue per brand. So, yeah, so we're financially, we are happy with the growth that we perform over the quarter. And the revenues and profitability is according to our plan.

Great, thank you, Jonas, looking into some highlights from the quarter. We press release the KFC win in UK. It's a visual art win, 1,000 restaurants, 5,000 licenses that we will roll out during the year. We have signed an agreement and have initial orders from Caffe Nero. They run 1,000 coffee shops. The rollout might take between two to three years before it's fully penetrated, but it's a great win. Shell Netherlands is won by Pixel Inspiration. Our partner for Dice and also ICI Paris with 200 stars, just to give you a little bit of names around to understand what's in those ARR figures. Most importantly is of course how the visual art integration is performing and it progress exactly according to plan. It's according to our budget, the internal budget. It's according to our internal time plan. And as of now, the integration project is completed in regards to group organization, group management system and processes in place, and also the group IT platforms. So now all main processes in visual art is run on the ERP stack that we have in the group. This is a quick overview how it looks like. So in Salesforce, for example, we now run the full marketing automation, the whole marketing activities that are data driven is run on Salesforce. And the same with support, the same with sales and CPQ, et cetera. I will not walk you through all of this, but it covers basically all of our operations. So we are super happy with that. And as Jonah said, what we see now is of course that our profitability level in percentage decreases as visual art have a slightly different revenue mix. So post integration focus now. The first off is in Q2, we will certify, re-certify visual arts according to ISO 27900 and also SOC 2. So they are in line with the whole group. We will then start to realize the operational synergies. It's a focus for Q2 to see how can we realize the synergies now. And then the third and the most important thing is of course also to tweak like the revenue mix according to our strategies, meaning putting more of systems and consulting into the hands of partners basically. We got a lot of questions about the IXM grid, which is the foundation in the tax stack. And we decided to give you a little bit of a look behind the hood, how it actually works. So as you all are aware, we have the business brands, DICE offer the InstaExperience Management Platform for partners. We have Grassfish, which work side by side with partners. And the offering is platform and consulting expertise. And then VisualArt that offers like in-store concepts, especially targeting the food and beverage as a specialty. The VisualArt development team are now joined the grid team and the Grassfish IXM team. And the IXM grid supports both the DICE platform and the Grassfish platform. How it works like this, we have a unified core that's running on a microservice architecture on Azure where we have core building blocks and what we do, it's audience management, it's content management, it's location management, et cetera, that are shared. We have a shared design system that can support our multi-brand approach going forward. We also host all of the product specific features in a unified way. And then we share the play out layer in the bottom, you see IXM player, where we need to integrate to all operating systems basically, to be able to run all of the in-store tech. So Tizen is the internal platform for Samsung. If you run on a Phillips screen, for example, they use an Android implementation. WebOS is for LG, et cetera. And lots of other things are going on, but it's a huge undertaking to support like any device in this space. And of course, this is a core of our strategy is to do this once and share it with the current two platforms, DICE and Grassfish, and of course also future platforms that we might take in in our acquisition strategy going forward. Great. Now I hope you have a lot of questions for us, and we're happy to answer as many as possible.

Yeah, and we have Frederick Nielsen analyst at Redeye that wish to ask a question.

Hi, Frederick. Good morning, Johan and Jonas. Thank you. And I want to start with a quite high increase in average recurring revenue per brand quarter over quarter. Could you elaborate a bit on that?

Yes, that has a quite simple explanation. We have, I mean, in the group, we have of course, a lot of brands with just a few licenses. So what we have done is to define a brand as a brand that has like more than five licenses so that we can actually consider them like a truly active customer. So that means that the number of brands in our definition has decreased. But if you look in the diagrams, the historic numbers are also recalculated according to this principle. So it's a more correct way of describing how many active customers we actually have.

And the result of this is that active brands are just about a thousand brands. With this new definition.

Yeah. Okay, great. And also capitalizations of R&D came down quite a bit compared to last quarter. I mean, what is a reasonable level going forward with visual artists as a part of your group and what's driving the decrease?

I would say that the level that we see in Q3 and Q1, that could be in some regards, like the level that you can expect being like the run rate going forward.

And as we also start focusing on cash EBTA, cash EBTA is what we track going forward. So it should not affect our key metrics.

I see, okay. But I mean, there's no big difference in your R&D investments. Or is it anything like that as well?

No.

Okay, great.

So it was, so Q1 is quite representative for the run rates.

Okay, great. And as you touched upon, I mean, FX is getting of greater importance in the current environment. So could you give us some kind of rough FX split for on pro forma figures, including visual art?

Yeah. So in rough numbers, just a little bit more, like 50 to 60% of the group's revenues are in like non-Swedish crowns. And like normally we have quite like natural hedge in terms of FX as we have like costs and revenues more or less in the same currencies. But when the movements are a little bit bigger, the effect is mostly come like derived from the source revenue because they are like high margin revenue, which are like highly affecting profitability.

And just to give a little bit of flavor that normally we don't calculate and reasoning around the FX implications at all, to be honest, but it was a huge shift, like a 10% change in the quarter, of course makes a difference. And I think if to give like some sort of like 3 million headwind.

Yeah, profitability wise, approximately 3 million for the quarter. So of course it affects the comparability between quarters when the shifts are this material.

Okay, thanks. And if we were to see significant tariffs on displays in the US market, what impact do you believe that will have on the demand for your solutions? I mean, you're not selling the displays, but still it's an important part of the overall solution.

Yeah, and I don't think it will be the case. Of course, they don't produce any LCD displays in the US. And I don't think it long-term will be the case that they accept to have 100% tariffs on those displays. As of now, our exposure is pretty low. Like average, let's say 5% or so. But of course it's a market where we are focusing on to grow. So it might affect the growth rates and time plan for some projects in the US market, but it doesn't affect like a current business.

Okay, I see. And last question from me. Could you tell us something about the KFC deal? How much of the licenses were active already in this quarter? And also if you could give some insight regarding other big QSR customers coming from VisualArt, how long have they come in their rollouts?

Like the rollout, the big start of the rollout will be in Q2. So it's really just the initial implementations that have been done. So it has had no significant impact on Q1 for the KFC deal. In regards to other QSR brands, we are growing according to plan, but I have no exact figures on how much or how many licenses each brand have grown in the quarter.

Okay, thank you very much. That's all for me.

Thank you, Fredrik. Thank you, Fredrik. We have one question related to the CEO comment in the report where we elaborate on acquisitions going forward. And asking us to tell us a little bit more if there is a change in M&A strategy or not.

There is a slight change in M&A strategy. And if you look at the last three acquisitions that we made, all of them have been really large compared to where we have been as a company in all those situations. Like the grassroots acquisition had a huge impact on the group. So did MultiQ and now VisualArt brought in like 130 people into the team. Now, as we have the grid, the ERP structure, the management system in place, we now also look to a phase where we can take on smaller acquisitions on more of like a roll up tactics in relation to that. And that's also due to that we have strengthened our financial position and we also generate a stronger cash flow and expect to do going forward. So we can do more with our own capacity than what had been possible basically the years that passed. Do you want to elaborate on that Jonas?

But to conclude, we have a proven effective M&A process and with all of these, with like the platforms and the foundations in place, we think that we can leverage on that recipe in order to actually also grow with the smaller acquisitions and not only focus on the transformative acquisitions that we performed like the last three or four years. Next question is that, okay, profitability is lower in Q1 than in Q4. What can we expect for the rest of the year?

Good question. Like as we started to guide, just after the acquisition of VisualArt, we said that this will have a negative effect in Q1 and Q2. And in Q3, we want to have like the profitability on the revenue streams back on track so that each individual revenue streams are in line with what it was like, SOS consulting systems. And then the work starts as of now, of course also to look at the cost synergies and start to change the revenue mix according to our strategy with focus on SOS as a larger portion. So that is the guiding that we give. You can expect the, so you can expect the revenue streams to be back on track in Q3 and then issues the progress on both costs synergies and a shift in revenue stream, revenue mix as we go.

Great. That was it for today. So thank you very much for listening in and have a nice weekend. Thank you.