Vertiseit AB (publ)

And welcome to this earnings call from Vertisit. Yesterday we have published the company's interim report for the first quarter in 2025. My name is Jonas Largeqvist. 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, 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 touchpoints in-store to bridge the gap between the customer journey online and offline or digital and in personal interactions. And, uh, looking into the financials, uh, we, as, uh, Jonah 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 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 crowns that were strengthened 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 EBTA and cash EBTA is lower than Q4. And just as we have guided for previously, this is all according to our plan and is affected by the by visual arts, different revenue mix and different profitability profile basically. During the quarter we have also welcomed a new investor, Eiffel Investment Group, a 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. 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 arts. 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. 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 restaurant, 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 a thousand 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 stores. 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 progresses exactly according to plan. It's according to our 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. And this is a quick overview how it looks like. So in Salesforce, for example, we now run the full marketing automation, all 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 Jonas 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 of the first office in Q2, we will certify, recertify, visual arts, according to ISO 27,900 and also SOC 2. So they are in line with the whole group. We will. We will then start to realize the operational synergies as 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 the revenue mix according to our strategies, meaning putting more of systems and consulting into the hands of partners, basically. We get a lot of questions about the IXM grid, which is the foundation in the TAC 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 in-store experience management platform for partners. We have GrassFish, which work side by side with partners and the offering is platform and consulting expertise. And then Visual Art that offers like in-store concepts, especially targeting the food and beverage as a specialty. The visual art development team have now joined the grid team and the GrassFish IXM team. And the IXM grid supports both the Dice platform and the GrassFish platform. And it works like this. We have a unified core that's running on a microservice architecture on Azure where we have core building blocks in 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 playout 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 Tyson is the internal platform for Samsung. If you run a Philips screen, for example, they use an Android implementation. WebOS is for LG, etc. And lots of other things are going on. But it's a huge undertaking to support 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, Dyson GrassFish, and of course also future platforms that we might take 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 Fredrik Nilsson, analyst at Redeye, that wish to ask a question.

Hi, Fredrik. 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... 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 above a thousand brands with this new definition.

Okay, great. And also capitalizations of R&D came down quite a bit compared to last quarter. I mean, what is the 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 Q1, that could be in some regards the level that you can expect being the run rate going forward. Yeah.

And as we also start focusing on cache EBTA, cache 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 Q1 is quite representative for the run rate.

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 effects split for on pro forma figures including visual art yeah uh so in in like rough in in rough numbers just uh a little bit more a little more like um like 50 to 60 percent of of um of the groups of the group's revenues are in like non-swedish non-swedish crowns And like normally we have a we have a we have quite like natural natural hedge in terms of FX as we have have like costs and revenues more or less in the in the same more or less in the same. in the same currencies. But when the movements are a little bit bigger, the effect is mostly derived from the source revenue, because they are high margin revenue, which are highly affecting profitability.

And just to give a little bit of flavor that Normally, we don't calculate and reasoning around 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,

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 are 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 rate 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 visual art, how long have they come in their rollouts?

Like the, the, 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 Visual Art 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 the platforms and the foundations in place, we think that we can leverage on that recipe in order to actually also grow with smaller acquisitions and not only focus on the transformative acquisitions that we performed the last three or four years. Next question is that profitability is lower in Q1 than in Q4. What can we expect for the rest of the year?

Good question. As we started the guide, just after the acquisition of VisualARQ, we said that this will have a negative effect in Q1 and Q2. and in Q3 we want to have like the profitability of the revenue streams back on track so that each individual revenue streams are in line with what it was like SaaS 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 SaaS as a larger portion. So that is the guiding that we give. You can expect the revenue streams to be back on track in Q3 and then you should see a progress on both cost synergies and a shift in revenue mix as we go.

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