Vertiseit AB (publ)

Hi, everyone. Welcome to this earnings call. We at Vertisit have today published our interim report for the third quarter of 2025. My name is Jonas Lagerqvist. I'm deputy CEO and CFO of the company. And my name is Johan Lind. I'm the CEO of Vertisit. Today we published our interim report, which we will deep dive in a bit during this call. We will touch upon the integration of the acquired MDT, which was acquired in July. We will present the financials and discuss things like the background for them. We will also touch upon the Winning Together camp that we performed during the quarter. And by the end of the session, there will be a Q&A. So please use the raise hand function or just write your questions in the Q&A function in Zoom. Yeah.

And just to give you a brief overview over the quarter and our view on the report, we are really happy to exceed now 300 million Swedish crowns in ARR. It's a big milestone. And as you see, like the last year, we have grown the ARR 69%. We have been able to integrate the visual art and we, as you know, in Q2, we also took measures to realize synergies. We were guiding towards a margin above 20% and we delivered 22% in the quarter. So really happy about that. The MDT integration is also finished according to plan and on top of that we deliver 15% organic growth the last 12 months. During the quarter the organic growth was a bit softer. 11%, a little bit due to a weak Q2, but we see how the market is really ramping up. So I think we are in a really strong position and we think it's a strong report. As you know, we are a SaaS company delivering in-store experience management platform to leading brands and retailers. And the value we create for our customers is the ability for them to facilitate a better customer journey, orchestrate all diggable touchpoints in-store. And from a business model perspective, In our report, we followed the license revenue, the ARR growth, but there are also components of consulting services and system sales that can fluctuate. In this quarter, the revenue mix was very much tilted towards SaaS, where we delivered strong figures, but but the system sales and consulting were soft. But that's something that can vary over time. Talking about the MDT integration, as you know, we did an acquisition of MDT in Germany with customers such as Deutsche Telekom, McDonald's in Germany, 1,250 restaurants for McDonald's. And it's a part of our new strategy to deliver on a roll-up agenda. And this fits perfectly into our strategy to do acquisitions, which add to our customer base, takes us into new markets, et cetera. And just to give you a recap, when we did multi-queue acquisition years ago, it took us one and a half year to finalize the integration. With Visual Art, we were up to speed with six months, but now we managed to actually finish off this integration within three months, and it gave us a lot of confidence going forward into executing on our roll-up agenda. I also want to highlight some key wins that we are really proud of during the quarter. We were signing the biggest retail media deals we have seen in the Nordics. We're selling a group. It's a group consisting of Netto, Fertek, Spilka, etc. And they also have like 2000 locations. So it's a huge potential, but it's a framework agreement where we, of course, have started to migrate, started to roll out, but we will grow with them over many years to come. Same goes with Instormedia from Spain. It's one of the leading international retail media companies and we will also work with them. We are now appointed their main platform and we will gradually, customer by customer, migrate to the GrassFish platform.

Moving into the financials. We can, like another quarter, confirm that we still are growing our ARR, both sequentially and, of course, organically. So we sum up our ARR by the end of the quarter to 316 million Swedish crowns. That constitutes a growth of almost 70% compared to last year. And looking at the organic growth in the quarter, it was 2.6%. And if we annualize that, we have an annualized growth rate of 10.9%, which is somewhat lower than usual. But looking in parallel at the NRR, we can confirm that we had a continued strong growth on existing customers, but had a somewhat lower new customer sales during the quarter, which is also a consequence of a Q2 where the activity was a little bit lower. We remain on really low churn levels, which is, of course, really important because it also points out the quality and the value that we manage to deliver to our customers and provide a stable base for our growth going forward. And during the quarter we can actually see that the activity on both existing and new customers are picking up.

It's a big difference if you compare Q2 where we were missing our own budget figures and we had a real drop in activity and investments were postponed into the future. Now we really see how activity and the market sentiment start to become better and better gradually. We have seen that throughout the quarter.

And what we can see on profitability-wise is that the measures that we took during Q2, they are delivering and affecting our profitability according to plan. So we're delivering according to and even slightly better than our guidance, ending at an adjusted EBTA margin of 22%. which we find strong and which is in just the right direction from where we were pointing at.

During the quarter, a big highlight was of course the Winning Together camp, as we wrote about in our report. It was the first time since the acquisition of Visual Arts that we brought together all employees throughout the group. So from all over the world, we flew into Sweden, met for a whole week together, almost 300 people. It was fantastic to just exchange ideas where people get to know each other and really become part of this unified culture of winning together. We had great keynotes and fantastic days where we had like a mix of panel discussions and team building activities. So I think it... It will deliver value as we go forward as one group.

So we're now moving into the Q&A section. So please use the Q&A function or use the raise hand if you would like to join the conversation. So we can welcome Fredrik Nilsson, analyst at Redeye. Hi, Fredrik.

Frederick?

Can you hear me now, perhaps? Yes. Thank you. Hi. I want to start with the ARR growth. I mean, you've touched upon it, but it seems like it's most related to a soft Q2 due to the geopolitical turmoil rather than you see the overall negative impact from soft macro, as we have seen in many other companies. Is that the right way to interpret what you are saying?

Yeah, like what we're saying is basically, of course, we had like a week or two, as you all know. We took the measures to make sure that we deliver the right profitability for the rest of the year. We guided for that and we deliver on guidance. When it comes to growth, as you say, like the quarterly growth, it was... It's, of course, a quarter where we come out from a weak Q2. As you say, annualized, we are at 11%. And if you look at the last year, we are at 15%. So it's slightly weaker. But what we have seen during the quarter is that it's picking up and the market sentiment is getting better and better. So I think everything is pointing in the right direction when it comes to market sentiment and development.

Great, thanks. And I mean, you gained one big deal and one partner, as far as I understand, within retail media in the quarter. Could you tell us about the competitive landscape in that segment? What companies did you compete for those deals with, for example?

They were actually investigating the market themselves. If you go for the in-store media in Spain, they had elaborated a lot on platforms. So they were actually comparing platforms. But in the end, they just had a regular negotiation with us because we were their platform of choice. And actually the same goes with Salling, where they had already a platform installed, but we got to know them and they They wanted the knowledge and expertise from visual art to be able to help them build the retail media business with the experience that we have in the team. And eventually, of course, they also needed to change the tech to make it happen and to deliver on where they were going. So you could say like in final stage, we had like, it were no like tenders. We were alone in the final part of those processes.

Okay, I see. And you talk about the AI features a bit in your CEO letter. I mean, is that the features showcased at the GrassFish Summit coming to Dice as well? Or are there new features we're talking about here? No.

We work a lot with AI in three different streams now. I think it's an area where we want to lead the development in our industry. And I think it's a must-win battle to be in the forefront of AI development. One part is of course for the internal operations where we now start to have a more structured approach on how we work with AI agents and build them together with humans in our normal processes. So there is a lot of efficiency gains that that will deliver. Then, of course, we have AI enablement in the products. And there will be lots of new features the coming year in all aspects of that, like how do you schedule, as we've shown in the first feature that we released on the summit, when it comes to generative AI. But what I believe is the most important thing is to make the product AI-friendly for other agents to use. There is a lot of new terms with MCP, etc. But basically, give the ability to our customers, retailers and brands to use their agents to run our products. And then last but not least is that we see a big increase on the consulting side where we actually help our retail customers to use AI in a better way to deliver better customer experiences, more personalized communication. And that's also an area where we have seen increased demand the last quarter.

Interesting. And just one last question from me regarding system sales. I mean, is it mainly a natural fluctuation or is this a beginning of perhaps a larger structural shift towards your goals with a lower share of system sales in the long term? Yeah.

So what you actually saw this quarter was that the SaaS share of revenue was about 50% again. So it was an extreme. But the overall strategy is that SaaS should grow as a share of total revenue. We push as much consultancy work, as much hardware work as we can on partners and integrators. That's our strategy. But I think it was the soft share of revenue as we saw in this quarter will not be the new norm. It was due to the weak Q2. So we will see a slightly different mix in the coming quarters.

Great. That's clear. That's all for me. Thank you very much.

Thank you, Fredrik. And then we have Richard Engberg from Carnegie. Good morning, guys.

Can you hear me? Good morning. So a couple of questions. My first is like you announced a selling deal quite late in Q3. So would you say that the rollout of this is going to contribute more in Q4 and during 2026 than it did during Q3?

Absolutely. It's just a smaller part of the potential of the contract that we have had active and invoiced during the quarter.

Okay, great. Also, talking about this new partnership deal, as I can understand, the company is quite big and a leading... leading network, what sort of timeframe do we discuss? And will it start during Q4 or it will be more focused during 26 and 27?

I estimate that we will have at least 500 licenses or something in that range in Q4. So it's just the first project. It's a specific grocery chain in a specific market that I can't talk about right now. But the rest of the projects under the framework agreement will run the coming two years. So I would estimate like an even distribution over two years.

Okay, great. Lastly, now when you have integrated MDT and you start looking on the market for more potential M&A?

Absolutely. Our ambition now is to get into a new phase where we should deliver two to four acquisitions per year.

Okay, great. That was all for me. Thank you, guys.

Thank you so much.

Thank you, Rickard.

Okay, then we will take some questions that has come through the Q&A function. So, would you say that visual art has performed as expected for 2025? And would you expect visual art to, on a standalone basis, to deliver roughly the same sales and EBITDA contribution as in 2024?

Good question. Visual art have delivered in line with our expectations, slightly above in some areas. They are definitely a growth driver also in bringing new brands in and also in the field of retail media it has exceeded our expectations. As you all know, when we acquired the company, it was more or less on zero in profitability. So that has, of course, been a main focus for the year. And we realized a lot of synergies in Q2. But there is still progress. We expect the visual arts to deliver the same growth as they have shown, but we of course also expect them to continue to deliver a higher and higher margin for the years to come.

And then important shift is, of course, like the shift towards the overall vertisit strategy to push more and more of the systems and the consulting towards partners to increase SaaS as share of revenue. So like top line wise, they will not grow as fast like in the years to come.

And that has been, of course, a big focus. And I think I'm proud for what we have executed during 12 months. We have divested their LED business. We now have the major wins. like KFC in the UK, where hardware has not been part of the business model. There are also some really nice opportunities that we look into that are in collaboration with partners that are all in line with our strategy.

And then there is a question on continuing guidance. And to that we can say that normally we don't guide. We did it in Q2 and that was of course because we were performing a bit weaker than expectations and that we also performed some efficiency measures. that we believed called for some guiding. So we have guided for the second half of the year with an EBITDA of 20% or above. And we do not provide any updated guidance, but performance in this quarter is according to plan.

Yeah, and our goals are the guidance. So we should reach 1 billion Swedish crowns in ARR, latest 2032. And of course, if we continue on the growth pace that we have now, we will reach that earlier. It's just math. And then we aim to reach 35% cash EBTA. And that's the best proxy to cash flow. On the way there we should have 20% and above growth consisting of both roll-up and acquired growth of course. And then we should increase our profitability per share 25% annually, and we should continue to have really high customer satisfaction, low churn, and deliver an annual net revenue retention exceeding 100%.

And a question regarding working capital. So for the ones who studied the cash flow in detail, you can see that we increase working capital with approximately 15 to 20 million compared to normal. And I think it's just important to understand that our business model does not require an increase in working capital over time since we do not work with a stock or an inventory of hardware. And we also work really actively with credit times and payment terms, both towards our customers and towards our distributors and partners when applicable. In the long run, we do not require to increase our working capital. But there, of course, can be fluctuations from quarter to quarter. But over time, we do not need to increase our working capital. And I think that was it for today. So the next time we meet in this forum, it will be in next year after the release of the Q4 year-end report. So thank you very much and see you again soon. See you. Thank you.