Vertiseit AB (publ) (VERTB) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to this Vertiseit earnings call for the third quarter of 2026. My name is Jonas Lagerqvist, and I am Deputy CEO and CFO of the group. And with me, I have...

Johan Lind, I'm the CEO of Vertiseit.

This morning, we disclosed the group's financial results for the third quarter of 2026, and the report can be found on vertiseit.com, and we will move through it during this call. If you would like to ask questions, please use the Q&A function. You can always also use the raise hand function if you would like to join the call and talk to us directly. So we will move through the financials in the report. We have a -- one topic that is Dise becomes Scala, where Johan will elaborate on this. We will give you a brief strategy update on the ongoing strategy changes that we are performing. We will disclose some highlights, and we will finish off with a Q&A session. So please bear with us.

Yes. And for those of you who are new to Vertiseit, we support brands and retailers to create better customer experience in store. We provide a SaaS platform for in-store experience management that gives retailers the ability to orchestrate all digital touch points in store, where -- whether it's for branding, whether it's for campaign, tactical communication, retail media or sales support to be able to orchestrate all those displays or devices in store is what in-store experience management is all about. We -- if we look at the numbers now, we have reached SEK 464 million in ARR. We are more than 300 full-time employees. We support more than 2,000 brands now. We reached a new mark there since the Scala acquisition, and we operate more than 450,000 touch points.

Okay. So let's move into the financials. And to summarize the key findings in the Q3 report. We -- this quarter, we performed an ARR growth of 44% compared to last year, which is exceeding our financial targets. In -- isolated in the quarter, we have an organic growth of 3.5%, which means that on an annualized basis, we grow by a growth pace of 15% organically, which is also aligned with our long-term target of growing ARR to SEK 1 billion until 2032. What we can clearly see in the report is also that with an increased share of SaaS revenue, we also improved our profitability. And on our most important profitability measure, which is the cash EBITDA, we improved that by 91% compared to the same period last year on a per share basis, which is also in line or exceeding our financial targets. We have a negative cash flow effect that is very much affected by the Scala acquisition, which is -- which consists of one-offs and temporaries. The integration project was closed and performed according to the time plan and also in line with our own budgets for the activities. We also conclude that we have a strong international pipeline and have an even improved market traction, but Johan will talk more about this later. In the quarter, we have a strong revenue increasing by 45%, and despite having quite a lot of systems revenue during the quarter, we still perform and increasing the SaaS share of revenue to 54%, which then leads to an increased profitability where the adjusted EBITDA margin is 25%. And also the cash EBITDA margin is significantly strengthened to 22%. And this is -- for us, this is the like clear evidence that our strategy of increasing SaaS as share of revenue is actually paying off, and will, in time, lead to the long-term profitability target of 35% cash EBITDA. In the cash flow, we have some seasonal buildup, which is due to a decreased holiday liability because our staff is on holiday during the period. And there is also like a seasonal working capital buildup due to like picked up activity after people returning from holiday. And related to Scala, we have some one-off payments of the costs that were provisioned for in Q2 related to the integration project. And there is also a temporary working capital increase where we -- since we have invoiced a lot of the Scala customers late in the quarter. And so there's -- and all in all, this will have a positive cash flow effect in Q4, which will then likely be stronger than a normalized Q4 quarter. And for comparability causes, I can also say that we have done some minor changes in the P&L and in the segments, and that is very much driven by the ongoing project of relisting Vertiseit from First North to NASDAQ main market. And in practice, it means that some segment-related costs that were related to the segment SaaS and consulting. They are now in the P&L moved to cost of goods sold. It's solely like -- it's solely an accounting change. And if you want to follow the gross margin as in the same way that we have reported it historically, please look in the segment note for this. ARR wise, we increased by 3 -- like we have a net organic growth within the quarter of 3.5%, meaning a growth rate organically of 15%. And year-over-year, when taking into account like fixed foreign exchange rates, we grew by 44%. And we also managed to increase the net revenue retention slightly to 108%. And we also have a churn that remains on low levels, which is very comforting. So another quarter of ARR growth in the books. And we are very happy like financially and business development wise with the quarter and have the ambition to just keep on moving along the -- in this direction. Ambition stays intact. We're moving towards our ambition to become the global #1 platform company within our space. And our long-term targets are to reach SEK 1 billion in ARR by 2032, which the current organic growth rate actually enable us to reach without acquisitions, but those will happen as well. So hopefully, we will arrive at this target earlier than 2032. And also, the increased share of SaaS revenue pushes us towards an increased profitability. So measured as cash EBITDA, we are to have 35% by 2032, and we are moving in that direction. And the financial targets, which we all exceed during the quarter is that we should always have an ARR growth exceeding 20%. We should always grow our profitability per share by at least 25% and have more than 100% net revenue retention. So the all checks and balances are green for this quarter.

Thanks a lot, Jonas. And as we have communicated in the separate press release, we have decided to rename the Dise business to Scala. As you're all aware, we brought the Scala acquisition, the product into the Dise organization. We harmonized around the Dise strategy, the Dise way of working, the Dise organization. But when we look at the assets in the Scala brand, it's obvious, like they are -- Scala was the company who actually invented the digital signage space already in the '80s, and they are the most well-recognized brands globally. And as Jonas mentioned, we can see that already that the deal flow and the opportunities on both end customers turning to us and also partners turning to Scala is by far exceed what we have experienced before. So from now on, we will not mention Dise. So Dise has become Scala. The integration project is completed. It's completed on time. So within 3 months, we managed to transform the business from a very scattered business, working with partner sales, with direct sales, working with also components of consulting and hardware into a pure software play with sell-through partner. It's really impressive that this has been performed in such a short period of time, closed down warehouses and decreased the organization to around 35 people from more than 100 and aligned it into the Dise Group. We have also moved all direct brands to the partners. And of course, there are like more to do in converting all like perpetual customers to pure SaaS. But all in all, we managed to perform everything on time, close the project, and we also managed to do that on budget. So it's a fantastic achievement for everyone, from everyone involved. We also, as previously communicated, we are gradually expanding into the APAC region. We have sent in all the documents establish now in Tokyo, in Japan, which is the market where we have most traction. And we will do it region by region. So we start off with Japan and make sure that we can capture new business there, and also employ resources on site. And then if that goes according to plan, we will continue in a sequence with Singapore and Mumbai in India. During the quarter, we also had the yearly strategy update. So we have been working both with our Board of Directors in workshop format in the management team and in different parts of the organization to really look through our strategies in relation to Scala, Grassfish, Visual Art, to simplify the strategy and also reduce overlap. And we think this update is something that will drive both. It will make our offering more clear, and it will also give us the opportunity to realize more synergies going forward. So the strategy simplified is that Scala is the partner-first IXM platform. It's partner-first partner only. So we sell the platform through partners only. And that's, of course, super scalable since the partner do all of the heavy lifting, and we provide them with the platform and support to be successful in their markets. With Grassfish, we sell the IXM platforms to large international enterprises that want to build their IXM platform and solutions into an in-house operations. So basically, they want to do it themselves and take responsibility themselves. And typically, Grassfish work with customers like Lidl, with Porsche, where they have large in-house teams. And then we sold the platform directly. We sell consulting expertise directly, but work side by side with their internal teams and also their internal partners for system integration, et cetera. And with Visual Art, it's the opposite. It takes the stand in how do we create the best in-store experience concept and also how do we run that. So we call it digital in-store concepts designed for impact. So that's retailers that want to outsource the whole, not only concept creation, but also the actual management of that solution. But what we also change in the strategy is that Visual Art will work much more through integration partners to do more of the heavy lifting when it comes to the infrastructure. So we -- both Grassfish and Visual Art will work with shared global AV integrators to get global scalability in this business because that's needed to improve scalability and become a real global player. And this also means that Grassfish will now be from the 1st of January when this goes into effect, we will move all like general contractor assignment to Visual Art. So there will be like no hardware at all in the Grassfish part of the business. So previously, there was an overlap since Grassfish in the Nordics had that business model as well. So now Scala will be software-only. Grassfish will be software and consulting. And Visual Art will focus on the concept creation, working with hardware integrators. Going into highlights. It's not mentioned, but I think the biggest highlight, I think this is the strongest report that we have delivered so far as a company. So it's really nice to see. And also that we pick up in profitability as expected, of course, after the Scala acquisition. But when we change the mix, as Jonas said, that it's really fall through. We also communicated separately that we signed a global framework agreement with Circle K. It's a huge opportunity since Circle K is one of the largest convenience store chains in the world. We have expanded in the Nordics, into North American market. We go now also into Germany, into Poland. So it's really progressing nicely, and it's part of the organic growth that you see in the numbers. We -- we have this increase in inbound activity supported by the Scala brand. And the relisting process that we communicated a bit early in the year is progressing according to plan. And with that, I welcome you all for like Q&A questions.

Yes. I will take some questions that we've received in the Q&A. And it says that the Q3 shows a strong improvement in margins. How much of these improved margins can be attributed to Scala synergies and how much potential remains?

I think it's a question for you, Jonas.

Yes. Of course, quite a lot is attributed to the Scala integration, but the whole integration is, of course, made possible by the organization and the structure that has been -- that has been built up over years in Vertiseit, where we have like a strong group overhead, where we can actually take in acquisitions, we can realize the synergies. We can integrate acquired companies into our -- like our IT back end, into our processes, into our management systems and so on. So more or less, like increased profitability, increased margins is a result of increasing SaaS share of revenue. And of course -- and in this case, much of this comes through Scala.

And I think that's why we actually on day 1, decided like we designed the profitability first. So Scala was not profitable. It was very much the opposite. And we actually, on paper, just saw that if we bring this into Dise, and we require at least 35% profitability, what type of organization can we build? And can we manage to run that on those resources? And definitely, we could. And so like buying like that type of companies and be able to transform them in like a 3-month period, I think we have the most efficient machinery on the planet to do that in our industry.

Okay. Some business-related questions. You mentioned 2 QSR procurements in Q2. How are these progressing?

Yes. So we have a few large tenders out there, and we mentioned -- we mentioned a few in the U.S. Circle K, of course, was a win. That was one of those, but there are actually -- the 2 others are remaining, they are still open. There is actually long decision periods in many tenders right now. So the pipeline is a bit larger than usually, but -- and also the decision period for those are a bit longer than what we have been used to. But it looks promising. And as we said, so the pipeline good, but also a nice increase in inbound leads that are top of the funnel as well.

Yes. We have our 3 analysts in the call, and let's take them one by one. Fredrik from Redeye, would you like to join the call? Fredrik.

Regarding the clearer strategic direction of the 3 brands, will it have any near-term impact on systems and consulting sales on the group level?

No, the answer is no. So we will move brands, especially in the Nordics from Grassfish to Visual Art, but on a group level, it remained the same. So it's just a balance -- internal balance between the business brands.

I see. Great. And you had an uptick in the organic ARR growth this quarter. Is there anything specific driving that? And do you see any signs of an improving market?

Yes. Like we see a small pickup. And I think I'm happy if we can remain on this level near term. That's the best estimate as of now. So as you say, like, yes, it is a pickup, and it's in line with, I think, what we communicated last quarter that we saw positive trends. And I think the business climate is definitely going in the right direction when it comes to opportunities and weighted pipeline.

Okay. I see. And the absolute quarter-over-quarter ARR increase is larger than what the organic number you report suggests. So I guess there's an impact from FX and perhaps also from converting some licenses in Scala. Like could you elaborate a bit on the mix between FX and impact from Scala?

Yes. So FX, like I don't have the numbers in my head, but of course, FX is quite big in the quarter since it has been a weakening Swedish Krona. But that's why we always report in fixed. But then as you say, what we also can see if you look at the sales revenue per se, of course, we still have a bit to do and to make sure that all contracts from the Scala does not constitute any items that are not like in -- like that should not be defined as ARR. So there might be some items that we need to put into consulting as an example.

And then, of course, we have -- there is an effort to be done to work with converting the shares of the Scala revenue that is more maintenance related than our -- like our -- the billing model and the business model that we have in our other license business. But that's an upside potential that will be conducted over like over years in the future.

Yes. So there is more -- there is an upside potential. And I think if you compare like reported ARR with SaaS, SaaS revenue, of course, the truth is somewhere in between.