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

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

And my name is Johan Lind, I'm CEO of Vertiseit.

So yesterday, in addition to holding the Annual General Meeting for 2025, we also published the company's Q1 report. So here is the first page of the report, and we can report an ARR of SEK 281 million 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 [ Q&A ] 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, Vertiseit, 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. And looking into the financials, we -- as Jonas said, we reported SEK 281 million in ARR. And if you look at the chart here, the latest 2 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.

Yes. 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 the quarter. And as more than half of our revenue is from non-SEK 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 closed the quarter at SEK 281 million. 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 the -- by Visual Art's different revenue mix and different profitability profile basically. So -- and during the quarter, we have also welcomed a new investor, Eiffel Investment Group, French institutional investor, which affects our net debt. So we decreased our net debt to SEK 140 million compared to just about SEK 200 million 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 SaaS metrics, there is -- we have a quite strong ARR growth during the quarter. And when -- if you annualize the growth during the quarter, we see that we are like above 20% on a 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 yes, so we are -- financially, we are happy with the growth that we performed 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 released the KFC win in U.K. 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 [ Caffè Nero ]. They run 1,000 coffee shops. The rollout might take between 2 to 3 years before it's fully penetrated, but it's a great win. [indiscernible] Netherlands is won by Pixel Inspiration, our partner for Dise and also ICI Paris with 200 stores. So just to give you a little bit of names around to understand what's in those ARR figures. Most importantly is, of course, how we -- how the Visual Art integration is performing, and it progressed exactly according to plan. It's according to our budget -- 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, the whole -- 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 has a slightly different revenue mix. So post integration focus now, the first half is in Q2, we will certify -- recertify Visual Art according to ISO 27000, 9000, 1400 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 get a lot of questions about IXM Grid, which is the foundation in the tech 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, Dise offer the in-store experience management platform for partners. We have Grassfish, which work side-by-side with partners and offering is platform and consulting expertise. And then Visual Art that offers like in-store concept, 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 Dise platform and the Grassfish platform. But 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, this content management, this 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 Tizen is the internal platform for Samsung. If you run a Philip screen, for example, they use an Android implementation. WebOS is for LG, et cetera. And a lot 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 core of our strategy is to do this once and share it with the current 2 platforms, Dise 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.

Yes. And we have Fredrik Nilsson, analyst at Redeye that wish to ask a question. Fredrik?

I want to start with the 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 5 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 above 1,000 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 a reasonable level going forward with Visual Art as a part of your group? And what's driving the decrease?

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

And as we also start focusing on cash EBITDA, cash EBITDA 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. So it was -- so Q1 is quite representative for like the -- 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 FX split for -- on pro forma figures, including Visual Art?

Yes. So in rough numbers, just a little bit -- little 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 costs and revenues more or less in the same -- more or less in the same currencies. But when the movements are a little bit bigger, the effect is mostly derived from the SaaS 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 it to give like some sort of like SEK 3 million headwind?

Yes. Profitability-wise, approximately SEK 3 million for the quarter. So of course, it affects the comparability between quarters when the shifts are this material.

Okay. And if we were to see significant tariffs on displays in the U.S. 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.

Yes. And I don't think it will be the case. Of course, they don't produce any LCD displays in U.S. 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 U.S. market, but it doesn't affect like our 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 rollout, it will -- like 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.

We have one question related to the CEO comment in the report where we elaborate on the -- 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 3 acquisitions that we made, it's -- all of them have been really large compared to where we have been as a company in all those situations, like the Grassfish 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 our -- 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 past. Do you want to elaborate on that, Jonas?

But to conclude, we -- I mean, 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 smaller acquisitions and not only focus on the like transformative acquisitions that we performed like the last 3 or 4 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 Visual Art, we said that this will have -- 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 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 -- so 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 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. Bye.

Thank you.