Vertiseit AB (publ) ($VERTB)

Hi, everyone. Welcome to this earnings call after Vertiseit this morning have released our interim report for the first quarter of 2026. My name is Jonas Lagerqvist. I'm the Deputy CEO and CFO of the Vertiseit Group. And with me, I have Johan Lind, CEO of Vertiseit. Welcome. We will today guide you through the quarterly report of the first quarter 2026. And on today's agenda, we have a walk-through of the financials. We will present and discuss some of the highlights during the quarter, and we will finish off with a Q&A session. So if you have any questions whatsoever during the call, please use either the Chat function or the raise hand function if you wish to talk in the call and speak directly. So let's start, Johan.

Yes. And for those of you who are new to Vertiseit, we are a SaaS company offering an in-store experience management platform for brands and retailers. Our vision is to connect the world of retail. And we really want to be the infrastructure for the in-store communication, basically being able to operate, orchestrate all digital touch points in store.

Diving straight into the financials for the quarter. Those of you who have been with us for a while, you recognize this slide, when we have now added one more bar, proving that we can keep growing our ARR sequentially. And we have done so since 2012. And this, we believe, is like one of the strongest evidence of the value that our offering creates with our customers and the resilience in our revenues. So we closed the quarter on an ARR of SEK 341 million. We're on our way towards our long-term target of having SEK 1 billion in ARR. In review, we would like to highlight that we continue to grow during profitability as we have done for like a very long period of time. ARR growth compared to last year amounts to 24%, which is exceeding our financial target of 20%. Profitability, the increase compared to last year was 27%. And recapping our financial targets, we said that we are to grow our profit per share by at least 25%, which is then -- the outcome is also in line or exceeding our financial targets. We are experiencing a strong demand in the market. We have a pipeline of very high-quality opportunities that we are currently working with. And we would like to emphasize this communication that we now have done for some quarters that there is a strong interest and the strong demand in the market. And in this Q report, we also like report briefly on the activities that we perform in the M&A market. And also there is a very strong activity. There are -- we have quite some opportunities that we are actively exploring. And we are confident that we will be able to deliver on our acquisition plan where we say that we can -- we will perform in the span between 2 and 4 roll-up acquisitions per year. We closed at an ARR of SEK 341 million, meaning a year-over-year growth of 24%. And during the quarter, the growth isolated was 3.3%, meaning that the organic part of the growth annualized is approximately 14%. We have an NRR, which is normally quite close to 50% of the organic growth this quarter. It was a little bit weaker than 50% of organic growth, meaning that the majority of the growth actually came from new sales and new customers this quarter. And we still operate with a good margin above our target of having 100% in NRR. For Q1, the churn rate was still quite low, even though it was slightly higher than previous quarter. In Q1, we normally have at least an acceptance for that the churn can be slightly higher than other quarters. Depending on that there are many contracts that renews at year-end, meaning that when churn occurs, it is quite likely that it occurs at year-end and then visible in the Q1 figures. Net revenue increases slightly, but we are, at the same time, now back on a SaaS revenue -- SaaS share of revenue of exceeding 50%, which is where -- long term, where our margin expansion will come from besides, of course, the general growth in SaaS revenues. But the SaaS share of -- an increased SaaS share of revenue is incremental when we -- to increase our general profit margins. Yes, some highlights.

Absolutely. Looking into some highlights besides the figures. So, it was like an intense quarter when it came to outbound activities on fairs and so on. We started off the year with all brands being represented in New York at the NRF, the world's largest retail conference. We were at ISE Barcelona. The booth up to the left with ISE is the booth we were represented within -- in Barcelona. ISE is the biggest like ProAV fair in Europe. Then we added to EuroShop in Dusseldorf, where both Grassfish and Visual Art were represented. Visual Art with their own booth, and we had Grassfish in [indiscernible] the video down to the left. We have also been to D-Congress where the pre-event related to retail media. We have the Shoptalk in Barcelona. So it has been a super intense first quarter when it comes to this type of activities. Another highlight during the quarter was the big announcement from Visual Art and the Bonnier News. They actually established now the first combined Retail Media network in Sweden, where you have -- where you combine different in-store networks in a unified offering. It's really exciting to see. The interest from both agencies and from retailers has been great and exceeded our expectations. So we see a strong like momentum in network effects where we get a lot of inbound interest from especially retailers in Sweden now. We have also like designed now a really strong blueprint and business model around this, where networks join our Retail Media hub. They also get -- they also need to sign up for additional Retail Media modules and components, which add to our ARR. So we don't go after like rev share. We go after software licenses in relation to Retail Media. And I think we are like in a unique position to be able to do this. It's super hard to replicate as we are -- as we have the customers in scale. You can see like new networks coming in like week-by-week. I think yesterday, we announced that [ Apotek Hjärtat ] sign up to this network. So it's just great momentum and that we get like an inbound effect that we are not used to. We will also continue to focus in this field. So we take this blueprint now. We were at D-Congress with Andreas Villoid on stage. We have a pre-event sponsored by Samsung in Sweden. But now we take it to like OMR into the DACH and the German and DACH markets, where we also will have a lot of sessions in Retail Media. So the goal is now to just replicate what we have been able to achieve in Sweden and do that for other markets. I now hope that you have a lot of questions. And Jonas, do you already have any?

Yes, we have some. Let's welcome Fredrik Nilsson from Redeye.

I want to start with system sales. I mean, they can be volatile, but still they are down like 20% compared to the same quarter last year. And I note that you also mentioned that you, of course, push through a lot of that to your partners instead. But could you perhaps explain a bit what is normal fluctuations versus you pushing systems over to partners?

Yes. Great question, Fredrik. Like as you say, like long term, we want like more and more of systems revenue to go via partner and also like in consulting, we want them to do more. So that the SaaS share of revenue improves. But I should say this was a slower quarter in system sales than our own budgeting. So -- and as you say like it fluctuates a lot, and it can be the opposite in some coming quarters. But I think we should not pay too much attention to system sales, especially not now where a lot of the deals are done like within the Retail media space and also more and more business are international where we don't have the systems component.

I see. Great. And on a similar topic, but regarding consulting, it's down by about SEK 1 million compared to last year despite MDT and Muse joining, and I believe they should have added about SEK 3 million, SEK 4 million perhaps in consulting. So is that a good assumption? And why has it declined then? And what should we expect going forward for consulting?

It's a good question. Like we have some industries where they have been really tough on consulting expenses during the quarter, and it has affected us as well. And especially, I would say, if one category stands out is like automotive, and it's -- usually, they come back again after a quarter or 2. But yes, I expect it to be slightly stronger going forward. But I will -- I'm not sure that we will go all the way back in the next quarter.

Okay. Great. That's clear. So let's move on to the really important stuff and the more positive stuff. So you increased the ARR growth sequentially a bit. But you mentioned also last quarter that you see longer sales cycles in Grassfish. I mean, has that changed? Or could you give us an update about Grassfish in particular?

Yes. I would say that the momentum in the market is good. Pipeline is improving step-by-step. And as Jonas said, I think we all see that it's really, really high-quality opportunities. As you say, we see a small shift where a slightly better organic growth and it's through the line. It's actually in this quarter within all business brands that have a slight improvement compared to Q4.

Rikard Engberg from DNB Carnegie. Welcome.

Can you hear me?

Yes, absolutely.

Okay. So my first question is related to audio. You said that you started to winning deals with an audio and existing customers. Do you believe that this will have an effect on the net retention revenue rate going forward during the year? Or is it still a quite small share of revenue coming from audio?

It's a great question. Thank you. Like I think it's great to see that we're now starting to get signed deals basically, like if we have signed like 5 to 10 contracts in the quarter, but it's still relatively low figures compared to the overall ARR, of course. So I don't think that you need to rewrite your forecast or anything based on the in-store audio. It's just like -- but it's promising. Like I think it's great to see that when you add something to your portfolio, it's -- the hardest part is to get it from like theory, implementation into the sales organization and actually see results once -- so I'm really happy to like see traction in the market, but I don't think that it should have a material effect on the SaaS metrics.

Okay. And a follow-up question on the SaaS metrics. You previously mentioned that due to your acquisition, these SaaS metrics can become somewhat skewed when you compare them year-over-year. Is this one reason for the somewhat lower NRR in the quarter, whereas it's been less momentum on existing customers?

Yes. If you look at the NRR -- of course, if you add acquisitions, which we have done, then, of course, it's harder to compare. But the NRR, in particular, was slightly below 50% of growth. So I think -- but it's just like 1 to 2 percentage points, like. So I think that's -- I don't see a real trend in that, even if it looks like that on the chart. But the organic growth has come down a bit if you look at the 2-year -- from a 2-year horizon. But if you look at the NRR, it typically trends around 50% of the organic growth.

And other SaaS metrics that you referred to are, of course, affected by the acquisitions. I mean, if we just take MDT for one example, we added like 2 really large customers and then quite a number of smaller customers. And of course, that gives the effect that both like average revenue per license and average revenue per brand goes down a bit. And that will be -- that's a fluctuation or an event that, of course, will happen depending on what acquisitions we do perform like going forward. So that has nothing to do with like the development in our organic -- the organic development in our SaaS customer portfolio.

And lastly, you talked about M&A both during the presentation now and in the CEO letter. Is there -- what are you looking for specifically? Is it geographical expansion? Or is it more product-related expansion with new customers?

Yes. Like our strategy is clear, like we want to have overlapping businesses so that it's scalable to improve profitability, but we're also looking in to strengthen our footprint in South of Europe and in North America in particular.

Thank you. We have a lot of questions in the chat, and I will try to answer as many of them as possible. While on the M&A track, there is a question if the recent development within AI has changed, what we are looking for in terms of M&A?

Yes. And I would say like not really. I think, we are in the forefront in this industry when it comes to AI development. And I don't see like any new targets that are ahead of us that we want to acquire. I think our capability of converting existing customers after an acquisition have improved a bit once we have the keys due to AI. So it's something, I would say, that we have the opportunity to look into acquisition opportunities that before maybe we consider them being a bit too complex to migrate. But I think that has shifted to a bit in our favor.

Great. Thank you. Follow-up question on Retail Media. Can you like elaborate on the actual business model? What effect does it have on advertising revenue?

Yes. So typically like -- typically, if you look at the figures, if a network that only uses their in-store experience management platform for internal communication -- sorry, for their own in-store experience and both branding, tactical communication, but also like interactive solutions. If they add the component of Retail Media, it will improve our revenue from those licenses with about 40%. And it's both from licenses that we get from the advertisers and licenses that we get from the retailer for our Retail Media Services and the Retail Media Hub under the Retail Media Module.

And can we say anything about like how big is the potential upsell on like SaaS-wise from the Retail Media add-ons?

Yes. So it's 40%.

Okay. And quite a lot of good questions regarding NRR and the SaaS KPIs, which like from like a first look seem to be declining like quite a bit. But as we said, the NRR, even though it's slightly weaker than last quarter, it's still in the vicinity of 50% of organic revenue. So we see no -- there is no trend like in our current customer portfolio. I mean, we still have an average penetration of around 30%. So the upsell potential is still there. But of course, it can vary a bit quarter-by-quarter like where the growth comes from.

But a recommendation there is to look at like the organic growth because we come from -- if you look some years back, we were trending around 20%. And now we are at 14% in organic growth. So of course -- so I think the NRR, you should look at that number compared to the organic growth pace and then the pattern look not that bad.

Yes. And also average revenue per customer license that must also be viewed in the light of that we have done acquisitions that adds like a different profile to the total portfolio. Some questions regarding the SaaS revenue that it is actually slightly lower than last quarter, while ARR is increasing. And that can also happen since we do operate in -- on, like, many currencies. Currency effects can, of course, change from quarter-to-quarter and from year-to-year. So whenever we talk ARR growth and the SaaS KPIs, we always make -- we always adjust for FX. So actual numbers can always differ both to the better and to the worse, but it's always FX adjusted.

Yes. And there can be changes like if there is a negotiation with the customer and so it affects like the SaaS revenue. But the ARR is always like the contractual revenue, and it's also based on the last month in the quarter.

There's a question on any one-offs during this quarter. And I would say that we have adjusted for some minor one-offs, which is more or less related to the process of evaluating this change. But other than that, of course, we have invested quite heavily in marketing activities during this quarter, which is significant for Q1. But nothing really like out of the ordinary. I mean, next quarter will be -- will, of course, then we have to take into account that the yearly salary revision for all employees go into effect. So from a total perspective, there are no material one-offs during this quarter. A general question on the AI thing that we discussed more in thorough on last quarter's earnings call. If we see any like trends or development in the competition from AI that significantly affects us or our strategy?

No trends like when it comes to competition. I see -- we see a number now of requests in tenders where we need to describe how open the platform is to work to actually have agentic workflows and work with -- so that our platform have the MCP support, et cetera, to support agentic workflow from the customer point of view. I think that's maybe the what have hit us from the market side. But of course, we believe like our competitors too, will, of course, also use all the tools and the capabilities that this brings to the table. And I think it will -- maybe there are a legacy platform that can evolve fast enough with -- in this new environment, but the same goes for us. So I think we all got the same tool sets, and we don't see any like newcomers or anything that are unexpected in the market.

Regarding systems margin, they came out in -- like in the stronger part of the scale. Like normally, we have a systems margin of between like 26% and 30%. And this quarter, it came out at 31%. And it's on the higher end, but it's like a normal fluctuation depending on like what type of customers were like targets for roll-up during this quarter.

And typically, when you have higher volumes, and I'm pretty sure we will have those quarters as well during this year. So typically, if you get higher volumes, you do a big roll-up for a customer. And then typically, the margins are lower. So it usually go hand-in-hand.

And for those of you who have looked into the cash flow statement, it was strengthened compared to last quarter, partly due to that working capital was a bit -- was lightened this quarter. But also as we come out of the process, the efficiency measures that were executed in Q2 last year for -- they affected cash flow during the second half of this year. So going forward, cash flow should be expected -- could be expected to follow the profitability development going forward. But both profitability and cash flow is, of course, like our highest priorities together with continuing to ensure the ARR growth. And that can also be like the answer on what's like the profitability profiles of the acquisitions that we look into. And of course, the important thing, like in parallel to the quality of customers that the acquisitions should bring, it should also increase and strengthen both profitability and cash flow. These are -- that's the profile of the acquisitions that we look into.

And that's also why it's important that the majority of roll-up targets that we actually have a fully like overlapping, like value proposition and the product offering so that you could get more synergies out of the roll-up acquisitions.

Thank you. That was it. Thank you for all the questions. And if there are some questions that might arise that we didn't answer in this call, please feel free to reach out to us any time, send us an email or come visit us at our offices. So have a great day and see you all again in this forum next quarter. Thank you.

Thanks so much.