Verve Group SE (VRV) Earnings Call Transcript & Summary

Thank you moderator. Good morning. I would like to welcome our investors, analysts and our stakeholders to our financial hearings with regards to the Q1 2025 financials of Verve Group SE. I would like to take the first part and then hand over later to Christian to do the financial part. Yes, I'd like to start with some highlights of our first quarter. We are pleased to report another strong quarter, getting strong market share and further expanding our EBITDA margin. So going into the numbers, a bit of an overview here. We were able to generate EUR 109 million of net revenues and -- which is a 32% increase versus last year. I'm very proud to have a very strong organic growth again, building on a very strong first quarter last year already, but now this quarter with 16% organic growth. In our adjusted EBITDA, we see really, let's say, with scaling, we get also more profitable. Adjusted EBITDA grew by 37% and amounted to EUR 30 million in the first quarter of 2025. And our adjusted net results also showed an increase of 30%, a bit more taxes we have to pay. That's why you become more profitable, but also here, really nice development. Then go to the growth drivers, what is behind it. We saw our ad impressions growing nicely with 24%. So with an overall faster growth, we were also able to make more money per impression actually, and what you see is -- also is that Q1 is not always the strongest part or it's not the strongest part of Q1. Seasonality-wise, it's the weakest quarter, but we are really able to grow our ad impressions in a very nice way. And what's behind that? On the right side -- the right upper side, you see, let's say, new customers. And as in the last quarters, new customer gain is really driving our revenue increase strongly. So we had a 51% year-on-year increase in customers. And the customers we show here are the customers over $100,000 annual revenues. So a nice increase here also in this quarter. On the net dollar expansion rate, which is showing how much revenue did customers do versus the same -- the customer -- sorry, we had already last year in the same quarter. There, we saw that we did the same amount of revenue, which is 100% which is a bit lower than we are used to, actually, but normally around 110%, really increasing the existing customers. We had a bit of headwinds from some larger customers, especially Google, like walled garden is really taking more volumes as it looks on its own platform, YouTube, and it's taking volumes away from the market. So we felt that and we had some other customer losses. But they were fully compensated by other customers growing, so with 100% stable versus last year. Same number, customer retention rate is always a bit weaker in Q1, 94%, yes, some companies also getting under $100,000 level. But still, I think good number and a good basis for further growth. So low churn will, of course, drive our growth faster into the future, and keep in, I would say, in mind that it's over $100,000 customers. So there is always some getting under or over the $100,000. Then getting to the next part of the presentation. What we often forget because we concentrate a lot of numbers, but it's all about customers. Customers is what is driving our revenues and customers are in a market which is, yes, let's say, pretty difficult ad tech market. Our mission is to make media better, and that's what we work on, and I would like to guide you through a bit of insight of what is driving our customers, our partners. We work for two sides of the, let's say, advertising equation, and that the one side is the publishers, the other side is the advertisers. For publishers, it's about monetization. They want to make as much money as possible, of course. But they are facing also challenges at the moment. They get less on page traffic because of the search results of Google sending less people to the pages, but also now search tools -- the new AI-driven search tools are also not sending traffic to pages anymore. On top, there is, because of privacy, more and more ad volume that doesn't have an ID, and that's more difficult to sell or where they get less money for. So what's it about, it's about selling ad spaces at best price and with a high fill rate and about maximizing earnings, ensure customer privacy, not annoying customers. So also important to not show ads that are irritating or too many ads and leveraging customer relations and data. In our ecosystem, we are able to really help customers on this to boost their revenues and to boost their results, and we have two examples here. SmartNews is a leading AI-powered news aggregator. They have approximately 5 million to 6 million monthly active users worldwide. It's one of the top news apps in the world. And yes, we help them with creating more demand for their ads. And one of the ways we're doing that is by creating private marketplaces, so called PMPs. That's why we curate their inventory and make it easier to sell. And yes, they are super happy with the results we are achieving here as well. Of course, we had 141% quarter-on-quarter revenue growth for them and strong increase of the eCPM and 39% fill rate increase. So this is one example. Then Microsoft, we work for Microsoft for their app business for the Microsoft App store. They are both the major app developer themselves, but also publisher. They enable third parties to publish their apps on the store. And we were able to show a quarterly revenue increase of 20% and a 138% increase in revenue per user. So also here show really good results. And yes, happy with being able to help our publishers here. We have many more, of course, but we didn't want to make the presentation too long. Then we have -- the other side is agencies and advertisers -- especially, the advertisers are using mostly agencies. Also, they have the challenges, challenge like more ID-less audiences. If somebody says, no, how do you reach this person -- I say no to using the data, sorry -- how do you reach this person? So they also are facing, let's say, a lot of chaos basically in the ad tech market with a lot of double fees that they pay margins, I would say, in transparency and it's all about in the end, ensuring the outcomes. So how do we do that or what's important for them? It's about reaching the right target group, with the right message, in the right channel for brand and performance. Brand advertising is different. You want to make your product known, your brand known and you have performance advertising and that's about really much more direct selling. We do both. Then it's about, of course, for the advertiser about brand efficiency -- sorry, budget efficiency, brand safety, no fraud and privacy compliance and also about insights, measuring and it must be easy to use, so AI tools and support play a big role here. So that's on the advertising side. And also here, we have examples. And one of the examples is from Reckitt. Reckitt is a big, I would say, company in the U.S., and they have their tablets -- their, I would say, tablets for the dishwashers, and their brand Finish Ultimate and it was for them to drive more sales basically in-store. And for that, we use Schema, which is one of our solutions. Schema, I would like to explain that a bit. We're collecting data directly from consumers through an opt-in polling technology. So after an ad or before an ad, we show them choice where we ask people, "Hey, are you interested in? Yes, no, and you can also opt out." And with this solution, which works in an ID-less environment as well as an ID-based environment, we get 100% first-party content-based interest from people. And that leads really to very good -- how to say, rates -- very good success rate. So that means that every consumer reached has opted in. And when they then see the message, we are showing the best results for the advertiser for the campaign. And here, we have some really good results, for example, for Reckitt, we achieved 88.3% increase in household penetration, 3.2% increase in the sales buying per occasion and that's good. I mean 3.2% sounds low, but for -- in the retail, this is really a very good number. And with this campaign, we added 240,000 products to the shopping cart. Another example, that you see on the right is McDonald's. So we also work for McDonald's. Here it was about creating foot traffic to get more store visits, and that's happening via the app. So also here, we use Schema, and we were able to, let's say, get 6.8% store conversion rate, which is really also very strong; 628,000 store visits; and we had a 1.5% click-through rate, which versus normally a 1% benchmark is also extremely good rate. So very happy customers, and that's what it is about in this market. We need to make sure that we show results for our customers, for our partners and drive the revenues. As in the past, we are really strongly focused on ID-less advertising. ID-less advertising, yes, privacy means that less and less IDs are available, and Apple is already very strongly supporting that. But also on Android, we see a big part of the ads -- substantial part of the ads without an ID. And even though Google now announced that they will not deprecate a cookie, there is still the trends towards, let's say, you have to ask the consumer, do you want to get consent and more and more people say no. In that sense, it's important, and that's what we want to show here that you achieve results also with ID-less apps. And what we show here on the left side, you see it's more cost effective. Below you see some of the comparisons that's from our platform. So we see that with an ID-less ad, you are 36% more cost effective. This has to do with much less people bidding on this traffic. So there's a lower price on it. Then on the performance, on average, we are performing a bit worse than with an ID. So we are talking about 83% performance, 17% lower than with an ID. But if you then take the equation, you have the 30% higher efficiency by targeting without IDs. And that's not the only world. When advertisers want to target, they want to of course target with IDs and without IDs because there's also parts of the market where you still have an ID or big part of the market also, but it's all about having the combination and the possibility of doing it. A bit of progress also here, ATOM, our solution to really generate audiences on device. We have presented that before. We have now 30% penetration on our SDKs. So it's really getting at scale now, which allows us to really use it, yes, at scale for advertisers. Then also super happy that ATOM now also for Android is ready, and we started launching that. So it's still in the early adoption phase, but we will also scale that throughout the year. And then another thing we're working on further progress here. On the screen, it's possible to see a difference between male and female, females with long nails touches a screen of a mobile phone differently than a male. And you would say, why is this important? It's important to differentiate between male and female because most advertisers have different campaigns for male and female. Even for the same product, it's often in a different color. And now with our screen, we are able to fit 70% of accuracy to say it's a male or female to check the gender. So that's pretty cool, and we further continue to innovate on that part. Then going a bit to the next page, getting to, yes, let's say, an overview of what we are investing in. And I think that's also important to show -- to give a bit of wider overview. So one of the main points here is expansion and unification. We further continue to unify and aggressively grow our sales force. Important, one brand, we decided that last year, during the AGM was the official decision. So we have started rolling that out. Jun Group still has to be rebranded to Verve, but we are doing that. And for the rest, sales forces are integrated. So the Verve sales force, the Jun Group sales force are integrated, and we now are really growing that. Then globalizing our offering, it's about also going into different markets into Europe, into LatAm, into Asia. We take market by market and each market has different requirements, so that needs to be done. Expanding our product portfolio and getting sector specialists, we see that really demands per sector are very different. Travel has a total different demand than retail, and we need sector specialists to really drive our sales there, and I'll come to that later also our products. Then increased brand recognition and global go-to-market approach. So also with unified brands, we're working really -- yes, getting more recognition. We do that on the trade fairs where we are, but also, of course, the branding campaigns and expanding that. Then platform unification. Yes, I mentioned it already before. We have now our Infra all-in-one platform, so everything is integrated into GCP. So that project is finalized, drives a lot more efficiency, has the advantage that you don't need as many people to run the platforms and also that you are, of course, able to scale easier and go forward, yes. Then the next second or the next point is about integrating the platform. So the aim is to, by the end of this year, have one single integrated supply demand and data platform architecture. With the acquisitions we did, we acquired several stacks -- several technology stacks. We have integrated a lot of them already, but we're now currently working on big integration of the last two SSPs to integrate that into one. We're now in an hot phase at the moment in Q2, where we're really doing a lot of the lifting of the volume already. And then the rest of the year, we will have more fine-tune work and to shift the last part of the traffic. So that's a big project we're working on. It will make us a lot more efficient. Same on the demand side that we have two DSPs, which are almost integrated into one. And then the data platform architecture, a lot of it has already been prepared and also that will be integrated into a single architecture once the stacks are integrated. Those stacks, DSP, SSP and data platform are seamlessly connected, so also that makes it efficient. And that makes us a much more efficient company, of course. And yes, just to give a simple example, if we now do some solution development, product development, platform development, we need to do it for several stacks, in this case for example for two SSPs, and it's, of course, much more efficient if you only have to do that for one SSP. So driving a lot of efficiency if we have done this. Then improved performance and efficiency, further investing in AI, further investing in our targeting. We're looking at floor price settings at demand shaping, supply shaping and a lot of process, et cetera, in this platform, which is very complex. We have to within 100 milliseconds to really make this targeting, get the ad sold and yes, very important to use AI there, but also to have a lot of data. Then we work on product innovation. We continue our focus on ID-less targeting. I gave an example of that already before, working on several things there. Focus on AI driven measuring, data/targeting optimization. So the process that I just described for the performance and efficiency platform, yes, are AI driven. So that's a strong focus there, but also further processes when we use LLMs, et cetera. Then sector and channel-based innovation, mentioned before, we're getting sector experts to be also focusing our product, more on different sectors on the needs of the sectors. I just showed you Schema, for example, for more retail, I would say, of applications, but we have different solutions there also for Digital Audio. We are working on lots of podcasters now, for example, to drive that. Then also on the capital market side, we have some big achievements, not in Q1, but now in early Q2. So we'd like to mention those, the uplisting into the regulated market in Frankfurt, which opens up the share for a lot of other investors that are not allowed to invest in nonregulated markets and also successful bond refinancing, which will bring us to lower interest costs. And then further focus on our Investor Relations, we still have to find out that a lot of people don't know us and a lot of people don't understand what we're doing. And yes, that needs a bit more explanation. So we're also doubling down on Investor Relations. This brings me to the end of my presentation. So getting to a fully unified end-to-end platform by the end of time 2025 is the goal, further continuing to grow and further continuing to innovate and further continuing to make media better. I would like to hand over to Christian for the financials.

Thank you very much, Remco, and I will first cover the financial performance and then I'll transition into guidance for the full year. So if we go to the first slide here on financial update, we had a solid start to 2025. Total revenues grew 32%, up from EUR 82 million to EUR 109 million. And I think by any standard, that's a very strong start to the year. And also when we look and compare ourselves with peers, 32% growth in Q1 is very strong. Our organic growth was 16% like-for-like. And this is actually on top of a very strong quarter last year, Q1 last year, which was 21%, which is 16% on top of 21% organically. Jun Group is performing very nicely and obviously contributing to our overall growth. It's also becoming increasingly integrated into our go-to-market model. Our sales teams and commercial teams are now fully integrated and working basically seamlessly together towards customers and representing our products. This actually also means that it is becoming and will become increasingly difficult for us to separate out Jun Group revenues because of the cross sales and synergies. It's a headache for finance but basically, it's a good thing for the business because it shows our integration and our synergy extraction is going well. That covers the revenue side. In terms of costs and profitability, costs are in check. We are managing according to our plan, and you also see here that while we grew top line 32%, we actually lifted EBITDA 37% to a margin of 28% margin, and we lifted EBIT 40% at the same time. So we really see the operational scale coming through with profits growing faster than top line. If you look here at the left-hand side, there are different quarters represented, you will note that Q1 is always our lowest quarter, Q4 is always our highest quarter in our types of business. It also means that the scaling effects in Q1 are least pronounced. So scale is less pronounced in Q1 versus Q4. And that's because we run less ads but basically on the same setup and people costs. But in spite of this and in spite of us also doing investments in the business this year and already here in Q1, we -- especially around our -- expansion of our sales coverage, we improved EBITDA margin with 1 percentage point, and go from -- to 28% versus 27% in the same period last year. In terms of cash flow, cash flow generation was in line with expectations. We always have a negative effect from net working capital in Q1 and Q2, and then it reverses in Q3 and Q4, but if we look at cash flow generation before those net working capital effects, we generated positive cash flow from operations of EUR 23 million. And from that, we made investments of EUR 10 million. So that's Q1 in a nutshell. If we then move to the next slide, and you will here see revenue and EBITDA on a 5-year horizon. Essentially, Q1 adds to the scaling of our revenue and profitability and extends our track record. On the revenue side, we grew our revenues on an LTM basis, up to EUR 464 million, up from EUR 437 million for the full year of 2024. And on EBITDA, we grew to EUR 141 million versus EUR 133 million for the full year '24. You also see that we -- over those 5 years, we've achieved 32% growth on our top line, and at the same time, we've lifted EBITDA 45%. And altogether, this is way beyond the Rule of 40 that many of you will be familiar with. We take a lot of confidence out of this track record and being able to do this on such a consistent way. It proves our ability to convert investments -- make investments and really convert those into attractive returns over a time series. And this also basically provides us the confidence that we will continue to invest in the business. Even if this year will be challenging and we may face some macroeconomic headwinds, we will continue with our plan to make investments in technology and in sales to capture growth in the coming -- in this year and the coming years. And that actually brings me to the next slide. This slide shows our operating cash flow and our CapEx investments. And granted, it's quite information-rich, I'm aware, but the key message here is we are producing healthy cash flow generation to both service our debt and to make the investments that we want to make in innovation and differentiation of our technology platform. If we first turn to operating cash flow here on the left-hand side, and I think let's focus on the dark blue bars, we've had an operating cash flow of EUR 128 million on an LTM basis. It's slightly down from the full year of EUR 137 million. This is again due to seasonal effects on net working capital and some larger one-off payments including taxes that we made in Q1. But overall, we expect a strong lift in the operating cash flow as we move through the year and we move into high season. You will also know that we placed a EUR 500 million bond, refining our existing bonds. We did that at very attractive terms compared to what we were paying before Euribor plus 4%, and this will lower our cash interest payments that are depicted here in the chart. We are still paying in total EUR 45 million. And from Q2 and onwards, you will see the impact of our refinancing of our bonds, and this will significantly reduce our interest payments going forward. On the right-hand side, you see our CapEx development has been -- if we focus here on the purple and dark blue which is our maintenance and expansion CapEx, it's been roughly around the EUR 40 million mark. We will continue to invest between EUR 40 million to EUR 45 million in this year and in the years to come. This is obviously a choice for us, but a necessary choice for us really to be on the cutting edge of technology, make the investments that we need to do in our -- being differentiated around our ID-less technology. We could do less to have a better operating cash flow generation, but this is a choice that we're doing for the year. We are also reaping the benefits of a more unified platform, more unified development teams. And that means that we're also getting more coding hours, more development hours on a like-for-like basis and all helping us to get a -- to a better result on our development efforts. Turning now to the next page. Here, you see on our net debt leverage ratio and also our interest rate -- interest coverage ratio, two factors depicting our financial health and balance sheet health. It's important for us to say that we continue to have focus on net leverage ratio depicted on the left-hand side. It's slightly up from the levels of end of 2024. Again, it's due to less cash at hand because of payouts in Q1 and net working capital effects. But it's key for me to -- we are maintaining at 2.5x, so largely unchanged from going out of last year. And it is important for me to state that this will be continued focus point for us during the year, aiming to get to a ratio of 2.0. On the right-hand side, we have interest coverage ratio at 3.3x. So we are able to pay our interest at 3.3x, also a testament to a healthy level and testament to our financial health. So in summary, overall, a very good start to the year from Q1. We maintain focus on operating cash flows and deleveraging for the company, and we are fully able to service both our debt and our technology investments. That brings me into the next point, which is guidance for 2025. I think everybody can appreciate with all the dynamics going on in the world, both macroeconomic, political, geopolitical environment, tariffs wars, 2025 is a particularly tricky year to set guidance for. There's a lot of factors to take into account. And that also means that we have a slightly wider range on our guidance that we might have in a normal year. Let me try to share just some of the perspectives and some of the key considerations that goes into setting our guidance. Essentially, to summarize across all these factors, we do have -- there are certain elements of uncertainty and less visibility on the macroeconomic outlook and ad spend outlook for U.S., which is particularly important for our business, given we have so much of our business in the U.S. And also, as many of you will have noticed, we've seen volatility around the development of the U.S. dollar initially with an appreciation in Q1 and then a depreciation in Q2. And I'd say those are probably the two factors that on a shorter basis makes it difficult to set guidance for 2025. On the other hand, we also have a number of factors that provides a structural tailwinds both on the short term, midterm and long term. Just to mention a few, yes, we operate in a quite competitive business. But at the same time, where there are quite sizable players that we often refer to as walled gardens, but all regulatory shifts and antitrust actions are addressing this and will, over time, we expect lead to a much more level playing field for independent players as us. Obviously, everybody has focused on the potential breakup of Google, difficult to say when that could happen, but the long-term trends all support a more level playing field. We continue to see a shift towards privacy, and this drives obviously the big opportunity for us in ID-less targeting. And yes, Google has announced that they will not deprecate the third-party cookies. This may slow the development, but all the tailwinds are towards higher focus on privacy and an opportunity for our targeting technology. And we get also a lot of questions around -- sorry, we get quite a bit of questions around how does the change in consumer behavior around moving to a large language models, ChatGPT type of potentially impact? And the net-net of it is that it will move focus and time spent and money away from search and open web to channels that are more immersive, those being some of the channels that we're in, in mobile in-app and CTV. So I hope you can appreciate that while facing some volatility on the economic -- macroeconomic outlook [Technical Difficulty] we have number of factors that also very support growth, and those are some of the factors that we try to come into now. Please go to next slide. Having all this in mind, what does this really mean in terms of numbers? Well, our guidance for 2025 full year on top line is between EUR 530 million to EUR 565 million. This is a lift of between 21% and 29%. Our guidance for the adjusted EBITDA is between EUR 155 million to EUR 175 million, a lift of respectively, 16% to 31%, at the lower range, representing an EBITDA margin of 29%, and at the higher range, it would represent a margin of 31%. The difference comes from a more pronounced operational scale effect if we have higher -- if we hit the top end of our range. We will, of course, strive to narrow the band as we gain more visibility through the year. But despite some of the factors that play right here in these quarters, we are confident that we will have another very strong year, and we will continue our path around profitable growth to deliver results in this range. If we then look to the next slide, and we look towards our midterm growth perspective, we reconfirm our growth perspective on a 3- to 5-year time horizon, it's unchanged versus last year. We -- our growth perspective and aim is to deliver between 25% and 30% revenue growth and 30% to 35% EBITDA margin. Some years, we will see more growth. Some years, we will see less growth, but I think showing our past track record for the last 5 years, we have proven we've done it before. And we also know there is plenty of opportunity in the market and growing size of market opportunity for our ID-less targeting, the technologies to achieve these goals. So with this midterm perspective, we are on a path. If you do the math and you do the midpoint, we are on a path to create a business that is -- has more than EUR 1 billion in revenues and at least at the level of EUR 330 million in EBITDA generation. Our aim for -- I also want to just mention a callout net leverage ratio, where the target is to be between -- or the aim is to be between 1.5 to 2.5 and with a short-term aim to be closer to 2. So this really depicts the potential of the business in a '28 to '29 year time horizon, EUR 1 billion in revenues, EUR 330 million in EBITDA at least. And with such numbers to capture for us, I hand back to Remco to summarize the core priorities for '25.

Thank you very much, Christian. Yes, coming a bit more towards what are we further planning in the company and Christian already gave the guidance. I think, yes, we have positioned the company very well, but we will further do, let's say, a lot of things to drive the growth further. We will, first of all, start to continue investing in our ID-less and AI. We have seen that really with that, we are differentiating ourselves in the market. We are, let's say, with our early invest in ID-less, we have really built a strong position, and we want to further double down on that and to invest further in it. And AI, I mean, everybody is talking about AI, it's for us, super important and we make big progress. So also there, important to invest. And AI is nothing without data. So also further making sure that we get enough data to feed our AI engines. Then leveraging our direct supply. That means that we further will continue to build on our direct supply. We integrated over 65,000 apps, reached over 200 million TV screens, CT connected TV screens or further doubling down also on digital out-of-home audio and retail media. Having this strong direct supply position really also differentiates us in the market. We are one of the best in that -- in the U.S. We want to also double down on that internationally. Then finalize our platform unification by the end of the year. I mentioned that already before extensively that I won't go in detail here. Invest in brand and agency sales. So we have great products. We can prove that they work. And now it's really about scaling that, and that means adding extra sellers. There's over 3,000 midsized agencies in the U.S. There's the holdcos. There's a lot more agencies internationally. So to really work with those, you need salespeople and you need also, of course, the backup staff, the account management, the people that run the systems, et cetera, et cetera. And then expand omnichannel capabilities. It's, yes, not only getting supply partners, but also making sure that as we are in in-app with our SDK is really a top-notch SDK, we want to have the same technical capabilities also in the other channels. So those things are very important. We have now over 800 employees in the company, and we are focusing on a lot. We're also even focusing on a lot of other things -- sorry, on a lot of other things we don't focus because you need to focus as a company, but these are the main ones here on the left side. Yes, it's about what's going to go now. We want to further gain market share by delivering measurable outcomes for our customers with a focus on AI-driven ID-less targeting and access to direct supply. And despite macroeconomic uncertainties, we will keep investing in these growth drivers with the potential to reach over EUR 1 billion net revenues within the 3 to 5 next years. So Verve has shown consistent revenue and EBITDA growth in the past years. We have become one of the major players in ad tech in the U.S. And with our strong product offering and now further scaling our brand and agency sales, we are well positioned and on a successful growth path to further drive this growth. So that brings me to the end of this presentation. We're happy with Q1, and there's more to come, and I would hand over to the moderator for questions. Thank you very much.

[Operator Instructions]

It's Adrian Elmlund here from Nordea. So firstly, you talk a great deal here in the report of economic and geopolitical uncertainties. Could we get your thoughts behind how this impacts your business in Q1? Did you see any major fluctuations here in Q1? And also with regards to the comment of the start to Q2, which seems to be somewhat soft in your language, do you expect stronger growth in the second half of the year since -- if we look here, I'm referring to rather confident revenue guidance for the full year. And if Q2 seems to be a bit weak, is H2 back-end loaded, so to say?

Yes. Do you -- I can take that question. So in terms of Q1, we did not see any big effects of advertisers slowing their advertising or marketing budgets. But we obviously do see concern. When we talk to our advertisers, we do see that they are concerned and there are certain uncertainty around whether the sentiment in the U.S. market would layer into GDP fundamentals and thereby impact the economy. We could see a quarter or 2 quarters with a little bit less growth, but we would evaluate it to be more transitory. So you're right in the way that we could see a somewhat slight dampening in the coming months, but then with a pickup later in the year.

Yes. Maybe to add to that, an example, we just had a few weeks ago, a car manufacturer that I was also involved in, a U.S. car manufacturer. And he said, why should I advertise if I don't know if I still make money on my cars, and that's because of the import parts and things like that. So we see some weakness in the market. I wouldn't say it's really overwhelming at the moment. But we have to be careful with the coming quarters. But as we see it at the moment is, let's say, it's difficult to judge, but there has been a lot of loud shouting and threatening of very high, how to say, tariffs. But in the end, it might not all come as severe. But we all don't know and nobody has a crystal ball. So we are, let's say, yes, taking a bit larger spread in our guidance than we normally do, and that has to do with the market circumstances. But I think that's what you hear from other companies as well. It's super difficult to guide. We are more confident with our midterm guidance than it is easy to guide on the short term, to be honest.

Okay. Fair enough. You also guide here for a potential decline in the adjusted EBITDA margin year-over-year. How much of this would be related to economic uncertainties versus your investments in the OpEx being personnel and technology investments, et cetera? Is there any like CPM or ad impression expectations that you could share with us for the year?

Yes, I can maybe start with, let's say, the market development and then Christian, you can maybe go on the overall. What we see is that it differs a bit per market, and it not necessarily all has to do with, let's say, weakness in the market. On CTV, we have seen versus last year a strong decline in CPMs, and that has a bit to do. There has been a lot of extra supply coming to the market with fast channels, with Netflix, et cetera, et cetera. And as such, with a lot of supply and the demand not all yet focusing so much on CTV, you can see that CPMs go down. On the mobile side, we don't see that. But let's say, we have seen in '22, '23, if really it would come to more severe weakness of advertising budgets that there is less demand, less demand means lower prices. On the other hand, we have been able also now with Jun Group to really add more services, especially on the demand side. And that's also resulting, as you already see in Q1 in, let's say, a higher yield per ad impression basically. So we're pretty confident that we can, let's say, compensate a big part of it. But of course, we're also dependent on the market. And that, of course, yes, higher revenue, lower revenue has an influence on EBITDA, but Christian can say some things to do that.

Yes. I would comment that the main effect is because we are choosing to add people to the business, especially in 2 areas, mainly around expanding our sales coverage in the U.S. towards brand and advertisers. So essentially building out the team that we already acquired with Jun Group and -- that's number one. We are also -- in certain areas, we are hiring experts for AI, and those are expensive. So that means that we continue to plan to make those investments for the year. And should we then hit the lower range of our top line, we, of course, still need to cover that cost.

But important to say that the absolute EBITDA will further grow according to our guidance and that we are confident that we'll have a good year. And as I've said before, if it's raining, it's easy to overtake. So in that sense, even if the market conditions are maybe not as great this year, which we don't know, then we are very confident that we will further gain market share.

Okay. Perfect. Last question here. Could you talk us through the potential impact from a [Technical Difficulty] break and kind of where the market stands today? What's the potential magnitude if this would go into effect?

Sorry, you broke up at least on my side. Can you repeat the first part of your question? The effect of what?

Could you walk us through the potential impact from a breakup of Google? Where does the market stand today and what could happen?

It's also here difficult to really say. But Google, with its walled garden, as we call it, which is, let's say, having a lot of advertiser contacts and has a very strong, let's say, asset in the market being YouTube. At the moment, they force agencies to spend big budgets via their network and a lot of that goes to YouTube. And what we've seen in the last year, and it has not only in our numbers also in Q1 now that, let's say, a lot of Google spend that they also did on third-party supply is more and more going to YouTube because they just make more money with that. One of our peers has been heavily hit by that. I think everybody has seen a bit of it in the market. So those kind of games are not possible anymore if there's a breakup. But the first difficulty already is how will the breakup exactly look because that's not known or not decided yet. But for sure, if they cannot play this, yes, I'd say, I put -- I have a lot of power in the market to get budgets and then I put them on my own properties. If that goes away, it will free up a lot of budget in the market, and that should have a very positive effect on the open market. So I don't know how big the effect will be, but there will be a very positive effect.

The next question comes from Rasmus Engberg from Kepler Cheuvreux.

I just wanted to come back to Q2. In the report, you mentioned supply side unification, but did you also see an effect on the demand side in the second quarter in the beginning there? Or is it a technical thing?

Yes. What -- I can take this one -- this question. Thank you, Rasmus. What we are referring to, we are doing this big migration of the platforms. And in Q2, let's say, we have a big shift of, let's say, the supply side platforms. So what we are referring to is an internal thing where we really are putting a lot of -- we're unifying all the traffic on one platform. And if you shift traffic from one platform to another, you get things like a database that maybe doesn't work. So you can have technical hiccups, which we had a few in the last weeks actually. But you also have AI routines, which need to be adjusted to, let's say, new AI work on it on our side, but also on the side of the DSP that's, for example, buying it. So in that sense, doing these platform integrations, and we have done them in the past, always leads a little bit to disruptions in the service, also onboarding of new customers is delayed a bit by that. That's not a problem, not an issue. Short term, it hurts a bit. But on the mid and long term, it will have a positive effect. And let's say, the big shift and lift on the SSP is happening now in this quarter. So we expect that to all have an extremely positive effect in the rest of the year. But yes, you're -- I'd say, interpreting it in the right way. We don't see so much on the, let's say, on the market side, except for the car example that I gave before. So we have a few, but not a lot. And on the demand side, talking to our agencies, we hear some that are drawing budgets forward. So they say, let's spend it already then it's spent. If that will have an effect on the midterm, we don't know. But yes, still looking pretty positive about our chances or opportunities into the market. I hope that answers your question.

Yes, very much. So I was more worried that the guidance included flat or no growth towards the end of the year, but that doesn't at all seem to be the case, organically I mean.

No, no. Also the salespeople that we're adding, also those take time. I mean, if you add a salesperson now, he doesn't immediately bring in a customer. I mean that's rare. And some of the salespeople might not be so good, so you have to replace them. So also those things are, yes, let's say, working out a bit later. And that's the reason that we are really speeding that up now, which might indeed, let's say, put a bit of pressure on Q2, but I'm not so afraid of that actually because it will really yield in the Q3 and Q4. So yes, no concerns there from my side at least.

That was a good clarification. And can you just outline because you don't give the details in the report, but what happened with the tax rate, both paid and reported? And what do you sort of think is a reasonable assumption for the year? So about the paid tax effect.

Christian?

Yes. So overall, we do see that we will be paying more taxes going forward than we have done prior, and that's because we are turning profitable in many of our entities. You should -- we would expect an effective tax rate around 30% for the year.

And that's both paid and reported, I assume or...

Yes.

The next question comes from Edward James from Cantor Fitzgerald.

I've got 3. So if we go through them just one by one, if that's okay. Just beginning with organic growth. I believe the previous guidance at the time of the full year '24 results was for meaningful double-digit organic growth for fiscal '25. Q1 organic growth of 16% is clearly strong, and it's a really good number. But can you just give us some more context as to how you feel this should evolve through the year? And just some more context as to how you view organic growth for 2025 with your updated guidance?

Yes. Let's say -- maybe I can take this, Christian. So we see further double-digit organic growth. But as we mentioned before, there is macroeconomic uncertainty in the market. So there can always be a quarter where it's a bit less. We're super happy with Q1. I think 16% is a good percentage to start the year with. This company can do substantial double-digit growth. We are really aiming for that, but there is no guarantee on it. So in that sense, it's difficult to say. But I mean, of course, the guidance includes our Jun Group, which was consolidated last year from August 1. But for the rest, it's all organic growth. So if you do the calculations, you see that there's a substantial organic growth in this company, in the guidance. I hope that answers your question.

Yes. No, that's helpful. And then just on the -- on guidance, as you mentioned, the revenue guidance and EBITDA guidance is wider than it normally is. And I guess the key swing factors within that guidance is revenue given you continue to invest. Could you just unpack the assumptions -- the underlying assumptions for the upper end and the lower end of this range? And what are the 2 or 3 particular things that you would need to see in Q2 or Q3 to increase your confidence in hitting the higher end of that range?

Yes. I will -- I can give you a bit of context around the band. If we take the top line, the revenue line first in our guidance. So -- in our lower end of the range, we do factor in a scenario where we would see some macroeconomic uncertainty lead advertisers to conserve spend on the short term, not a contraction, but conserve some of the spend, which would mean lower growth in the market overall, but also for the channels that we are in. So you will probably note that in the channels we normally are in, mobile in-app and CTV, they are structurally growing 10%, 12%, 14% every year. And in our low range of the scenario, we do factor in that, that growth will take off for some time. Now is that 1 quarter, 2 quarter, 3 quarter, that's to be seen. In our high end, we factor in a sustained growth in our advertising channel with some marginal impact from macroeconomic worries, but not a significant lowering of the growth rate. Does that provide you some sense of the scenarios that are behind?

Yes. No, that's really helpful. And just to be just more specific on the FX point. In terms of FX for the lower and the higher end, I guess the implicit assumption is a continued weakness in the U.S. dollar?

It is. It is. So -- it's very important to look at what happened in Q1 and what happened in Q2. So in Q1, there was actually an appreciation of the U.S. dollar versus the euro, plus 3%. In Q2, of course, everybody would have noticed that the dollar fell quite significantly around 4%. Those effects of Q1 and Q2 roughly even out each other, not fully, but they're opposite directions. And then the assumption is actually for the remainder of the year to have a U.S. dollar to euro exchange rate around 1.12, so roughly where it is today. And if we calculate through and with our exposure of the business to the U.S. dollar, and I'll just remind you that the vast, vast majority of our incoming payments and outgoing payments are in U.S. denominated. So they naturally hedge. But if we calculate those scenarios through then, we can see an effect of roughly 2 percentage points. Now if the dollar moves more, it will, obviously could be in either direction, it could have a bigger effect. But that's how we looked at it and with roughly around plus/minus 2 percentage point impact on translation for the full year.

That's very helpful. And then just my final question is just on just some of the trends we've seen in Q2. I know you've answered some of the questions already. But if we were to just exclude the kind of internal impacts around the supply side platform unification, we just focus on, let's call it, the underlying market signals that you're seeing in your core customer segments and how they evolved in Q2? And how does that kind of make you feel where the net expansion rates, in particular for your business overall will trend in Q2 and Q3 as we go through the year?

Yes, I can take that. Sorry. We see on the customer front, let's say, not much. There is a bit, I would say. It's always difficult to judge. Is it market? Is it more individual customers? There are some segments that are a bit weaker at the moment. But overall, I would say Q2, as we look at it today, doesn't look too bad. But let's say -- let's wait what is going to happen. I mean there was a lot of shouting about tariffs, et cetera. So far -- I gave the example of the car industry, car manufacturer. But so far, it's not coming as bad as it was expected at a certain point. But it's -- I mean, yes, it could change. As I said before, there are some agencies that tell us that they bring budgets forward. That means that you don't see it now, but you might see it in the next quarters or already in the end of this quarter. But so far, as I said, it's really -- it's not as bad as we expected a few weeks ago. Let me say it that way.

The next question comes from Martin Yang.

My first question is about the weakness you cited on the second quarter. Is there any way to quantify the impact of the integration either on a weekly revenue run rate or monthly revenue run rate basis as a comparison from a year ago or a quarter ago?

No. Thank you for your question, Martin. And we are not giving exact numbers out at the moment because, let's say, we have a larger company here, and we are not looking at exact details. But what I said, I mean, on the market, we don't see a lot of effects, and we see a bit on the technology side on the few days that we had in the last weeks. But for the rest, no alarm here, positive signs, positive signals. And let's also see June is, let's say, in Q2, always an extremely strong month, much stronger than the month before. So let's see what's coming for the next month. I'm pretty confident that also Q2 will not as bad as some people make you believe. Yes, let's look forward. And our guidance, let's say, is for the full year also. So we're confident at this point in time that we will be making that.

My second question is about -- Do you have a target goal for ATOM's penetration among your customers? And is the continued penetration of ATOM a driver or a factor for your annual guidance?

Yes, ATOM has become an important part because it gives us a lot of data. And with data, our AI systems work better and our targeting works better. So ATOM is important and becoming more and more important. With now the current penetration, we have it at scale. So that means that we really can, how to say, target with it, and we are further building on that, but that makes it better, but it's not, let's say, we have the minimum scale that was required. And with that, we are able to build more cohorts or more categories and -- but that also takes time. So it's really scaling now. It's getting nicely into, let's say, our -- yes, our targeting, our revenues. So we're super happy about it. And now also with Android, we are able to further extend that. Because we've also seen that with ATOM, even if you have an ID, it gives you different signals like, for example, this male-female signal, which is often much more reliable or in most cases, more reliable than what a lot of data providers give you as signals. So with ATOM, yes, I think we really have got a very strong, how to say, tool to get our targeting and everything stronger and with that also increase our revenues. I hope that answers...

Got it. My last question is about AI and any -- do you have any plan to embed more either AI agents like features or copilot features in your customer dashboard so that they can maybe save more time, get more value out of your targeting products?

Thank you for the question, Martin. I expected the agent question because, yes, agent technology is now what everybody is talking about. Of course, we are also working on that. And it's mostly if you talk about self-serve platforms for the customer, but also internally, if we have platforms where we do the settings and where we run the campaigns. Agentic is really becoming -- yes, it's an important part in making things easier, more available and also less human resource intense. So we're, of course, also working on that. And there's a lot of progress in the market, and we're also profiting from that.

The next question comes from Christoffer Jennel from Inderes.

I wanted to start with the retention rate, which saw its lowest level for many years. Would you say that this is an effect of the current macro landscape or some sort of growing pains considering the strong order intake in 2024? And also what type of customers are churning in the quarter?

Yes. We -- thank you for the good question, Christoffer. Looking at the customers, we cannot see that it's really -- at least not in Q1 and also not early Q2, that it's really a certain overall weakness in the market. There are some customers that bring their budgets down. We saw quite a bit of Google volume actually and which is coming in via different pipes going down, which we're also not so unhappy about because it's more indirect volume, which we would like to anyway lower slower down in our platform. But still, it doesn't show nice in the number, let's say, admit that. I'd rather would have seen 110% there. But overall, I think it's a bit a part also of, yes, growing pains, you called it, of really getting bigger. You lose some customers. We concentrate on those where we really can add value and can bring forward. And so it's not necessarily a bad thing, but of course, it's nicer if your existing customer base grows. But also be careful, Q1 companies get under the $100,000. So some of the negative churn we see now, I would expect in, let's say, the next quarters, especially in Q3 and Q4 to come back in those numbers.

Could I also just add, and I understand the focus on that metric, but I think also to add and just complement, I mean, where we are really seeing a significant growth is customers that we onboarded during last year, not even past Q1, but from Q2, Q3, Q4. That is really driving our growth and supplementing our growth.

All right. And the next question is regarding the customer intake in Q1. I'm just wondering if you are satisfied with the organic intake in Q1, considering the first half of the year is typically seasonally stronger period for customer intake as advertisers [indiscernible] with new solutions.

Yes, we are happy with the intake in Q1. We have really added a lot of customers and also a lot of publishers, let me say it that way. So customers on the advertiser agencies as well as publishers. So we're happy with that. But as we have shown over $100,000 customers in the last year, the ones that we really newly onboard in Q1, you don't see in those numbers or hardly see in those numbers because there's not many that scale in 1 quarter to over $100,000. But we are super happy and there will be more growth coming there. And also with the customers, let's say, the new customers now getting over $100,000, which have been onboarded earlier, we see a very good momentum.

Okay. And the last one for me regarding the $1 billion revenue target for 2028 to 2029, how much of that do you anticipate to be M&A? Or do you anticipate to be reached fully organically?

This will be majority-wise organic, but we are, let's say, not ruling out that we can do some M&A to fill some gaps that we have or also to get some scale maybe in different geos. So in that sense, majority-wise, it will be -- I mean we show strong organic. We have said it's more than -- yes, double digit -- good double digit. Now with our 16% in Q1, a good start for this year. And so we're confident that we can do the majority of that organic. But in our 25% to 30% midterm guidance, there's also some inorganic in there.

And please note that we factor in, of course, that some years, we will have high growth. In some years, we might have a little bit lower growth. This is an average, but it will bring us to a point of a EUR 1 billion company. That's also why we said '28 versus -- and '29 as a time line, 2028-2029.

The next question comes from Vincent Edholm from Pareto Securities.

I was just wondering about the gross margin development following the acquisition of Jun Group last year. If you would be able to describe the development of Jun so far? And if you might be able to give any color on what to expect for the next year as well?

You want to take that question or shall I?

I think you have more close eye on the Jun Group business.

Yes. Jun Group has a very high EBITDA margin or gross margin also. And we have announced already in the past, if we start scaling it, then it will go down a bit and still will be higher than what we had on average before. So it has a positive effect on our overall margin. That's also what you saw in the numbers of this quarter. While, let's say, Jun Group was not growing in the past, it is growing now. But to scale it really, we here and there let the margin lower a bit because they're working really with extremely high margin. So that's also to serve basically advertisers, yes, more bucks for their money to be, let's say, stronger there. But overall, our margin will go up.

And is that true for the remaining of the quarters here going forward, sequential increases in gross margin? Or will it fluctuate?

No, it will go up. And let's say, also especially in the stronger quarters of the year, Q3, Q4, unless there is a strong macroeconomic downturn. But if there's not, you normally see also margins going up during the rest of the year because the, let's say, the cost per -- I'd say, the CPMs go up in the -- because there's more demand towards the end of the year. So we see further development there. But of course, take into account that from August 1 last year, we had the Jun Group already in the numbers.

Thank you for all the questions. I will now hand the conference back to the speakers for any closing comments.

Thank you very much. Yes, then coming to the end of the presentation. Yes, the company is going extremely well, strong organic growth, a very good outlook for the rest of the year, a bit of macroeconomic uncertainty, but we will use that. And I think the important part of the message is really we have a great product, we need now further to sell it, and that's the reason that we're investing in extra salespeople, and we want to continue that even if there's a little bit more headwind maybe macroeconomically. But we think with that, we can gain a lot of market share and further build this company. So thank you all for, yes, listening, and thank you for your trust, and we will continue to work on making media better. Thank you very much.