Vertiseit AB (publ) (VERT-B) Q4 2025 Earnings Call Transcript

Hi, everyone. Welcome to Warburg and this earnings call. Vertisit has today released its year-end report for Q4 of 2025. My name is Jonas Lagerqvist. I'm Deputy CEO and CFO of Vertisit. And with me, I have Johan Lind, CEO of the group. so this morning we uh we published our q4 report and we'll go through it and deep dive into into some some of the most relevant topics we will we will go through the acquisition that was finalized during the quarter of muse and stoked ai in germany we will look into the to the quarterly financials we will present some highlights on in in the business during the quarter we will also go through and discuss some some some key AI related topics and we will finish off with a Q&A session where where everyone can can get their their questions answered and should you at any time have any questions feel free to use the the chat function and should you want to to join the call and and talk with us use the race hand function so please joan yeah so for those of you are new to the company vertaisit we are a sales company we provide an in-store experience

management platform for retailers and brand to facilitate the customer meeting by bridging the gap between online and in person where the core capability that we have is to be able to orchestrate all digital touch points in store whether it's for branding purpose tactic communication if it's sales support or all the way to transactional loyalty so the the business model is quite straightforward so our source revenue is related to the number of deployed touchpoints in store looking into the muse and stocked ai acquisition it's a really interesting one it's a highly strategic acquisition from from our side most of our previous acquisitions have been exactly in the same scope as we have acted ourselves where we have basically covered the full value proposition of the target company. But Muse and Stoked is a little bit different and I will walk through this with you all. So Muse is a small company, Hamburg-based, 10 employees, founded 2010. They have been in the forefront of retail tech and consulting in this space. like 50 50 portion of in-store audio and in-store experience and we will we will go in a little bit into the in-store audio because that's uh that's a very interesting one where ai will have a big impact um if you look at uh from a revenue perspective the revenue was 3 million uh 0.8 million euros in ARR, profitable in line with where the group is running as of now. If we go to the next slide, the important thing with Muse is that it adds a lot of AI expertise into the group, especially in the field of in-store audio, but also in other disciplines. They have been one of the disrupting companies within the in-store audio space. So what we see is that they add knowledge both in product development, consulting, and operations. I will get back to that in the AI session section later today. and the in-store audio is a space which is pretty much as big as digital science traditional digital signage or visual communication but for many years we have been outside of this space due to that the insta audio have been highly regulated very like service oriented And what we see now is that you could do like on-demand audio messaging in-store with AI. You could leverage also like music libraries that are AI generated, meaning that in-store audio goes from service-oriented service to more of like a product sauce tech delivery with the margins that we want to have. The interesting thing is also that Muse are very well positioned when it comes to the fashion retail industry in Germany. So they have a lot of strong local German brands in their portfolio that we can grow with. What we do is that we bring basically the whole Muse into visual art and form a new in-store audio division and bring some of the key people into consulting.

And also Marco will join Grassfish and he is one of the two founders of the company. so moving into the quarterly financials um i think this is a shark that many of you are familiar with by now and we're just proud to say that we keep we keep development according to our track record we we are now passing 14 years of sequential error so we have we've always managed to grow our ARR from quarter to quarter during now 14 years, which is somewhat of an achievement. Some high-level bullets from the quarter is that we keep growing our ARR. The ARR amounted to 332 million by the end of the quarter that's uh that's a year-over-year growth of 27 percent and out of that 27 16 is organic and which which all together is a growth number exceeding our financial target of 20 percent we also managed to manage to deliver profitability during the second half of the year of 20 which was uh which was the profitability level that we guided for when we uh when we when we communicated this target in in q2 2025. during the quarter we have expanded our ai capabilities both in both internally but also through the acquisition of Muse and Stoked AI and all across both our product development, our consulting business and in our internal operations. We strengthened our organization in Germany. We continued to grow during profitability. We've also had a really high inflow of high quality international leads on a level that we have not seen seen before which gives us like a very positive stance going into 2026 we've also started an evaluation to to relist the company to Nasdaq main markets in line with our ambition of building a strong like quality company and being able to attract even more broader investor base. so 27 growth year over year of which 16 were was was organic when looking at the the net revenue retention it remained stable and and even even increased a bit so just just above 108 meaning that more than 50 of our of our organic growth now comes from growth on our existing customer which is a is a solid receipt on that we have we have a competitive competitive offer that we deliver quality and value creating solutions to our customers so that they want to keep growing their business and keep expanding with us the churn rates on like an annualized level stayed at three percent which is which is very low and that we are that we are really happy for and we we see that the sales environment is improving when we when we now enter 2026 um on net revenue level we decrease our top line by a by eight percent and that is is very much related to to decreasing system sales during the quarter and when we decrease system sales we do that in favor of of delivering hardware through our through our partners which is in line with our overall strategy in order to become more more scalable and being able to expand more rapidly rapidly yeah so we delivered on the 20 ebta guidance for for h2 and uh worth mentioning is that we we have some some one-off costs uh during the quarter of approximately 5 million that we that we are not adjusting for so underlying profitability is somewhat stronger than the actual reported.

Great. And looking into SaaS metrics, it looks like a lot of red dots. I think we brought this into the presentation just to give you a high-level understanding of what's the impact. What Jonas just mentioned is that growth on existing customer is super strong, representing more than 50% of organic growth. So net revenue retention is strong. The customer acquisition costs are highly impacted on a year-over-year basis. But that's explained by Visual Art now being included for 12 months. And the business model with Visual Art is having a higher a higher sales a higher spend on sales organization and marketing but what we should look at is really the the actual cuck so it it's still way more cheaper to actually grow organically than even even the cheapest acquisition that we do so the actual CAC and CAC ratio is still really, really strong numbers compared to most SaaS companies I looked at. If you look at the average revenue per account, it's diluted in Q4 and it's diluted due to MDT being, MDT was a part of the ARR number the quarter before, but it was fully integrated in the end of the quarter, meaning that all accounts and the impact on the SaaS metrics was in Q4. So when we bought MDT, we aimed for Deutsche Telekom and McDonald's, but we also had a long, long tail of smaller customer which pushed down the average revenue per account. and so that's why it looks like a trend shift in that KPI but overall I think the source metrics are really solid and if you have any any other questions on those KPIs don't hesitate to reach out to us looking at some business highlights we often get a lot of questions on on on customers and how expansion on new contracts are going and so on and i just want to mention like a three so um three of the customer with highest impact on the growth in the quarter was stadium where we roll out the retail media network. Selling Group, the biggest contract we secured last year. We have now exceeded 8,000 licenses that are active. Circle K is a slightly older contract, but where we during the year have expanded into the US market. other highlight is of course that we we now see that we we execute on on the strategies that we have we for each each brand so we and we at nrf in new york the biggest retail conference in the world we were represented with both dice grass fish and visual art but with slightly different approach so dice were together with the digital signage federation a shared space where they met with partners grassfish had had partner dinners outside we had in in new york events we had the porsche porsche dealership as an example um working together with large integrators on that one and visual art had their own booth at nrf and had really nice numbers in football and lead generation there so it's it's nice to see that we actually can execute on the on different like go-to-market strategies and different like value propositions um in in reality and not just in theory uh circle k uh just to give you a little bit of an overview so this is the map now where we can see all of the locations that now are running are running our system so circle k is now exceeding 16 000 units deployed and the cool thing with that is that it's still just 14 the brand penetration because this concept is actually designed from a from a global perspective even though we go after market by market when another like topic that is like high priority for the year in our company is to leverage like ai in product consulting and operations and i think we have gained a lot of like traction uh just the latest quarter and with we brought some key people from the muse acquisition into our ai task force which where we have equipped all employees with the right tool sets. We can see that we have more than like 30 agents and wipe coded components that help us in daily operations as of today. In consulting, we start to see a lot of like productivity gains. We improve on content workflows. And the same goes for products where we launched like almost a year ago we launched the first like ai targeting scheduling mechanism into the product we now bring in store audio and messaging in as a module and we also bring new modules for actually generate like content and enhance content quality and so on into the product so I think it's super exciting times to to really like every week we see like new opportunities in the landscape and when I at the same time I get of course a lot of questions from from in investors customers and people I meet like okay like how will AI impact and the software industry how will it impact vertice it and what are the opportunities and threats and so on and like um so like a short short description of like our uh analyze right now is that like the high higher up in in our vertical stack that you are uh the most gain and you can have from from ai So from an opportunities perspective, we have productivity gains in our consulting offering. Basically, we can build applications and content and solutions and even integrations much faster than before. in product development especially like isolated modules to our platforms can be developed much faster than before also like the ux experience and adoption to different vertical specific needs or even customer needs are there and threats is of course that it's a threat that the consulting are affected by more and more like in-house competition but to be frank in our business it is not bad like we don't do consulting for the sake of consulting is it's like a tool to secure that we deliver value for our customers so that they deploy our solution and that it generates more licenses so even if it's short short term can have like an impact on consulting it can also be a boost in adaptation another threat is of course an increased competition in product development and i think it's like what we can see in gains in productivity and speed and innovation it's the same for our competitors so it's just to be on on our toes and continue to lean forward and keep keep a high pace we also see like we have not seen it in practice but we can see it in theory that there will be an opportunity for even for customers to build like slim cms layers that are basically vibe coded in connection to their their internal stack but with in those cases they will still need like an underlying infrastructure device management play out everything that we we have so looking into like barriers resilience like we are really like vertical it's a vertical integration that we provide everything from what meets the customer in in terms of content and ux in the applications data layers to make that content personalized and targeted it's customer specific modules applications beneath that you have the product modules you have our core cms but you also have the the core capabilities the infrastructure and the actual play out and device management where our software is installed in in devices which is actually the ixm grid yeah so um uh so in if you look at the points like it deeply integrated into customers ecosystem it's on device it's uh device management for all operation systems with where we can control units that are like seven years old and of course also that we are when we are infrastructure is also very high demands when it comes to security and and workflows etc where of course you need to meet the highest standards in the market but so like if you look at like from from a positive point of view i think what we see with ai i think we can bring more solutions faster to a lower price point to the market and and what from a logical perspective that should give us like more deployment more licenses and we don't see any like any risk at least

the the coming years for like infrastructure to be affected do you have any more points to that or reflections no i think we can move into the into the q a and i look forward to to receiving any questions on this because i know that this is uh high on like all software investors agendas right now um so we received some questions uh in regards to the to the to the list change that we're evaluating and what we can say there is that that it is currently currently being evaluated by the board and and like more communication will of course come as as this evaluation progresses and any decisions are are taken and now we have frederick from from from red eye that would like to join the call frederick hi hi jonas and joan and i want to start with a comment in the ceo letter you mentioned that you believe that your market position is stronger than ever could you perhaps elaborate a bit on that why is it and how do you see that's the case But, yeah, like it's an observation, like how much attention we get when we are out in the market.

So we, as you know, in the first quarter, we have been at NRF, we have been at ISC. And I can just see that the footfall and the traction there is better than it's ever been. But what we also see is that the international leads that we get are more global and they also come from a bigger portion of those outside of our core territory.

Of course, the majority of our contracts and customer relations is from Nordic and the Dutch region. but now we see a big portion also from from north america middle east even india and so on interesting great and if we look at the organic arr growth your outlook in the last quarter were quite optimistic you mentioned some tariff related softness in q2 spilling over and so on yet in q4 the growth is roughly similar to q3 i mean why is that and do you think the current inflow of business opportunities as you mentioned is enough to take you back to about 15 percent

yeah it's a very good very good question uh like what we have seen is that our business opportunities are a bit larger in size. The cycle of closing more international business is longer. So the pipeline looks healthy, but we wish that we had closed a little bit more business in the last quarter than we did. So I would say that we are not 100% satisfied with the growth the pace organically even though it is still healthy figures and but most important we should have a slightly stronger cash flow that than we have so that's the two focus areas for us now is to bring out like a stronger profitability cash flow and of course improve improve slightly on on the organic growth and to give you some sort of direction for the year i believe the year to be be stronger than last last year when it comes to growth still q1 q2 is

we normally like weaker than than q3 q4 and q3 is normally the strongest when it comes to profitability great that that's helpful so also one question about ai as you mentioned you demonstrated some features at grassfish summit last year so regarding that features and other features in general what's the feedback so far and what's the general interest in ai from customers currently i think just the last like six months and the last quarter in particular when we look

into basically all all tenders or processes that we are part of is it's top on the agenda like your product needs to be needs to be agent friendly needs to be able to integrate into to the workflows that the customer basically design. So it's like highest on the priority from on the customer's agenda when selecting a platform today. Together with security, I would say. Security is also ramping up in significance.

I see, that's all for me. Thank you very much.

Thank you very much. so right rick uh now we have uh rickard um analyst from kenegi hi rickard see if we have a record with us yeah we don't hear you yet record or we can take uh maybe a question in between yes um we have a um okay a couple of technical questions financial questions um about the the personnel costs the cost of staff that are that are up approximately 10 compared to compared to last year uh even though cost savings were implemented in q2 and uh you can take that yeah and there is uh of course since uh during during the year although that we have although that we have done cost savings we have also made two acquisitions which have added uh quite a few quite a few employees and and also looking into looking into the the quarter isolated we we had there were like five million in in extraordinary costs that were that were adjusted for and as previously mentioned roughly the same amount that that actually actually exist in the in the pnl that we're not adjusted for and i would say that both of these both of these items amount to about 10 10 million are items that will not be carried forward and the split between them between like administrative costs and the cost of staff is about 50 50 on this so um that should be like some somewhat of a guidance of the actual like running cost level that we uh that we are on right now um and another relevant question is of course uh fx effects and uh as uh as people might know i mean the swedish crown has been appreciated during the quarter which has quite quite the material effects on arr in absolute numbers as like 50 of the of our sauce revenues are in like non-swedish crowns so so that's also the reason that we that we always talk about growth in in in fixed currencies so so of course it has a it has an impact on the on the absolute reported number in in err and i would say in but on on on bottom line level on ebta level it has a minor impact since we have a good hedge in the shape of having both revenue and costs in the same in the same currencies like throughout the organization but of course i would say if there is an effect on on ebta as well but i would i would estimate that to approximately like five percent some questions regarding gross profits that we have a we have uh somewhat reduced our gross profits uh on on sauce we have increased the margins on uh on sauce and i would say on on on the on the systems side um our our margins are typically like somewhere in the like 27 28 percent uh percent range now we had a stronger quarter this uh this this quarter a week a quarter one year ago and that is very much dependent on the character of the actual rollouts being being performed on the markets that we sell hardware and it can can fluctuate quite heavily yeah so um like it it's totally depends on what what type of projects we are running and in what competition yeah so richard let's uh let's give it a new try can you hear us can you hear me now yes hi okay great thank you and thank you for presentation and

my first question is uh you present that you roughly have around 14 brand penetration on circle k and looking at other similar like very big customers what level are you on these should Is Circle K lower than average or on average? It's a little bit lower.

If you take our key account customers representing 75% of our turnover, the average penetration for the concept for the markets that they are designed for is around 30%.

Okay. Thank you. and also like if we look on the nr r i mean is this the sort of level given the penetration you have on your largest customers that we should look for going forwards slightly below one ten percent or do you see the increased as you say increased sentiment that it might accelerate during 2026 good question like normally we say that we are satisfied if if we have 50 of the organic growth in from existing customer base so if we if we grow like 16 16 organically the nrr

should be 108 in that example so i think i expect that pattern to be solid throughout the year so if we manage if we manage to increase the organic growth most likely and our will will follow and if not it will follow the same pattern in the other direction okay thank you that was all for me thank you very much rickett thank you so much um and then there is the the uh like recurring question regarding uh acquisitions and whether or not we plan to uh to like endure and keep the uh keep the current or planned pace of doing uh two to four acquisitions um per year and um and that

is uh that is of course repeating our growth strategy um like aside from growing uh growing organically by approximately like 15 to 20 percent uh we do uh selected acquisitions uh like um along um along the way and uh these can be like the like the larger larger ones like more transformative strategic acquisitions like we've done for for example visual art and we have our roll-up acquisitions which is smaller in size more or less more or less acquisitions of customer base and which we are supposed to to to integrate really rapidly maximum three months um but we always do these uh these acquisitions sequentially so we never do overlapping acquisitions meaning that we uh we we have like um room in a year to do to perform two to four acquisitions and and um well there is no change to that uh ambition so i think that's uh that was that is what you can expect from us also going forward uh and i think that was uh that was it for for this time so we thank you all for participating and listening into this earnings call and should you have any other questions or or comments feel free to reach out to me or to to Johan anytime thank you very much and see you here again soon thank you so much bye