Vertiseit AB (publ) (VERT-B) Q1 2026 Earnings Call Transcript

hi everyone welcome to this earnings call after we advertise it this morning have released our interim report for the first quarter of 2026. my name is jonas larryfist i'm the deputy ceo and cfo of the vertice it group and with me i have joan linden ceo of vertice it welcome we will today guide you through the uh the the quarterly report of the first quarter 2026 and on today's agenda we have a walkthrough 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 the chat function or the raise hand function if you wish to if you wish to join the call and speak directly so let's uh let's start joan yeah and for those of you who are new to vertice it 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 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 um those of you have been with us for a while you recognize this this slide when we we have now added one more one more bar proving that we can keep growing our arr sequentially and we have done so on since since 2012 and this we believe is like one of the like the strongest evidence of the of the of the value that our offering creates with our customers and the resilience in in our revenues so we close the the quarter on an ARR of 341 million we're on our way towards our long-term target of having 1 billion in ARR. In review, we would like to highlight that we continue to grow during profitability as we have done for a very long period of time. ARR growth compared to last year amounts to 24 percent which is uh exceeding our financial targets of 20 percent profitability uh being the increase compared to last year was 27 percent and uh recapping our our financial targets we uh we say that we are to to grow uh our um profit per share of by at least 25 percent which is which is then the outcome is also in line or exceeding our financial targets we are experiencing like a strong demand in the market we have a pipeline of like very high quality opportunities that we are that we are currently working with and uh we would like to like emphasize this communication that we now have done for for some for some quarters that there is there is a strong interest and a strong demand in the market. And in this Q-Report, we also report briefly on the activities that we perform in the M&A market. And also there is a very strong activity. 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 will perform in the span between two and four roll-up acquisitions per year. We closed at an ARR of 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 of the organic growth this this quarter it was a little bit a little bit weaker than than 50% of organic growth meaning that the the majority of the growth actually came from from new sales and new customers this quarter and we still we still operate with the with a good margin above our target of having 100% in NRR. For a 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 There are many contracts that renews at year-end, meaning that when CHERN occurs, it is quite likely that it occurs at year-end and is then visible in the Q1 figures. Net revenue decreases slightly, but we are at the same time now back on a SaaS share of revenue of exceeding 50 50 percent uh which is uh where like long long term where our margin expansion will will come from um besides of course the um the general growth in sauce revenues but the the sauce share of an increased sauce share of revenue is incremental um when we when to increase our general profit margins yes some highlights absolutely looking into some

highlights besides the figures so it was a like an intense quarter when it came to outbound activities and fairs and so on we started off the year with all brands being represented in york at the nrf the world's largest retail conference we we were at isc barcelona the booth up to the left with dice is the booth we were represented with in at the in barcelona it isc is the biggest like pro av fare in europe then we headed to euro shop in disseldorf where both grass fish and visual art were represented visual art with their own booth and And we had grassfish in Umdachbooth, the video down to the left. We have also been to the congress where the pre-event related to retail media. We have been to shop talk in Barcelona. So it has been a super intense, super intense first quarter when it comes to this type of activities. another highlight during the quarter was the big announcement from visual arts and the bonnie news they actually established now the first combined retail media network in sweden where where you have the where you combined different in-store networks in in a unified offering it's really exciting to see the interest from from both agencies and from retailers has been great and exceeded our expectations we see a strong like momentum in network effect where we get a lot of inbound interests from especially retailers in in sweden now we have also like design now a really strong blueprint and business model around this where network join our retail media hub they also they also get they also need to sign up for additional retail media modules and components which add to our our ARR so we we don't go after like rev share we go after software licenses in in relate in relation to to retail media and i think we are like in a unique 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 Oléns signed 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 we take this blueprint now we we were at the congress with andreas lind on stage we have the pre-event sponsored by samsung in sweden but now we take it to like omr into the duck and the german and duck markets where we also will have um we'll have a lot of sessions um in in retail media so the goal is now to just replicate what we have been able to achieve in sweden and do that for for the other markets i now hope that you have a lot of questions and jonas do you already have

any yes i have some but let's let's welcome frederick nilsson from red eye hi frederick hi jonas and joan thank you very much 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 yeah Great question, Frederik.

As you say, long term, we want more and more of systems revenue to go via partner. And also, in consulting, we want them to do more so that the source share of revenue improves. but I should say like this was a slow 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 within the retail media space and also more and more business are international where we don't have the systems components.

I see. Great, thanks. And on a similar topic, but regarding consulting, it's down by about 1 million compared to last year despite MDT and Muse joining and I believe they should have added about 3-4 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. We have some industries where they have been really tough on consulting expenses during the quarter and it has affected us as well. Especially I would say if one category stands out it's like automotive and it usually they they they come back they come back again after a quarter or two but but yeah i i expect i expect it to be slightly stronger going forward But 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 ARR growth sequentially a bit.

But you mentioned also in last quarter that you see longer sales cycles in grass fish. i mean is has that changed or could you give us an update about grass fish in particular yeah i would say that the momentum in the market is is good uh pipeline is improving step by by step and as jonah say i i think we we all uh we all see that it's really really high quality opportunities uh as you say we see a small shift where a slightly better organic growth and it's uh is through the line it's uh it's like actually in this quarter within with an old business brand that have a slightly slight improvement compared to q4

great thank you very much that's all for me thank you so much for it thank you for it um we have a follow um sorry uh rickard engberg from dnb canada welcome morning can you hear me yes absolutely okay so uh my first question is related to audio you say that you started to winning deals with an audio and existing customers uh do you believe that this will have an effect effect on the net retention revenue rate going forward during the year or is it still

still a quite small share of you coming from audio it's a great question thank you like um i think it's great to see that we're now starting to get to get signed deals basically like if we if we have signed like five to ten 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 like rewrite your forecast or anything based on the in-store audio. It's just like but it's promising. I think it's great to see that when you add something to your portfolio, the hardest part is to get it from theory implementation into the sales organization and actually see results once so i'm really happy to like see traction traction in the markets uh but i don't think that um it should have a material effect on on the sauce metrics okay thank you and a follow-up question on the sauce metric metrics you previously mentioned that due to your acquisition these sauce metrics can become somewhat skewed when you compare

year over year. Is this one reason for the somewhat lower NRR in the quarter, or has it been less momentum on existing customers?

Yeah, if you look at the NRR, and 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 uh i think it but it's just like um one to two percentage point right yeah yes so um uh i think uh that's um i i don't see a real trend in that even if it looks like that on the chart but uh but the the the organic growth has come down a bit if you if you look at the two-year uh two from a two-year horizon and but

if you look at the nrr it's typically trends around 50 of uh of the organic growth and and other sauce metrics that you refer refer to are of course uh affected by the um by the acquisitions i mean if we just take mdt for one example we we added uh like two really two really large customers and then quite a number of of smaller customers and of course that that gives the effect that both like average revenue per license and average revenue per brand goes down a bit and that's that's that will be that's a that's a fluctuation or an or an event that of course will happen depending on what acquisitions we do perform like going going forward so that's that That has nothing to do with the development in our organic, the organic development in our SaaS customer portfolio.

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

Yeah. Our strategy is clear. 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.

Okay, thank you.

That was all for me. thank you thank you rickard um we have a lot of questions in the chat and i will try to try to to try to answer as many of them as possible uh while on the uh while on the mna uh track there is a question if the recent development within ai has changed what we are looking for in terms of M&A yeah and I would say like no not really I think we are in the forefront in this industry when it comes to AI development and and I don't see like any new targets that are ahead of

us that we want to acquire and it's yeah I think our capability of converting existing customers after an acquisition have improved a bit once we have the keys due to AI. So if something, I would say that we have the opportunity to look into acquisition opportunities that before maybe we considered 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 on the actual business model what what what effects does it have on advertised revenue yeah so typically like typically if you look at the the figures if a network that only uses their in-store experience management platform for internal communication uh oh sorry in for their own in-store experience and both branding tactical communication but also like interactive solutions if they add the component of the retail media it will improve improve our revenue from those licenses with about 40 percent and it's both from licenses that we get from the advertisers and licenses that we get from the retailer from for our retail media

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 uh um on like um sauce wise uh from from the retail media add-ons yeah so it's 40 percent um okay and like quite a lot of questions regarding nrr and the and the sauce kpis uh which uh which like uh from like a first look seem to be seem to be declining like quite a bit but um as well as we said the uh the the nrr uh even though it's slightly weaker than uh than last quarter it's it's still uh it's still in the vicinity of 50 of uh of organic revenue so uh we see no there is no there is no trend like in our current customer portfolio i mean we still have an average penetration of around 30 so the ups the upsell potential is is still there but of course it can vary a bit quarter by quarter quarter by quarter like where the where the growth comes from but the recommendation there is to look at like the organic growth because we we come from from uh if you look some years back we were trending around 20 and now we are at 14 in organic growth so of course um so i think the nrr you should should look at that number compared to the organic growth pace and then the pattern look not that bad yes and and also average average revenue per customer license that that that must also be be viewed in the in the in the light of that we have that we have done acquisitions that adds like a different different profile to the to the total portfolio um um some uh some questions regarding regarding the sauce the sauce revenue that that it is actually slightly lower than last quarter while arr is increasing and and that can also that can also happen since uh since we we're since we do operate in uh on like many many currencies um currency effects can we can of course um change from from quarter to quarter and from year to year so whenever we talk uh whenever we talk arr growth uh and the in and the the sauce kpis we we always make uh we always adjust for uh for fx yeah so actually so so actual numbers cannot can always differ both both to the better and to the worse but it's always um fx

adjusted yeah and there can be changes like if there is a negotiation with a customer and and so it it affects like the source revenue but the arr is always like the contractual contractual revenue and it's also based on the last last month in in the quarter um there's a question on any uh on any one-offs uh during this quarter and um i would say that we uh there we have we have we have adjusted for some some minor one-offs which is more or less related to the to the

process of evaluating list change but but other than that uh of course we have we have we have invested quite heavily in marketing activities during 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 we have to take in account that the yearly salary revision for all employees go into effect so like from a total perspective there are no like material one-offs during during this quarter a general question on the on the ai thing that we that we discussed more in thorough on last year last quarter's earnings call if we if we see any like trends or development in the competition from ai that that significantly affects us or our strategy No trends like when it comes to competition.

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 etc to support agentic workflow from the customer point of view i think that's maybe the uh what i've hit us from like the market side but of course we we believe like our competitors um to will um will of course also use all all the tools and the capabilities that this brings to the table and i think it will maybe they're a legacy platform that can can evolve faster now with in this new environment but the same goes for us so i think we we all got the same tool set and we don't see any like newcomers or anything that are unexpected in the market um regarding uh regarding systems margin they came out in like in this industry in the stronger part of the scale yeah like normally we normally we have a systems margin of between like 26 and 30 percent and this quarter came out

at 31 and uh it's uh it's on the it's on the higher end but it's uh like a normal fluctuation depending on depending on like what what type of what type of customers were were like targets for rollout 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 big rollout for a customer and then typically the margins are are lower so it usually go hand in hand um and uh we for those of you have looked into the looked into the the cash flow statement it was it was strengthened compared to compared to last quarter um part partly due to um due to uh that um um working working capital was uh was a bit uh was lightened this this quarter but uh but also as we as we like come um we come out of the uh the process the the efficiency measures that were executed in q2 last year uh of course they affected cash flow during like the second half of this year so so going forward cash flow should be expected could be expected to uh to like to follow the uh follow the profit um the profitability development uh going going forward but both profitability and cash flow is of course like our highest priorities together with the together with continuing to ensure the ARR growth and that can also be like the answer on like what's like the profitability profiles of the acquisitions that we that we look into and um and of course the important thing um like in parallel to the quality of customers that the acquisitions would should bring it should also it should also increase and strengthen both profitability and um and cash flow these are the that's that's the profile of the acquisitions that we that we look into yeah that's also why it's important that that the majority of rollout targets that we actually have a fully like overlapping like value proposition or and the product offering so that you could get more synergies out of the roll-up acquisitions thank you that was that was it thank you for for all the questions and if there are some some questions that that might arise that we didn't answer in this call So please feel free to reach out to us anytime, 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.