Vertiseit AB (publ) (VERTB) Earnings Call Transcript

Hi, everyone. Welcome to this extra investor call that we've invited to given that we, yesterday, on the 18th of November announced the acquisition of Muse Content, a German company. My name is Jonas Lagerqvist. I'm the CFO of Vertiseit, and this is...

I'm Johan Lind, I'm CEO of Vertiseit.

So during this session, we will go through the background of the Muse acquisition. We will give you a brief information about Muse and StokedAI. What is it that we have acquired. And we will elaborate on the rationale and the structure behind the acquisition. And in the end of the presentation, there will be a Q&A session. So you can either write your questions in the chat or you can use the raise hand function if you would like to speak with us during the Q&A. So yesterday, we announced the acquisition of Muse Content. It's a Hamburg-based company with offerings within In-store Audio, who is on the forefront of both retail and AI within our industry. So brief figures about the company is that they have a revenue of approximately EUR 3 million. Of this is like the majority is consulting, but there is a portion of ARR included. They are profitable and brings approximately -- brings 10 employees to the Vertiseit Group.

Yes. So looking into the acquisition rationale. It's a little bit different from what you might have been used to when we look at acquisitions. Usually, we focus like purely on existing customer base and their existing ARR. Muse is really a strategic investment into new fields, both AI and music and audio in-store in particular. So we take it step by step. It adds AI expertise to our consulting and product development and operations. And this is very essential because we have followed Muse and identified that they have been in the forefront of AI implementation within customer experience in-store. It also adds AI-enabled In-store Audio into the group offering. And this is a space -- In-store Audio is a space that is big. It's a space where we haven't been present. And AI is really changing the dynamic in the audio space where it goes from like a service offering to really a tech-enabled offering. Hopefully, we can deep dive a little bit into that. It also adds consulting expertise within fashion retail in Germany and the DACH region in particular, where they have like a handful of people that are really at the forefront in this space. Super excited about that. And of course, it strengthen Visual Art's organization because we already have a Hamburg office and now we will bring the team together and create a really strong hub. In this acquisition, we also acquired all the AI assets from StokedAI with the same owners. So we have also a set of tools like SongSwipe StoreGrid, AI sales agent and AI adaptive audio that we will hopefully have the chance to introduce to you closer in the coming months.

Looking into the structure of this acquisition. It was valued at EUR 3.4 million. So looking at it from like an ARR multiple, it's just above EUR 4 million. But still -- the character of this acquisition is a little bit different from the roll-up acquisitions performed. Payment is done in the majority of cash, but 35% of the purchase price is paid in new Vertiseit shares that are issued at SEK 73 per share, meaning a premium of approximately 20%. And they are also associated with a 36-month lockup for the previous owners who are also, of course, joining the Vertiseit Group. And together with an earn-out over 3 years, it's like a strong sign of the commitment and belief that the key people in this acquisition shows in Vertiseit.

Yes. looking into the integration, the former 2 owners, Marco and Filip will be key players in our journey going forward, where Marco will head up as the CXO in Grassfish and also join the group management team. Filip will head up the new In-store Audio department in Visual Art. We will establish Hamburg as Visual Art's DACH hub. And we will, of course, integrate In-store Audio into all parts of our offering and also enable our partners to carry out this offering to our existing customer base. We will leverage the consulting expertise in the group, both in the field of fashion retail, but also in the field of AI in all aspects of that from consulting to product and in our operations, of course. They have a nice set of brands that we will work closely together with. And hopefully, we can scale with them with the broader offering that we take to the table. Their customers is purely within retail, customer experience and lifestyle brands. So it's a perfect fit to our strategy.

So now we open up for some Q&As. [Operator Instructions] So please welcome [ Jacob Bernard ].

Congratulations on the acquisition. I have a couple of questions here. Wondering if you can maybe start by talking a bit about Muse's business model. You state that it's roughly 1/4 of SaaS revenue and then the rest is equally split then between consulting and hardware. Like what kind of hardware and consulting services is it that they are selling? Is it similar to your offering? And will you continue to run the business as it is? Or will you change the strategy?

Yes. Great questions, all of them. Muse is -- first of all, they are a consultant firm within digital in-store. So -- and In-store Music, of course. So a big portion of their business is the consulting offering. And in many projects, they just hand over when they have designed the concept, they have designed the service blueprint, they hand over to larger integrators. So -- but there are also projects where like more specialized projects where they have delivered the full solution, including SaaS platforms and also the technology needed to realize a project in practice. So they will be fully integrated into Grassfish and Visual Art, meaning that their offering will align completely with the current offering, current strategies that we have in Grassfish and Visual Art.

Okay. And a follow-up on that is maybe like what's your expectation then if you integrate it into Grassfish and Visual Art, their offering, like what's your expectations of upselling on Muse software to your existing customers? I mean, do your customers already have an In-store Audio supplier? And like how likely do you think they are to change?

Yes. It will not go overnight. But if you look at big full service providers in the space, M-Cube, Mood Media, they have a bigger portion of In-store Audio than digital signage in their offerings. I can assume that the market is more or less 50-50 as of now. So of course, it's a huge potential for us over time to make In-store Audio a significant share of our recurring revenue streams. But it will take time. So it's nothing that will happen overnight, but it's a fantastic opportunity to expand our offering into existing customer base. And then talking about the product, like their AI-enabled audio suite has some really nice capabilities. So you could do -- you can generate audio messaging on demand. So let's say, if you want to tell everyone that the store is closing in 5 minutes and that they are welcome back tomorrow, you can do that with any voice or character, you could do that in any language globally with the new capabilities that AI bring to the table. It cost a fortune before to do this. Also with In-store Music, they have now produced a library of, I think, exceeding 4,000 tracks. And you could really curate music with AI that really aligns with the brand and that are royalty-free. So it's really disruptive now in the music and In-store Audio segment, and I think it's a perfect timing for us to step in.

Okay. Very interesting and exciting. That was actually my next question why you think it's a good time to enter now, but then I got the answer there. But can you maybe talk a bit about -- more about the competitive landscape, like you mentioned some competitors there before, I think, but how is competition?

Yes. So traditionally, it has been like really service-oriented. So it has been like a craftsmanship to curate the music over and over again to adapt to season, to adapt to the brands evolvement. And so that's why it has been a space where we haven't entered. So we have had collaboration with a lot of those music in-store brands over time. And -- but what we see now is that technology changes everything and changes the dynamic. So that's why it's really exciting.

Okay. Very interesting. And just two more for me, and then I'll get back in the queue. So can you say something -- maybe it's a question to Jonas, if you can say something about the average like revenue per location for -- from Muse? Is it possible?

I would say that the -- like the overall offering, I mean, apart from the audio part aligns very much with the one both in Grassfish and Visual Art. So it's more or less a perfect match integrating these -- the Muse business into Visual Art and Grassfish.

But from like a math perspective, you could say that you don't need as many licenses, of course, per location. But if you want to model like price per location, it's between like SEK 200, SEK 300 and a location and month.