Vertiseit AB (publ) (VERTB) Earnings Call Transcript

Hi, and welcome to this Vertiseit earnings call for the second quarter of 2026. My name is Jonas Lagerqvist. I'm Deputy CEO and CFO of the group. And this is Johan Lind, CEO of Vertiseit. This morning, we disclosed the group's interim report for the second quarter of 2026, and we will elaborate on this in this -- during this call. At the end of the call, there will be a Q&A session. Feel free to use the Q&A function to send us any questions that you would want us to answer during the call. You can also join in if you wish to speak with us directly during the call. The agenda for today is, of course, the Scala acquisition that was finalized during the quarter. We will elaborate on the financials. We will share some highlights from the business, and we will finish off with a Q&A session. First, just a short background on Vertiseit. Johan, please?

Yes. Thank you. Vertiseit, our vision is connecting a world of retail. And by that, we mean building the infrastructure for the physical customer meeting. And we -- at the core of our offering, we provide an in-store experience management platform to be able to orchestrate all digital touch points in store. The in-store experience management platform covers everything from manage all of your stores, your locations and data associated with that, manage audience management, to know who do you talk to, who do you meet. And of course, the core is to manage the actual experiences, meaning managing content, meaning managing the application and of course, also capture the outcome and results of the experience. We work with 2,000 brands. We orchestrate more than 450,000 touch points in physical spaces. And as you've seen in the Q report now, our ARR after the acquisition of Scala reached SEK 440 million. We have 300 employees spread around 13 offices globally. The vision of the group, I told you is connecting world of retail, really be the infrastructure of a connected world of retail. And ambition is to be the #1 in-store experience management platform globally. Looking into the financial goals, Jonas, do you want to cover?

Yes. Our long-term goals in the long-term goals, we state that prior to 2032, we should reach SEK 1 billion in ARR. So it's approximately twice the amount that we have today. And we will also be in a position where we have 35% profitability measured as cash EBITDA, so as close to actual cash flow as it gets. And during the way towards these long-term goals, we should always have an ARR growth annually exceeding 20%. We should always grow our profitability measured as cash EBITDA per share of at least 25% annually. And we should always have more than 100% net revenue retention, meaning that we should always keep growing on our existing customers.

Yes. And of course, the highlight of this quarter was the acquisition of Scala, and we can walk you through this a bit. So Scala is the pioneer within our industry. So if you look at the company. It was founded already in 1987. So it's the most well-known brand in our category. It has a real global presence with customers in every corner of the world and a large installed base. However, the vast majority of the installed base globally is perpetual licenses. So if you look at the actual revenue, it's not that high that you could expect. So they have a turnover of SEK 200 million. Last year with SEK 85 million that fits into our definition of ARR, meaning that it's either software subscriptions for updates of perpetual licenses, meaning maintenance or it's a pure SaaS revenue. At the point of acquisition, there were a bit over 100 employees in the Scala business. They were also part of a bigger group named STRATACACHE with a significantly larger organization. And I will look into -- describe a little bit how we will reposition Scala within the Vertiseit Group. Worth mention is that Vertiseit ourselves when we started the company in 2008. And after just a year or 2, we actually become Scala partner ourselves. So when we started the company as a full service provider, we were a Scala partner until actually Scala was acquired by STRATACACHE. That was until the point where we, in 2016, actually decided to acquire Dise. And the reason for that was that Scala from being partner only decided to compete with the partners and go directly as well. And we said that it doesn't fit us. So we -- we actually chose to acquire Dise at that time. And then Dise have followed like basically the old recipe of Scala, sell only through partners and being device-agnostic and software only. And that means that we have a unique knowledge about the company from working with them for a very long period of time. And we also have employees in the group who have been working in the early stage when Scala was founded. If we look at the acquisition rationale, it's, of course, a significant expansion of the international partner ecosystem. I think that's very important, especially in the U.S. market. We add Forte, AVI-SPL and Diversified, among others, that are really strong within the digital signage sector in the North American market. We strengthened our position since Scala is the most well-known brand in digital signage. Vertiseit as a whole are strengthened by this acquisition, and we can see that in reach and incoming inbound leads and tenders and so on. We accelerate our growth in North America. And for those of you who have followed the company, we have done a significant effort to push in that direction in the last 2 years. The last year, actually, Sebastian, the Head of Dise, have lived there with his family. So it's really nice to see that we now get a strong footprint because 50% of the Scala customers are actually North American customers. We also add a very large base of untapped SaaS potential since Scala have deployed millions of licenses throughout the years. Even though it's not SaaS today, it's an untapped potential to convert to SaaS and recurring revenue. The profitability will be in line with our long-term goals. So we have designed an organization around Scala with where we have a requirement of 35% cash EBITDA, and I will describe a little bit how we managed to do that. The acquisition structure is a share and asset structure. And it was actually a distressed situation where STRATACACHE needed to sell Scala really rapidly. So we had, I think, 4 days to give them an indicative offer and less than a month to finish off this transaction. We -- so we decided that we buy the European entities. And -- but we -- in the rest of the world, U.S. and the rest of the world, we actually acquired the assets. So it's a mix share and asset acquisition. I think it reduced the risk significantly, and I'm pleased that we actually chose that path in this transaction. We performed a directed share issue to finance this with a price premium to current share price. And the rest is just an expanded credit facility with Nordea Bank. Looking into the integration. So what we have done is that we have reduced from more than 100 employees down to 35, and that's only possible due to a very rapid integration and a very -- also an integration where we are really strict on some strategic pillars. So one pillar is that Scala is now a strategic software offering within Dise, meaning that Scala no longer have its own organization. They have the development team around the product, but the actual organization is the Dise organization, meaning that we don't have duplicate key account managers or duplicate support or duplicates and anything basically. So it's a new second product to Dise. It's partner-first, partner-only, meaning that we give back all direct sales to the partner community and all business from now on is only through partners. We gradually transition also the installed base from perpetual licenses to a true SaaS offering. It will take years to complete. We implement a device-agnostic offering. We no longer offer Scala technology in terms of hardware, media players, et cetera. So instead, we have stepped back to the original Scala idea on being device-agnostic and invite device partners. So we have closed down all facilities, all warehouse facilities. And -- so it's really important now to execute really rapidly on bringing direct customers to partner, stop doing full service deliveries, which they actually have done and being like 100% aligned with this strategy because that's what make this equation works. All integration costs, including payments for people on Garden Leave is all recognized already in this Q2 report, amounts to SEK 28.7 million. So there are no, like future costs to expect due to this acquisition. Of course, there are cash flow effects, but in Q3, but and maybe a small, small, small portion in Q4, but not more than that. Jonas, financials.

Yes. So we increased our ARR. We come out at SEK 440 million at the end of the quarter, which is just above 50% growth compared to last year. Of course, the majority comes from Scala, but we also keep growing our ARR organically. So everyone has seen this slide before, but we are still -- I mean, we are still very proud of keep performing an organic growth from every quarter-to-quarter and have continued to do so for many, many years. So this is an important like fundamental in our business to actually have a positive net revenue retention, keep growing on existing customers and then add to the -- add to the organic growth with acquired growth, like the Scala example. So the whole Vertiseit Group continued to grow and grow during profitability. Just above 50% ARR growth, which exceeds our financial target of 20% annually. Cash EBITDA compared to Q2 2025 has doubled during the quarter, also indicating that we will manage to actually reach also this financial target related to profitability. So Scala, first, like Johan said, we had a global reach, a global network of customers, a global network of partners, some SEK 85 million in ARR and a very nice potential to convert perpetual licenses into future SaaS revenue. As mentioned in the report, we also see a strong international pipeline and continuing to receive evidence of our market position as we are now more and more frequently invited to really substantial international tenders also on the North American market. In the SaaS metrics for this quarter, they are somewhat like disturbed when it comes to comparison due to the inclusion of Scala mid-quarter. So many of the metrics actually exclude Scala. But of course, important to understand how the actual organic business is performing. So we strengthened the net revenue retention during the quarter to 107%, and we also reduced our churn from 4% to 3% in this quarter. So the annualized churn, so the churn on an annual basis. In the quarter, isolated, we had a net growth of 2.9%. Annualized, that means just above 12%, which is a little bit below what we are used to. But given the activities that were performed during the quarter, we are quite satisfied with that number anyway, especially as the NRR strengthened and the churn remains low. Revenue-wise, we are still including Scala, which was consolidated from the 1st of June. So 1 out of 3 months during the quarter was including Scala in the financials. So we are still around 50% SaaS share of revenue. Scala contributed with approximately SEK 10 million in revenue during this quarter. So -- and profitability-wise, the adjusted EBITDA, where we adjust for the costs relating to the Scala acquisition and the Scala integration and also a minor share of costs related to the relisting process that we are also in the middle of. As communicated before, we are investigating the opportunity to move from Nasdaq First North and relist the company on Nasdaq Main Market. We will get back to that on a later point in time. EBITDA strengthened from 17% last quarter to 18% in Q2. Also, the cash EBITDA margin has been strengthened. Moving into some highlights for the quarter.

Yes. So of course, obviously, the biggest highlight is to get a grip on all new customers, partners that we have in the Scala ecosystem. And I think it maps perfectly into verticals that we already are strong in. So it adds customers in the QSR spaces, and add customers in fashion, in finance and so on. And I think as we go when we have -- we have now a frequent plan of meeting all the partners, meeting end customers to really get a deeper understanding. And after that, of course, we will deep dive into some highlights in the customer base and in the partner community there. Another highlight in the quarter is the Circle K. We continue to grow with Circle K market by market. And this quarter, we started to expand into Poland and rollout in Poland. We actually started as of last month with this one, and it's a quite rapid pace. They have currently 350 service stations, and they will continue to grow in the market. But that's really nice. We can see like Circle K is really expanding market by market with our offering. We also had the Grassfish Summit. It's a yearly investment that Grassfish are performing every second year in Sweden and every second year in Vienna. This year, it was in Vienna. And the demand for tickets to this event was higher than it ever had been. So it was a great success. It's really an investment that we do to create and facilitate a place where the community within in-store experience management can meet. So 90% of the attendees are current partners in the ecosystem, and it's really well perceived by the audience.

Okay. So we are now in the Q&A session. We have received quite some questions, and I will try to -- I will try to present them all. In case you don't believe that you get your answers properly answered, you are more than welcome to get back to us at any time, of course. There is a question on the revenue contribution. Scala contributed with SEK 11 million in revenue and approximately SEK 2 million in profit for the quarter. And given that detail, there is a question whether Vertiseit grew organically the rest and also on profit, so approximately SEK 20 million in revenue growth and SEK 14 million in profit growth and whether or not we could explain or elaborate on this. And I would say that, yes, we have -- the rest was organic Vertiseit growth. And the increased profitability was, of course, that we had a favorable revenue mix during the quarter and also a favorable margin during the quarter. There is a question on our plans for the U.S. now that we have an increased amount of staff on the ground. How are you targeting big customers in U.S.

Yes. So in the U.S. market, the main strategy now with such a large footprint with Scala partner is, of course, to sell indirect via the Scala partners. But some of the integrators also partners to Visual Art and Grassfish. So in -- we will also use those integrators more actively to expand on opportunities that we have within the Grassfish Visual Art ecosystem, meaning expand with QSR brands that we have a strong footprint with on the Visual Art side and also expand with some of the global concepts and global platform framework agreement we have with Grassfish. But the vast majority of business will be carried out by Dise, Scala partners.

How hard is it to convert perpetual licenses to SaaS?

It's hard, but it's doable. We have done it before. So we have done it in previous acquisitions. We have done it, we transformed Dise at the point in time. We converted Scala back in the days. But it's a big undertaking. So it's something that you perform over years. It's not something that you can do in a quarter or so. So I would say there will be perpetual licenses in the market for Scala for at least 3 years into the future.

And what incentives are there for partners to contribute to this conversion from perpetual to SaaS?

So we have changed a lot in Scala. But most importantly, we have made it much more favorable to go with SaaS. So they will have higher margins, a lower -- a significant lower price than what Scala used to have on SaaS. And we also incentivize the partners so that they get a 5-year discount when they convert from perpetual to SaaS, meaning that they will have a very nice margin for the coming 5 years, even if they start from a low installed base because the model with Dise, Scala is that the higher volume you have, the bigger discount you get so that we prioritize the partners that are loyal to us, have proven that they can run and operate a customer over a long period of time and keep them. But I think the model that we have put into place are appreciated. And we have had meetings with some of the largest partners, at least 4 of them in the last month, and they have been really positive to the approach that we have taken in regards to this.

We have Fredrik Nilsson, analyst at Redeye, who would like to join the call. Hi, Fredrik.

Hi, Jonas and Johan. Can you share some more info about the Volvo deal? What does it mean for the independent retailers using your software today? And why do you think you lost if you did that, the deal?

Yes, it's a good one. We actually discussed -- we said that it's so easy to only like present like the positives. So in this quarter, within the automotive sector, we had this new framework -- global framework agreement with Stellantis from the Scala acquisition that grows really nice. But we also mentioned that we actually lost the integrator deal in -- for Volvo Cars Sweden in a tender. We don't actually know how it will play out. It was a tender to push prices. It was not, it had really, like, low requirements on most of the items that we are strong at, especially the platform and the technology side of things. And they brought a lot of global competition into the tender, and it was rewarded to Mood Media in the U.S. So they have 1,000 employees, but they have a very, very limited organization in Europe and in the Nordic. I don't know if they have any employee. So we will see how it plays out. Of course, we still do a lot of things for Volvo with other contracts for corporate communication. We do the Volvo Studios on a separate agreement. We do also related -- we do have separate agreement, of course, with Volvo Trucks, Hertz and among others. And we also have partners in the ecosystem who do other markets. But we were really surprised that they chose to go for a full service provider for the Swedish market without like a proper global setup. But we will see how it evolves. But if it's less than 1% of the total ARR if we lose everything. And I don't expect that to happen in at least a short period of time because every dealer have separate agreements that spans over at least a year.

Great. That's a good color on that. So there was another question about the contribution from Scala. I have another point of view on that. But I mean, SEK 10 million for a month when you expect SEK 200 million in annual sales, it sounds a bit low. Could you elaborate on that?

Yes. So the SEK 200 million that is the estimated turnover of the Scala business previous year. Reason for being vague on the exact number is that there was -- it was an equity deal in Europe and an asset deal in the U.S. So it was -- we were actually carving out assets and contracts from like -- from a larger entity. So that was the approximate revenue for last year. If we were to take that exact amount going forward, it will be approximately SEK 200 million. In this amount, there are some hardware components. And that as part of the integration and as everyone know, we are -- we have the ambition to push hardware sales to our partner. So the top line going forward is very much dependent on in what pace we manage to phase out that hardware. So that's one reason like if you look at the revenue like going forward. And the other one is, of course, that it's been consolidated for 1 month, but we -- it's also a big business that we are -- that we moved from one ERP system to another. So there was also limited invoicing performed during that month.

Yes. especially, as I said, the biggest portion of the business is U.S. and in U.S., it was an asset deal. So of course, like not all revenue streams are up running as normal. But I think we have described it quite well. We have designed everything around the recurring revenue, which will amount to at least SEK 85 million. I assume we have like a nice potential to expand that significantly on the perpetual license sales, which is part of the rest. And then, of course, we have the consulting revenue, which -- where we support the partners to be successful in their implementations. And the risk is, of course, the third part where it's also by design that we will phase out hardware. And in what pace that actually occur it's not given at this point in time.