Earnings call transcript: NowVertical Q2 2025 sees stock plunge 29%

NowVertical Group Inc. (NVRT) reported its Q2 2025 earnings, revealing a 13% decline in revenue year-over-year to $8.3 million. Despite a 622% increase in operating income for the first half of the year, the company’s stock plummeted by 29.25% following the announcement. According to InvestingPro, the company maintains a "GOOD" overall financial health score of 2.88, with particularly strong performance in profit metrics. The company continues to focus on leveraging data and AI technologies, bolstered by strategic partnerships with major cloud service providers.

Key Takeaways

• Revenue for Q2 2025 decreased by 13% year-over-year.
• Stock price fell by 29.25% in the wake of earnings announcement.
• Operating income surged by 622% in H1 2025.
• Strategic partnerships with Google Cloud, Microsoft Azure, and AWS.
• Focus on achieving a $50 million revenue run rate.

Company Performance

NowVertical’s performance in Q2 2025 was mixed, with a notable decrease in quarterly revenue but an impressive increase in operating income for the first half of the year. The company’s strategic focus on data and AI technologies, along with partnerships with major hyperscalers, positions it well in the rapidly growing cloud market. However, the decline in quarterly revenue suggests challenges in converting its technological investments into immediate financial gains.

Financial Highlights

• Q2 2025 Revenue: $8.3 million, down 13% year-over-year.
• H1 2025 Revenue: $18.6 million, a slight increase year-over-year.
• Q2 2025 Adjusted EBITDA: $1.0 million, down from $1.5 million in Q2 2024.
• H1 2025 Adjusted EBITDA: $3.6 million, a 36% increase.
• Operating Income: Increased by 622% in H1 2025.

Market Reaction

Following the earnings announcement, NowVertical’s stock experienced a significant drop of 29.25%, closing at $0.37. This decline reflects investor concerns over the company’s ability to maintain revenue growth amidst a challenging market environment. The stock’s performance is notably below its 52-week high of $0.70, indicating a cautious market sentiment.

Outlook & Guidance

NowVertical aims to reach a short-term milestone of a $50 million revenue run rate and a $10 million EBITDA run rate. The company plans to focus on organic growth in North America and EMEA, leveraging its strategic partnerships and commercial engines. While no specific growth rate guidance was provided, the emphasis remains on sustaining momentum in its core markets.

Executive Commentary

CEO Sandeep Mendurada emphasized the company’s strategic direction, stating, "We help our clients transform data into tangible business value with data and AI technologies." He also reiterated the company’s goals, saying, "Our goal is really clear. We want to reach in our short term milestone that we have defined as the 50 million of the revenue run rate and the 10 million of the EBITDA run rate."

Risks and Challenges

• Continued revenue decline may impact investor confidence.
• Execution risk in achieving ambitious growth targets.
• Competitive pressures in the rapidly evolving cloud and AI markets.
• Economic uncertainties affecting client investments in data technologies.
• Dependence on strategic partnerships for growth and market penetration.

Q&A

During the earnings call, analysts sought clarity on the company’s multiyear licensing deal accounting and its public sector deals in Brazil, which account for less than 8% of revenue. Discussions also focused on the growth strategy for strategic accounts and revenue recognition for reseller arrangements.

Full transcript - NowVertical Group Inc (NOW) Q2 2025:

Moderator/Host, Now Vertical: And on the presentation materials related to today’s earnings press release and financial statements that are available on the company’s website, investor relations section at www.nowvertical.com and in the sedar.com website at sedar.com. All figures discussed on today’s call are in US dollars and will be on an IFRS basis unless otherwise noted, and we will refer to specific non IFRS such as EBITDA, please refer to the cautionary note in our presentation and to non IFRS and other financial measures section in our MD and A for more detail. Today’s presentation will be led by Sandeep Mendurada, the company chief executive officer, who’s also joined by Christine Nelson, the company chief financial officer, and RJ Garber, the company chief development officer. We’ll break for questions at the end of management’s formal remarks. During the question and answer session, we’re gonna take questions from our covering analysts over the phone or on video and all other questions from our listeners through the webinar portal q and a chat box.

Thank you for joining us, and now I’ll turn over the call over to Sandeep to begin this earnings call.

Administrative Support, Now Vertical: Skip Sandeep a minute to log back in here. K.

Moderator/Host, Now Vertical: Everyone just stand by. Sandeep Sandeep disconnected. He’ll be back on shortly. Again, if you’re just joining us, Sandeep’s line disconnected. He’ll be joining us shortly.

Everybody who’s on the call, please stand by. We have Sandeep back with us.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: My apologies. This was just my laptop, I think. Wanted to install something on Zoom. I’m back here. Give me one second.

Do we have the right screen?

Moderator/Host, Now Vertical: No. You gotta go to presentation mode.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Better?

Moderator/Host, Now Vertical: Yes. Perfect. K.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Yeah. Welcome again to the quarterly results of Nava to go. And just as we do for the refresher for our existing investors and for any of the potential investors joining us for the very first time. Just a refresher on what we do for our clients, who we are, and then we will dive into the the quarterly results as well as Christine is gonna take you through some of the details of our quarterly results. And then I will talk about some of the business updates as well as how our strategy is evolving and developing.

But first and foremost, why we exist in the market? We help our clients transform data into tangible business value with data and AI technologies, and we do it very fast. Now let me break this down for you. Data, as we all know, is a very vast subject. We focus on the areas that have the greatest impact on the enterprises and the businesses, and that’s customer and finance data.

The power that we bring by extracting value of the customer and finance data is just phenomenal for these enterprises. This customer and finance data combination is the engine for the marketing campaigns that you may be seeing, the sales operations, customer services, finance departments, and we help them unlock that value in their data. What do we mean by business value? Let me give you an example. So for The Economist, we help them increase the increase the subscriber retention by 9%.

And this is what we call as tangible business value, which you can tie down very nicely and easily and directly to the revenue or the cost savings. So that’s the tangible business value we deliver. And how we work with the data and AI technologies is some of these hyperscalers, the likes of Google Cloud, Microsoft Azure, AWS, and we also then bring in our own proprietary software at the appropriate times that really unlocks the value and delivers the ROI with data and AI technologies. That’s what we do, for our clients. Who we are is, we are a global data and AI company, and we are making the enterprise AI possible.

This is a rapidly growing cloud market, and this rapidly growing cloud market is heavily influenced by the data and AI technologies. We are structured in two markets, and that’s how we span across the globe. The two markets are North American EMEA market and the LatAm market. This way, we are able to support so many of these global clients and wherever they are operating from, very nicely. We serve, as of today, more than 250 clients that are on our portfolio.

But interestingly, out of those 250 plus clients, we have got more than 100 clients that are of enterprise grade. These are the multibillion dollar revenue businesses, FTSE 500, very large enterprises, household names that are on our, portfolio. And we support these clients, these enterprise clients, and all of our other clients with, the 500 plus strong team of data and AI professionals that are again spread across the globe. What we really, bring to life is by delivering the right kind of technologies that you see on the screen on the right side of the screen. Like I said, these are the they are hyperscalers.

The Microsoft Azure, GCP, AWS that we work with, and we combine the scale and power of these hyperscalers. But at the same time, we’ve also bring in some of these data platforms like Snowflake and Click, that are the right software, in certain situations and to deliver certain use cases for our clients. Anaplan is another, finance specific forecasting model software that has got really high value for large complex enterprises and especially is driven by the CFOs in the business with the connected planning approach. These six technologies bring in majority of our revenue, and we are strengthening this power even further. We are probably proud to be working with some of these client logos that you see here, the likes of, say, Adobe, Sky, Informa, Niranka x, AstraZeneca, Bayer in LatAm also.

So these are some of the clients that have got really global footprint and have got very complex landscape where we can bring in a lot of value over a very long period of time for these, clients. Just getting into the, revenue performance of our quarter. Of course, you may have seen, the published press release already. There is a decline in our, q two twenty twenty five for us compared to our q two twenty twenty four. Our revenue in quarter two twenty twenty five is 8,300,000.0 US dollars.

This decline reflects the planned actions rather than any kind of demand weakness for our solutions and services in the market. And that’s one thing I just wanted to, clarify upfront. I will take you through all of these three factors that have influenced, you know, so called decline in the revenue, in q two twenty twenty five. But before we discuss that, it’s important to remember that roughly 20% of our revenue comes from our own proprietary software license or the license reselling, activities. And these license reselling activities, are primarily with, say, the likes of Click or Google and, and whatnot, they are concentrated primarily in the LatAm market for us and specifically in Brazil and Chile, within the LatAm market.

This part of the business behaves quite differently towards solutions and services business, which affects the quarterly comparisons, at times. So just giving you the context that this, the reason I’m giving you the context of that 20% of our revenue side is because all of these three factors are coming from that side of the business, which is within LatAm and Brazil and Chile specifically. So, going into the first aspect that had, the impact on the revenue, last year, we began signing multiyear license deals. And just to give you an example, a three year licensing deal, you know, 1,500,000.0 of a three year licensing deal, which, is invoiced at $500,000, per year is recognized upfront under IFRS. So what that means is the 1,500,000.0 of the revenue and the associated cost, all of that will hit our 2024, results.

Even though we receive the cash, in annual installments from the multiyear deals, These longer than term deals are really positive for our business because they bring in that predictable cash flow. However, in the accounting treatment, what that means is that revenue comparison in 2025 reflects that hangover from the upfront recognition of that revenue in 2024. So the multiyear contracts, although they are really positive, you know, for the business, but right now because we started signing them up in the last year for the very first time in any meaningful ways, we are just having that hangover, you know, 2025 comparison. And this, the the the this kind of effect is gonna be normalized in the next few quarters, absolutely, as we sign more and more of these multiyear deals every year. So, this was a $1,000,000 impact on our revenue for q twenty twenty five.

The second part is, coming from Chile. You may remember last year, we restructured a lot of our LatAm business, and Chile was, one of the key areas that we restructured the business in. This business was incurring losses and had very poor, cash management, as well. What we have done is we have brought in the new management team there and a new commercial team, which is now rebuilding all of that revenue and, streamlining our p and l and the cash flow, as well. So while we are rebuilding all of, the revenue there, we have an impact on the 2025, revenue so far.

The positive thing is we have reestablished our relationship with Click, and Click was the only relationship or the most, you know, primary relationship that we were dealing with, within Chile. We are also now building our relationship with Google Cloud and and expanding and enhancing our footprint within Chile. So the revenue that is being rebirth in Chile is a lot more meaningful. It’s a lot more strategic revenue, and it’s profitable, revenue in Chile. But we will see this revenue being rebuilt in the next, few quarters as well, and we are very confident that we will be able to replace all of that restructuring, revenue impact that we have.

One of the things that we do is we sell to the public sector or the government bodies also. And this part of our business is now only concentrated in Brazil. Some of the contracts that we were dealing with in the government side, again, these were all licensing contracts. They got deferred from q two to the to the future months. And sometimes these government procurement cycles could be very unpredictable.

However, our teams are very confident. We we are very confident that we will be closing these deals in the coming months. This impact was about 700 and, 60,000 to be very precise. Now overall, that is more than $2,000,000 or $2,200,000, impact that we had on q two. But like I said, this decline is very planned actions, coming from the planned actions rather than any kind of market, weakness, you know, from from the demand for our solutions and services.

So we are really confident that this is not really, an ongoing impact. This is an impact just we are seeing in q two because of these factors. Just to give you a snapshot of, how our h one looks like against, the results for q two, of course, the revenue dropped, in q two twenty twenty five, which is 8,200,000.0, and that’s a drop of 13% year over year as compared to ’24. The EBITDA, again, had the same reflection. Majority of the licensing deals, because it’s net revenue as we registered under IFRS, would have an impact.

It will be translated into our EBITDA as well. Because of that 2,200,000.0 impact on our revenue, that is coming from primarily the licensing deals, although reselling of the licensing deals, the EBITDA EBITDA also had an impact, which is down 29%, year over year. However, the positive news here is that all of the efforts that have been going in restructuring and really cost management and bringing that efficiency into the cost management, we have got very positive operating income from the operations. So that’s really positive. But if you look at the h one numbers, we are looking really positive.

Of course, the revenue is just a soft, you know, increase year over year to 18,600,000.0.

Administrative Support, Now Vertical: The EBITDA

Sandeep Mendurada, Chief Executive Officer, Now Vertical: is massively positive at 3,600,000.0 as compared to last year h one. And at the same time, the operating income has, has got a phenomenal impact, which is 622% increase over the last year, h one. So 2,200,000 of the operating income is a very fundamental KPI for us, and that’s looking very positive, which kind of bakes in all of the fundamental KPIs in the right place for us. So although, q two performance, we are completely mindful of that, what really has occurred in q two, we are very excited about the results we have delivered overall in h one. And that gives us a very, very strong outlook for the rest of the year, and we are very confident that we will be closing the whole year on a very strong, KPIs.

I will now hand it over to, Kosteen to take you, through some details of our finance updates, but I will then come back and talk to you about some really interesting insights about how we are shaping our strategic accounts program and how that’s translating into our strategic revenue mix and more sustainable growth. So over to you, Kasim.

Christine Nelson, Chief Financial Officer, Now Vertical: Thanks, Sandeep. So I’ll walk you through the adjusted EBITDA income from operations performance. So adjusted EBITDA was 1,000,000 in q two twenty twenty five compared to 1.5 in q two twenty four. And then year to date performance is incredibly strong, increasing by 36% to 3,600,000.0 from 2.6 in the prior year. Also, income from operations has increased by 41% to $600,000 in Q2 twenty twenty five compared to 0.4 in 2024.

Another actually incredibly huge improvements on our year to date performance, which has increased by 622%, which is 1,800,000.0, compared to 2.2, compared to 0.3, sorry, in 2024. So huge improvement here. In both of these KPIs, we’ve seen incredible improvements. This is really driven by management’s concerted effort to manage costs, our move to an operator first model, and also to drive our growth within our strategic accounts. And now while it’s not shown on the slide, and I know Cindy mentioned it, our you know, managing cost has been a a huge piece for us to be sustainable going forward.

And admin costs are not on the slide, but they have decreased if we were looking quarter over quarter by 1,400,000 or 31%. And then year to date, we’ve actually been able to reduce our cost by 2,400,000 or 22%. So these efforts that set the company up for sustainable success, and and while we’re continuing to grow our strategic accounts, we’re also also continuing to find more efficiencies and more cost efficiencies in the business. Next, I’m gonna talk about the big deal that we did in q two that we’re incredibly proud of. So this quarter, we completed a massive debt recapitalization with HSBC.

This has been truly, like, transformational for the business on multiple levels, and I’ll walk you through those. But it’s also just set us on a very strong foundation for scalable strategic growth going forward. So right now, as of q two, we have a $6,000,000 term loan that’s amortized over five years, and we have an 8,700,000.0 draw on our revolver, which leaves us with another 11,300,000.0 available of capital for us to grow the business, whether it’s organically, inorganically. So one of the big things for us, just from a finance accounting side, it’s really simplified our balance sheet, simplified our debt structure. You know, previously, we were spread across multiple lenders.

Now we have, you know, one major lender, simplified balance sheet, improved working capital position, and also significantly improved terms. So the actual cost of our capital has decreased significantly. Under our previous structure, cost of capital was around 11%. Now it’s closer to seven. In addition to that, our payment structure has improved as well.

The revolver is an interest only, so with the principal due in three years. And then we also have an option to extend that for another two years as well. So the reduction in cost of capital, improved quarterly debt payments has freed up even more funds in addition to that 11.3 and the $26,000,000 line to drive our strategic growth. Furthermore, this deal has given us additional flexibility. As we know, we have a convertible note that’s due in October.

This HSBC deal gives us the flexibility to fully retire that now. Overall, this debt recap has just put us in an incredible position to fuel our organic and inorganic growth under our one brand, one business strategy. And we’re incredibly excited to work with such a fantastic global supportive partner in HSBC. Back to you, Sandeep.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Wonderful. Thanks very much, Christine. We cannot be happier with a partner like HSBC on board with us right now. And like Christine said, you know, it really gives us the power and the fuel to now not only take care of our balance sheet properly, simplify everything, reduce the cost of capital, but also now invest in the future growth, which we never had, in the past. So now we have the means to really, find the real accelerators, in our business.

And that’s, that point brings us to this thing about our strategic accounts. Before I talk about the strategic accounts, what we mean, first of all, by the strategic accounts or how we define the strategic accounts is two things. First of all, these are very large enterprises, typically multibillion dollar, enterprises, global businesses with revenues of at least at least $505,100, million, US dollars. That’s how we typically define, you know, these enterprise clients from the size perspective. But the second part is we also want to assess what’s the headroom for us to grow by bringing the value to these businesses.

When these two things match, it’s not just about the size. It’s also about the partnership that we could have to offer the right value to these enterprises and how much of a problem we can solve. When we spot these two things, these accounts go into our strategic account part. Now the interesting part is, if you remember, we, had the growth in the strategic accounts as one of the core, pillars of our strategy, when we published that in early, 2024. So strategic accounts growth is one of the key drivers of our strategy, if you like.

What we are really pleased to announce is this strategy is gaining traction. It’s generating the right results. It’s working. So what you can see on this slide is the top 30 strategic accounts that we have been talking all along 2024. We had 6,000,000 of revenue from them in h one twenty twenty three.

In the last two years, if you compare the, first half, in the last two years, we have almost doubled our revenue in those 20 strategic accounts. And this is coming from the focus that we have brought, into these accounts by bringing the right mindsets, bringing the right people, and also when we have integrated our business, bringing in all of the cross sell and upsell of the solutions and high value services that we offer to our, clients. Why this also matters is if we look at the lifetime value of some of these strategic accounts, they could go upwards of $5,000,000 easy. Majority of them have got a lifetime value for us of more than, $5,000,000. In fact, many of them have got more than $10,000,000 of the lifetime value.

One of our largest, strategic accounts, and long running strategic account has got more than 20,000,000, US dollars of lifetime value. That’s how valuable these relationships are. So one of the key points there is we don’t need to have many of these strategic accounts or we don’t need to even go and win many of these strategic accounts Even if we go and focus on two things, one is expanding our presence and our offering of value to these existing strategic accounts and just adding handful of those strategic accounts to our part, that will really deliver phenomenal rate of growth to our business. What we have done in terms of growing that strategic account part is we have also added another 10 strategic accounts to this part of 30 strategic accounts. So overall, now we have got 40 strategic accounts that we are focused on, and these 10 additional accounts have now brought in an impact of 1,600,000.0 of revenue to our h one alone in 2025.

And you can see how we have also focused on these new strategic accounts to bring in that meaningful revenue and that sustainable revenue growth, from these strategic accounts. That’s the key value that we have. One of the key factors that had impact in the revenue mix that you look at in the business now and the impact of that revenue mix is that we now have got 70% of our revenue coming from, these strategic accounts, more than 70%, which was only 45% of the revenue. This is high value. This is more re re recurring kind of revenue.

This is more profitable revenue, and that’s what we are really excited about. So what what we have been able to prove is that the strategy that we laid out is working really, really well for our business. It’s growing our profitability really in nice ways, but at the same time, bringing in the right revenue mix. What we would like to do is amplify this strategy now further. And what we have got with HSBC as a partner is the availability of the capital to invest in the right areas.

And at the same time, if you combine that with our positive operating income, we now have all the means to accelerate our growth and and amplify the strategy even further. This is exactly what we have been waiting for. And now that we have got the these means and the capital to invest, what you would see is in the next few quarters, the rate of our growth would be a lot more aggressive. And this is where I just wanted to bring in, to your, attention, you know, how the strategy is beginning to work and deliver tangible results for us. Our goal is really clear.

We want to reach in our short term milestone that we have defined as the 50,000,000 of the revenue run rate and the 10,000,000 of the EBITDA run rate. And I believe we would like to see 10% of this overall revenue coming from our integration activities by consolidating all of our acquisitions and running as one business, one brand. How are we activating this is by bringing in our strategy of the account integration, all the strategic account, and the headroom that we have in all of those strategic accounts that I just talked about. And this is then supported or enabled by the critical partnerships, the technology partnerships that we are weaving and nurturing really nicely. For example, we are, premier partners with GCP, not only in LatAm now.

We are also premier partners in The UK. We are channel, growth partner of the year with Click, as well. These are the partnerships that we are nurturing that then enable us to bring in some really good, really meaningful strategic accounts, the net new strategic accounts to us by offering, the right, technology solutions to them. The capability integration comes from all of the integration that we are doing. There are so many examples that we have.

We have brought in so much of efficiencies in our, delivery model. We have brought in so much of collaboration of, you know, picking up, one part of the, business that is really strong in delivering one particular service or solution, bringing them to the other parts of our business. And that’s the capability integration that we have. We have also bought the global center of excellence going on now, which are now also not only bringing in the efficiencies, but also driving the innovation with our clients and keeping us two steps ahead of our clients in the market. At the same time, we have these growth levers, which I talked about, you know, we have got massive headroom within our strategic accounts, all the enterprise accounts.

And we are, at the same time, embedded in key growth markets, both both in the North American EMEA market as well as LatAm. And that the the contracts that we deliver, the solutions that we deliver are really high value. Some of them even more than a million dollar for a year of our solutions and services to a particular client. We have also embedded our operational scalability with hyper elastic delivery model, and our delivery powerhouse is sitting between Argentina and India. And there’s a seamless integration going on there with operational KPIs now being measured, for the whole of the delivery model.

And like I said, all of the strategy is then enabled with these critical technology partnerships, which are the key enablers of growing our strategic account, bot. So that’s where, our strategy is and how the growth levers are working. What we are what we see ourselves as positioned in the market is for that scalable strategic revenue that I talked about, which is more profitable, which is, more sustainable and more reordering and recurring in nature, which we are already doing. Sustainable capture generating operations. We have brought about massive changes as we have seen.

Our operating income is really, really positive, and it has come a long way, in the last six quarters. So this is one of the KPIs we will hold very strong onto, and we are latching onto it in a ways that it really, has become a very sustainable operating income. And we have got multi multiple growth drivers. But primarily, it’s from it’s coming from our operational, scalability that we have baked into the business as well as the technology partnerships that we are nurturing. These are the, growth drivers that we are looking at.

What we have also planned the business for very nicely now is for the inorganic growth. And now that we have got the capital available for, us to demonstrate, growth in the organic side, we are also gonna be opening up our taps on the inorganic growth, in the future. With that, I will stop here and open it up for any questions from the audience.

Moderator/Host, Now Vertical: Super. Thank you, Sandeep. Again, to our audience, if you have a question, please use the q and a, chat bar, within the portal. And for our listening, covering analysts, if you wanna raise your hand to come in live to ask a question, please do so. Our first, question comes from Suthan Sukumar with Stifel Securities.

Suthan, you’re

Suthan Sukumar, Analyst, Stifel Securities: I’m here, guys. Thank you for taking my questions. For my first one, I wanted to touch on the reseller accounting changes here. I’m just kinda curious what drove the the the sudden shift in the accounting treatment or the accounting the guidance here on the treatment of these multiyear reseller deals. Is this related to maybe the makeup of deals, whether it’s software versus hardware contribution or or something else?

Just looking for some more color there, guys. Thank you.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: I’ll take the initial part of this, Christina, and then you can go into the depths of it. But nothing has shifted as such, Sultan. The primary shift there was a positive shift, which is we we started signing multiyear contracts last year, which is a positive thing for us because it gives us the predictable revenue and the cash flow in the business. However, like I was saying, the accounting treatment of it means if it is a 1,500,000.0 contract for three year period, then all of that revenue and the associated cost is accounted for in 2024. We, of course, get the cash flow, in the subsequent years, but the accounting within IFRS is is in the year when we signed the deal.

And the only change there was that we started signing those deals in 2024. That’s why we are just seeing that impact right now. But as we sign more and more of those multiyear deals, this this effect is gonna disappear. But, Christine, anything you wanna add, Walker?

Christine Nelson, Chief Financial Officer, Now Vertical: Yeah. Just to clarify, there has, yeah, been no accounting change. The only thing was under IFRS, with these reseller arrangements, you have to recognize a 100% of the revenue at all of the costs on the point of delivery. So say it’s a three year deal. That’s a new deal that we’ve got a client to sign up for three years.

A 100% is recognized on the day of delivery. Where under, like, a normal subscription revenue, you would expect it to be amortized over that three years. So you’d get revenue in year one, year two, year three. Well, we’re we’re having to recognize three years of revenue on one day. And so normally, if it was a one year, you know, subscription, you’d see that revenue the same quarter the following year and then the following year.

Well, for these, say, it’s a three year multiyear deal, we won’t see, you know, revenue again in our income statement from that particular client for three more years. And so just with that huge change of more more of these material multiyear contracts being signed, it’s causing a bit of a a timing thing. But as Sandeep says, the cash flow is still the same. So we’re still kind of billing on an annual basis, and so the cash flow timing doesn’t change. And that’s also why you guys have seen an increase in accrued AR and accrued expenses.

It’s because of those big multiyear deals that we’ve been closing.

Suthan Sukumar, Analyst, Stifel Securities: Okay. Great. And that’s that’s, that’s helpful. Second question on is on the public sector delays. Can you speak a little bit about, you know, how meaningful the public sector is to your business?

Like, what percentage of revenues does that account for today? What the delays are are largely tied to. And and as you know, from where I sit, it’s not something I’ve looked at as a key driver for your business, but just curious if, you know, given your expertise in in Brazil and with public sector opportunities, is this could this be an opportunity as you think about your global footprint?

Moderator/Host, Now Vertical: Sandeep, you’re muted.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Yeah. Sorry. So our public sector or the government contracts are concentrated only in Brazil, first for now. So the rest of the business has hasn’t got any meaningful presence or revenue stream from, the public sector. In Brazil and the overall revenue from the public sector is less than, 8% right now.

And majority of that is coming from the licensing deals. It’s got the services as well. But a lot of that comes in from the licensing of the software, and this was also primarily tied with click relationship that we have. So public sector only in Brazil, majority licensing deal, less than 10%, of our revenue for sure, and they are tied to click. So you’re absolutely right in one sense that it is very specific part of our business.

However, we do we do deliver some really tangible business value to these government bodies in Brazil. And there are some some phenomenal business outcomes that we have seen, which are also repeatable and reusable in the other parts of the the Brazilian government bodies. So the only problem there was that the procurement cycle, because of the unpredictability there, it these deals just got moved to the future months. Like I said, we are very confident. The team on the ground as well is very confident.

That’s why I’m sharing this confidence on their behalf that we will be closing those deals in the coming months.

Suthan Sukumar, Analyst, Stifel Securities: Okay. Great. Last question for for me guys is just on the strategic accounts. You know, obviously, validation there with this continued expansion with those key customer relationships. And and it sounds like, you you guys continue to keep the the foot on the pedal with respect to investments here.

Can you speak a little bit about the type of investments that you’re making, to help you grow that share of wallet, grow those relationships? And and how are you thinking about balancing that with, with the operating leverage and margin expansion in the course ahead?

Sandeep Mendurada, Chief Executive Officer, Now Vertical: So, first of all, you know, last year, that’s where that that’s the strategy that we communicated, and these are the assets that we saw in the business. And the potential of growth, you know, in that growth lever that we have within the strategic accounts was just massive. We wanted to prove it, first of all. So what we did was brought in first of all, identified what are those strategic accounts based on those two criteria that I mentioned earlier, and then brought in the right team, the right account managers, the right technology people in there so that we can really bring in the right cross sell and upsell, potential into those strategic accounts. Also, bringing in the right focus.

If we were delivering only one part of our solution or a service to that client, how can we bring in the other solutions and services to them? We also leverage the technology partnerships like Click and GCP to penetrate even further into these accounts. So there there was the focus and the investment that was brought in, but initially, the idea was to really prove this strategy that we believe we can grow these strategic accounts. And if you now see last eighteen months, we have proven that strategy is the right strategy. It’s working, and it’s delivering tangible results for us.

So the investments that we are well, now, needs, Sutan, is to bring in the wider account management teams there, the wider very senior consulting teams who can understand the pain points of the business, who have the right visibility on those accounts, and they create the right visibilities in not only one geography, but across the globe that the account may be operating in, create the right visibility there, and then position the right solutions and services that are really high value and very profitable solutions and services for us. That’s where the investment is gonna go in creating that commercial engine for the accounts growth, and the expansion, if you like. So call it the account management, very senior consulting style people who understand not only our business, but they understand how to, traverse through the industry and a specific account and then bring in the right, right technology team and the right use cases to expand our value to those clients. But you will see that is not just one type of individual or one type of role. The commercial engine is gonna have, say, presales type of consultants.

It will have the consultants who can go and prove the value really fast with a proof of concept or a minimal viable, product, which then sets the tone for a larger transformation within those accounts. And we have seen this grow from, say, you know, an initial account where we went in with a $75,000 initial contract for six weeks. We have been able to then grow it to half a million to 2,000,000 in the next twelve months, and one of the larger accounts even went up to $3,000,000 in the same year. We want to bring in more of those multimillion dollar accounts, and we want to expand in those accounts nicely in the future. This is where the investment is gonna go.

Now one point that you had about the profitability, they these accounts, of course, are more profitable because we can see the partnership is over many years. Some of these accounts, we have been working with them for more than five years, more than eight years, even ten years. Now when you look at the longevity of all these accounts and if you look at the lifetime value that we get as our revenue, it’s really high. And because we are not having to spend, on the net new win as much, our cost of sales and marketing is lowered. And hence, these accounts are more profitable.

Suthan Sukumar, Analyst, Stifel Securities: That’s perfect. Thank you. Maybe I’ll squeeze in one one last one, for, for you and maybe, Christine as well. Just kinda curious on, you know, what are your priorities here around capital allocation going forward with respect to managing leverage and working capital and so forth?

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Our key focus is really, Suthan, on really accelerating the organic growth, which is right now already proving that we are proving the tangible results from there. So the the first aspect for us is gonna be to amplify and accelerate all of that organic revenue growth with the capital that’s available to us. And where exactly we will do that? First, it’s gonna be North American and EMEA business because we just know the sophistication of the solutions and the services we have there and the type of strategic accounts we have got in North America and EMEA, we can expand very rapidly. And the value creation that we are gonna have for the business by onboarding more of these strategic accounts in North America and EMEA business is gonna be higher.

That doesn’t mean we are not investing in the LatAm business stock, but the LatAm business already has bit of that commercial engine to deliver the organic growth. We will strengthen that further and specifically focusing on the technology partnership channel to bring in new business to enhance our footprint into the existing accounts as well. So those are the two areas that you would have where the investment would go from the strategic accounts perspective. But the third area is the nurturing and the co selling and co marketing with the technology partners like, Google Cloud. This is where we are investing quite heavily across, the business.

There are certain events that are already scheduled in The UK where we have now recently received the Premier partnership, relationship in September. There are a couple of events already happening where we are jointly going to certain industries and certain, type of clients that we want to showcase our solutions to and then see how we can add value. But this particular technology partnership channel, again, has proven to be, very profitable, and it’s proven to be bringing the right strategic accounts to us. And this is why we will be investing more into this third category of our, growth lever.

Suthan Sukumar, Analyst, Stifel Securities: Okay. Great. Thank you for the thank you for the color and feedback. Guys, I’ll pass the line.

Moderator/Host, Now Vertical: Andre, there are no current questions in the queue from the phone. If you could take the questions through the q and a chat.

Administrative Support, Now Vertical: Sure. Thanks. Thanks, Glenn. So just building on the strategic accounts, there’s a question about how strategic accounts grew 44% in h one twenty twenty five and accounted for over 70% of revenue. So what what exactly are are this, or what exactly is the strategic account category?

And perhaps and this is for you, Sandeep, if you can elaborate just to club a few questions together in the interest of time. Is this the top 30 accounts that you discussed previously, or is it a varying set of accounts? Just trying to compare apples to apples.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Yeah. They they are, initially, the numbers that I showed you on the slide. I can I can bring that slide up again, if you like? You know, the the growth that we have seen initially, what we demonstrated was from the, 30 strategic accounts, the top 30 strategic accounts that we have been talking about all of, 2024, and that’s where the growth, came from. We have almost doubled our revenue from those top 30 accounts between 2023, 2023, and the 2025.

That’s really the massive growth. That the reason I then showed another 10 strategic accounts was the add on. These were the 10 first of all, I just wanted to compare apples to apples between the three years, and then I added those 10 strategic accounts. I’m just gonna bring in that slide one more time, so that really paints the right picture. Let me know if you can see my screen.

Suthan Sukumar, Analyst, Stifel Securities: Yep.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Yeah. So the the you know, what what I then showed was this, 10 additional strategic accounts that we added in 2025 that have brought in another 1,600,000.0, of revenue for us. And if you look at the same, you know, strategic 10 strategic accounts, as we you know, over, the top 30, it was really minimal revenue, in 2023 and even in 2024. We brought in that focus and have been able to grow, those 10 strategic accounts to 1,600,000,000.0 in 2025. So this is where that growth is coming from, and that’s what we are really positive and excited about because the strategy that we wrote on the paper and we said we think is gonna work is actually working.

So that’s where the growth is and just to give the breakdown of those thirty and ten.

Administrative Support, Now Vertical: And and when you think about it from a geography perspective, what’s the geographic concentration or the split and, you know, LatAm, US, UK, etcetera?

Sandeep Mendurada, Chief Executive Officer, Now Vertical: We have eight strategic accounts in North America and Kenya, and rest are in LatAm. Now one nuance there is the value from the strategic accounts in North America and EMEA is much higher than the LatAm just because of the sophistication and the scale of the clients that we are working with. And that’s one of the reasons why I was saying when Sutan asked that question, this is where we are gonna be investing, you know, capital to bring about that accelerated and aggressive growth first because the the demand for our solutions and services is much higher. And in North America, the clients can take on these sophisticated solutions quite nicely from from us.

Administrative Support, Now Vertical: And just still on the revenue, we’re, so what is the, kind of the macro in the industry right now? Where are the pressures, coming from, if at all? Are there, are there, rightsizing activities or, you know, compression and spend, for services for Now Vertical or companies like Now Vertical, right now?

Sandeep Mendurada, Chief Executive Officer, Now Vertical: I think, like I said, you know, the demand for our solutions and services is increasing. There is a lot of demand for our solutions and services in the market. But the biggest driver or the influence of change influence of change that’s coming from is this growing cloud market, this rapidly growing cloud market, which is influenced primarily by the data and AI technology. What our enterprise clients are challenged with or they’re facing as challenges is how do they deliver the right ROI from their investments into this data and AI technologies. And this is where we are coming into play.

We have delivered some, you know, content around what is that cloud market, how rapidly it’s growing, how it’s, really overpowered by the three hyperscalers, GCP, AWS, and Azure, and how the, enterprises are unable to deliver the ROI from these technologies. And what these enterprises need is the partners like Now Vertical who have done this many times in different industries to hold their hands and really guide them through the through the road map that is more likely to succeed and deliver the ROI for them. And that’s why I always say what we focus on is the business value and the business outcome and not just a provider of technology. And this is what differentiates us from so many other players in the market in our industry. So that’s that’s the challenge that we are solving here, which we believe we can do such a great job at across the business, both in both the markets.

And we have got so much of headroom just within our existing accounts itself to bring in this high value solution with the technologies.

Administrative Support, Now Vertical: And just on the on the solutions oriented revenue, another question we received was that that that portion of the revenue was high. Can we interpret this as a sign of a promising project pipeline, or can you give a general outlook regarding your current, pipeline and maybe the current status of the cross selling efforts across markets?

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Absolutely. The pipeline is very strong. That’s why I’m very confident about our outlook for, the h two, 2025. And this pipeline is definitely coming from, many of these high value solutions and how we have consolidated our solutions and services, after the integration of the business. And now we are way more valuable for our clients.

Now we can offer them the suite of things which were, just not available earlier. The the support portfolio of our catalog, which was just not available earlier. So this is where our confidence is coming from. The pipeline is strong. We are gonna invest our capital into, building the commercial engines, like I said, and which will also bring in, the acceleration in our, growth rate.

Administrative Support, Now Vertical: Great. Just one more question on this. So we we explained the the revenue rack of the multiyear license deals, but does something explain the softness in closing new license deals, reseller, specifically license deals, in, in this queue? Is it mostly Brazil and Chile? Has something changed, or do you expect these deals to rebound or not?

Which dovetails into this, sort of exit run rate.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: There there’s always a bit of seasonality. So, yes, this is in Brazil and Chile only first of all. So that’s the only part, like I explained earlier, this, you know, activity that we have of the, industry standard software reselling is only in LatAm and in Brazil and Chile. Now these multiyear deals, they they have a bit of seasonality with certain clients. We cannot we cannot drive it or we cannot control it.

This is also driven by the market in certain ways. And that’s the seasonality that you would always have in any kind of a business, whether it’s, you know, the multiyear deal that is coming up for renewal or there’s a multiyear deal that is there in in net new multiyear deal that’s in the pipeline. And what we saw was just a bit of the deferral of these, contracts in the public sector within Brazil. But what I was reflecting on, the $1,000,000 part of it is the is the multiyear contract, part which we signed in 2024. There are multiyear contracts in the pipeline even in 2025.

Like I said, you know, over a period of time, and this is not for, I’m not talking about five years. I’m just talking about in the next few months, this will ease out because we started signing these multiyear deals in 2024.

Administrative Support, Now Vertical: Thanks. And given this current quarter, does this have any impact on reaching the 50,000,000 revenue run rate and $10,000,000 EBITDA run rate, objectives or goals?

Sandeep Mendurada, Chief Executive Officer, Now Vertical: No. There there we our goal is very clear. Our strategy is very clear, and it is working. And we are growing the the 80% side of the business very nicely, and I’m not even worried about that 20% part of the business. You know, this is again, this is gonna grow.

It’s just the timing aspect of it. And some of it, like I said, was also the, you know, the planned actions for restructuring of the business. So in a way, if you look at it, it’s really a positive thing that we are breaking in these multiyear contracts into the business. It’s just a little bit of the time passes, and you will see that it has eased out. So not worry about really reaching this goal of 50,000,000 run rate and 10,000,000 EBITDA run rate.

K. Great.

Administrative Support, Now Vertical: Think see if we have any more questions here. There was a question around just sort of your growth out outlook for the business and what does that look like in the coming quarters.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Yeah. I think we we we have not yet given any guidance, as such to the market about, the growth rate and what the numbers are gonna look like. So I’ll I’ll stay away from giving any guidance right now. We will come to that point. Of course, as you know, this business has been transformed quite significantly, and, we are in that transition, mode.

Everything is beginning to work really well from our strategy. So we are confident that, at some point, we will start giving the guidance to the, market. But at this point in time, we are not, giving the guidance to the market.

Administrative Support, Now Vertical: Great. Now we only have, one minute. There is a question around, some of the revenue in, or, actually, we’ve we’ve touched revenue. There is one question if we can squeeze it in on the cost structure going forward. Are the admin expenses of about 3.2, million USD the new normal?

Suthan Sukumar, Analyst, Stifel Securities: That would

Sandeep Mendurada, Chief Executive Officer, Now Vertical: be the

Administrative Support, Now Vertical: last question.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Christine, would you like to take that question, please?

Christine Nelson, Chief Financial Officer, Now Vertical: Sorry. Can you repeat the question, Andre?

Administrative Support, Now Vertical: Is the $3,200,000, cost structure the quote, unquote new normal? We had a question on that.

Christine Nelson, Chief Financial Officer, Now Vertical: Yes. I mean, it’s it’s the new normal. We are continuing to work on making more efficiencies. But, yes, the the past two quarters are gonna be, on average, the the new normal going forward for admin costs on a global basis, but we’re continuing to work on finding more cost efficiencies. Also, you know, if we are investing more capital into the growth, whether it’s our, you know, our sales partnerships team, any kind of that, we might see a change there, but this is a good baseline for going forward.

Administrative Support, Now Vertical: Great. Thanks very much. I know we’re a million over. Appreciate everybody’s, questions, and thanks to the to the team for presenting. And thanks, Glenn, for setting this up, and hope to see you soon.

Christine Nelson, Chief Financial Officer, Now Vertical: Thank you.

Sandeep Mendurada, Chief Executive Officer, Now Vertical: Thank you very much.

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