Earnings call transcript: Vertika reports strong ARR growth in Q4 2025

Vertika (EGX:VERT), a software industry player with a market capitalization of $4.12 million, has reported robust financial performance for the fourth quarter of 2025, driven by significant growth in annual recurring revenue (ARR) and strategic acquisitions. The company’s stock, however, experienced a decline, reflecting broader market trends and investor sentiment. According to InvestingPro, the company maintains a GOOD overall Financial Health score of 2.74.

Key Takeaways

• Vertika achieved a 19% organic ARR growth year-over-year.
• The integration of Visual Arts boosted ARR growth to nearly 70%.
• EBITDA stood at 33 million Swedish Krones (ETR:KRNG), with a 16% margin.
• The company is expanding its presence in key U.S. markets.

Company Performance

Vertika has demonstrated consistent growth with 52 consecutive quarters of sequential ARR increases. The acquisition of Visual Arts has significantly enhanced its growth trajectory, allowing the company to consolidate its market position and expand its portfolio. This strategic move has also enabled Vertika to double its product development resources, thereby strengthening its competitive edge.

Financial Highlights

• Annual Recurring Revenue (ARR): 275 million Swedish Krones, up nearly 70% with acquisition
• Organic ARR growth: 19% year-over-year
• EBITDA: 33 million Swedish Krones (16% margin)
• Cash EBITDA: 21 million Swedish Krones (11% margin)
• Net debt: Approximately 200 million Swedish Krones
• Net revenue retention: Around 110%

Market Reaction

Despite strong financial results, Vertika’s stock price decreased by 9.55%, closing at $0.03, reflecting broader market volatility. The stock trades between its 52-week range of $0.02 to $0.05. Based on InvestingPro analysis, the stock appears fairly valued at current levels. The company’s Price-to-Book ratio stands at 1.29x, while investors may be reacting to the negative EBITDA of $0.29 million and integration challenges of its recent acquisition. For deeper insights into Vertika’s valuation and financial health, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Vertika is optimistic about returning to normal profitability within the next six months, aiming to improve its current Return on Assets of -10.21%. The company aims to increase its SaaS revenue share to over 50% in the next fiscal year and is focusing on strategic expansion in the U.S. market, particularly in the food and beverage sector. InvestingPro subscribers can access additional insights, including expert analysis and peer comparison tools, to better evaluate Vertika’s growth strategy and market position.

Executive Commentary

"We have now doubled up the resources in product development," said CEO Johan Lindt, highlighting the company’s commitment to innovation. CFO Jonas Largigquist added, "Everything is coming out as expected or and then some," indicating confidence in the company’s strategic direction.

Risks and Challenges

• Integration Challenges: The rapid integration of Visual Arts poses operational risks.
• Market Volatility: Fluctuations in stock price may affect investor confidence.
• Debt Levels: A net debt position of 200 million Swedish Krones could constrain financial flexibility.
• Competitive Pressure: The need to maintain growth amidst intense market competition.

Vertika’s strategic initiatives and robust financial results position it well for future growth, although market reactions indicate some investor caution. The company’s focus on expanding its SaaS offerings and geographic presence will be key to sustaining its growth momentum.

Full transcript - Vertika (VERT) Q4 2024:

Jonas Largigquist, CFO and Executive CEO, Verteisense: Hi, everyone. Welcome to this earnings call. Verteisense has today released its year round report for the fourth quarter of twenty twenty four. My name is Jonas Largigquist. I am CFO and Executive CEO for Vertices.

Johan Lindt, CEO, Vertices: And my name is Johan Lindt. I’m the CEO of Vertices. So as Johan said, we are now really happy to present the year end reports. And it’s also q four is actually the first quarter where we also incorporated the latest acquisition visual arts into the figures. So this is the first time you actually see how how does Verticus look look like stepping into the new year.

Jonas Largigquist, CFO and Executive CEO, Verteisense: And on today’s agenda, we will walk through the Q4 financials. We will, we will highlight some business highlights during the quarter. We will also elaborate on the visual art integration, which has been going on during the during the quarter. And we will finish off with a q and a session where, where everyone can join in and get their questions answered. So please use the q and a function in this webinar, and we will answer the answer questions by the end of the presentation.

Yeah. So we have today released the interim report for the fourth quarter, year end report 2024. And ARR is reported at $275,000,000, million Swedish krones, and which is, of course, a significant increase both compared to last year and the previous quarter, mainly due to the incorporation of the Visual Arts in this quarter’s numbers. The acquisition was finished on the October 2, meaning that this quarter is the first where we, where we actually have consolidated visual art into Vertexit Group financials. By this, by this quarter, we can we can summarize more than thirty thirteen years or fifty two quarters of, of the straight sequential ARR growth, something which we are really, really proud of.

Compared to compared to last year, adjusted for for currency effects, we had a year over year ARR growth of 19% when looking at from a straight organic perspective. When taking the additional visual art ARR into account, the growth compared to last year was almost 70%. EBITDA is coming in on a level of 33,000,000 for the quarter, corresponding to a margin of 16, which is a decrease compared to last quarter, but also expected due to the due to the revenue mix that visual arts adds to the group where where which has a larger portion of systems sales. Cash EBITDA, which means profitability after taking investments into product development into account coming in at 21,000,000 or a margin of 11%. In connection with the acquisition, we took up some financing at our bank, leading us into a net debt position of approximately 200,000,000, which is well within the company’s covenants.

Cash flow for the quarter was strong from operations, but due to the fact that Q4 is always quite systems heavy quarter as well as we had quite heavy sales at the by the end of the quarter, meaning that working capital increased, but is expected to be corrected during the first quarter in ’20 ’20 ’5. So sauce wise, we had a currency adjusted quarterly net growth of 3.6%. So somewhat a little bit softer growth during the quarter. But given the facts that the integration work that has been ongoing that Joanne would elaborate on. It’s, we can, we think it’s quite understandable.

But, churn rate is still on really, like, controlled levels. And the net revenue retention, meaning how much we grow on existing customers, are still in the vicinity of 110%. As we can see by the SaaS metrics, somewhat slower growth isolated in Q4 due to that focus have been more or less on the integration. Yeah. Net revenue retention still on still on really, really good numbers.

And what is, what what is actually really, really good to see is that average revenue per brand when when taking all the new visual art customers into account increases significantly, meaning that we have that we now have significantly higher revenue per brand, which is, which is very much in line with the with our our strategy to focus on larger customers with larger potential.

Johan Lindt, CEO, Vertices: Talking about that, the customer mix is actually something that we present for the first time in the reports. So the single largest brands represents 5% of the ARR. The top 10 brands in our portfolio of customers represents 33. And the hundred largest customers represents 75. And that’s, that’s very much in line with our strategy.

As you know, we have, like, 1,500 brands, altogether. And, the the top hundred, represents 75 is really key because it’s it’s a number that we actually can serve re really well, and where we, I think that’s key to have a high annual net revenue retention and have happy customers in the long run. We also shared for the first time, split by customer segments. So, as we presented in the report, visual arts have two third of the revenue in a very important segment, food and beverage. On the group, it now represent 25%.

In food and beverage, you have the restaurant and QSR segment, subsegments. You have the subsegment of grocery and convenience stores. And all of those are are really, really strong in our portfolio. Second up is automotive, followed by a variety of consumer retail. Travel and transport is everything from airports to ferry lines to public transport in some cases.

And, financial services is banks, real estate, etcetera. The, the business highlights of, of the period is, of course, was communicated directly after New Year. And it’s, that the visual arts signs with KFC UK. It’s a really nice agreement with that covers a thousand restaurants, more than 5,000 licenses for a three year period. It it’s a pure sauce and consulting.

The ARR on the licenses are, 5,000,000 Swedish krones. And it really points into the direction of where we want visual art to be. We want to expand with this, top tier global QSR brands into new markets. And we we think that will be a significant driver for our growth going forward. So talking about visual art and integration, we we have worked, like, really, really hard.

And as you know, it’s only been a quarter, more or less, since, since we brought them on board. And, the whole team of both Verteisit and, and visual art have done a tremendous job into the actual integration. So by by the start of new year, we have implemented basically all of the group IT platforms. I think you can we have it on a slide here. We have we are now live with Salesforce (NYSE:CRM) for CRM CPQ.

We have the Business Central in place for, like, how many legal entities?

Jonas Largigquist, CFO and Executive CEO, Verteisense: They are they are a lot.

Johan Lindt, CEO, Vertices: So we’re on Yeah.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Like, plus 25 big entities at the moment.

Johan Lindt, CEO, Vertices: And, and Bright Analytics for financial reporting, Power BI operational KPIs, the unified licensing management is in place. So by by mid April, all licenses in, in visual arts was actually incorporated into licensing well. So now that is done, and all invoices are now automatically invoiced through the GroupRight Plata management system framework is in place. And, of course, we fine fine tune all the processes and routines and instructions is an ongoing task. Contract management in place, HR management, recruiting tools.

We are now in the same Microsoft (NASDAQ:MSFT) tenant, manage, like, documentation, etcetera, in a unified way. So this is now in place. So it’s, it has been a really, really intense period, but we are super happy that we performed that in, like, more or less a quarter compared to more or less like one point five year with MultiQ. So I think we are in really good shape now when it comes to bringing in acquisition to fuel the growth going forward. Part of the integration is, of course, more than culture, people, processes, and tools is also like tech.

And the platform integration is, is has also progressed really well. So as we said, visual art brings a really, really strong, like, development team, strong tech to the group. What we have done is that we combine the resources of visual art, Grassfish, and Verteisit. So a lot of development resources have gone from visual art into the grid team together with technology, especially within play out on device management. And then we also bring resources into Grass Fish.

So go going forward, the we have now doubled up the the resources in product development, basically. And, visual arts will in the future run on the Grassfish platform so that we we run we run three business brands onto two platforms on one back end stack, the IXM grid.

Jonas Largigquist, CFO and Executive CEO, Verteisense: And now we will open up for for q and a. So please go ahead and ask question. Should you have should you have them?

Johan Lindt, CEO, Vertices: I see a raised hand there.

Jonas Largigquist, CFO and Executive CEO, Verteisense: I can see that Frederick Nilsson, analyst at Redeye, would like to join the call.

Johan Lindt, CEO, Vertices: Perfect.

Frederick Nilsson, Analyst, Redeye: Hi. Thank you. I want to start with with the revenue and basically key all kinds of revenue. I mean, the Q4 numbers were quite high relative to the pro form a for the full year. I mean, is that mainly due to seasonality?

Or do you see a strong momentum in systems perhaps also? Or could you elaborate a bit on that?

Johan Lindt, CEO, Vertices: Well, thank you, Janice.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yeah. There are a lot of seasonal effects, especially in terms of systems when we’re in Q4. So that’s it’s naturally a strong system sales quarter. But apart from that, I would say that the business, both both the old advertising business and the, the additional visual art business is progressing according according to plan. And, given when we when we compare, now what we see in the actuals compared to what we, what we, what what what what we anticipated throughout the due diligence, we are there.

Everything is coming out as expected or or and then some quite important cases also better than better than expected.

Frederick Nilsson, Analyst, Redeye: Okay. Great. And regarding visual art and now moving to the Grassfish platform, I mean, as I understand that you were very happy with the technology that came with visual art. And now you in some way, I mean, take it away, perhaps you could put it. But I guess that’s not the case really.

So perhaps if you could elaborate a bit on what will GrassFish bring to visual art and what will visual art bring to you and your full IXM platform?

Johan Lindt, CEO, Vertices: Yeah. So the main asset that we bring in from visual art to the group is technology that we now build upon in the grid. So in in, and the key elements there were, visual art were particularly strong was, the play out technology and the device management is really the application that you run on the edge. And, in in, when it when it comes to the actual platform, we also add in the grid. We add now a unified design system and so on so that you can build both shared components, but also product specific components for, both dice and, and grass fish.

So, I I should say that that’s, that’s really like the foundation. So a lot of the tech will be like key assets for the groups that we brought in from visual arts.

Frederick Nilsson, Analyst, Redeye: Okay. Great. Last question from me regarding The US market. Visual Arts has an office in Chicago and DICE now establishing in Atlanta. I mean, why different cities, and what can we expect from you in North America in in this year?

Johan Lindt, CEO, Vertices: Good question. So with DICE, it’s really that we are % relying on, the partner channel. So it’s not possible to, to buy licenses directly from DICE. And it’s also super important that there are no leakage when it comes to information about possible opportunities, etcetera, between DICE and the other group business brands, Grass Fish and Visual Arts. So we we prioritize to run, DICE, really separate, from the others.

And then when it comes to why Atlanta, we we want to be close to Scientific Games (NASDAQ:LNW) as the first, like, really major customer in The US market that expands really rapidly and where we see a huge opportunity to capture, to have that as a foundation and also, of course, serve the new partners that we communicated in last Q reports. So that start to start to build to build like a local momentum with local partners there. With, with visual art on the other hand, and now the visual arts activities on The US market related to to food and beverage will, of course, also benefit Grassfish as as it will be the Grassfish platform going forward. It’s concentrated now in Chicago, as you say, and really on that’s the home of McDonald’s (NYSE:MCD) as an example. But it’s also really focusing on the QSR and convenience store space as we go right right now.

Frederick Nilsson, Analyst, Redeye: Okay. Great. Thank you very much. That’s all from me.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Okay. And then we have a specific systems sales regarding the business model and how it’s structured due to the fact that we’re that we only have 10,000,000 of inventory compared to, like, 110,000,000 in in sales during the quarter.

Frederick Nilsson, Analyst, Redeye: Yeah.

Jonas Largigquist, CFO and Executive CEO, Verteisense: And that is, that is, that is, like, a good example of how we’ve structured the business model given the fact that we, in the systems, in the systems sales, we we hardly ever touch the hard the hardware. So we have we have agreements with distributors on on on each market, meaning that that the hardware leaves the distributors and goes directly to to site for for installation by our part by our partners. And, our then we have our payment terms are more are more favorable from our distributors than than we provide to our customers, meaning that, even though we we grow, we do not, we do not we do not increase our our working capital. And, that that is like in the in the normal case. And due to due to q four, we might, we might stick there might be some working capital working capital increase due to, like, like, a peak.

But in the in the normal, like, development of that revenue segment, we do not increase any working capital. And actually, the inventory level of 10,000,000, it’s also too high. So that’s also a focus area for us to decrease. And a question regarding a comparison of the integration of visual art to the compare to the integration of of MultiQ. What similarities and differences can can we see?

Johan Lindt, CEO, Vertices: I think when we brought MultiQ in, we we were we didn’t have the foundation, when it comes to ERP infrastructure, basically. So we needed to reinvent that at the same time as we did the integration. And so I think the work that we did with the MultiQ integration really laid out the the foundation for for this integration. So it was basically the same, same tasks. Core challenges were the same, to straighten up, like, license management, etcetera, and figure out, like, how do we streamline and get synergies out of operations.

But the key difference was that we had so much stronger, processes and platforms into play so that the playbook was was not, like, under construction. It was ready to be used.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yep. Now we have now we have a very, very good, like, blueprint in place, and we we also, like, prove to ourselves that we can that we can, in a very short amount of time, actually perform quite extensive integration work, which is really, really positive going forward. And we have a question from Kennyergi, who asks if the if the KFC deal had been able to perform for visual art on a stand alone basis or if it is a first sign of revenue synergies.

Johan Lindt, CEO, Vertices: No. No. To be honest, I think they they would have been landing that deal either way, to be honest. But the good thing is that it, it also shows that the model that we are work with to increase the share of SaaS revenue in relation to consulting, specifically systems, it’s it really aligns, with with our strategy. So as visual art growth, grows outside of the Nordics, we can expect them to follow, like, the pattern that we have followed in the rest of the group where you have a larger share of SaaS, basically.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yeah. In what cases have, you know, have visual art KPIs surprised you on the upside?

Johan Lindt, CEO, Vertices: That’s a good question. Like, I think on the upside, you can see that they have, like, a strong revenue per brand. I think that the impact it had on on the whole customer mix was good. You can also see that the concentration to awards like food and beverage was a little bit stronger than we anticipated. I think the expansion on their top brands is really impressive.

And I also think in general, they’re like sales activities and the opportunity pipeline is better than we anticipated.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yeah. I think we can I mean, to, like, conclude on on findings, I would I would say that even even though we had high expectations on, we had high expectations on people, on customers, on tech? And I would say in in all of these aspects, we’ve been, we’ve been, we’ve been positively surprised.

Johan Lindt, CEO, Vertices: Very much so.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yeah. So it’s, we we are really, really happy with that we that we actually could come to an agreement in in that. Okay. What are the key elements in increasing profitability, and when will you be back to a normal profitability level?

Johan Lindt, CEO, Vertices: So we don’t do, like, real guiding, so I won’t give you a date. But we’re I I think, before we are on track with the same type of profitability per, like, revenue stream, it will take, like, half a year. And then the the last things, is, of course, to get a slightly better, like, revenue mix between the revenue streams, and it will take longer time. And then the third pillar is, of course, to realize internal synergies that we have now in so many aspects from purchasing, supply chain, finance, marketing, whatever it might be, that there are much synergies and effects to gain there.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yeah. And I think it is also important to point out that this is this is not, like, this is not, like, a dominating, like, cost synergy case. We we really, really want to want to, like, keep as much of the, as much of the momentum and the, and the strengths in in visual artists as as possible to keep, like, fueling the growth going forward.

Johan Lindt, CEO, Vertices: And at the same time, put the resources where we get, like, the best results.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yeah.

Johan Lindt, CEO, Vertices: And I think that that is key.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Okay. Follow-up question on the revenue mix. When will you be back on a SaaS share of revenue of more than 50%?

Johan Lindt, CEO, Vertices: That’s a good question. I I I say that some somewhere, like, in next year. I want to give you a month, but during not during this year, but during next fiscal year. Yeah.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Okay. That was the, that was the last question. Do you have any concluding words on the q four?

Johan Lindt, CEO, Vertices: No. But it’s it feels really, really great now to have, like, everything incorporated, to have the figures in place. Now we can start tracking the business as we use we are used to and have the full visibility. And I think we are in a really, really good shape with the strong momentum, stepping into the new year.

Jonas Largigquist, CFO and Executive CEO, Verteisense: Yep. Yep. Really looking forward taking on 2025. So we will, we will meet again after publishing our report for the first quarter. Thank you very much.

Johan Lindt, CEO, Vertices: Thanks so much. Have a good day. Bye.

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