Hi, and welcome to this earnings call for Vertiseit's Q2 report for 2025. My name is Jonas Lagerqvist. I am Deputy CEO and CFO of Vertiseit. Beside me, I have Johan Lind, CEO of the group. Today we have disclosed the numbers and the outcome of the second quarter for 2025. As we do every quarter, we meet for this earnings call broadcasted from Varberg. This is today's agenda. We will give you some details on the recently finalized MDT acquisitions. We will go through the financials for the quarter and elaborate on what we have done during this period. We will finish off with a Q&A session where we will answer all the questions that will arise during the call. Please use the Q&A function to post your questions.
Should you wish to join the call and talk to us live, use the raise hand function and we will let you in during the Q&A session at the end of the call.
Yes, so for those of you who are new to the company, Vertiseit, we are a SaaS company offering in-store experience management platforms to enhance the customer experience in stores. Our customers are leading brands and retailers that use our tools in their operations, particularly in store, to operate all digital touchpoints, everything from where they run everything from brand communication to tactical sales to the sales support tools throughout the customer journey. In Q2, just as we finished Q2 or the day after, we finished off with the MDT acquisition, and I'll go through some of the rationale and the highlights from that acquisition. MDT, in short, it was founded already in 2002. For us, it means that we now take a leading position in the German market. We dominate like the Nordics.
We have been strong in DACH, but the German market is of strategic importance for the group as Germany is one of the largest economies in the world. MDT has two main accounts which are of strategic importance for us. It's Deutsche Telekom and McDonald's. Just to grasp the scope, only McDonald's is 1,200 + locations only in Germany. It also adds to what we already have with Visual Art in the Nordics and Spain and some other countries for McDonald's. In total, we had 30,000 licenses, SEK 20 million in ARR, and that's not included in the disclosed numbers in this report. It's 15 employees and they operate with a very solid EBITDA margin above 35%. Their sales strategy is also in line with how we grow our business with sales through partners. There are just some examples of how it looks like in reality.
This is pictures from McDonald's and Deutsche Telekom. As we say, they already have a partner strategy with different types of partners, everything from AV integrators like CANCOM, Dig Media, FLYERALARM , which is more of a long-tail strategy, MIB, and they cover different types of partners and verticals. Looking into our operations in the Vertiseit group, we operate through Dise, Grassfish, and Visual Art. MDT will be fully integrated into Grassfish. I will give you some flavor on that one on the next slide. MDT fits like 100% to Grassfish. Grassfish and MDT are more or less overlapping functionality from a platform perspective, also from a strategic perspective. They really fit. This time, we will run a full integration where we aim to do it in three months.
That is aligned with the strategy that we updated you all on in Q1, where we say we now aim for more of a roll-up approach where we fully integrate smaller targets but with a higher frequency. Within three months, we should be able to integrate the management system, our way of working, ERP, IT infrastructure, and organization, and join forces on the Grassfish Aqua development.
The acquisition was performed on a company valuation of 4.3 x ARR at SEK 87 million on a cash and debt-free basis. We also made use of the previously communicated new financing structure that has been set up together with our main bank, Nordea. We use these new credit facilities together with our existing cash in order to finance the acquisition. Moving into the financials for the second quarter of 2025, we continue to have a stable ARR growth, now exceeding 13 years of sequential ARR growth every quarter. We closed the quarter on SEK 290 million in ARR. As Johan pointed out, the MDT contribution of SEK 20 million is not accounted for during the quarter as the acquisition was finalized after the quarter, but will be included during Q3. Compared to last year, ARR growth amounted to 66%. Of these 66%, 16% was constituted by organic growth.
We think this is a stable outcome of the quarter. We are also performing in the range of 15% - 20% that we're used to and that we have communicated to perform on going forward in terms of organic growth. During the quarter, we had a 4% growth isolated in Q2. The NRR, the net revenue retention, was 107%, meaning that we continue to see that half of our growth comes from our existing customers and half of our growth comes from newly acquired customers. The churn rate is definitely under control on an annual basis. MDT will, in Q3, contribute with SEK 20 million. On today's levels or Q2 levels, we will be on SEK 310 million. We are almost a third of the way towards our long-term targets.
On the level that we are on now, we would require a 17% organic growth rate throughout 2032 in order to organically reach the long-term target of SEK 1 billion in ARR. We still have and we maintain our strategy where we are to grow organically together with selected acquisitions. At this growth rate, we would reach the goal organically in 2032. Compared to last year, we have a SaaS share of total revenue, which is somewhat lower than we had pre the Visual Art acquisition. That is, of course, one of our very important tasks in order to increase profitability, to work so that the revenue mix moves back towards having at least a 50% SaaS component of total revenue.
The EBITDA margin came out at 30% on an adjusted basis, which is very much in line with our own expectations and our own plan, where we said that we would be on a somewhat lower level during the first half of the year during the Visual Art integration, which was finalized in Q1. During Q2, as we previously announced, we've been focusing on identifying, evaluating, and realizing the synergies from the acquisition and in the organization, which has been both evaluated and realized by the end of the quarter. Thus, the EBITDA adjustments are just below SEK 17 million.
To give a somewhat of a flavor to that one, we can say that before this realization of synergies, we have dual locations in the group in Oslo and Copenhagen and some other places. We reduced the FTE with 20 people. We also reduced many consultancy agreements that we have with consultants. The total of these synergies and the actions that we now have taken will give us an EBITDA level above 20% the second half of the year.
Yeah. Among the actions performed, worth to mention is that we further centralize group functions. We align on how we expand internationally, just like so that we don't have any or have as little geographical overlaps in terms of organization going forward, so that we can continue to scale our organization in an efficient way. We have also closed down a third-party warehouse to further rely on partners even more when it comes to system sales and systems rollouts. Altogether, these actions, which will be implemented during the second half of the year, fully enforced, will improve both profitability and cash flow with around SEK 25 million on an annual basis.
To be clear, all actions, all decisions are already in place.
Yes. Besides these efficiency measures, there's also an adjustment of M&A costs. It's costs related to the acquisition, which was finalized after the end of the quarter. In this, there are also costs related to the establishment and the setup of this new financing structure. With a new financing structure in place, which is a scalable structure that we can continue to grow with over a number of years, including a revolving credit facility, it means that we can be more efficient in how we utilize the current credit facility, meaning that we do not have to have larger outstanding amounts than necessary. That is, of course, also resulting, will of course, result in a much more efficient way of reducing interest expenses and so on going forward.
The reason for this credit financing structure to be implemented in the first place is, of course, to support the current M&A strategy, where we're looking into performing more roll-up acquisitions in a somewhat higher frequency, but that can be smaller in size than the acquisitions that we have done in the recent years, which all of them have been large compared to Vertiseit's own size. We're really happy to do the first test run of these credit facilities with the first roll-up acquisition performed of MDT after the end of Q2. Now we move into the Q&A. Please, we can see that Fredrik Nilsson from Redeye, analyst at Redeye, would like to join the call. Hi, Fredrik.
Hi, Jonas, and thank you. Could you elaborate a bit on what kind of roles you are reducing in addition to the offices that you mentioned?
Yeah, just elaborate on the...
Yeah, of course. The offices are more sales-related where we don't need duplicates between Grassfish and Visual Art. When it comes to most other positions that are related to group functions, we now centralize even more when it comes to procurement, HR, and finance. I should say related to group capabilities are the rest.
Okay, great. I think you mentioned at least in the interview with Direct that you see a somewhat more cautious market than you have hoped for. Could you please tell us a bit, is there a difference among geographies and sectors, and why do you think the market is a bit more cautious than you expected?
Yeah. We can see that the growth rate is now in the lower part of the normal range between 15% and 20% organic growth. Q2 was a little bit slower than our own forecast for Q2. Q1 was pretty much in line. It was really clear when the tariff discussions in the U.S. had the effect on us that a lot of decisions, even though we have a strong pipeline, that a lot of decisions were postponed into the future. I should say that given that the sales cycles have been longer now, I think it was a solid growth in Q2. I expect it to be more or less in line or a little bit better in Q3.
I see. It might be a bit early, but it would be still interesting to hear any potential feedback from customers regarding Grassfish Aqua. Have there been any implementations or discussions with it so far?
Yeah, that's correct. We launched the Grassfish Aqua. It's the first really grid-based pure cloud platform. We launched it at Grassfish Summit, which was a really great event, 200 attendees during a three-day event. The feedback on site was fantastic. We have a lot of demos and with customers at this stage. I should say that it might take half a year before we have any large-scale implementation of what we demonstrated on stage. What Fredrik talked about is that the Grassfish Aqua has the first real agentic AI implementations where you can basically get the system to communicate for you based on your communication goals with really nice AI enablement in the product. Of course, AI enablement in the product is a key pillar now in our product development. I think it will take some months before it's a real, real driver in growth.
Okay, I see. Finally, you have seen a very low churn for some quarters, but also a slight negative trend in net revenue retention. What are your takeaways from that?
I think the key takeaways is that we see that the growth from current customers, from existing customers, it remains at almost exactly like 50% of the total growth. I think it's quite natural that the net revenue retention reduces a bit when the overall growth is lower than the previous quarter.
Yeah, it's the same. My analyze is the same. Activity is a little bit lower in the market. That's the fact we see.
At the same time, we have a historically strong pipeline. Sales cycles tend to be a little bit prolonged when the market takes a little bit more cautious position.
Great. That's all for me. Thank you very much.
Thank you.
Thank you, Fredrik.
We also have Rikard Engberg. Rickard, are you with us?
Hello, guys. Can you hear me?
Hi, Rick.
Hi.
I have a few questions. First of all, are there certain industries where you see higher pace in the, so to say, slow down and conservatives? For example, how is the automotive industry compared to QSR?
Our automotive customers are on that scale. The implication on their activity is lower than you would think because their rollouts are multi-year plans. It doesn't change that rapid. I think we don't see any real sector-specific differences right now. I think it's a climate where people focus on what will happen with tariff, how will that affect them. In that climate, it's always a good choice to just wait with new investments. That said, I think delivering 16% organic growth in that environment is still strong.
Okay, great. Also, I mean, in the start of the year, you talked a lot about the US. Given the current climate around tariffs, especially for screens, has this planned expansion been put at a lower pace now than at the start of the year?
Of course, it affected a lot in the U.S. market. Even though we don't sell equipment there, there needs to be equipment from our partners sold and imported. They don't produce any displays in the U.S. market. The U.S. market was affected, but the U.S. market is still a very small portion of our current business, so it's not that big of an effect. I think we believe they will sort it. It doesn't change our future view on the U.S. market as an important market for growth going forward.
Okay, great. Just one question for clarity. When you discussed that the ARR growth rates will be above 15%, that is the organic, so to say, on a year-to-year basis.
Yes.
Okay, good. My last question is regarding MDT. They had a quite high EBITDA margin when you acquired them. Will it be possible to see any synergies on the cost side there, or do you think that we will continue to operate on these quite high margins?
As you say, they step in at a level that is in line with our long-term goals of 35% cash EBITDA. We don't see that, it's not, we don't aim to do any cost reductions short-term there. We think they are on a good level. Long-term, of course, there will be synergies, but short-term, no.
Okay. Finally, you used a question regarding your M&A strategy going forwards. Are the targets that you're looking for, are they similar size to MDT and are similar characteristics, i.e., that we have certain key customers that you would like to get closer to?
Yeah, I think MDT is a perfect example of our new strategy. It's an 80% SaaS, a Salling Group partner. They have some key customers with large volume in markets where we want to grow. I think they're really in line with what we are looking for at the moment.
Okay, thank you. That was all for me. I guess happy summer.
Yeah, thank you, Rickard.
Thank you.
See you.
We have some more questions on the MDT acquisition. One regarding McDonald's. You have McDonald's in the Nordics, Spain, etc. How come that you want to buy customers on older software instead of organically winning this market yourselves at a seemingly lower price?
Yeah.
What's the dynamics?
The dynamics is that the sales cycles of winning like huge installations like the Deutsche Telekom and McDonald's, it's a multi-year. It's a really good rationale to buy accounts of that size because you only manage to bring a few of them yourself at the time. Also, actually, Visual Art lost against MDT on the software side in the last run. I think building a really strong position at large brands where we, like in, and at the end of the day, we want a global framework agreement with those brands. I think it's important to take like key markets.
A software-related question regarding MDT. Okay, how come that the MDT software integration takes three years? Is the backend also expected to take three years?
Good question. What we see with MDT is that they have a lot of complicated integrations done for many, many years with especially Deutsche Telekom, where there is a lot of functionality in their software that we have in the roadmap of Aqua but one year from now. We need to catch up with the roadmap in Aqua to meet some of the key features that they have for especially Deutsche Telekom before we can start the migration. If everything goes as we expect, I think we will start those migrations 12 months from now. In a good scenario, we are done in two years, but I'm not afraid if we take up to three years, which is also the end of life for the old Grassfish One platform that we run with BMW, Porsche, etc. It's the same scenario there.
Okay. Some efficiency measures related in questions. I think we've already gone into the components of the measures that were done. We can clarify that of these measures, approximately half of this cost that was accounted for in Q2 was cost of staff-related costs. The type of positions that were affected were mainly group functions where we centralized these even further, also geographically, and also overlapping positions in markets outside of the larger markets in the smaller remote offices. If you compare the costs related to the MDT acquisition with the costs from the Visual Art acquisition, they seem quite high. Why? That's absolutely correct. We should bear in mind that a portion or a quite large portion of the M&A-related costs are also related to the establishment and the setup of the new credit facility. That will serve us for many years, many years going forward. That's that explanation.
Lastly, if there are no further questions, is that okay, you described the market as more soft than before. What's your view on the second half of the year?
Yeah. As we say, we tend to grow organically between 15% and 20%. Q2 was a little bit softer, close to the 15%. As you say, in the range between 15% and 20%, we will be closer to 15% the second half of the year, even though we have a really strong and super interesting pipeline. We see that decisions now take longer and sales cycles are slower.
That was it for today. We would like to wish all of you a really, really good summer. We will see each other again when it's time to present the Q3 report. Thank you very much.
Thank you so much.