Hi everyone, and welcome to this extra investor meeting with regards to the news that was published just an hour ago that Vertiseit acquires mdt Medient echnik GmbH, a German digital signage company. My name is Jonas Lagerqvist. I'm the CFO and Deputy CEO of Vertiseit, and this is Johan Lind, CEO of Vertiseit. We will be with you here for a short news update on this event. At the end of this presentation, there will be possibilities to ask questions in the Q&A. Just use the raise hand function or write questions in the Q&A, and we will answer that by the end of the call. Please, Johan.
Yes, so we can start off with describing mdt a little bit. I will walk you through some figures in short. mdt is one of the real pioneers in the digital signage space, especially the software space in Germany. They were founded already in 2002. They have 30,000 licenses in the market and ARR of SEK 20 million. They have a sales strategy where it's partner-first, which fits us very well. The SaaS revenue constitutes 80% of their turnover. They also operate with a high EBITDA margin with a margin of 35% in line with our long-term goal for the group. That's really nice. As we now start to execute on more of like a roll-up agenda, we also focus a lot on key customers with high growth potential. In this case, mdt has Deutsche Telekom with a large install base. They also have McDonald's Germany.
That's the two most significant accounts. This is just an example of how it looks in real life. I think we can go to the next slide. Their partner-first strategy, as I said, aligns really well with how we want to scale our business going forward. They work with integrators like CANCOM in Germany, but also different types of partners with a different customer profile, basically. Okay, so what was the investment rationale? Of course, it adds 30,000 licenses. It adds SEK 20 million ARR. It adds a pool of talented people to the group. It improves our profitability and cash flow. It also strengthens Visual Art's already strong position at McDonald's in Europe. Altogether, this brings Vertiseit Group above SEK 300 million in ARR based on the already communicated Q1 figures. It also takes us above 250,000 touchpoints active today.
Small update on just McDonald's standalone because that's, of course, a big, big portion of the rationale. With McDonald's before the acquisition, Visual Art are present in and operates Sweden, Norway, Finland, Denmark, Belgium, Spain, and also Georgia, 6,000 touchpoints. The German market is huge. German alone is 1,280 restaurants with almost 10 licenses per restaurant. It brings it up to 18,000 licenses with McDonald's in total. Next up is, of course, the question, will this become a standalone brand or will it be integrated into the group? When we work with this, it's really clear that mdt fits perfectly with the Grassfish offering. They offer platform and expertise. They sell through partner, and the product itself has really been a main competitor to Grassfish in the German market. The Grassfish one platform really covers for what mdt has in place.
What we aim for and have agreed with the seller is a full integration. mdt will become an integrated part of Grassfish [DACH]. We will run a really quick and smooth integration process in line with our new roll-up strategy, meaning that we will implement our management system and way of working, the ERP, IT infrastructure, and the organization into play within three months. The development team in mdt and the whole team, of course, will join Grassfish, but especially the development team will join the shared effort into the newly released Grassfish IXM Aqua development. We believe that the full migration of their install base will take up to three years. The shared efforts now go into the new product.
The acquisition structure is a Grassfish acquisition. The valuation was on a debt and cash-free basis at approximately SEK 87 million, which is equivalent to an ARR multiple of 4.3, which we find is very beneficial for Vertiseit, especially since it's a very well-functioning company with a documented profitability in line with the group's current long-term profitability targets. It is financed through Vertiseit's own cash in combination with our new credit facility that's in place and was communicated last week together with Nordea. That was put in place in order to facilitate our growth and acquisition strategy. I think everyone is familiar with this slide, but it shows that we have continued to grow our ARR sequentially each and every quarter for more than 10 years, and we keep on doing so.
In Q1, the reported ARR was SEK 281 million, and adding SEK 20 million through the mdt acquisition now takes us north of SEK 300 million. The full Q2 numbers and Q2 ARR will be presented next week along with the Q2 report. Altogether, this is one important step of many towards our long-term goals of having more than SEK 1 billion in ARR by 2032. We're soon one-third of the distance to that. Simultaneously, we will increase profitability to reach 35% Cash EBITDA profitability. I think that is important to point out that there are very many high-quality acquisitions out there, of which mdt is one, not only adding high-quality ARR and top-tier customers, but also adding a profitable acquired growth to the group. We really believe that this acquisition ticks many of the boxes that we aim for in our acquisition agenda and our growth strategy.
This takes us further towards our vision and our ambition to become the global leader within in-store experience management. Now we move into the Q&A. Please let us know should you have any questions. I know that we have a raised hand. Someone would like to comment to the call. Fredrik Nilsson from Redeye.
Hi, thank you very much.
Hi, Fredrik.
Just so I get the numbers right here, is it SEK 20 million, that's ARR, and another SEK 5 million in other revenue? Is that correct?
Approximately that, yes.
Yes.
Okay. And.
The majority of the turnover is SaaS revenue in the company.
Okay. I assume that the remaining part is mostly consulting, or do they have some kind of system offering as well?
It's an equal split between consulting, and they also have a line of their own media player.
Okay, great. I assume this is not the main point of this acquisition, but is there anything useful in the technology that you can use in your Aqua platform going forward?
I think the product itself has been developed for many, many years, and they have had a leading position in the market for many years in Germany. There are some really, really strong concepts in their platform and software stack. What we will do is that we will bring them with new technology into the Grassfish IXM Aqua products as we go.
Okay.
is more or less rebuilt with new technology into the new product.
Okay, I see. Could you tell us anything about the growth rate in this company in the last few years?
It varies a lot because they have had really dominant customers for them. For us, McDonald's Germany and Deutsche Telekom will not be that dominant, of course, but in their business, they have been. It has varied a lot depending on how those two customers have acted. You could say that the average growth rate has been between 5% - 10%.
Okay, great. Lastly, also a clarification question. I think in the press release, you mentioned a profitability in line with your target of 35% Cash EBITDA. I think in the presentation now, it was 35% EBITDA. Is there a difference there or do they basically?
Same number in that company.
For this company, the Cash EBITDA is EBITDA.
Okay, great. That's all for me. Thank you very much.
Thank you.
I think we also have Rick ard from [Carnegie]. Is that correct?
Hello?
Can you hear me?
Yeah,
absolutely.
Hi, Rickard.
Okay, great. Hello, guys. The question is, I've noticed there has been a lot of M&A activity within digital signage. Have you experienced any competition for this acquisition? Do you think that it will be more consolidation of industry going forward?
We absolutely think there will be more consolidation. As you say, there is a lot of activity in the market. In this particular case, we have had a relationship and talked to mdt for at least five years, Jonas. Am I correct? They have also had dialogue, of course, with other potential investors. In the process, they chose us as the preferred acquirers. We were alone in the process.
Great. Are there any overlapping clients that are just having on the same market, or is it mainly clients that do mainly have local German clients?
Except for McDonald’s , which really we hope that one plus one equals three, there are no obvious overlaps in the customer base.
Okay, thank you. That was all for me.
Thank you.
Thank you, Rickard. Okay, we've had a couple of text questions here. I will direct them to you, Johan. How does this acquisition align with the strategic objectives of the IXM grid?
Yeah, what we have communicated before is that we build now a core tech stack on Azure, where we aim to have the same playout technology and edge for all platforms. In this particular case, we will not integrate that backend into the mdt product. We will have a longer period of conversion instead. The team will join forces with Grassfish in developing the next generation of Grassfish product. Eventually, that's how we benefit. We benefit from the resources, and we will then convert the customers customer by customer.
The next question is, how many similar acquisitions do you anticipate being able to execute on an annual basis?
That's a good question. Like before, if you look on the track records, we have done larger acquisitions than this, and we have managed to do approximately one per year. We have also described this new phase where we can do more of roll-up acquisitions that we can fully integrate into existing business brands as the next step of how we evolve. The aim, and let's see if it works, but we aim to have it fully integrated from an operational perspective within three months. If that succeeds, we can definitely manage to take on two, three a year with this perspective.
Yeah. One key success factor that we've identified in our acquisition and integration processes has been to perform them sequentially. We do one acquisition, do the full integration before we move into the next one, which we aim to continue to do. With these smaller acquisitions, we can integrate them much quicker, meaning that we can uphold a somewhat higher frequency than before. We will still, of course, always be ready to evaluate the larger acquisitions once they appear. Their characteristics are that they, of course, materialize when they materialize. In the meantime, we are working with the roll-up side of the acquisition agenda as well.
I also want to highlight that it still means that we are doing the actual work. You and I have been on site together with [Oskar]. It's the three of us that performed the acquisition together with, of course, CMS Wistrand and Johannes Wårdman.
Yeah, we are very much hands-on in the whole acquisition and integration process. Of course, this has no effect whatsoever on our organic growth targets. Just like before, we have a solid organic growth during profitability. In parallel, we perform these selected acquisitions. I think that was it for today. We will meet in this forum again shortly when we present the Q2 report in the middle of July. Until then, thank you very much. See you.
Thank you so much. Bye-bye.