Verve Q3'25 preview: Pace of recovery and customer base in focus

Source: Inderes & Modular Finance IR (consensus includes 8 estimates)

Verve is set to release its Q3 results on Tuesday, November 18. We expect the company to show flat organic growth, reflecting both the ongoing recovery from the SSP platform unification challenges that impacted Q2 and significantly tougher year-on-year comparisons. Profitability is expected to come under some pressure as revenue recovery has yet to fully offset the company's simultaneous scaling of its sales organization. The two acquisitions announced in September will have minimal impact on Q3 figures due to timing, with Captify contributing only about two weeks. Our primary focus will be on management's assessment of the platform migration recovery trajectory, the development of key customer metrics to evaluate the impact of the outage on the client base, and updates on the integration progress of the recent acquisitions. Additionally, any commentary on market conditions and the outlook for Q4 will be closely monitored as we approach year-end.

We expect 6% y/y growth amid tough comparisons and ongoing platform recovery

While our estimates for H2’25 remain unchanged in aggregate, we have rebalanced the quarterly distribution ahead of the Q3 report. Specifically, we have trimmed our Q3 estimates slightly and shifted the corresponding uplift to Q4, leaving the overall second-half outlook unchanged. We now expect Q3 revenues to come in at approximately 120 MEUR (Q3'24: 114 MEUR), representing around 6% growth year-on-year, with organic growth expected to be flat. Inorganic growth will primarily be driven by Jun Group, which only contributed to two months in the comparison period. Neither Captify nor Acardo will have a meaningful impact on the Q3 figures. Captify was consolidated from September 16, and Acardo from October 1, meaning Q3 will reflect only about two weeks of Captify's contribution (estimated at ~1.6 MEUR).

Apart from Q2, where organic growth was negative due to the platform outage, the expected flat organic development in Q3, compared to previous quarters (Q1'25: 16% y/y, Q4'24: 24% y/y), reflects two key factors. First, the uncertainty around the pace of recovery from the SSP platform unification challenges that especially impacted Q2'25. Regarding this, management indicated in the Q2 report that supply-side revenues were already approaching Q3'24 performance levels, suggesting a gradual normalization. However, the unification of other formats, such as CTV and web, is yet to be complete, which we believe will have a small impact on Q3 growth. Second, Verve faces significantly tougher year-on-year comparisons, as Q3'24 marked a period of exceptional 31% organic growth and strong market momentum. In addition, the weakened EUR to USD is also expected to weigh on the top line.  

While some macro indicators, such as U.S. consumer sentiment and job growth, have softened (which generally is a bad sign for the advertising landscape given the correlation to macro), commentary from peers suggests that the ad spending environment has been relatively stable in Q3.

Within the open internet peer group we track, average growth in Q3 was 8% year-on-year (Q2’25: 12%, Q3’24: 17%), while Walled Garden ad businesses (Google, Amazon, Meta) posted a stronger 21% year-on-year (Q2’25: 18%, Q3’24: 16%). On this basis, we expect Verve’s organic growth to trail the open internet as well as the Walled Gardens. However, including the impact of M&A, Verve’s total growth should closer align with the open internet peer group.

Recovering revenues and a higher cost base to weigh on margins in Q3

Moving down the income statement, we estimate the adjusted EBIT to come in at 22 MEUR (Q3’24: 25 MEUR), representing an 18% margin (Q3’24: 22%). The expected margin contraction reflects fewer scaling effects, as we expect Q3 revenue recovery to fully offset the company’s simultaneous scaling of the sales organization. Additionally, we estimate the adjusted EBITDA at 28 MEUR (Q3’24: 34 MEUR), equivalent to a 24% margin (Q2’24: 30%). Going forward, we expect the completion of the platform unification in July should drive improved operational efficiency and reduced infrastructure costs, thus supporting improved margins.

Verve’s cash flow is affected by seasonality and normally shows lower cash flows at the beginning of the year, as the company pays publishers after Q4. The cash flow profile typically improves as the year progresses, as do rest of the financials. Q3 is typically a solid quarter for cash generation, though not as strong as Q4. As such, we expect FCFF generation in H2’25 to be roughly in line with last year, driven by improved working capital management and a higher DSP contribution.

Comments around recovery from the platform outage, customer metrics, and M&A integration progress are in focus

Our full-year estimates remain unchanged from the latest update in mid-September, following the acquisitions of Acardo and Captify. Our 2025e revenue estimate stands at 505 MEUR (FY2024: 437 MEUR), with an adjusted EBIT of 108 MEUR (FY24: 107 MEUR), equivalent to a 21% margin (FY2024: 25%). Adjusted EBITDA is estimated at 135 MEUR, corresponding to a 27% margin. As such, our estimates align close to the midpoint of the company’s updated guidance (revenue: 485-515 MEUR, adj. EBITDA: 125-140 MEUR). However, the company’s guidance does not include the impact of M&A, unlike our estimates. After adjusting for the M&A contributions we estimate for 2025, our forecast would essentially be at the low end of the company’s guidance. This is consistent with how our estimates have been throughout 2025, reflecting our somewhat cautious view of the digital advertising market outlook amid the year’s macroeconomic and geopolitical uncertainties and overall weak U.S. consumer sentiment.

We believe the most important aspect of the Q3 report will be management's assessment of the platform unification recovery, as well as the development of key metrics in order to evaluate the post-outage customer impact. We will closely monitor the development in large software clients, where we expect a bounce back following the outage that resulted in some clients falling below the 100K threshold, overall customer onboarding, as well as retention, to gauge the impact on the client base post-outage. Comment around integration progress of Captify and Acardo, as well as market outlook, we also be of interest in the report.