Verve Q3'25: Investor trust put to test

Heading into the Q3 report, we focused primarily on the pace of revenue recovery following the Q2 platform outage, its impact on Verve’s client base and onboarding, and cash flows. In our view, the Q3 report, which fell short of our estimates on the key figures, did not sufficiently address these concerns. Although the SSP platform has remained stable since mid-August, several key indicators suggest that the recovery is progressing more slowly than anticipated. Uncertainties remain regarding near-term growth, customer behavior, and the sustainability of intake trends. We also feel that the timing of the change in revenue recognition could have been better, and the weak cash flows in Q3 also cast increased uncertainty on visibility and predictability going forward. Following the Q3 report, we have made downward adjustments to our estimates. That said, if management can restore investor confidence and deliver on our conservative estimates, the stock is very cheap. We continue to see attractive return potential over the next 12 months and reiterate our target price to SEK 26 (was SEK 36)

Softer figures across the board

Verve revenue decreased -3% year-on-year in Q3’25, reaching 110 MEUR, with FX-neutral organic growth amounting to -4%, which was below our estimate (120 MEUR). Key KPIs, including the net dollar expansion rate (NDER) and large software clients (LSC), showed a mixed performance in Q3 after the sharp Q2 drop caused by the platform outage, though we assume the unification still had some spillover effects in Q3. Meanwhile, while below the record high figure in Q2, customer retention remained high at 96% (Q2’25: 98%), which we consider especially important as it shows continued limited customer impact from the outage. Adjusted EBIT came in at 15 MEUR (Q3’24: 25 MEUR), translating to a 14% margin, which fell short of our 22 MEUR estimate. The lower EBIT was largely driven by the lower revenues, higher D&A costs, and a weaker gross margin than expected. Free cash flow was also much weaker than expected, primarily due to negative changes in working capital.

We lower our estimates on the back of the Q3 report

Following the Q3 results, management commentary, and outlook, we have cut our FY25-26e net revenue and adj. EBIT estimates by -2% and -7-12%, respectively, with a follow-through effect on the rest of the forecast period. Ad spending trends appear to continue to be relatively soft, albeit stabilizing alongside a more predictable macroeconomic backdrop after a turbulent start to the year. However, certain macro indicators, such as U.S. consumer sentiment and job growth, have softened, adding uncertainty to the outlook given the historical correlation with advertising budgets. Even so, we believe Verve is structurally well-positioned, where its exposure to the faster-growing digital advertising channels, a strong competitive foothold in privacy-first advertising, and solid customer intake should support growth even in a softer market environment. We expect net revenue to grow by 18% in 2026 (9% organic) and 9% in 2027, with adjusted EBIT margin to improve from 2025e of 19% to 24% in 2027.

It is a clear high-risk/high-reward case at the moment

As we alluded to in our update following the profit warning in mid-August, the increased share price volatility we flagged as a risk has since materialized. Based on our updated estimates and continued share price weakness, Verve trades at an adjusted EV/EBIT of 5x and an EV/FCFF (excl. earn-outs) of 8x for 2026e, which are very low multiples in absolute terms, in relation to peers, and relative to our acceptable valuation range. As such, we see upside potential in the valuation multiples. Moreover, our DCF model, which captures Verve’s long-term value creation, points to a potential upside with a fair value estimate of SEK 38 per share (was SEK 45). While Q3 did not do much in restoring credibility after Q2, as seen in the stock price reaction, we believe consistent delivery over the coming quarters is needed before we are comfortable setting the target price closer to our fair value. Nonetheless, we see meaningful upside should the operational trajectory improve going forward.