Verve Q4'25: Burden of proof remains on cash flows

Verve's Q4 report confirmed the preliminary figures from January, with revenue reaching 194 MEUR with an adjusted EBITDA margin of 25%. However, the detailed cash flow statement reinforced our concern about weak cash flows, which continue to challenge our investment thesis. With cash conversion being notably weaker than in previous years and debt levels remaining high, the execution and deleveraging trajectories are increasingly unclear. Management attributed the weak cash flows to limitations on its receivables securitization program and emphasized that expanding the program is a top priority for 2026, expecting it to notably strengthen cash conversion. While we view this direction as sound, the timing, magnitude, and effects of this remain uncertain, and we have lowered our FCFF estimates to reflect this uncertainty. Management needs to demonstrate sustained cash conversion improvement before we can place greater confidence in the investment case. We lower our target price to SEK 20 (was SEK 24) and reiterate our Buy recommendation, as we continue to weigh attractive valuation multiples against ongoing execution uncertainties.

Cash flows disappoint, but customer metrics reassure

As the top line and EBITDA were already known ahead of the report, our primary focus was on cash flow, balance sheet, key performance indicators (KPIs), and the customer base. Regarding cash flow, the report confirmed clear challenges in converting its earnings into free cash flow. Operating cash flow for Q4 came in at 20 MEUR, significantly below the comparable period of 55 MEUR, and FCFF amounted to 11 MEUR (Q4’24: 42 MEUR). The primary driver of this weakness was working capital, which consumed 26 MEUR in the quarter despite Q4 being a seasonally strong period for cash flow. Management attributed this to securitization program limitations and timing mismatches between advertiser and publisher payments. To better neutralize the working capital impact of growth in 2026, Verve intends to expand the program, which it expects to strengthen cash conversion and contribute to deleveraging of the balance sheet. Operationally, we feel the key KPIs were overall solid. While net dollar expansion rate only improved gradually to 92% (Q3’25: 90%), customer retention reached a record high of 99% (2Y avg: 96%), showing continued customer trust post-unification.

Minor revisions with more conservative cash flow outlook

Given that the Q4 results were in line with the preliminary figures and our estimates were already adjusted following that disclosure, we are making only minor revisions to our forecasts. Specifically, we have recalibrated the quarterly phasing for 2026, expecting a somewhat weaker H1 and stronger H2 due to FX headwinds, reassessed the short-term impact of the large customer loss, and communicated front-loaded sales force investments. Our FY2026 estimates remain largely unchanged at 697 MEUR revenue (was 705 MEUR) and 155 MEUR adjusted EBITDA (was 158 MEUR), still within the company’s 2026 guidance. We have lowered our FCFF estimates to reflect execution uncertainty around the securitization program expansion. We now project 2026 FCFF* of 70 MEUR (down 12%) and 2027 FCFF of 91 MEUR (down 7%).

Attractive multiples, but credibility must be rebuilt

Verve's valuation remains very attractive on paper, trading at an adjusted EV/EBIT multiple of 6x and an EV/FCFF multiple of 9x for 2026, below both historical levels and comparable peers. However, we think current execution uncertainties and the challenging 2025 weigh on what are justified multiples at the time being, with management having much to prove. Before any meaningful re-rating, management needs to demonstrate sustained cash conversion improvement, prove that platform efficiencies are sustainable, and rebuild investor trust through consistent execution. That said, the platform is now unified, the market environment appears to be stable, and the 2026 guidance suggests that management has confidence in returning to a more normalized growth trajectory. On this basis, if the company can demonstrate improved cash conversion in 2026 and make meaningful progress toward its deleveraging targets, we believe the stock could re-rate significantly. However, we believe the company has much to prove before a stronger scenario can be priced in with confidence.