Original-Research: Verve Group SE (von GBC AG): BUY

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Original-Research: Verve Group SE - from GBC AG

06.03.2025 / 10:31 CET/CEST

Dissemination of a Research, transmitted by EQS News - a service of EQS

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Classification of GBC AG to Verve Group SE

Company Name: Verve Group SE

ISIN: SE0018538068

Reason for the research: Research study (Note)

Recommendation: BUY

Target price: 8.30 EUR

Last rating change:

Analyst: Marcel Goldmann, Cosmin Filker

BUSINESS DEVELOPMENT FY 2024

Verve published its preliminary business figures for 2024 on 27 February

2025. According to these figures, the operator of a fully-integrated

advertising software platform (ad-tech platform) recorded a record year

thanks to strong organic growth with a significant increase in revenue of

35.7% to EUR 437.01 million (PY: EUR 321.98 million) and was thus able to

benefit significantly from the ongoing recovery of the advertising market.

In particular, the dynamic growth of 46.0% in the fourth quarter (of which

24.0% was organic growth, excluding Jun M&A and currency effects) to EUR

144.20 million (Q4 2023: EUR 98.7 million) made a significant contribution to

this, with the final quarter also closing with new record figures at revenue

and earnings level.

In addition to the significant organic growth impetus (organic growth

achieved: approximately 24.0%), the Jun Group acquisition carried out in

summer 2024 also further increased the pace of growth.

According to the company, the Group integration of this acquired technology

company is proceeding according to plan. Their technological and personnel

integration is progressing well, with the first successes already visible in

the form of a significantly higher organic growth rate of 10.0% for the Jun

business in the past financial year 2024 (PY: 1.0%). Verve expects to

realise further sales synergies in the current financial year and believes

it is well on track to achieve at least the originally communicated EUR 9.0

million in synergies in the 2025 financial year. In the medium term, the

company even sees further potential for annual sales synergies in the range

of EUR 30.0 million to EUR 40.0 million.

In terms of revenue distribution, the traditionally largest advertising

segment 'Supply Side Platform' (revenue share of SSP: 89.3%) accounted for

the lion's share of revenue, with revenue totalling EUR 390.27 million (PY: EUR

301.39 million). Due to the strengthening of the "Demand Side Platform" as a

result of the Jun acquisition, sales in this segment jumped to EUR 100.55

million (PY: EUR 47.12 million), resulting in a somewhat more balanced segment

mix than before.

The rapid revenue growth recorded resulted primarily from an increase in the

software customer base and the expansion of advertising budgets with

existing software customers. The number of major customers (sales volume > EUR

100,000) on Verve's ad-tech platform increased significantly by 56.8%

year-on-year to 1,140 at the end of the fourth quarter (number of major

customers at the end of Q4 2023: 727). Even excluding their acquisition in

June, the company also reported strong (organic) customer growth of 39.5% to

1,014 software customers on an adjusted basis. At the same time, existing

software customers increased their advertising budgets significantly by

15.0% to a rate of 110.0% at the end of the fourth quarter (net USD

expansion rate Q4 2023: 95.0%). At the same time, the volume of digital

advertising delivered or placed increased significantly by 33.0% to 274

billion at the end of the fourth quarter (advertising ads at the end of Q4

2023: 206 billion).

On the product side, growth was driven in part by increased customer demand

for Verve's innovative ID-less advertising solutions (e.g. in the form of

ATOM 3.0 or Moments.AI). With revenue growth well above the average for the

advertising industry, Verve succeeded in gaining significant market share

and thus further expanding its leading market position, particularly in the

mobile market segment.

Their extremely positive business development was also reflected at all

earnings levels. With EBITDA totalling EUR 128.52 million, the strong level of

the previous year (PY: EUR 128.46 million) was even slightly exceeded.

However, it should be noted at this point that the previous year's figure

was significantly positively influenced by a revaluation of the AxesInMotion

earn-out payment liability (positive special effect of EUR 62.76 million).

Adjusted for special effects (e.g. M&A and restructuring costs or

revaluation of balance sheet items), adjusted EBITDA (Adj. EBITDA) increased

significantly by 40.0% to EUR 133.25 million (PY: EUR 95.17 million). This

resulted in a moderate increase in the adjusted EBITDA margin (Adj. EBITDA

margin) to 30.5% (PY: 29.6%).

In terms of net performance, a clearly positive consolidated result (after

minority interests) of EUR 28.80 million was generated, which was below the

previous year's level (PY: EUR 46.73 million). However, this significant

decline is mainly due to the positive one-off effect from the revaluation of

an M&A-related payment obligation described above.

The company guidance (sales of EUR 400 to EUR 420 million and Adj. EBITDA of EUR

125 to EUR 135 million) raised again by Verve's management at the end of

August 2024 was thus significantly exceeded in terms of sales and was at the

upper end of the communicated earnings guidance range in terms of earnings.

Our sales and earnings forecast was also exceeded (sales of EUR 410.02 million

and Adj. EBITDA of EUR 128.11 million).

With the publication of its preliminary business figures, the ad-tech group

has also provided a rough outlook for the current financial year 2025 and

intends to further concretise this guidance in the further course of the

year (probably in the first quarter). Against the backdrop of an already

good start to the year, Verve's management expects double-digit organic

growth for the current financial year, with this targeted significant

business expansion to be achieved primarily through the increased marketing

of ID-less advertising solutions and an expected strong US advertising

market (Verve's core market).

At the same time as issuing a general outlook for the current financial

year, Verve's management has once again confirmed its medium-term guidance

(sales CAGR: 25.0% to 30.0%; Adj. EBITDA margin: 30.0% to 35.0%).

Accordingly, the technology company expects continued high growth momentum

in the form of double-digit profitable growth rates beyond the current

financial period.

In light of their strong performance, the continuation of their high growth

momentum and their extremely positive company outlook, including

confirmation of the medium-term guidance, we have left our previous sales

and earnings forecasts for the financial years 2025 and 2026 unchanged. We

have also included the 2027 financial year in our detailed estimate period

for the first time with specific estimates.

Based on our confirmed forecasts and the first-time inclusion of the 2027

financial year in our detailed estimate period, which have also led to a

higher starting point for the estimates for the subsequent financial years,

we have significantly raised our previous price target to EUR 8.30 per share

(previously: EUR 6.70 per share). In view of the current share price level, we

therefore continue to assign a 'BUY' rating and continue to see significant

upside potential in Verve shares.

You can download the research here: http://www.more-ir.de/d/31910.pdf

Contact for questions:

GBC AG

Halderstrasse 27

86150 Augsburg

0821 / 241133 0

research@gbc-ag.de

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Date (time) of completion: 06/03/2025 (8:21)

Date (time) of first distribution: 06/03/2025 (10:30)

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2096382 06.03.2025 CET/CEST

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