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

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 € 437.01 million (PY: € 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 € 144.20 million (Q4 2023: € 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 € 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 € 30.0 million to € 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 € 390.27 million (PY: € 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 € 100.55 million (PY: € 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 > € 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 € 128.52 million, the strong level of the previous year (PY: € 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 € 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 € 133.25 million (PY: € 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 € 28.80 million was generated, which was below the previous year's level (PY: € 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 € 400 to € 420 million and Adj. EBITDA of € 125 to € 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 € 410.02 million and Adj. EBITDA of € 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 € 8.30 per share (previously: € 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)