Scala Integration And SaaS Conversion Will Shape Fairly Valued Retail Experience Platform

Catalysts

About Vertiseit

Vertiseit provides an in store experience management platform that helps retailers manage and measure digital touch points in physical locations.

What are the underlying business or industry changes driving this perspective?

• Although Vertiseit now reaches SEK 440 million in ARR with more than 2,000 brands and 450,000 touch points, reliance on retail focused in store experiences means any slower rollouts or store level technology budgets could limit ARR growth and delay progress toward SEK 1 billion, with a direct impact on revenue and earnings.
• Although the Scala acquisition significantly widens Vertiseit’s North American partner network, the shift to a partner only model and the handover of direct customers to integrators could take longer than planned, which may cap new project volumes and weigh on both revenue growth and net margins during the transition.
• Although Scala’s large installed base of perpetual licenses offers scope for conversion to SaaS, management expects this process to take years and any hesitation from partners or end customers to move to subscriptions could slow recurring revenue growth and limit improvement in cash EBITDA margins.
• Although Vertiseit is consolidating Scala’s development into a leaner 35 person organization and targeting 35% cash EBITDA, the reduction from more than 100 employees and ongoing ERP and IT integration work could stretch resources, which may raise execution risk and put pressure on profitability if customer support or project delivery is disrupted.
• Although Vertiseit is seeing a stronger international tender pipeline, including in QSR and automotive, the loss of the Volvo Cars Sweden integrator tender and the long decision cycles for large global contracts mean that wins may be lumpy, which could keep ARR growth and EBITDA progression uneven from period to period.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Vertiseit compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Vertiseit's revenue will grow by 14.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 0.1% today to 11.9% in 3 years time.
• The bearish analysts expect earnings to reach SEK 125.1 million (and earnings per share of SEK 3.34) by about July 2029, up from SEK 739.0 thousand today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as SEK184.3 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 22.8x on those 2029 earnings, down from 2675.6x today. This future PE is lower than the current PE for the SE Software industry at 24.2x.
• The bearish analysts expect the number of shares outstanding to grow by 5.51% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.17%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Vertiseit has long-term goals to reach SEK 1 billion in ARR and 35% cash EBITDA. If the company continues to report ARR of SEK 440 million with more than 20% targeted ARR growth and at least 25% annual growth in cash EBITDA per share, sustained progress toward those goals could support higher earnings power and a re-rating of the Vertiseit share, particularly through higher revenue and cash EBITDA.
• The Scala acquisition adds a large global customer and partner base, including significant exposure to North America. If Vertiseit successfully converts Scala’s perpetual licenses into SaaS over time and benefits from the untapped SaaS potential across millions of historical deployments, recurring revenue could rise meaningfully, which may support stronger net margins and earnings.
• Management highlights a strong international tender pipeline in QSR, automotive and other verticals. If Vertiseit secures some of the very large QSR tenders or additional global framework agreements similar to Stellantis, contract wins could increase ARR and strengthen Vertiseit’s competitive position, with a direct positive effect on revenue and EBITDA.
• Vertiseit has already reduced Scala’s organization from more than 100 employees to 35 around the product and is consolidating systems within 3 months. If this lean structure holds while service levels remain intact, the group could benefit from operating leverage over time, which would support higher cash EBITDA margins and earnings.
• Net revenue retention of 107% and churn of 3% on an annualized basis indicate that Vertiseit is currently expanding revenue from existing customers. If this pattern of positive net revenue retention continues alongside low churn, the compounding effect on ARR could be larger than expected, with a material impact on long-term revenue and profit growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Vertiseit is SEK62.0, which represents up to two standard deviations below the consensus price target of SEK72.5. This valuation is based on what can be assumed as the expectations of Vertiseit's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK85.0, and the most bearish reporting a price target of just SEK62.0.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be SEK1.0 billion, earnings will come to SEK125.1 million, and it would be trading on a PE ratio of 22.8x, assuming you use a discount rate of 7.2%.
• Given the current share price of SEK58.8, the analyst price target of SEK62.0 is 5.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.