Partner Marketing: Profit-focused

The difficult economic environment and stronger Swedish krona weighed on Partner Marketing, with FY25 revenue growth of 2.6% slightly down from the 3.6% in FY24. Despite this, adjusted EBITDA grew 33% and the margin increased 1.8pp to 7.8%. Management is focused on maintaining profitability in this division (the use of AI tools is helping to manage costs), while funding growth areas such as the new US office. We have trimmed our growth forecasts for this business reflecting a weaker demand environment and currency headwinds.

Influencer Marketing: Growth engine

Influencer Marketing revenue grew 32% in FY25, after growth of 50% in FY24. As previously written, management invested in growing the creator base in H125, which depressed full year adjusted EBITDA margins, although adjusted EBITDA increased 38% y-o-y in Q425 showing the positive impact of the investment. We expect this business to continue to exhibit strong growth and margins in a market where demand currently outstrips supply.

Valuation: Upside despite lower estimates

Quoted peers that have reported year-to-date have provided a more cautious outlook for the year ahead. At the peer group median EV/EBITDA and EV/EBIT across FY26–27e, Tradedoubler’s share price would be SEK10.9. Our DCF values the share at SEK11.4. Discounting both by 20% for the majority shareholding gives a share value of SEK8.7–9.1 (previously SEK9.0–9.5), well ahead of the current share price. In our view, triggers for upside include accelerating demand in Partner Marketing, successful growth of the US business and wider adoption of the Appiness product.

Update on growth strategy

Tradedoubler continues to advance its four-pronged growth strategy.

1. Strengthen position across European markets. The partner marketing business is already well established in Europe and management noted that this is a relatively mature market, so growth will predominantly come from gaining share from competitors. The market for influencer marketing is younger with higher growth prospects as not all brands have fully explored this channel. Tradedoubler sees demand for influencer marketing outpacing its supply of influencers and sees investing in growing the creator side of the network as crucial to drive revenue growth. The company noted that it launched more than 800 new client programmes in the year across all product lines, and signed up several major brands, including Warner Bros, Hackett and Saily in Q425. Campaigns for L’Oréal, which signed up in Q325, went live this January. The network has been enhanced with a Shopify plug-in and a new Amazon affiliate partnership via integration with PartnerBoost.
2. Expand into new geographic markets. Tradedoubler opened its new US office in Miami in H125. By the end of the year, it had moved the office to New York to improve proximity to major brands. For now, the US is only focused on partner marketing, as Tradedoubler already had US brands and publishers on its network. We would expect Metapic to be launched there in due course, but this will involve the process of signing up influencers to the Metapic network before the service can go fully live.
3. Deepen relationships with existing customers by selling the entire product suite. Quite a few of Tradedoubler’s over 3,000 brands already use both Tradedoubler’s partner and influencer marketing solutions and several also use Appiness, Tradedoubler’s app marketing solution. The challenge is to cross-sell to more of its customer base, as more points of contact increase stickiness, and this partially protects Tradedoubler from shifts in marketing budgets across different channels. While the primary business model of Partner Marketing and Influencer Marketing is CPA-based (cost per action), the company does also encounter opportunities to access branding budgets with Influencer Marketing that are cost per click-based. Currently, Appiness is too small to report separately and is included within Partner Marketing, but the company sees this as a high growth solution that at some point will reach the scale to be broken out separately.
4. Build Tradedoubler for an AI-driven market. The company continues to incorporate AI tools into its workflows to improve efficiency and scalability and maintain margins. In terms of the impact of AI on its business, management noted that it had seen lower volumes from some publishers, but that this had been counterbalanced by better conversion rates. The network includes several AI-first publishers and a growing number of content publishers. Despite the push to automation supported by AI, management emphasised that a core competitive strength is the network it has built up over many years, which relies on relationships with brands and publishers, local market presence and human expertise.

Review of Q425/FY25 results

In Exhibit 1 we summarise Tradedoubler’s performance in Q425 and FY25. FY25 group revenue was slightly below our forecast and showed growth of 5% or 8% in constant currency (cc). The Swedish krona strengthened against all the main currencies that Tradedoubler operates in (EUR, GBP, PLN, USD) during FY25 and continues to do so year-to-date. Adjusted EBITDA was 2% ahead of our forecast and 17% higher year-on-year (23% cc). Normalised operating profit was 15% ahead of our forecast and 24% higher year-on-year. Reported operating profit after change-related items totalling SEK51.4m was below our forecast and lower year-on-year mainly due to the Kaha earn-out revaluation charge of SEK43.7m, which was incurred in Q425 as management got clarity on the full-year performance and outlook for the Influencer Marketing business. We highlight that this implies better performance from Influencer Marketing than was originally anticipated when Kaha was acquired.

The key metric that management uses to measure performance (adjusted EBITDA to gross profit margin) increased from 21.0% in FY24 to 22.8% in FY25, moving closer to the company’s long-term target of 25%.

The timing of customer receipts in Q425 resulted in negative working capital driving net cash up from SEK68m at the end of Q325 to SEK94m at the end of FY25. For FY25, cash flow from operating activities was SEK122.1m, or SEK91.5m before working capital inflow, offset by capex of SEK33.3m, earn-out of SEK7.0m and lease and debt repayments of SEK23.7m.

Geographic performance

We discuss group performance on a regional basis:

• DACH: this region continued to see good performance in Q425, with revenue up 25.5% y-o-y, resulting in revenue growth of 25.0% and a 70.0% increase in adjusted EBITDA for FY25, overtaking the South region to generate the strongest margin.
• France and Benelux: the region saw 8.2% growth in Q425 and 15.0% growth for FY25, showing recovery after the email marketing business caused a down year in FY24, and seeing improving performance from Metapic. The region showed good operational leverage with adjusted EBITDA up 57.9% in Q425 and 144.3% in FY25.
• Nordics: the region has suffered from weak demand over the last two years as the loss of a few large clients worked its way through the numbers, but in Q425 the Nordics generated the first quarter of revenue growth since Q124. The adjusted EBITDA margin improved by 0.6pp in Q425 to 8.2%, although weaker revenues in Q1–325 weighed on the full-year margin.
• South: the region showed a 4.3% revenue decline in Q425 but generated growth of 4.1% for FY25. The adjusted EBITDA margin remained strong in both periods.
• UK and Ireland: a few clients reduced their volumes through the platform; for example, one supermarket chain cut its spend in half. This region also includes the nascent US partner marketing business. Revenue declined 24% in Q425 and 3% for FY25, pressuring adjusted EBITDA margins for both periods.

Performance by business line

Partner Marketing revenue grew 3% y-o-y in FY25, although saw a decline of 1% in Q425 (+4% cc). Partner Marketing continues to feel headwinds from the weaker economic environment. As brands tighten their budgets, Tradedoubler has to fight for each new client or campaign, and growth was slower than the prior year. Although adjusted EBITDA was marginally below our forecast, it grew 33% y-o-y, which in turn drove a 1.8pp increase in the EBITDA margin to 7.8%.

Influencer Marketing revenue grew 32% y-o-y with 33% growth in Q425. The company invested in growing its influencer base in the first half of the year and that investment has started paying off, with adjusted EBITDA increasing 38% in Q425. For FY25, adjusted EBITDA declined 3% reflecting the pace of investment earlier in the year. The business saw order value growth above 50% in most markets, with France seeing order values almost tripling. The business successfully launched in Denmark, Belgium and Portugal. Adding to the traditional Fashion and Beauty verticals, Metapic expanded into the Finance and App verticals. This business contributed 10.7% of FY25 group revenue, up from 8.5% in FY24.

Outlook and changes to forecasts

Management did not provide short-term guidance but maintains its long-term targets to grow revenue at 10% per year and generate a margin of adjusted EBITDA to gross profit of 25%. Management aims to balance profitability with targeted investment in growth, with a focus on cost control in Partner Marketing and investment in scaling the Metapic business where there is greater growth potential. Gross margin is expected to remain flat to slightly up, helped by the growing contribution from higher-margin Metapic.

We have revised our forecasts to reflect FY25 results and introduce a forecast for FY28. Reflecting currency headwinds and the previously announced loss of a large e-commerce customer, which will affect H126 revenue, we have trimmed our revenue forecasts in FY26 and FY27, resulting in a reduction in our adjusted EBITDA forecasts. We have taken a conservative approach to working capital in FY26, assuming that accounts receivable revert to historical days sales outstanding for FY26–28. We have factored in the Kaha earn-out (undiscounted liability SEK66.9m) as three equal cash payments through working capital in FY26, FY27 and FY28.