Verve Group — Funding accelerating investment programme

Verve Group (FRA: VRV)

Last close As at 24/06/2025

EUR2.60

0.02 (0.70%)

Market capitalisation

EUR487m

More on this equity

Research: TMT

Verve Group — Funding accelerating investment programme

The Verve Group has successfully completed a directed share issue of 12.9m new shares, raising SEK360m (€32.5m), with which it intends to scale its sales capacity, develop new product solutions, invest further in AI and expand into emerging areas such as retail media (with maximum leverage of 2.5x). This comes on the heels of a bond refinancing, reducing interest costs. Q1 figures showed revenues up 32% on Q124, delivering an adjusted EBITDA margin of 28%. We have edged revenue expectations up, but take a more cautious view on margins given the accelerated investment programme. Verve’s privacy-first and AI-driven solutions position it well to gain further market share. In our view, the valuation remains undemanding.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Media

Q1, bond issue and capital raise

25 June 2025

Price €2.60
Market cap €594m

Net cash/(debt) at 31 March 25

€(351.2)m

Shares in issue

187.2m
Code VRV
Primary exchange FSE
Secondary exchange N/A
Price Performance
% 1m 3m 12m
Abs (5.4) (17.2) 103.5
52-week high/low €4.2 €1.5

Business description

Verve operates a software platform for the automated buying and selling of digital advertising spaces in real time. It is the market leader in in-app advertising in the US and among the largest providers in Europe. Verve also serves substantial CTV volumes, plus channels such as mobile web and digital out-of-home.

Next events

Q2 results

19 Aug 2025

Analyst

Fiona Orford-Williams
+44 (0)20 3077 5700

Verve Group is a research client of Edison Investment Research Limited

Note: EBITDA is adjusted. PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments

Year end Revenue (€m) Adj. EBITDA (€m) PBT (€m) EPS (€) EV/EBITDA (x) P/E (x)
12/23 322.0 95.2 26.9 0.36 9.9 7.2
12/24 437.0 133.2 46.3 0.22 7.1 11.6
12/25e 540.0 162.0 90.2 0.35 5.8 7.3
12/26e 593.0 182.0 114.7 0.44 5.2 6.0

Q1 results show strong start to the year

Revenue was up 32% on Q124, representing organic growth of 16% (excl. the Jun Group acquisition and FX impact). Adj. EBITDA was up 37%, giving a margin of 28%, from 27% in Q124. Verve has now issued its guidance for the full year (previously only medium-term aspirations have been published), putting revenue in a range of €530–565m, with adj. EBITDA of €155–175m. We have increased our revenue estimate from €520m to €540m, but trimmed adj. EBITDA from €175m to €162m until the outlook clarifies. This still gives an expected margin of 30.0%, at the bottom of the medium-term guided range of 30–35%. Our FY26 revenue estimate climbs from €560m to €593m, with an EBITDA of €182m (previously €185m).

Working to optimise capital structure

Management had previously indicated a bond refinancing exercise. This was cemented in May, with the issue of a €500m senior unsecured callable floating rate bonds, due 1 April 2029. The proceeds are to redeem existing bonds, with surplus for investment in growth. The key impact is a substantial reduction in interest costs, which we now estimate at €34.7m for FY26, down from €41.5m. More recently, Verve completed an oversubscribed €33m directed share issue, bringing in new institutional investors predominantly from Sweden, Norway, the UK and the US. Speed and cost made this the preferred option over a traditional rights issue.

Valuation: Discount to ad-tech peers

Ad-tech sector share prices have underperformed over the year-to-date as macroeconomic prospects stuttered, with an average decline of 16% and little protection offered by scale. The median FY25 rating is now 1.3x revenue and 7.2x EBITDA. If Verve was trading at par across FY25 and FY26, this would imply a share price of €3.25 (March 25: €3.94). This is 25% higher than the current level. Our DCF-based approach returns a higher value at €6.52 (was €6.17).

Q1 metrics show continuing positive trends

Ad impressions in the first quarter were well ahead of prior year, in what is always the least busy period of the year. The net dollar expansion rate was 100%, with a continued increase in the numbers of clients generating over $100k of gross revenue. Total software client numbers were also ahead, as shown in the table below. The overall growth therefore represents both new customers coming on board and a greater spend from existing customers, with a particular uplift in mobile full-screen and video formats. Higher personnel costs reflect the inclusion of staff from Jun Group, bought in July 2024, with overall margins slightly ahead of Q124.

Reduction in net leverage is one a key focus for the year, with a medium-term target range of 1.5–2.5x adjusted EBITDA. On a pro-forma last-12-months basis to include Jun’s EBITDA, the adjusted Q125 ratio was 2.5x. Our full-year estimate is for FY25 to return to 1.5x, which implies a good level of potential flexibility to look at accelerating the drive to build market share, both through greater internal investment and/or through additional acquisitions.

Market conditions broadly favourable despite turbulence

While the broad market conditions for the advertising sector are overshadowed by concerns regarding geopolitics and the wider macroeconomic backdrop, there are some core positive trends underpinning Verve’s confidence in its medium-term prospects.

Key is the group’s positioning on privacy-first advertising solutions, which sit well with market developments. The incorporation of AI and data has been in the group’s DNA for many years, so it is integral rather than grafted on to its methodologies. The group is the market-leading mobile supply-side platform (SSP) on both Google Play and Apple in the US, the largest global market. The investment in balancing up the demand-side is reflected in the increasing proportion of revenues; up to 24% of the group (pre-intersegment elimination) in Q125, from 13% in Q124. EBITDA margin is higher on this side of the business at 34.1% against 18.9% from the SSP activities (Q124: 22.2% and 21.5%, respectively).

It is as yet far from clear what the ramifications might be from an enforced break-up of Google’s advertising activities, but any change would likely enhance the opportunity to take market share for those players with sufficient funding and market position. We would view Verve as being a potential beneficiary. This applies to the broader sector beyond Google, where market patience with the proliferation of platforms, business models and lack of transparency has worn thin and consolidation among the providers is likely to accelerate. In the less established channels, such as retail media and audio, the opportunity exists to build a meaningful position without the need to dislodge an incumbent.

Revisions to forecasts

With the full-year numbers in March, we increased our FY25 revenue forecast from €510m to €520m. In light of the strong revenue performance in Q1, we raise this again to €540m, with a consequent uplift in the FY26 figure from €560m to €593m. This is a 10% increase on FY25, which is well below management’s medium-term ambitions for revenue growth of 25–30%, with this more reflective of the degree of underlying uncertainty in the market. We are now assuming a heavier spend on sales and marketing and new product development in the current year, again informed by the Q1 results. This results in a lower FY25 adjusted EBITDA estimate of €162m from €175m, with a smaller reduction in FY26 from €185m to €182m. This equates to a margin of 30.0% rising to 30.7% in FY26, which is at the lower end of management’s medium-term guided range of 30–35%.

We have now also factored in the benefit on interest cost of the bond refinancing, with the new bonds bearing a coupon of three-month EURIBOR +4.0%. With a full year, our FY26 assumed interest cost falls from €41.5m to €34.7m.

Valuation

As previously, we have looked at Verve’s rating when compared with ad-tech peers, which are primarily listed in North America. The general stock market performance of the sector has been weak over the year to date, in line with sentiment towards advertising markets, with the notable exception of Digital Turbine, which has surprised on the upside and raised guidance.

Verve is trading ahead of peers on EV/sales but below on EV/EBITDA. If we average these measures and look across both the current year and FY26, parity to peers would equate to a share price of €3.25, around 30% higher than the current level. A DCF analysis (WACC: 10%, terminal growth of 2%, unchanged) suggests a higher value at €6.52, up from €6.17 previously.

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