SSP temporary disruption

Verve has historically grown both organically and via acquisition, resulting in a number of different tech stacks, which it has been progressively integrating. This latest unification project, bringing together all the group’s in-app marketplace activities (from five), was significantly larger (handling over 1bn bids/day) and more complex, and proved more technically challenging. This affected platform stability, bidding activity and new customer onboarding through Q225 and into July. Management believes the issues are now resolved. Financial guidance has been revised down for FY25, with a knock-on impact to FY26. Longer-term ambitions remain intact, with organic growth prioritised. The (oversubscribed) directed share issue in June has eased the pressure on financial leverage.

Capital market day focuses on market opportunity

The adtech market is complex and generally poorly understood, so the content of Verve’s CMD was primarily oriented at demystification, particularly regarding the importance of privacy in the value exchange between publishers, advertisers and audiences. We looked at this in some detail in our recent report, Triangulating Perspectives, which includes an interview with Verve CEO Remco Westermann.

Valuation: Discount to adtech peers

Verve’s share price fell an initial 25% on the trading update on 14 August, but has recovered around half of that in subsequent days. Adtech sector share prices have underperformed over the year to date as macroeconomic prospects stuttered, with an average decline of 17% and little protection offered by scale. Their median FY25 rating is 1.4x revenue and 7.1x EBITDA. If Verve was trading at par on EV/EBITDA across FY25 and FY26, this would imply a share price of €2.71 (May 25: €3.25). This is 24% higher than the current level. Our DCF-based approach returns a higher value at €6.06 (was €6.52).

Technical issues and ad market weakness dampen Q225 growth

The more recently established demand-side group offering continues to build strongly, and now represents around a quarter of group revenue (pre inter-segment eliminations), up 82% on the prior year with the inclusion of Jun Group, consolidated from 1 August 2024. (We note that ‘demand side’ works aligned with advertisers, ‘supply side’ with third-party publishers and Verve’s own games studio).

The company-specific issues behind the guidance revision relate to the major project undertaken on the SSP integration. This was the culmination of an extended programme to pull the tech stacks together, the considerable scale of which can be seen in the exhibit below.

The US advertising market (and those of other markets less directly relevant to Verve) continues to suffer from a lack of confidence both at the business and consumer level, reflecting the uncertainty surrounding the potential impact of tariffs on the economy. It can be argued, though, that a difficult market should mean that advertisers migrate towards solutions that deliver better returns on their advertising spend. This underlying dynamic is positive for the group’s medium-term prospects, with a growing body of case studies showing the successful outcomes of campaigns using its privacy-first approaches.

The full CMD presentation can be found here.

Underlying metrics indicate fundamental business resilience

The total number of software clients increased in Q225, and the retention rate of those generating revenues in excess of $100k has remained strong. Some of the decline in absolute numbers of customers in this cohort quarter-on-quarter is attributable to retained customers simply spending less in light of the unfavourable underlying consumer market conditions. Personnel expenses in the period represented 22% of revenues, up from 18% in Q224, explained by the inclusion of Jun Group for the period.

Forecast adjustments reflect revised guidance

The complications from the unification project affected the volumes and bidding mechanisms from existing clients and delayed the onboarding of new clients, with recovery slower than initially anticipated. Management sizes the impact at around €34m of net revenues. The guided range has been lowered from €530–565m to €485–515m, and our revised forecast sits just below the midpoint. We have made the same percentage reduction to our FY26 revenue number, which remains highly tentative due to the volatile market conditions.

The guidance for adjusted EBITDA has been lowered from €155–175m to €125–140m, with the bulk of the revision (€19m) attributable to the unification project on trading impact with an additional €4m impact on cost, and a further €9m reduction due to adverse fx movements.

With the bulk of the integration now effected, the focus is shifting to scaling the volume of business being transacted. This involves a greater focus in building expertise within particular verticals and, more importantly, a considerable expansion of the sales teams. From around 35 at the start of the year (c 50 currently), the ambition is to recruit at least 100 more, a process that has already started. The general rule is that a new salesperson should start covering their remuneration after six months, making a positive contribution before 12 months, with those who fail to achieve this hurdle replaced.

With the intended expansion into new markets, the payback is likely to be slower than additional resource would be in the group’s established US market position, which delivered 79% of group revenues in Q225. The UK, Scandinavia, Brazil and Mexico are listed as targets for the current year, with the ambitions for FY26 extending to three to five new markets, most probably in other parts of Europe and then expanding in the longer term to the Asia-Pacific region.

This accelerated expansion knocks a further €4m off adjusted EBITDA guidance for FY25, making a total reduction of €32m. Our forecast assumes a marginal improvement on this outcome, with a reduction of €30m. We have taken a comparatively cautious view on how the expanded sales effort plays out in FY26, with an assumption of a flat adjusted EBITDA margin.

Valuation

As of May 2025, Verve is listed on the Frankfurt Regulated Market and is included in SDAX, having moved from the Scale segment to General Standard.

As previously, we have looked at Verve’s rating when compared with adtech 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’s share price dropped an initial 25% on the brought-forward Q225 figures and revision to the full-year outlook last week, but it has since clawed some of that fall back, sitting at around 13% below pre-announcement levels.

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 on EV/EBITDA would equate to a share price of €2.71, down from €3.25 in our previous calculations in June, but still roughly 25% higher than the current level. A DCF analysis (WACC: 10%, terminal growth of 2%, unchanged) suggests a higher value at €6.06, down from €6.52 previously.