Redeye strengthens its positive view of Vertiseit following a Q2 report that exceeds our expectations. Organic ARR growth was strong at 21%, and the margins continue to improve. We will likely increase our forecasts and Base Case somewhat.

Vertiseit

* Operates in a highly fragmented market with numerous competitors, potentially limiting market dominance and pricing power.
* Revenue base is not widely diversified, with sales heavily concentrated in Grassfish, Visual Art, and Dise offerings.
* The software industry's median 10-year ROIC is below 15%, indicating potential challenges in sustaining high profitability across the sector.
* While showing promise, it's too early to conclusively state that Vertiseit's competitive advantage will last for decades.
* Despite global presence, most sales are generated in the Nordics and DACH regions, indicating room for geographic diversification.

* Strong recurring revenue model with over 50% of sales from SaaS, indicating business stability and scalability potential.
* Well-positioned to benefit from secular tailwinds in retail digitalization and omnichannel integration, with significant growth opportunities in underserved markets.
* Demonstrates pricing power and customer stickiness, evidenced by consistent price increases above inflation without significant churn.
* Proactively promotes environmental sustainability through initiatives that reduce returns and freight in retail, contributing positively to the industry's ecological footprint.
* Maintains strong customer and partner relationships, fostering innovation and product development through close collaboration.

* Operating margin (EBIT) below 20%, suggesting potential challenges in maintaining high profitability levels.
* Return on Equity (ROE) below 20% for the last five years, indicating possible inefficiencies in utilizing shareholder capital.
* Inconsistent earnings growth, failing to maintain a 10% annual increase over the last five years and lacking stability over a 10-year period.
* Weak dividend performance, with no consistent growth or payments, potentially limiting appeal to income-focused investors.

* Strong gross profit margin (>40%) and consistent operating margin growth indicate pricing power and improving operational efficiency.
* Revenue growth consistently above industry average for the past five years, signaling market share gains and competitive strength.
* Robust short-term liquidity with current assets 1.5 times greater than current liabilities, demonstrating strong financial health.
* Healthy debt management, with net debt less than two times operating cash flow and five times free cash flow.
* Efficient inventory and accounts receivable management, both below 20% of sales and their respective 5-year averages.

* Potential governance concern with the CEO attending all board meetings, which may limit independent oversight and evaluation of CEO performance.
* Recent insider selling activity, though limited, could be perceived negatively by some investors.

* Strong founder-led leadership with CEO Johan Lind demonstrating long-term vision, industry expertise, and commitment to building a leading global software company in the Digital In-store Experience Management niche.
* Consistent execution of a software-centric strategy, challenging industry norms and delivering solid organic growth and profitability, with management adapting to challenges and delivering on promises.
* High insider ownership, with management and board members holding significant stakes, aligning their interests with shareholders and demonstrating confidence in the company's future.
* Transparent and candid communication with investors, providing comprehensive reports, hosting earnings calls, and maintaining consistent messaging focused on long-term value creation.
* Diverse and experienced board of directors with relevant expertise in retail, technology, and finance, supporting the company's strategic direction and value creation process.