Since Verve had already disclosed its organic growth figure of 31% for the quarter, expectations were relatively high going into the report, and with margins coming in on the softer side, we were not surprised by the share price reaction on the reporting day. However, adjusting for the high expectations, we believe the report was still strong, with both sales and adjusted EBITDA growing 45% y/y, while operational cash flow increased by 94%, supported by working capital changes, reducing the net debt ratio to 2.6x at the end of the quarter.

Verve is one of the few assets in the Nordics to gain access to the fast-growing adtech space. Since Verve underwent a name change (previously MGI) and pivoted from being a gaming company to primarily focusing on adtech, we believe Verve is still a relatively hidden asset among Nordic investors. Through Verve, investors gain exposure to the ongoing shift from offline to online marketing, while being invested in a market-leading player in its niche with high organic growth, margins, and cash conversion. Given Verve’s diversified customer base, the company also faces relatively low operational risk, making it an attractive case in a market that is otherwise quite hard to get exposure to in the Nordics.

On the back of the report, we are making relatively minor adjustments, increasing our sales estimates for 2024e-2026e by 4%, while raising our Adj EBITDA forecast by 5% for 2024e and 4% for 2025e-2026e. We expect Verve to exceed its 2024e revenue guidance of EUR400-420m but to be at the higher end of its Adj EBITDA guidance of EUR125-135m. We increase our Base Case from SEK40 to SEK45 and fair value range from SEK18–SEK60 to SEK20-65.