The reduction in OPEX we expected did not occur. Instead, OPEX increased y/y and sequentially to SEK50m compared to our forecast of SEK40m. Although continuing finetuning of the new group-common IT systems and the annual Grassfish Summit somewhat inflated costs, probably SEK~2-2.5m, the underlying cost base is larger than anticipated. While the FCF ex NWC was positive, due to a substantially adverse effect from NWC, FCF was negative 17.8m. SEK-17.8m is a high number compared to Vertiseit’s total cash and credit facilities of SEK21.9m. However, considering the likely upcoming sale of the Transportation segment combined with the positive FCF ex NWC, we believe the risk of Vertiseit needing additional financing is low.

ARR growth remains strong, with a y/y growth of 20.7% and an annualized q/q growth of 20.2%. The absolute increase q/q was SEK6.8m, somewhat above our forecast of SEK6.0m. Although seeing longer sales cycles in some areas, Vertiseit added several new customers with significant potential during the quarter and First Impression, the leading full-service provider in Benelux, as a partner to Dise. Thus, Vertiseit’s top line is doing fine, likely increasing its market share.

We lower our Base Case to SEK39 (46) following lowered forecasts and a slightly more cautious view of Vertiseit’s profitability prospects. Our EBITDA margin forecast for Q4 2024 is 20%, and despite having an estimate rather far from the target (30% in Q4 2024), we still expect margin increases from now on. Management focuses on profitability and cash flow and states the target is, indeed, challenging.