ARR growth remains solid, with an FX-adjusted y/y growth of 16.7% and an annualized q/q growth of 21.1%. The absolute increase q/q was SEK 5.7m, somewhat below our forecast of SEK 6.0m. While the solid SaaS growth aligns with recent quarters, the quarter’s highlight was the profitability and cash flow improvement. EBITDA – CAPEX (adjusted for one-offs) was SEK 12.6m (7.9) compared to our forecast of SEK 5.4m and relative to SEK 1.0m in Q2 2023. The beat was due to a solid gross profit, compensating for the higher OPEX. Cash flow was strong at SEK 42m, excluding repayments on debt. Besides a SEK 28m contribution from the sale of MultiQ Transport and the strong EBITDA – CAPEX, Vertiseit has also released working capital, with NWC now amounting to 3.6% of R12m sales – a normal level.

Overall, management sees solid demand with an improved pipeline regarding both volume and quality. However, it is too early to discuss a trend shift from the recent period with long sales cycles. The positive trend in SaaS metrics and the solid ARR growth supports management’s view of customers investing in digitalizing stores as a strategic investment and, thus, being relatively insensitive to the softer retail market – that is at least the picture so far. Also, the recent deal with the major lottery and sports betting company Scientific Games, highlights the interest in Vertiseit’s SaaS solutions worldwide.

We leave our Base Case at SEK 39 (39). While the slight increase in forecasts and higher confidence in Vertiseit reaching solid profitability motivates a rise, our increase of the risk-free rate from 2.5% to 3% mitigates that effect, resulting in an unchanged Base Case. We increase our EBITDA – CAPEX  forecast by 3% for 2024. Although we only make minor adjustments, we are more confident in expecting increasing margins in 2024 following the strong outcome this Q3.