ARR growth remains strong, with an FX-adjusted growth of 18% y/y and an annualised q/q growth of 19% - compared to 24% in Q4. The increased market activity management saw at the end of 2023 continued at the beginning of 2024 with an increased number of requests from customers. EBIT was SEK16.2m (4.5), and our forecast was SEK9.4m, while EBITDA – CAPEX was SEK 17.6m (4.5) compared to our forecast of SEK 7.9m. The beat was mainly due to strong System sales – with healthy gross margins – and somewhat higher SaaS sales and lower CAPEX. Free cash flow was strong at SEK22m, further improving Vertiseit’s financial position.

In summary, we view the long-term goals as ambitious yet realistic. We are encouraged to see the profitability target focusing on EBITDA – CAPEX and a target focusing on per share. However, our forecasts – which are unlike Vertiseit’s targets – do not include future M&A and are more conservative than the long-term goals. Aligned with the long-term goals, the CMD highlights that Vertiseit plays a role in the long run and is currently setting a group for scalable growth in every aspect. The new group-common IT systems were chosen to fit a much larger organisation, and the IXM Grid initiatives support long-term scalability from acquisitions and organic growth.

We increase our Base Case to SEK50 (42) following increased forecasts, higher confidence in Vertiseit reaching solid profitability, and a positive impression about the company’s long-term prospects from the Capital Markets Day (CMD). Trading at 15x and 13x EBITDA – CAPEX for 2024e and 2025e, respectively, we believe Vertiseit remains an interesting case – despite the share price increasing by ~60% YTD – combining a large global market, ~18% organic ARR growth, and a strong profitability trend.