The premium was the autumn stock price compared to the issue price in the spring. Well, the situation had changed quite a lot, but it still somehow strengthened my understanding that purchases should be started if Remco himself had paid a significantly higher price for the share in the spring.
Let’s do a short calculation of the valuation Verve could earn based on 2026 figures. We will use operating cash flow before changes in working capital as the starting point for the calculation, as it is adjusted for changes in working capital, which can be assumed to be 0 in the long term. This is 115.660 meur/100 meur/130 meur in 2024 and (2025 and 2026 according to my own forecast) 2024e/2025e/2026e, which would correspond to an operating cash flow margin of 26.5%/17.5%/18%. When we subtract maintenance investments of -40 meur and financing costs estimated by Inderes at approximately -40 meur from this, we arrive at a free cash flow of 50 meur. We estimate Verve, as a growing company, to earn a P/FCF multiple between 12-18 to create a reasonable valuation range. When this is multiplied by the SEK exchange rate (approximately 11 SEK to EUR) and divided by Verve’s diluted share count of 220,557 thousand shares, we arrive at the following target price range: 30-45 SEK depending on the P/FCF multiple given. This calculation includes four important assumptions: firstly, an estimate of financing costs decreasing significantly from 2024 to 2026, secondly, maintenance investments remaining largely unchanged at approximately 40 meur, revenue growth to 723 meur, and an achievable operating cash flow margin of approximately 18%. In my opinion, the aforementioned assumptions are realistic or at least in the right ballpark, so I would estimate that the stock has significant upside potential from the current price.
21 Likes
A change in accounting practices, unannounced, mid-fiscal year, and with insufficient comparative data, is certainly a cause for immense frustration among analysts and portfolio managers, but also raises red flags in some places. An unexpectedly incoming change creates an enormous amount of extra work for analysts and investors, as new information needs to be quickly analyzed into a sensible format.
So, it’s not just about whether the change is justified, but also about how it’s implemented. If handled well, this change in accounting method would have been announced in advance, and the relevant comparative data would have been reported simultaneously. Now, the whole package was dropped into the ether during the earnings release, at a time no analyst or portfolio manager could have expected.
Of course, to top it all off, a terrible result was revealed behind these numbers. It’s not hard to see why the stock price dropped.
17 Likes
I don’t believe the result decreased because of that change in interpretation, but because of those bad numbers. No one would be interested in an accounting change if the company was booming with high-margin growth. Now that revenue decreased, EBITDA decreased, operating profit decreased, profit before taxes decreased, and EPS decreased, it’s no wonder it decreased. And it’s decreasing more day by day. When the sales of such a not-yet-so-established player turn to a decline, it is a really bad sign. Whatever the reason.
10 Likes
Perhaps in this case, I paid the famous tuition fees. On the other hand, it’s better to pay the piper young, and I guess one can self-reflect and learn for the future. I’ve been buying
3 Likes
I myself joined in on the downtrend now. Next week will show if I joined too early. That 30% on the negative side of yours is certainly unpleasant, but if they still manage to move the business forward and into growth, then it will surely go upwards again. This next quarter will probably already tell us something about the directions. Let’s hope for the best, and patience is needed now.
3 Likes
Those are rookie numbers. -44.56% in my portfolio.
This would be nice. I haven’t been worried about indebtedness yet. Should I be? 
4 Likes
Hi @christoffer.jennel Could we get a slightly longer interview / Roast with Remco about the company’s situation? (Not some 15-min quick session) The stock is down over 60% in a year, while indices everywhere are massively up, so the underperformance is absolutely terrible. The company also performs somewhat poorly at events, so this would be a good time to gain visibility and restore investor confidence.
16 Likes
Hey @Mikemagnificent! I completely agree that a longer interview with Remco would be valuable given the latest developments. I’ll look into the possibilities and get back to you as soon as I know more 
36 Likes
Hi everyone! I’ve now received positive signals from the company regarding an interview with Remco next week. If you have any questions, please feel free to ask them here by replying to the post. Please send them by Monday, December 8th at the latest. I will try to collect as many questions as possible for the interview.
35 Likes
The most essential question is likely whether they believe they can again in the future reach the 2024 profitability level, now that this year has seen weaker profitability, at least due to temporary reasons? Or more precisely, is it possible to achieve better profitability than before (If we disregard recent acquisitions, which can probably change profitability in one direction or another depending on whether they are more or less profitable than the ‘previous’ Verve), now that the platform consolidation should have a positive impact on performance?
By the next US presidential election year at the latest, similar profitability should be achieved again, if political advertising carries significant weight in Verve’s business? How much weight does political advertising generally have on Verve’s figures in the USA?
Are the challenges resulting from platform consolidation finally completely behind them, and have technical challenges affected customer retention? Has new customer acquisition now truly gained momentum after the platform consolidation was completed? Has there been (positive or negative) feedback from customers about the platform now that the consolidation has been implemented?
How has the advertising market/business developed during the critical Black Friday/Christmas season? Some statistics were seen on the forum indicating that at least consumer trade has performed better than last year. It’s unlikely we’ll get any precise answer to this, at least regarding Verve’s performance during Q4, but if you ask indirectly about the market in general and not about Verve’s performance, then perhaps some answer will emerge 
.
What kind of market presence does Verve have in Europe or other markets besides North America? Has significant expansion into Europe etc. progressed/is it planned?
What is the situation on Verve’s gaming side? I assume they still own gaming business, even though it has taken a back seat due to the strategy change? Is it still a profitable segment, or do the synergies bring enough benefits to justify maintaining the gaming segment?
Here are a few possible question ideas 
18 Likes
Especially this year’s cash flow has been weak. Regarding the cash flow profile, one could ask for more details on how working capital evolves within the year; basic business capex and other related themes are of interest. If believing in growth and profitability targets, then what about cash flow targets?
10 Likes
1. What is the one thing Verve is currently failing at and how do you plan to fix it within 90 days?
2. Compared to your peers last year, growth and margins are lagging: what are you doing concretely that you didn’t do last year?
3. Which part of the business is currently unprofitable or weakest, and why haven’t you already made radical cuts there?
4. How do you ensure that organic growth is not just revenue inflation disguised by M&A?
5. What is the true customer churn in large accounts and what has been the trend there for the last 3–6 months?
6. If Apple or Google were to make a new privacy change tomorrow, what portion of Verve Group’s revenue would immediately disappear?
7. Which three KPIs best indicate if the business is truly heading in the right direction, and what are those numbers today compared to six months ago?
8. You have made several acquisitions. How many of them are clearly successful and how many are currently in a “turnaround” state?
9. What concrete benefit does Verve gain from its own data that directly translates into a higher take rate compared to competitors?
10. What is the biggest risk that management has taken in the last 12 months and why do you believe the market doesn’t understand it yet?
Thank you.
24 Likes
The questions are partly formulated in a moderately passive-aggressive way, but I’m sure Christoffer will make them presentable
21 Likes
Factoring:
Why was Factoring used less than usual in Q3? What is the overall strategy for factoring in the long run? Can it be reduced, or is it inherent to the nature of the business?
Cash Flow:
Why is cash flow so weak? When will it improve, and what are the drivers? What is the target for cash flow conversion?
Artificial Intelligence/AI:
Has the market changed with AI/ChatGPT, meaning there is less demand/volume where Verve operates?
Verve as an acquisition target:
Is Verve an interesting acquisition target for other players? What are the biggest synergies a buyer could gain from Verve?
If someone were to acquire Verve, would integrating it into their own business be challenging?
The company’s valuation has become very low by practically any metric. Has the company been approached with an acquisition offer in the last 12 months? (This can be disclosed according to MAR regulations if desired)
M&A:
Net debt relative to EBITDA is very high; are M&A activities on hold even if an interesting target is found? If a good target is found, would it be acquired if financing occurs through a directed share issue?
Focus:
Where is management’s focus, what is the biggest challenge being focused on, and where is improvement being sought?
Risks:
How confident is management that the platform integration challenges are now behind them?
Competition:
The market is constantly evolving; has Verve’s relative competitiveness weakened compared to other players? (Figures have weakened, and competitors have reported very strong figures)
Market:
How does the beginning of Q4 look compared to last year – is visibility better or weaker?
Looking at the big picture, will the overall market next year be easier/harder/similar to this year? (The assumption is easier, as tariffs and uncertainty affected advertising budgets, especially in H1, and now there will be no incremental negative impact from them)
16 Likes
Hi everyone! We have just published a longer interview with CEO Remco Westermann.
Hope you enjoy it!
63 Likes
Good set and special thanks to Christoffer, well done!
8 Likes
The questions were really well formulated, the answers were also good, and this was a clear relief for the market. Many investors had many unanswered questions, to which good answers were now provided.
Could you make this a tradition, having a short interview after every quarter? However, ensuring a certain depth is maintained, meaning it doesn’t have to be immediately after the results, but perhaps a week later, allowing time to calmly digest the results and ask more in-depth questions.
The forum here would also gladly submit questions. This would also improve the company’s communication with the market, as many investors do not listen to the Q&A section after the results.
Today’s interview was a clear demonstration of the concept working, and both the company and investors benefited from it.
16 Likes