Source: Inderes & Bloomberg (4)

Verve's Q2 results fell short of our expectations across the board, as macroeconomic headwinds dampened organic growth more severely than we had anticipated. The sluggish top-line development cascaded down to profitability, which already carried the weight of planned front-loaded growth investments. Although the company reaffirmed its full-year guidance on the premise of a stronger second half, the soft quarterly performance and rising leverage increase execution risks and point to downward pressure on our estimates.

Macroeconomic headwinds weighed on organic growth

Reported revenue came in at 152 MEUR (Q2'25: 106 MEUR), corresponding to 44% reported growth, but fell short of both our 158 MEUR estimate and the 162 MEUR consensus, as softer-than-anticipated underlying demand drove top-line development below our expectations. On a like-for-like basis, revenue grew by 6.5%, underpinned by modest organic growth of 3.5%. This was a clear miss compared to our expectation of low-double-digit organic expansion. According to the company, the advertising market proved more selective than anticipated, as macroeconomic pressures from tariffs and elevated oil prices constrained ad spend in key verticals such as travel, consumer packaged goods, and automotive. This contrasted somewhat with our prior view of a broadly stable market environment. Furthermore, inorganic growth from acquisitions contributed 4.6%, while currency headwinds had a negative impact of 1.7%. Although customer retention remained high at 99% and the Net Dollar Expansion Rate ("NDER") improved sequentially to 95% (Q1'26: 90%), the latter did not rebound as strongly as the company expected against a weak comparison base, reflecting a slower pace of scaling among existing partners.

Lower revenue base and growth investments pressured earnings

The sluggish top-line growth filtered through to profitability, causing adjusted EBITDA to land at 30 MEUR, missing our 33 MEUR estimate. However, the gross margin improved notably from last year at 40.0% (Q2'25: 33.1%), driven by the platform unification. Nonetheless, it edged down from the 41.0% achieved in Q1. According to management, this reflected a stronger focus on strategic partnerships that the company expects to create room for more sustainable long-term partner revenues. However, the lower absolute revenue base exacerbated the margin impact of the company's front-loaded investments in the global sales team and retail media, which we had already factored into our baseline expectations. Consequently, adjusted EBIT also fell short of our forecasts. Total one-off costs (IAC) amounted to 9.3 MEUR in the quarter, well above our anticipated 2 MEUR, and, coupled with the softer top line, were the key driver behind the notably weaker reported EBITDA of 21 MEUR (Inderes estimate: 31 MEUR) and the corresponding miss at the reported EBIT level.

The cash flow statement, which we had flagged as the single most critical watchpoint heading into the report, showed operating cash flow after working capital changes of 10.0 MEUR (Q1'26: 45 MEUR). This was consistent with our cautious stance: having drawn the securitization program to its 100 MEUR ceiling in Q1, the seasonally weaker Q2 could no longer lean on the same working capital tailwind. Coupled with the softer earnings, this pushed the adjusted leverage ratio up to 3.3x. During the earnings call, we will look for further detail on the onboarding of the two new legal entities and the status of the program's capacity increase. Tangible progress in cash conversion remains vital for strengthening the balance sheet and executing the long-term deleveraging path.

Reaffirmed guidance implies a steep H2 acceleration

Despite the soft quarter, Verve reiterated its full-year guidance of revenue of 680–730 MEUR and adjusted EBITDA of 145–175 MEUR. Our pre-report estimates for the full year stood at 681 MEUR for revenue and 162 MEUR for adjusted EBITDA. The company expects revenue and earnings growth to accelerate in the upcoming quarters, supported by positive seasonality and ramping sales capacity. However, in our view, the Q2 miss inherently steepens the required second-half trajectory and intensifies the pressure on management to demonstrate an operational inflection. Therefore, we anticipate some downward pressure on our near-term forecasts as we reassess the execution risks tied to the H2-weighted outlook.