Verve Q2’25 flash comment: Lowers FY25 guidance due to platform migration problems and FX

Source: Inderes & Modular Finance IR (consensus include 10 estimates)

Late yesterday, Verve announced that it lowers its full‑year 2025 outlook, now projecting revenue of 485-515 MEUR (was 530–565 MEUR) and adjusted EBITDA of 125–140 MEUR (was 155–175 MEUR). This downgrade stems from two main factors, with the first being platform migration problems, and the second being currency headwinds. In light of the guidance revision, Verve published headline figures for Q2’25 this morning, which clearly fell short of our estimates. While ad spending showed some pressure in Q2, management noted that market sentiment has stabilized since mid-June and continues to stabilize into Q3.

Severe technical issues and FX headwinds led to FY25 guidance cut

While merging its in-app SSP marketplaces into a single platform, Verve experienced severe technical issues, including server load constraints, bidding interruptions, and AI synchronzation problems. This slowed customer onboarding and meant lost or delayed revenue. Although the unification was completed in July, the recovery in onboarding and scaling has been slower than what the company had anticipated, and management sees a low probability of recouping the lost volumes this year. As a result, Verve estimates a ~ 34 MEUR hit to revenue, ~ 19 MEUR hit to adjusted EBITDA, and 4 MEUR in extra one-off costs related to the unification process). In addition, the weaker USD vs. EUR is estimated by the company to have a negative translation effect of an additional ~ 9 MEUR to adjusted EBITDA.

Q2 headline figures were soft across the board

Q2 revenue came in at 106 MEUR (Q2’24: 97 MEUR), representing a 10% increase year-on-year (+14% FX-neutral), while adjusted EBITDA was more or less flat (y/y) at 29.5 MEUR (Q2’24: 29.1 MEUR), corresponding to a 27.6% margin (30.1%). This was clearly below our estimated revenue of 123 MEUR and adjusted EBITDA of 34 MEUR (28% margin). Operating cash flow was also soft at 5.3 MEUR (Q2’24: 18 MEUR). Following the refinancing of bonds and an equity raise during the quarter, net debt inched down 8 MEUR (q/q) to 368 MEUR, with an adjusted net debt/EBITDA ratio of 2.5x.

Relative to previous guidance, the revised guidance implies a downward revision in revenue of 9% (at the midpoint), and of 20% in adjusted EBITDA (at the midpoint). Relative to our estimates, the corresponding figures are -5% and -14%.

Technical issues largely resolved, but recovery pace and customer impact remain uncertain

Management expects the technical issues to be temporary, with most being resolved by the end of Q2. SSP revenue is reportedly already approaching previous year’s Q3 performance, while the unification of other formats, such as CTV, will be completed in the coming quarters and is expected to have only minor impact on group results. The unification of all in-app marketplace activities into one single platform was completed in July, which will drive enhanced platform performance, cost-efficiencies, and scaling going forward. However, we see near-term uncertainty regarding the pace of recovery, the potential impacts on customer relationships and trust, and the risk of further technical setbacks. Following the guidance cut, we expect to lower both our top- and bottom-line forecasts. At yesterday’s closing price and with the new guidance, Verve’s share trades at a roughly around 5-6x adj. EV/EBITDA multiple and 6-7x adj. EV/EBIT multiple, which we believe remain on the low side relative to our acceptable valuation range.