Verve Q4’25 flash comment: Strong retention rate, but cash flows disappoint

Source: Inderes

Verve reported Q4'25 results on Thursday, confirming preliminary figures of 194 MEUR revenue and 48 MEUR adjusted EBITDA (25% margin), although reported adjusted EBIT fell short of our estimates due to higher-than-expected D&A expenses. However, our key focus heading into the report was the cash flow statement, deleveraging trajectory, health of the customer base, and operational metrics following the challenging 2025. Free cash flow came in at 11 MEUR, which was in the lower end of our estimate (10-20 MEUR) following the release of the preliminary figures and well below Q4'24's 42 MEUR. Management noted that a stronger emphasis on liquidity management in 2026, aiming to notably reduce working capital impacts on future growth and improve cash conversion. Key operational metrics showed that the customer base health remains solid, and while spending less in Q4, customers increasingly stick with the platform. The company will host its earnings call at 15:00 CET.

Q4 report confirmed our view of weakness in cash flow

Operating cash flow reached 20 MEUR versus Q4'24's 55 MEUR, showcasing weak conversion from the generated 48 MEUR in adjusted EBITDA. Working capital consumed 26 MEUR, which management attributed to limitations on its securitization of receivables and a mismatch between receivable payments and payments to publishers. The company did not reveal the impact of the receivable impairment from the lost customer. After CapEx of 10 MEUR and adjusted for the investments, FCFF landed at 11 MEUR, which was in the lower end of our estimate (10-20 MEUR) following the release of the preliminary figures and well below Q4'24's 42 MEUR. Full-year FCFF was therefore -10 MEUR (2024: 96 MEUR), representing -7% EBITDA conversion (71%). In the report, management emphasized a stronger focus on liquidity management in 2026 and is working on expanding its securitization program to neutralize the working capital impact of future growth, which they expect to result in notably stronger cash conversion and contribute to deleveraging throughout 2026.

We think the weak cash flow generation throughout 2025 and especially during the company’s seasonally strongest cash converting quarters was the primary reason for the bond tap of 50 MEUR that the company announced in early February. With the year-end cash balance amounting to 89 MEUR and Verve now facing two seasonally weaker quarters (H1), the bond tap provides additional headroom for working capital tie ups, continue investments in sales organization, expected contingent considerations of ~ 30 MEUR in 2026, and other growth initiatives.  Management expects that the combination of growth and increased cash flow optimization in 2026 will reduce its leverage over the course of the year.

Key operational metrics were solid

We believe the key operational metrics were overall solid. NDER came in at 92% (Q3'25: 90%, Q4'24: 110%), representing a small improvement quarter-on-quarter, but it still reflects weakening spend; as the ratio is calculated on a trailing twelve-month basis, the platform outage earlier in 2025 continues to have lingering effects. On a more positive note, the number of large software clients increased by 5% (q/q) and customer retention reached a record high level of 99%, which is above the 2Y average of 96%. We are encouraged by this high retention rate as it continues to show customer continued confidence in Verve post-unification. On the large customer loss, management did not provide any further details in the report.

Management reiterated its 2026 guidance announced with the preliminary figures of 680-730 MEUR revenue (17% growth at midpoint) and 145-175 MEUR adjusted EBITDA (23% margin). The company expects its planned investments in the sales force to be front-loaded in 2026 (Q1 and Q2), which will temporarily put pressure on EBITDA margins before the new sales cohorts reach full productivity later in 2026.

Operational progress is evident, but the burden of proof remains on cash flows

Overall, the Q4 report reassured us that the customer impact post-unification remains low, showing a growing customer base and that existing customers increasingly stick with Verve. While platform efficiencies are visible in margins, cash conversion weakness remains a key concern in our view. While management emphasized a much stronger focus on cash flow and liquidity management in 2026 and expects notably improved cash conversion by neutralizing the working capital impacts of growth, no specific targets were revealed. As such, we feel the burden of proof is on Verve in the coming quarters to show clear improvements in cash flow generation and progress in deleveraging to regain trust from investors.