Verve Q4'25 preview: Strong margins overshadowed by weak cash flows

Verve Group will publish its Q4 report on Thursday, February 19, 2026. The company has already released preliminary figures for the quarter and guidance for 2026, which reveal a mixed picture of the business's current trajectory. While profitability exceeded our expectations due to operational efficiencies, the top-line performance came in softer than we estimated and was dampened by the loss of a larger customer. The year-end cash position also suggests that free cash flow remains a point of concern. We will primarily look for and evaluate management's commentary on the path toward the 1.5–2.5x leverage target and, thus, the trajectory of improved cash conversion, but also comments on the health of the customer base following the loss of a larger customer in Q4.

Revenue growth tempered by the loss of a large customer

According to preliminary figures (released January 26, see our report here), Verve recorded Q4 revenue of 194 MEUR, representing 10% like-for-like growth and 5% organic growth. This was below the lower end of the company's previously provided guidance range of 560–580 MEUR for the full year, as well as our earlier estimates. One of the primary reasons behind this shortfall was the loss of a larger client, which we estimate accounted for a high single-digit percentage of total revenue. This client faced financial difficulties during the quarter, leading to a lower-than-expected revenue contribution and the discontinuation of the business relationship. We will be looking for additional details in the full report regarding the nature of this customer loss and whether we should expect any further spillover effects within the client base. Additionally, we will monitor key operational metrics such as the net dollar expansion rate (NDER), retention rate, and the number of large software clients (LSC) to further investigate the underlying health of the platform, customer base, and business momentum following the 2025 unification.

While we observe that some macro indicators such as U.S. consumer sentiment remain relatively soft, albeit recovering in the last couple of months, the inflation rate has moderated in recent months and the U.S. GDP growth has continued to be resilient, creating a solid environment for advertisers’ spending. In addition, commentary from peers who have reported suggests that the ad spending environment remained stable in Q4.

While only a few companies in our open internet peer group have reported, their average Q4 growth* was 13% year-on-year (down from 16% in Q3). In contrast, Walled Garden ad businesses (Google, Amazon, Meta) posted stronger growth of 20%. As such, Verve’s preliminary organic growth of 5% trails the open internet as well as the Walled Gardens. However, including the impact of M&A, Verve’s total growth should closer align with the open internet peer group.

Platform unification efficiencies supported strong profitability

Despite the revenue miss, Verve’s profitability in Q4 was a positive surprise to us. Preliminary adjusted EBITDA reached 48 MEUR, corresponding to a margin of 25%. This significantly outperformed our 19% estimate and was driven by efficiencies gained from the SSP platform unifications completed earlier in the year. For the full year 2025, the preliminary adjusted EBITDA stands at 134 MEUR, corresponding to a 22% margin with the updated revenue recognition (FY24: 24%, like-for-like). In the upcoming report, we will focus on the sustainability of these improved margins and management's ability to maintain cost discipline while continuing to scale the sales organization.

Cash flow and net leverage remain the primary investment concerns

In our view, the most critical aspect of the upcoming report will be the detailed cash flow statement, comments on the deleveraging path, and insights regarding the health of the customer base. Despite the encouraging profitability improvement in Q4, cash flows appeared to be lagging notably, and we expect that this was, to some extent, impacted by a partial impairment of receivables related to the aforementioned lost customer. Preliminary data showed that the cash balance fell by 23 MEUR to 89 MEUR during Q4. Based on our calculations, this implies that FCFF remained very weak during a seasonally strong quarter, potentially landing between 10-20 MEUR, which is well below the 42 MEUR generated in Q4’24. We feel this weakness is particularly concerning given management's earlier communication for stronger year-end cash flows. Consequently, net debt increased to 446 MEUR, resulting in a pro forma leverage ratio of 3.1x. This remains well above the company’s long-term target range of 1.5–2.5x.

Looking ahead to 2026, Verve has guided for revenues between 680-730 MEUR and adjusted EBITDA between 145-175 MEUR. The guidance suggests a return to double-digit growth (17% at the midpoint), where we expect organic growth to be around 8-9% and, thus, in line with the market growth that management anticipates within its target markets for 2026 (7-9%). However, we feel the investment case continues to be clouded by execution uncertainties regarding cash conversion and deleveraging. We will closely monitor management's commentary on the path toward the 1.5-2.5x leverage target and the trajectory of improved cash conversion

*When including the implied revenue growth of the guidance of those companies that have not yet reported.