Nepa AB reported a decline in net sales during its Q3 2025 earnings call, primarily attributed to phased-out contracts. Despite a 4% growth in subscription revenue, the company faces a challenging fiscal year with expectations of continued negative performance. The stock price dipped by 0.7% in pre-market trading, reflecting investor concerns over the company’s outlook. According to InvestingPro analysis, the company’s shares appear undervalued based on their Fair Value model, though the platform’s Financial Health score indicates weakness in current operations.
Key Takeaways
* Net sales declined due to phased-out contracts.
* Subscription revenue grew by 4%.
* Personnel costs decreased by 19% year-over-year.
* Stock price fell by 0.7% in pre-market trading.
Company Performance
Nepa AB experienced a decline in net sales during Q3 2025, largely due to the phasing out of certain contracts. However, the company reported a 4% increase in subscription revenue, indicating some positive momentum in recurring revenue streams. The company has been focusing on transitioning from an analyst to a trusted advisor model, enhancing its service offerings and operational efficiency.
Financial Highlights
* Subscription revenue growth: +4%
* Adjusted EBITDA less CAPEX: SEK 8.4 million (margin of ~1%)
* Personnel costs: down 19% year-over-year
* External costs: down 4% (excluding comparable items)
Market Reaction
Nepa AB’s stock price decreased by 0.7% in pre-market trading, moving from a last close of 14.3 to a lower value. This decline reflects investor concerns about the company’s declining net sales and the expectation of a negative fiscal year. InvestingPro technical indicators suggest the stock is currently in oversold territory, with the shares trading near their 52-week low. Investors seeking deeper insights can access additional technical indicators and 11 more exclusive ProTips through the InvestingPro platform.
Outlook & Guidance
For the fiscal year 2025, Nepa AB expects continued negative performance due to losses incurred in the first half. However, InvestingPro analysts project the company will return to profitability this year, with an EPS forecast of $0.32. The company is focusing on growing its annual recurring revenue (ARR) and improving scalability without increasing resources. Investments in sales talent and marketing activities are planned to drive future growth. For comprehensive analysis including growth projections and peer comparisons, investors can access the detailed Pro Research Report available on InvestingPro.
Executive Commentary
CEO Anders Dahl emphasized the company’s strategic shift: “We are moving from an analyst to a trusted advisor with continuous marketing insights and intelligence to our clients.” He also highlighted the upcoming brand tracking platform, expected to lower maintenance costs and unify offices. Interim VP of Finance Edward Hoangman noted, “The predictability is increasing, but of course, in a bit of a sluggish market, the predictability, especially on ad hoc, is hard to predict.”
Risks and Challenges
* Declining net sales due to phased-out contracts could continue to impact revenue.
* The expectation of a negative fiscal year may affect investor confidence.
* Lack of specific ARR growth projections creates uncertainty.
* Market conditions remain sluggish, making predictability challenging.
* Dependence on Q4 bookings for credit facility usage.
Q&A
During the earnings call, analysts inquired about the increase in ad hoc bookings and the impact of the phased-out contracts on future revenue. The company confirmed that September was the strongest month in Q3 and addressed concerns about credit facility usage, which depends on Q4 bookings.
Full transcript – Nepa AB (NEPA) Q3 2025:
Conference Operator: Welcome to NEPA Q3 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Anders Dahl. Please go ahead.
Anders Dahl, CEO, NEPA AB: Good morning and welcome to NEPA AB’s 2025 interim report presentation. My name is Anders Dahl, and I’m going to walk you through the presentation today. I’m going to start with a quick overview, an introduction to NEPA AB, and then I’m going to walk you through Q3 in a brief overview, and then under the underlying growth in our ARR business to describe that a little bit more in detail, but also the support in business transformation that actually drives, or have driven, those numbers into a positive trend. Also, a short overview or an update of our new brand tracking platform transformation that we have kicked off during the early phases of 2025, but we will be fully launched early 2026. The Q3 financial results, outlook, and then a Q&A for the people who will wrap up the session with.
NEPA AB is a leading marketing intelligence company, driving brand growth by insightful market analysis. We track more than 7,500 brands across the globe with a daily measure of thousands of advertising campaigns and annually across 50+ markets. We deliver our insights to CMOs, marketing teams, and insight departments across the globe, mostly through global clients. Our way of reporting those insights is normally through PowerPoint presentations, Excel spreadsheets, but in most of the cases when it comes to ARR products, in dashboards and then always-on tools for our clients to act on our actionable insights. Our three core products are brand tracking, campaign evaluation, and marketing mix modeling, with the addition of our cMMM (continuous marketing mix modeling) that we introduced end of 2024, beginning of 2025. We combine market survey data with cutting-edge technology and excellent consultancy to deliver both recurring and ad hoc insights.
All our data is built on the survey data, comes from real people that we interview or collect across the globe. We have a strong presence in Northern Europe with a head office in Stockholm, presence in Helsinki, Copenhagen, London, and also a sales office and representation in the UK, US, and a strong team in Mumbai and India. Q3 in brief, fourth consecutive quarter with bookings growth, and we see sales bookings for more than 10%, an increase of more than 10%, including ARR bookings, which increased by more than 200% in a very strong quarter when it comes to bookings. We continue to see an underlying ARR growth, with an ARR growing more than close to 4%, SEK 4.7 million, excluding previous phased out contracts that we have announced earlier in previous reports, and extraordinary churn.
We have now realized our cost savings that we announced early on in H1, and those cost saving initiatives implemented in H1 are now fully realized. We have also positively returned to profitability with an adjusted EBITDA less CAPEX of SEK 8.4 million at the margin of close to 1%, which is a very positive sign, especially in a normally fairly soft quarter that Q2 normally is, with the summer vacations and all the other things happening during the summer. This shows our underlying growth in our ARR business year to date. This is the graph. We also see that the numbers that ARR bookings are trending in the right way, both in Q3, underlying year-to-year growth, and the subscription revenue, excluding for the phased out contracts and the churn, is an underlying growth of 3.6%.
The support to this, or the reason for those strong numbers, is of course our business transformation that we kicked off late 2024, early 2025. We are moving, with that said, we are moving from an analyst to a trusted advisor with continuous marketing insights and intelligence to our clients, with actionable insights and the focus on recurring products. Of course, that is a big help for our client and our client relationship that we are always on, but also for Nepa as a company to have a more predictable, resilient revenue. With that said, starting up this quarterly report, we’re going to introduce new key metrics to take a look at ARR bookings so that you can see the development in that area. We also phased out low margin contracts, like we described, started up late 2024, early 2025.
That will help us to have a much more kind of unified service offering and also help us with enhanced scalability when we start seeing the growth that we’ve seen now in the last quarters in regards to bookings. At the same time that we have done this unified service offering concentration, you can also see that we have optimized our cost base significantly. The SEK 22 million in annual savings were realized now in Q3. With the investment and the streamlining of the tech process, we have now built a delivery platform that we will start introducing. We have already introduced that with pilot during H1. We will add more pilots during H2, and then we will start rolling out this new tech platform in 2026.
At the same time as we have invested and modified our tech platform, we also invested in experienced hires in data scientists and a new marketing optimization team that are now fully on board, but will be fully up to swing towards the end of this quarter. That will also help us to accelerate not only in the client delivery and in the insight delivery, but also to help us to accelerate our product innovation and our product development. The new brand tracking platform that we introduced or that we started to develop in late 2024 will now be launched in the beginning of 2026. Already with the H1 pilot, we have good confidence in this platform. In H2, we will increase the number of pilots to be fully able to roll this out fully in 2026.
This new platform will significantly lower our maintenance costs and unify our office in a much better way. It is definitely a key enabler for greater focus on product innovation. Innovation that will give us enhanced UX experience, more AI tools, and a much better seamless product integration into our clients’ environments. The cost efficiency, the internal cost efficiency will definitely lead to more room for client tech development and more time to develop the client tech development that will add value to our services to our clients. The financial results for the quarter, net sales declined, largely driven by the phased out contracts and extraordinary churn. We see an underlying change, excluding for those contracts of minus 1%. The subscription revenue shows underlying growth of plus 4%. The recovery in ad hoc bookings, but lower Q2 bookings, will drive down the ad hoc revenue in Q3.
OpEx declined from practical savings with a full effect during H1 cost reductions in Q3. The personnel costs are down by 19% year over year. Other external costs are down by 4%, excluding items affecting comparability. In the light of those 19% year over year personnel reduction, we will also see that we have now managed to kind of do a transformation on the knowledge side with those new hires, especially on the marketing acceleration side. The items affecting comparability relate to an external consultancy fee that we have to incur during the summer due to temporary service disruption that is now solved and cleared out. The adjusted EBITDA for the quarter, EBITDA less CAPEX, is SEK 0.4 million or a 0.8% margin, close to 1%. This is a significant improvement from the negative H1 results. The cost savings are now in full effect.
We see underlying subscription revenue growth and strong bookings going into the next quarter and next year. For the outlook, I think one very positive signal is, of course, the return to positive adjusted EBITDA less CAPEX in Q3, which is strong evidence that the strategy that we laid out in the beginning of the year is really working. With cost savings, with investment in tech, with investment in a much more streamlined tech platform, with a strong focus on ARR that, of course, in some quarters might have an impact on the short-term profitability, but are building a lasting value in the business and floating us into a more stable and resilient business model. Fiscal year 2025 result is expected to remain negative due to losses incurred in H1.
The company is now in a much better position for sustainable profitable growth with the underlying strategy that I’ve explained, but also on the focus on the ARR business that we will continue to drive in the quarter and, of course, into next year as well. With that said, I’m now handing over to the Q&A side, and then we are taking in questions both in the activity feed, but also some pre-sent in questions that we will answer and discuss in a short while. Thanks a lot.
Conference Operator: If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.
Anders Dahl, CEO, NEPA AB: All right, so welcome to the
Conference Operator: There are no more phone questions at this time. I hand the conference back to the speakers for any written questions and closing comments.
Anders Dahl, CEO, NEPA AB: Thanks a lot. Now over to the Q&A phase. With me, I have our Interim Vice President of Finance, Edward Hoangman, and we will take turns on answering and asking those questions that have come in before.
Good morning, everyone. Thank you, Anders, for the introduction. Let’s begin with the questions we have already received. The first one, your ARR sales increased with SEK 1 million versus last year, and your total bookings increased by 10%. Does that mean that ad hoc bookings increased compared to Q3 2024?
We have added a new metric to ARR bookings that we will continue to post in our quarterly reports. Yes, the ad hoc bookings, they have increased as well, but we are not giving any specific number on that side, only on the ARR side, since that is our focus and is a long-term goal to kind of increase them over time.
OK, next question. Your ad hoc sales did recover nicely compared to Q2. Was the recovery driven by a good September or evenly distributed between the months? Was any month in Q3 better or worse than expected?
The summer months are always a bit slow, like I mentioned earlier on, that seasonality in Q3 is always hard to, depending on where people are back from vacation and activities during the summer. We have a pretty good spread over the months. We are actually increasing in all three months. September is, of course, the strongest month. We see good momentum from all three months, which is a very strong sign of when we are heading into Q4.
OK, thank you. Next question. Are there any salary costs related to the previous CFO recorded in Q3? I can answer that one that no, everything was taken in Q2. Next question. In Q4 2024, you talked about 25% to 30% higher net contribution margin per project compared to one and a half years ago. Is it correct that you have continued to improve project contribution margins since Q4 2024?
During the summer of 2023, in the fall of 2023, when I joined NEPA AB, we had a lot of changes. We implemented a plan to improve margins in general quite significantly. The big bump in those margins came in late 2023, early 2024. Of course, we continue to see improvements, and we still have goals to kind of continue to see improvements in this area, not as big as the bump as we saw in 2023, 2024. We have improvements planned, and we have improvements projects going on all the time. That is definitely one of our key metrics internally.
Next question. Are you expecting to reduce the credit facility usage in Q4 versus current levels? I can answer that one as well. That will mainly depend on the Q4 bookings volume, our ability to invoice more upfront, and working capital fluctuations, especially now when we are in the middle of a transformation going from ad hoc to more ARR focus in our sales organization. The next question is more forward looking. Where do you think your ARR will be in a year from now? Is it fair to expect double-digit ARR growth if the current bookings trend continue?
We don’t give any estimates or any forward-looking statements in that regard. As I said before, we’re going to continue to point out ARR bookings quarter over quarter, but we’re not giving any statement based on that. As a summary to that question, we’re going to continue to stay true to the strategy we launched in late 2024, 2025. Some of the key components, as you see in those numbers, are really paying off with the focus on ARR, with the focus on streamlining our contract portfolio. The mix of clients that are bigger clients right now is a different mix, a new ICP list, a tech investment, or a tech change in our tech stack has really shown some good signs during 2025. You will see the full rollout of that in 2026.
Of course, the focus on building the brand NEPA, and that is both kind of internally and externally. Externally, with strong marketing campaigns and a lot of marketing and sales activities. Internally, by investing in AI tools, but also investing in education and training for our teams, but also to be able to hire top talent, especially, like I mentioned before, in a marketing optimization team. That’s going to continue, and we are just at the beginning of that.
Next question is, you wrote that over the long term, gross margins have shown a positive trend in comparable projects and revenue streams. Could you quantify this? No, that’s nothing we are quantifying at the moment, neither gross margins or contribution margins in a specified way. Next question is, you have previously talked about increasing contribution margin by 25% to 30%. Where was it before, and where are you now? I think we haven’t disclosed any exact figures, only the increase on that matter. That’s nothing we can specify at the moment, but we are much higher, like Anders said. Another question on ARR. ARR is increasing by about SEK 3 million, which matches the contract for new customers that you signed in Q2. Should we interpret this as not signing any new customers in Q3? No, that’s not the case.
The SEK 3 million signed in Q2 were now activated with contract start dates in Q3. That’s why the new sales in ARR increased now in Q3. We have signed new deals in Q3 that haven’t been activated yet. Next question is, could you elaborate about how outbound sales are going now that you have a dedicated team in place?
Outbound sales is much more professionalized. It’s a totally different setup with a Client Success organization and a new business development team or a net new logo team. The way that we’re working with sales now is totally different from before. I think the predictability is increasing, but of course, in a bit of a sluggish market, as we have seen, the predictability, especially on ad hoc, is hard to predict if that’s going to fall in during the month or after the month or during the quarter or after the quarter. The view and the sight of the pipeline has been much clearer and much better to determine. It’s a totally different level of professionalism that we are now seeing in the sales and go-to-market team.
Next question is about the concentration in your ARR stock today. How big are the three clients? That’s nothing we have disclosed, but we did say in the report that we are having a much more diversified ARR portfolio now than we had before the extraordinary churn and phase out contracts.
We see that also in the pipeline that we are building and the opportunities that we see in the market. One is that we have a better mix of clients, and the other one is that with a bit of a change in our ideal client profile approach in the market, we are now also approaching clients that normally don’t buy and normally have not bought market research in a new way, especially in native digital companies that are seeing an increased need of especially looking into the upper funnel activities, brand building that they haven’t really measured before, and their performance marketing. I think the type of clients, the size of clients, and in our case, the way of uniforming or having a uniform offer to those clients is totally different now than it was a year ago.
Next question is that you have written extensively in this report and previous ones about your efforts in making the organization more scalable, freeing up resources, efficiency improvements, and the expected new contribution modeling from all these efforts. What do you think about your new current cost base and the potential revenues it can handle?
The new current cost base and the structure that we have built now that I mentioned before about the new brand tracking pipeline, for example, would definitely help us to scale without following or without having to continue to increase in resources. I can’t really give you any exact numbers, but we will definitely be able to scale our brand tracking deliveries significantly without adding cost. I think also the whole turnaround, or I think, I know that the turnaround or the change from moving from ad hoc businesses that was normally the go-to solution to increase revenue in a month previously, now to move to ARR, of course, it’s a bit painful that you don’t see the revenue coming in that month, but it will definitely give us a much more better client experience, but also a better and more predictable business model.
That will help us to scale the business significantly. The cost base of running and the maintenance cost of running our new brand tracker will be significantly different going into 2026. Yes, we can scale on the existing cost base with improved margins by that, that we don’t have to follow with more moving costs in that scale or in that increase.
The next question is on that same topic. The salesperson hired you in last year seems to have been very successful, and now you’re hired more. Please share how you think about the balance of investing more in sales talents compared to profitability.
I think they go hand in hand because the new salespeople that we have hired are much more of the kind of the rainmaking type. They are very professional. They’ve done this before. They have an experienced way of working. With the new setup in our kind of fulfillment organization or the delivery organization, we can serve those new deals in a much more efficient way. We also have pretty tough criteria the way that we are evaluating our salespeople. I think we have good control on matching investments or recruitments with growth in order to maintain or increase profitability every time we add more resources to the sales and the new business team.
You can also see from the numbers, and we have talked about that before, that we also moved a lot of delivery resources and delivery capabilities to India, which of course makes a good impact on the cost and the contribution margin in the projects. We have now, to some extent, changed the profile of the team in India as well to have more client-facing analysts in the Indian organization as well. There is an always measurement on profitability on all the hires we are doing and all the new investments we are doing in marketing, both on the sales side as well as the marketing side. All the marketing activities are being measured on an ROI basis. How well do we convert from activities we do? Marketing, brand building, exhibitions, reach out, webinars, customer events, et cetera.
The way we are delivering insights to our clients, we’re working the same way internally to make sure that we are getting a good return on investments on all the marketing activities we do, including hiring salespeople.
Next question is, do you have any more customized customers in your ARR stock today? Or were those three clients the only clients that had customized solutions?
To that extent, yes, they were definitely the one with the most customized solutions. Some of the clients are still on our old platform. When we move over to the new platform towards the end of this year, beginning of next year, there will be less customized solutions. In the case that we need to tweak a little bit in those deliveries, it’s much easier to tweak on that platform. The cost will be lower, and the possibility to customize contracts will be much lower. The few that remain are going to be phased out next year. They don’t have that impact as the ones that we have already phased out at all.
Next question is, would you like to develop around and what the pipeline looks like there?
We don’t give that separately, the pipeline and the growth in that pipeline. Like I said before, the new team in marketing optimization are now developing or taking on the client relationships and the projects we have. We have some significant projects on that side that are looking really good. As I described, I think in the previous earnings call, the team and product also leads, and especially the continuous also leads into discussions about brand tracking and campaign evaluation. Even in new client cases, we might open up the door with a discussion, but it might start with the brand tracking and then goes into an. The day when we feel that we are on a more kind of predictable path, we’re going to start reporting an separately.
Today, we don’t report on any product separately, the size and the development on that product, only on ARR and ARR bookings.
Next question is, what is your view on the cash flow situation? You have started to realize savings, but still have a negative cash flow. When will you see the cash flow effects from the transformation? I guess that goes back to the previous answer on the credit facility that depends a lot on the ad hoc and the ARR bookings going forward, the ability to upfront invoice the new deals, and also the working capital fluctuations that we see, especially over quarter endings. In general, we do see the savings being realized now from Q3. I don’t see any further questions. I’ll hand it back to you, Anders, for some closing remarks.
I would like to express some, first of all, to the organization, the way that we have transformed or working with the transformation process internally now is very strong evidence to the team efforts. It’s great to see that all the hard work that the teams and the different parts of our organization have done during the first phase of this year, but also during 2024. It is now paying off in numbers. I would like to thank you all for coming in with a lot of good questions, good discussions. Thank you for taking the time and listening in to our presentation of the Q3 financials from Nepa. Thanks a lot, and have a great day, and see you soon.
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