Structure

Brief overview

Introduction

Business Divisions

Business figures

Latest quarterly figures

Holding structure

Valuation

Conclusion

Sources

Brief overview

Market capitalization: 2.68 billion złoty

KGV/KGVE: 34/28

Annualized yield: 22.74% p.a.

Analyst rating: Buy

Introduction

Vercom $VRC (+0,26%) is a Polish company specializing in communication platforms (CPaaS). Companies use Vercom's solutions to get in touch with their customers. Specifically, communication between companies and customers is automated and made scalable. The whole thing works via the usual communication channels (email, SMS, push notifications).

Vercom was founded in 2005 by Jakub DwernickiAdam Lewkowicz and Krzysztof Szyszka. While Jakub Dwernicki moved to cyber_Folks and Shoper, Krzysztof Szyszka became CEO and Adam Lewkowicz CTO.

In 2020, the company finally achieved a leading market position in Eastern Europe. One year later, the successful IPO on the Warsaw Stock Exchange took place and another year later the company entered the international market. The expansion was primarily driven by the acquisition of MailerLite for around 340 million złoty. MailerLite offers customized newsletter design and the targeted, automated sending of emails.

Vercom's well-known customers include Ikea, Coca-Cola, American Express, DHL and Rossmann. However, the majority of sales still come from Poland.

Vercom employs around 400 people at 30 locations worldwide.

Business areas

Vercom is divided into many smaller companies. These include the aforementioned MailerLite, but also MailerSend, Mailercheck, PushPushGo, Oxylion, ProfiSMS and Leadstream. The company structure is therefore unfortunately opaque.

It is therefore all the better that the management is striving to merge all these services into the MessageFlow platform. MessageFlow will be available on the Azure marketplace from the 1st quarter. Azure offers access to over 130,000 potential customers. It was also announced that MailerLite will be available in the Google Cloud.

This fits in with the strategy of globalizing the customer base. This is expected to lead to further growth. According to Juniper Research (market research company), the total addressable market will increase 14-fold from USD 600 million to USD 8.2 billion.

Vercom is characterized in particular by a competitive price structure and is thus positioned much more favorably than competitors such as Klaviyo. Entry-level tariffs start at just EUR 10 per month, while Klaviyo only offers its cheapest option from EUR 20.

Business figures

Turnover rose by 47% to 469 million złoty (112 million euros) in the last financial year. It was not only in the recent past that sales growth was in the high double-digit range. The average sales growth from 2018-2024 was 42.5% and from 2021-2024 40%.

In 2024, net profit grew at the same rate to złoty 77 million (margin: 15%) and adjusted EBITDA to złoty 110 million (margin: 22%).

The balance sheet is robust. Non-current loan liabilities of złoty 67 million are offset by cash and cash equivalents of złoty 112 million.

The eightfold increase in the number of customers to 94,700 is also definitely worth mentioning. However, EBITDA only quadrupled in the same period. So you earn less from one customer. This is due to the fact that many new customers tend to belong to the SME sector and are not major customers with large budgets.

The explosive increase in the number of customers from 2021 to 2022 can be explained by acquisitions (e.g. MailerLite).

The majority of customers probably still come from Eastern Europe, but the American exposure seems to be gaining relevance. The latest data is from 2023. Compared to 2022, the share of America increased by 3 percentage points to 37%.

For the current financial year, management expects EBITDA growth of around 23%. In the medium term, however, the aim is to triple EBITDA by 2028, driven by organic growth and acquisitions. A budget of one billion złoty (235 million euros) has been earmarked for acquisitions.

Last quarterly figures

In the first quarter, the number of customers rose by 15 % to 98,000, which is a significant slowdown compared to last year (customer growth 24Q1: 24 %). At 6 %, sales growth was also only in the high single-digit range. Nevertheless, adjusted EBITDA rose by 23 % and net profit by 38 %. The reasons for this are increasing efficiency and falling administrative costs.

Encouragingly, a share buyback program with a volume of 30 million złoty was approved at the last Annual General Meeting. The dividend increases by 27% to 2.03 złoty per share. The current dividend yield is 1.7%.

Furthermore, it was decided to integrate MailerLite and MessageFlow into Shoper as a standard provider of communication tools for Shoper customers, which will certainly have a positive impact on sales figures for the coming quarters.

Holding structure

cyber_Folks: Polish technology company; complete takeover probably not planned for the time being

Adam Lewokwicz: founder and CTO

PTE Allianz Polska: participation by Polish pension funds

NN Group: manages pension funds

Valuation

With an expected P/E ratio of 28 and a P/B ratio of 5.24, the valuation is roughly in line with the historical average. The valuation ratios must be set in relation to the expected sales growth, which is expected to be around 16% p.a. over the next few years. Vercom therefore initially seems slightly overvalued to me.

However, as a DCF model is more meaningful, we are now making further estimates:

• For the pessimistic scenario, we assume a perpetual growth rate of 2.7 % p.a. and use the average FCF margin of 19 %.

• For the medium scenario, we assume a growth rate of 3% p.a. and an FCF margin of 20%.

• For the optimistic scenario, a growth rate of 3.3% p.a. and an FCF margin of 23%.

We also add a margin of safety of 25% to all values.

Conclusion

Vercom is definitely an interesting company. The sector and the strong Polish economy will ensure future sales growth.

The lack of transparency with regard to revenue distribution by region and other important missing data speak against an investment. In addition, all quarterly reports and earnings calls are only available in Polish.

In my opinion, there is no reason to invest. Personally, I am leaving Vercom on the watch list for the time being.

Sources

https://vercom.pl/en/financial-reports/

German shareholders and Poles

Polish companies and shares are rarely discussed in German-speaking countries. The best known are probably Dino Polska
$DNP (-1,1%) and Zabka $ZAB (+0,74%) which are both active in the food retail sector. In the small-cap investment community Text S.A. $LVC (+0,58%) is also known to some. Recently @Daxhund also published a recommendable post about the waste company Mo-BRUK $MBR (+1,88%) was also published. However, today's post is not about these four shares. This post is the beginning of a kind of series on Polish growth stocks. However, this first post contains some basic information about the Polish economy and a brief introduction to the stocks as a foretaste of what to expect in the coming weeks.

Poland as a business location

The most populous country in Eastern Europe is developing into a very attractive location for companies. This is particularly evident in the rapid development of gross domestic product to date: since 1980, the figure has risen by an average of 7% per year [1]. According to estimates, growth is only expected to slow by two percentage points to 5% per year by 2030. As in Germany, a large part of value creation is generated by the service sector. Industry and agriculture together only contribute around 1/3 to GDP [2]. With an unemployment rate of 2.7 % (Germany: 3.5 %), it also has the lowest unemployment rate in the EU after the Czech Republic [3]. Incidentally, the national currency is the złoty. One złoty is equivalent to around 0.27 US dollars [4]. The currency has recently appreciated slightly, but interest rate cuts are foreseeable in Poland in the coming months [5].

The economic success is also reflected in the share prices of Polish stocks. The best-known index is the WIG20TR performance index. This tracks the 20 largest and most liquid companies listed on the Warsaw Stock Exchange. With an annualized return of around 12 % over the last five years, it is roughly on a par with the German DAX index and the famous S&P 500.

google.com/finance/

It is worth taking a look at the Polish indices that track medium-sized companies. A comparison of the various indices reveals a clear pattern. The smaller the companies covered by the respective index, the higher the return to date. The smallest index, WIG80TR, comprises 80 small Polish companies and has achieved an impressive return of over 20 % per year. This is even better than tech indices such as the Nasdaq 100 (14.5 % p.a.).

google.com/finance/

Disclaimer

This is not investment advice. These are personal assessments and cannot replace professional advice. If you don't want to miss any more stock analyses from me, please subscribe to my free sub-subscription (link in profile).

However, it is difficult to invest in the Polish market via ETFs. However, if you are firmly convinced of Poland, you can take a look at the iShares MSCI Poland UCITS ETF USD (Acc). According to its own statements, the ETF promises "access to the highest-volume companies on the Polish stock market". It contains 13 different stocks. However, the largest position (PKO Bank Polski) is quite overweight with a share of 20% of the total position. The TER of the ETF is also quite high at 0.74% p.a. The past performance correlates strongly with the WIG20TR.

The three stocks

Vercom

With a market capitalization of the equivalent of 600 million euros, Vercom $VRC (+0,26%) is the most valuable of the three companies. Founded in 2005, the company offers cloud communication platforms (CPaaS) for companies to optimize their relationship with customers. Among its many products is the Emaillabs platform, for example, which can be used to reliably send notifications, password resets, purchase receipts and offers to customers. Turnover rose by 47% to 469 million złoty (112 million euros) in the last financial year. However, the share has its price: according to my own estimates, the P/E ratio is 27. It remains to be seen whether this valuation is justified.

cyber_Folks

cyber_Folks $CBF (-1,57%) is a Polish technology company. It specializes in web hosting and the registration and transfer of domains. It's like the Polish Ionos, but without its own cloud. With a steadily growing customer base of 370,000 and impressive average revenue growth of 40% since 2005, there is little to complain about in terms of figures. Half of the turnover comes from Poland, the other half is international sales. The company also holds large stakes in the other two shares. It holds 50 % of the shares in Vercom and 49.9 % in the other. The complete takeover of both companies is not planned for the time being, but rather a kind of cooperation in which the various products are implemented across all three companies because they complement each other so well. This will create an ecosystem that can be expanded through possible further acquisitions.

Shoper

Shoper $SHO (+0%) offers a platform based partly on a subscription model. With Shoper, companies can create their own online store. There is also the additional option of launching and managing advertising campaigns. In other words, a Polish equivalent to Shopify. In 2024, turnover increased by 26% to 192 million złoty. The net margin improved from 17% to 19%. The share price is currently 29 times the expected profit for this year. For Shopify it is 80 times. This raises the question of whether this valuation discount is justified and whether Shoper can continue to hold its own in the future.

Sources

[1]

https://de.statista.com/statistik/daten/studie/14410/umfrage/bruttoinlandsprodukt-bip-in-polen/

[2] https://de.statista.com/statistik/daten/studie/227370/umfrage/anteile-der-wirtschaftssektoren-am-bruttoinlandsprodukt-bip-in-polen/

[3]

https://de.statista.com/statistik/daten/studie/160142/umfrage/arbeitslosenquote-in-den-eu-laendern/

[4] https://www.google.com/finance/quote/PLN-USD?sa=X&ved=2ahUKEwi7zeDfo92NAxWbhv0HHS0VPEUQmY0JegQIChAv

[5] https://de.investing.com/news/economy-news/polnische-zentralbank-erwagt-zinssenkungen-im-juli-oder-herbst-93CH-3000499