Successful turnaround NOW looking to grow

Mini-Pitch / very cheap / my highest-conviction idea

As always,

1. I am very grateful for any feedback.

2. Do your own due diligence. Fact-check anything I say. It’s always possible that I made minor or major mistakes, even though I rigorously try to avoid them.

3. Nowvertical is an illiquid stock, so there is the possibility for major volatility and other liquidity related issues.

4. If you have any questions, feel free to reach out!

Disclaimer

This article is for informational and educational purposes only. Do not interpret anything below as financial advice. Always do your research & speak to a financial professional before making investment decisions. Stock prices and market value have changed since the time of writing. This is NOT a buy or sell recommendation.

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After pitching this company at several events around the BRK AGM in Omaha, I decided to use the flight home to write up a mini-pitch for my highest-conviction idea.

I’ve owned NowVertical for about six months but hadn’t gotten around to pitching it until now, midair on my way back to Berlin. As of early May 2025, it’s by far my largest position (70%), with an avg. entry price of 0,3CAD.

Since this is a very large position for me, I expect biases to play a significant role, despite efforts to counter them by seeking outside opinions. So:

1. Please take everything I write with a healthy grain of salt, and

2. I truly appreciate any feedback or challenge.

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Key Figures of interest

(all financial figures discussed are in USD)

Ticker: NOW (TSX-V) // NOW VF (OTCQB)

Run-Rate Adj. EBITDA: ~10M

Est. normalised FCF/Adj. EBITDA: +70% (due to negative WC & 0 Capex)

Run-Rate Revenues: ~44M

Net Debt (fully diluted): ~-3M

Share count (fully diluted): ~120M

EV (@Price = 0,41USD): ~45M

Upside Potential Over 3–5 Years

• ~2x – Conservative Case: Assumes minimal growth and only a modest re-rating.

  • This outcome reflects a scenario where most growth initiatives fail, which currently appears to be a low-probability event.

• ~5x – Base Case: Assumes the company achieves approximately 20% annual growth and a re-rating to 15x EBITDA.

• ~10x – Bull Case: Assumes the company continues to scale effectively, potentially growing in line with the broader market (~30%), coupled with further multiple expansion.

Company History

• IPO in late-2022

• The founder and CEO executed a rapid acquisition strategy, purchasing 12 global businesses in the data analytics consulting space, until Q4 FY23.

• However, there was no post-acquisition integration: no shared best practices, no internal communication structures, no central oversight, and no attempt to unify offerings or operations across subsidiaries. Each acquired company continued to function independently, with separate products, clients, and back-office functions effectively operating as a loose collection of standalone firms.

• In Q1 FY24, a new CEO, formerly the CEO of one of the acquired companies, took over after presenting a strategic plan to restructure the business to the board.

Integration & Restructuring

• Under the new CEO (between Jan.2024 - Apr.2025) the company underwent a comprehensive transformation:

  • Fully integrated operations across the group.

  • Divested non-core and low-specialisation businesses.

  • Standardised and simplified the global service & solutions offering.

  • Leveraged in-house talent in Argentina (400+ employees) and India (100+ employees) instead of relying on costly third-party consultants.

  • and many more.

• Operational improvements:

  • Adj. EBITDA margins increased from ~8% to ~24% (Q4FY23 vs Q4FY24)

  • Sustained EBIT-level profitability, overcoming prior volatility.

  • Achieved ~10% organic pro-forma revenue growth between Q1 and Q4 FY24, despite the intense focus on integration and margin expansion

    • Mainly by increasing revenues for the top 30 customers (~60% of revenues) by 20%

  • The CEO delivered on nearly all KPIs set early in his tenure and successfully integrated the entire business within ~15 months.

• Balance sheet restructuring:

  • Initiated a major simplification of the capital structure, with full cleanup expected until Oct.2025 months (including conversion and warrant overhang resolution).

• Restructuring Impact (Visible):

  • Significant reduction in overhead costs.

  • Sharp increase in cross-selling activity across business units.

  • Continued top-line growth despite restructuring efforts.

  • Increased & less volatile margins.

  • Huge reduction in debt and simplification of the capital structure

Business Overview

NowVertical Group is a global data and analytics consulting firm that helps large enterprises transform complex data into actionable insights. With its services not being R&D-related, examples include reducing churn rates for streaming services or lowering key risk metrics for financial institutions, resulting in clear ROI for CIOs/CFOs and therefore higher resilience during downturns.

Customer Base & Revenue Model

• The company serves primarily large multinational corporations (accounting for ~90% of revenue), of the likes of McDonalds, HSBC and Disney.

• Approximately 50% of revenues are recurring, split between Managed Services and SaaS, the latter from both proprietary software and third-party reselling.

• The other half of revenues comes from large transformation projects, which typically span multiple years and have a recurring nature, although contracts are usually signed on a 6–12 month basis

Business Footprint Post-Divestitures

Following the divestiture of non-core operations up until Q3 FY24, NowVertical now consists of around 3 large, and a few smaller, fully integrated globally operating businesses. The company has streamlined its structure and is focusing on high-value & high-specialisation segments of the market.

• Geographic Mix:

  • ~70% of revenue comes from Latin America, with the remainder split between Europe and North America (~30%).

• Core strengths:

  • The company specialises in Finance & Customer Data Analytics. While the services are primarily implemented through Google Cloud, they are also expanding into other platforms, including Azure.

• Notably, the LATAM business unit was named Google Cloud Partner of the Year in Data Analytics Consulting, a highly selective global award given to only one firm per category, underscoring the quality and depth of NowVertical’s capabilities, now accessible to all its customers following the restructuring.

An overview of all services & solutions:
https://www.nowvertical.com/solutions---services

An overview with an array of case studies:
https://www.nowvertical.com/functions

Upside

Management & Execution

• CEO Track Record & Execution

  • Clearly communicated strategic objectives and hit every KPI

  • Successfully restructured operations (90% done as of Q1FY25)

  • Achieved short-term target of 10M run-rate EBITDA in Q4 FY24

  • CEO himself expressed surprise at speed of turnaround

• Guidance

  • Short-term goal: 50M in revenue and 10M in EBITDA (on a run-rate basis)

  • Medium Term Goal:

    • Double-digit revenue growth (stated in Q2 & Q4FY24)

    • 15-20% EBITDA-Margins (stated in Q4FY24)

• Alignment of Interests

  • Insider ownership increased from ~7% to ~27% (Q1FY24 vs Q1FY25)

    • ~90% from converting deferred M&A payments into equity

    • ~10% from direct CEO purchases on the open market

  • Nearly all deferred M&A payments were owed to the current management teams of acquired subsidiaries and were converted into NowVertical shares, leading to alignment of interests across leadership

  • Incentives are particularly relevant for driving cross- and upselling between subsidiaries

• Integration Roadmap (Q2 FY24)

  • Phase 1: "Stability & Quality" (Done - Q1 FY25)

  • Phase 2: "Growth, Growth & Growth" (current focus)

Growth Drivers

• Cross-Selling Potential

  • Unlocking synergies across subsidiaries

  • Expanding client relationships geographically and across services

• Market Tailwinds

  • Global industry growth projected at +30%

  • LATAM market growing at +20%

• Leveraging delivery hubs in:

  • India: +100 employees

  • LATAM: +400 employees

  • Using these "delivery hubs" to grow operations cheaply in NA & EU

• Business Model Enhancements

  • Repackaging services for upselling and improved margin

  • Targeting higher-margin contracts and operational efficiencies

Catalysts

• Capital Structure Simplification (by Oct. 2025)

  • Convertible debt eliminated

  • M&A-related obligations resolved (Q1 FY25)

  • Most options and warrants cleaned up

• Argentina De-Risking

  • Accounts for ~30% of revenues

  • CEO (April 2025) cited improved macro conditions, fewer capital controls and political stabilisation under new leadership (Milei)

  • In the past, it was challenging to repatriate funds, but the company has successfully developed workarounds, even before the loosening of capital controls.

• Strong growth

Valuation

• >20% organic revenue CAGR likely in the mid-term

• 15x EV/EBITDA justifiable given growth, margin, and recurring revenue profile

• Implies 3–5x upside from current valuation over the next 3–5 years

Risks

Macro Risk

• Macro risk is the most important risk in my opinion, as a deep global recession would severely impact NowVertical. The clear ROI from offered services might dampen its effect; nonetheless, consultancy services are often the first to be cut during economic downturns or uncertainty.

Business Risk

• Change from restructuring to high growth

  • The company is transitioning from a restructuring phase to a high-growth phase, introducing execution risk as it shifts focus from past challenges to new ones that require different capabilities and strategies

• Industry Dynamics

  • Operates in a rapidly evolving sector that requires continuous adaptation to new technologies, regulations, and compliance standards, which introduces some negative optionality. However, the underlying businesses of NOW have long and strong track records, which help mitigate this risk

• Competition

  • The commodity-like nature of the industry increases competitive pressure. However, the company’s unique differentiators allow it to compete effectively, even against the Big4 consultancies with vast resources. Moreover, the rapid growth of the TAM further mitigates this risk, as demand for consultants outpaces supply.

Management & Dilution Risk

• Stock Price & Potential Dilution

  • A higher stock price could, in theory, entice equity issuance to reduce debt

  • However, management has high insider ownership and has made clear statements opposing dilution, further supported by cash > debt payments in 2025

  • Dilution risk is very low

Short-Term Revenue Risk

• One-Off Resell Deals in H2 FY24

  • ~15% of H2 FY24 revenue stemmed from two large reselling contracts, which will lead to cashflows from Q1 FY25 to Q2 FY26, meaning H2 FY24 revenue overstate the business's true performance.

• LATAM Seasonality & Offsetting Effects

  • Weak seasonal performance in LATAM during Q4 FY24, driven by both real factors like summer seasonality in the Southern Hemisphere and accounting-related issues such as Argentina's FX challenges and hyperinflation accounting, partially or fully offsets the inflated revenue from reselling in my view.

Strategic & Financial Risk

• Segment Disclosure

  • Segment disclosures since Q4 FY24 are unavailable / have been severely simplified.

  • While some past segments faced issues, none were significantly problematic.

  • A cynic might argue that this is an attempt to overshadow poor performance in a certain segment, but I believe the shift is sensible. Especially as cross-selling gains importance, the boundaries between individual business units blur, and the new structure makes it easier to communicate the overall thesis to potential new shareholders.

• Balance Sheet Sensitivity

  • High debt and negative working capital (WC) reduce financial resilience

    • Negative WC amplifies both upside and downside from a cash flow perspective.

  • If profitability holds up, the balance sheet should remain manageable. However, a sharp decline in profitability could quickly lead to dilution or financial distress, as the limited cash cushion wouldn’t cover substantial funding needs

• FX Risk

  • Earnings and cash flows are highly exposed to FX translation effects, as NOW reports in USD while nearly all revenues and costs are in local currencies. However, since revenues and costs are largely matched by currency, the underlying business risk remains limited.

Conclusion

NowVertical offers a compelling investment opportunity with significant upside potential, fueled by a successful restructuring and solid organic growth. The company’s operational improvements, differentiated positioning in high-growth markets, strong management alignment, and very cheap valuation create an attractive risk-reward profile, with the current valuation implying no growth and overlooking recent catalysts such as future balance sheet simplification and de-risking in the Argentinian part of the business, making it an appealing entry point.