NowVertical - a short Update

I have been relatively quiet around NOW’s most recent quarter due to a project that prevented me from posting. That said, I believe Christian Schmidt and Financial Skeptic have already covered the situation very well on X, substack and on Christian’s podcast.

Over the past few months, I have re-evaluated the pitch, and there are three core topics that I believe do not receive enough attention or are not fully understood by the market. I will try to highlight those here.

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.

1. The Working Capital situation

The reduction in working capital, particularly in accounts payables and accrued expenses, is driven by the repayment of legacy balances and is not related to any changes in payment terms. From 2026 onward, management expects working capital to grow at a much lower rate, broadly in line with revenue growth.

1. Google Premier Partnership status and pipeline implications

The company achieved Google Premier Partner status in Argentina in January 2025, in the UK in March 2025, and in the rest of LATAM a few months after Argentina. As a result, the 19 leads generated year to date were achieved with only four to six months of Premier Partner status across all regions. The sales cycle for these clients follows the typical pattern: (1) consulting, (2) small transformation projects, and (3) large transformation projects. Nearly all leads generated this year have so far translated only into consulting revenue, which is typically five to ten times smaller in dollar terms than full transformation projects. Management therefore expects next year to benefit meaningfully from the conversion of these leads into larger transformation engagements.

1. Strategic Account growth masked by Hyperinfalltion accounting

In Q3 FY25, hyperinflation accounting reduced reported revenues by approximately USD 1 million (YoY). This depressed reported Top 30 Strategic Account revenues, the company’s most important growth metric. As roughly 70% of total revenues are generated by these accounts, the hyperinflation accounting impact reduced the revenues of these accounts by approximately USD 0.7 million. Absent this effect, Top 30 Strategic Account growth would have been around 11% YoY rather than roughly flat. This reinforces my view that the strategy is working.

Conclusion

Overall, I believe the growth outlook, combined with positive FCFF assuming a normalization of working capital investments, is attractive. If we assume approximately 10% revenue growth for FY26 and a normalized Net Working Capital level of 10-12% of revenues, which is very conservative in my view, working capital outflows should normalize to roughly USD 1 million, compared to around USD 10 million for FY25e (or 8M YTD). Even assuming flat operating cash flow, this would imply around USD 2 million of FCFF. (Q4FY25 estimates are highly conservative and SBC is deducted from FCFF)

At a current EV of approximately USD 35 million, this implies a FCF multiple of roughly 16x. Any upside from revenue growth, margin recovery, or improved operating leverage would quickly make the valuation look very compelling.

My personal assumption for FY26e is that NowVertical should be able to generate +3M in FCFF.