Verisure on the path to deleveraging

Background:

• • Verisure Midholding AB (Verisure), monitored security services, HQ in Geneva, Switzerland. LTM Adjusted EBITDA c. €1.71bn and Total Net Leverage 4.5x as of Q2 2025; total adjusted net leverage 4.8x at FY 2024. Current ratings: Moody’s B1 (positive outlook in 2024); S&P B+.
• • Verisure sells professionally monitored alarm services to residential and small business customers across 17 countries in Europe and Latin America, with installation, 24/7 monitoring, verification and intervention.
• • FY 2024 Adjusted EBITDA: €1,534.0m, up 14.4% yoy; Adjusted EBITDA margin 45.0%. Adjusted EBIT: €819.0m, up 18.0% yoy; margin 24.0%.
• • Management: CEO Austin Lally; CFO Colin Smith. Governance was strengthened with an additional independent director in February 2025; otherwise continuity at the top team.

Segmental breakdown:

• • Portfolio Services (recurring subscriptions) is the economic engine. FY 2024 Portfolio Services Adjusted EBITDA: €2,141.9m with a 72.7% margin. Recurring monthly fees accounted for approximately 86% of FY 2024 revenue.
• • Customer Acquisition segment is structurally negative EBITDA by design, reflecting upfront sales and installation investment; in 2023 it was a €551.1m EBITDA drag. This depresses consolidated EBITDA in periods of growth and raises execution risk if acquisition discipline weakens.
• • Adjacencies (assistance devices and Arlo Europe retail cameras/cloud) are small to group EBITDA and not a swing factor.

Geographic breakdown:

• • Operates in 17 markets. The company is the category leader in most European geographies and present in selected Latin American countries. Exact country-level revenue or EBITDA mix is not disclosed; Iberia and France are historically key, with the remainder spread across Nordics, Benelux, UK, Italy, Germany and LatAm.

Revenue model and contractual structure:

• • Revenue is primarily subscription-based (self-renewing monitoring agreements). New customers pay an upfront installation fee and a monthly ARPU. FY 2024 ARPU: €45.6; FY 2024 LTM attrition: 7.4%; total subscribers 5,611,685 (+438,653 net adds in 2024).
• • The company offers internal and external financing for installation fees and regularly factors the externally financed receivables; factoring balances were €289m (Q4 2024), €265m (Q1 2025) and €261m (Q2 2025), which are excluded from Verisure’s leverage disclosures but are effectively a form of short-dated financing.
• • Inflation protection: management pursues “more-for-more” pricing and upsell rather than formal indexation. There is no broad-based contractual CPI pass-through; pricing power depends on customer acceptance and competitive responses.

Cost structure:

• • FY 2023 personnel expense was €1,157.7m, making people the single largest cost driver given the labor-intensive sales, installation and monitoring model.
• • Other FY 2023 operating cost lines included marketing-related costs of €203.0m and cost of materials of €73.1m. Lease-related cash costs in 2023 were €54.4m (lease interest plus lease liability amortization).
• • Variable versus fixed: sales commissions, installation labor and much of portfolio operations are variable or semi-variable; IT, premises and central overheads are more fixed. Management claims a flexible cost base and has historically dialed back customer acquisition in downturns; nonetheless, personnel costs and service levels impose a meaningful semi-fixed burden that could limit rapid margin defense if growth slows.

Shareholders and valuation:

• • Ownership: H&F approximately 59.6%; GIC (via Eiffel) approximately 21.8%; Corporación Financiera Alba approximately 7.6%; remainder held by management and others.

Strategy:

• • Continue to grow subscribers in under-penetrated markets via a face-to-face and multi-channel go-to-market model, sustain low attrition, and expand ARPU through new services and devices (e.g., anti-jamming, “Zero Vision,” locks, seniors offering).
• • Execute “Funding Our Growth” cost-savings program through 2026, embed continuous improvement, and use scale to improve procurement and service costs.
• • Financial policy communicated in 2024 targets deleveraging to 4.5x and active maturity management. Management has guided that debt is now 75% fixed and matures in 2026 or later.

Competitive landscape:

• • The market is fragmented with local and regional providers; Verisure is the scale leader in Europe. Competitive threats include telcos bundling security (e.g., Telefonica, Orange), DIY platforms from big tech (Ring, Google), and regional monitored alarm specialists. Brand, service quality, and field execution are differentiators; however, bundles and low-fee offers can pressure upfront fees and monthly pricing.

Corporate actions:

• • In April 2024 Verisure refinanced and redeemed a €800m Term Loan B maturing in 2025 and redeemed €100m notes maturing in 2027, while replenishing the RCF. This improved the near-term maturity profile but added to elevated interest costs.

Current trading:

• • Q2 2025: revenue €928m (+9.3% yoy); Adjusted EBITDA €426m (+11.8% yoy); Adjusted EBIT €236m (+13.9% yoy); Portfolio EBITDA €595m (+12.2% yoy). Adjusted EBIT margin improved to 25.4%. Liquidity (cash plus undrawn facilities) was €387m. L2QA Adjusted EBITDA was €1.709bn and TNL 4.5x, aided by continued deleveraging. ARPU rose to €46.6 and monthly EPC to €34.4; CPA rose to €34.4.

Risks and mitigants:

• • Customer concentration: diversified across millions of households and small businesses; concentration risk is low.
• • EBITDA adjustments and “Clean EBITDA”: Verisure reports Adjusted EBITDA that excludes Separately Disclosed Items (SDIs). In 2023 Adjusted EBITDA excluding SDIs was €1,340.5m vs Adjusted EBITDA including SDIs of €1,298.0m, implying €42.5m of SDIs. The company also publishes a non-IFRS “Adjusted Pro Forma EBITDA, last two quarters annualized,” which layers IFRS 15/16 and anticipated cost savings; for 2023 this was €1,388.7m calculated as €1,345.7m (L2QA Adjusted EBITDA excl SDIs) minus €44.9m IFRS 15 effect plus €62.9m IFRS 16 effect plus €25.0m anticipated cost savings. We view the inclusion of anticipated savings as aggressive. Our “Clean EBITDA” for FY 2024 is €1,534.0m and equals reported Adjusted EBITDA, i.e., it excludes SDIs but does not add pro forma savings, IFRS 15/16 remeasurements or L2QA annualizations.
• • Cyclicality: demand is relatively resilient, but pricing and churn can worsen when household disposable income is pressured. Verisure kept attrition within 6–8% through past cycles; however, the model requires ongoing acquisition spend to sustain growth.
• • Litigation and provisions: the business is exposed to data privacy, consumer protection and ESG-related compliance across multiple jurisdictions; management highlights evolving EU data and AI regulation. Ongoing tax audits occur in several countries. No material provisions disclosed, but compliance missteps could be costly.
• • FCF and leverage risk: leverage remains high. FY 2024 cash flow from operating activities was €1,330.1m and capital expenditure €919.8m, implying approximately €410.3m of FCF before financing and after interest and tax. Interest costs are heavy (FY 2023 finance costs €549.6m) and largely fixed, capping deleveraging speed absent continued EBITDA growth.
• • Regulatory and network risk: reliance on third-party telecom networks and technology sunsets (e.g., 2G/3G) require ongoing capex and churn management; consumer protection, data privacy and AI rules are tightening across the EU.
• • Geopolitics/tariffs: multi-country footprint creates FX and regulatory variability; translation exposure to SEK and NOK is meaningful.
• • Accounting and disclosure risk: 2024 restatement to reflect a factoring agreement under IFRS 9 underscores the need to scrutinize working-capital and receivables financing; supply-chain financing balances are excluded from reported leverage.
• • Financial distress history: none disclosed; the group has been active in refinancing and extending maturities.

Capital structure:

• • Total gross debt is primarily senior secured facilities and notes alongside other indebtedness; as of 31 December 2023 as adjusted total funded indebtedness was €7.479bn, with net debt of €7.588bn by Q4 2024 and €7.732bn at Q2 2025. IFRS 16 lease liabilities are present but modest relative to financial debt; lease cash outflow in 2023 was €54.4m.
• • Total Net Leverage: 4.8x at FY 2024 (Net Debt €7.588bn / Clean EBITDA €1.534bn). On L2QA as of Q2 2025, 4.5x (Net Debt €7.732bn / L2QA Adj. EBITDA €1.709bn).
• • Weighted Average Cost of Debt: not explicitly disclosed; the interest burden was €549.6m in 2023, and management indicates 75% of debt is fixed-rate with maturities in 2026 or later.
• • Near-term maturities: management states no significant maturities until 2026 after the 2024 refinancing actions, which mitigates near-term refinancing risk.
• • Contingent liabilities and provisions: none large disclosed; routine tax audits and compliance risks persist.
• • Supply chain financing: receivables factoring related to financed installation fees is in regular use and excluded from reported leverage; we would include these balances in a creditor’s adjusted net debt analysis.
• • Total liquidity: €387m of cash plus undrawn facilities at Q2 2025; cash at YE 2023 was €21.3m. The liquidity cushion is not large for the scale and leverage of the business and should be monitored.

Conclusion:

• • FCF outlook: FY 2024 delivered approximately €410.3m of FCF after capex. FCF should benefit from EBITDA growth and falling attrition, but high interest and sustained customer acquisition outlays temper upside. Execution discipline on acquisition payback and churn is critical; any slowdown in intake or deterioration in customer quality would hit both growth and cash conversion.
• • Valuation and capital structure: an internal DCF indicates EV between €14.567bn and €18.460bn with net debt of €7.953bn; debt would represent roughly 43% of EV at the upper bound. On statutory metrics, Net Debt was €7.588bn at YE 2024 against Clean EBITDA of €1.534bn. The capital structure is serviceable given current EBITDA and extended maturities, but it leaves little room for operational missteps or acquisition overreach, and liquidity is modest for the rating category.
• • Rating view using “Clean EBITDA”: Debt/EBITDA around 4.8–5.0x on a clean basis places Verisure squarely in the B1/B+ territory on leverage alone. Interest coverage on an EBITA basis is thin given 2023 finance costs of €549.6m versus 2023 operating profit of €603.0m, which is consistent with a single-B profile. Business risk is better than typical single-B peers due to scale, recurring revenue and customer diversity, but adjustments such as anticipated savings and exclusion of factoring from leverage are aggressive. Our indicative rating assessment: Moody’s B1 (middle of B1 band) and S&P B+ with a stable to cautiously positive bias contingent on sustained deleveraging to 4.5x and maintenance of FCF in the €350–450m range after capex and interest.
• • Bottom line: a high-quality, scale subscription asset with solid growth and margins but tempered by elevated leverage, heavy interest costs and a modest liquidity cushion. Conservative creditors should analyze net leverage including factoring and monitor any expansion of non-cash or pro forma adjustments in EBITDA.