Lime Technologies AB (publ) (LIME) Earnings Call Transcript

Hello, everyone, and a warm welcome to our Q3 call. My name is Tommas Davoust, and I've been at Lime since 2017, started as CEO in the beginning of this year. And with me, I have Anders.

Hello. My name is Anders. I've been at Lime September 2024, and I'm the CFO.

And as usual, feel free to write any questions in the chat, and we will try to answer them in the end of the session. So the agenda for today is to start with an overview of Lime and the sum up of Q3. We'll go into the order intake. We look at the revenue the profit and will end up with a summary. So starting with an overview, we have always been running Lime with a long-term perspective, and that has left us with this fantastic footprint. In 25 years, we have grown, on average, 18% per year with an average EBITA margin of 25%. And of course, that's something that we are really proud of. And what I would say is the biggest reason why we have managed with this year after year is our people. and our great corporate culture. And we know that in order to win in the competitive environment that we actually play in, we need to be a little bit better in everything we do. And we believe in creating a culture that is great at combining high performance with a lot of care. And it doesn't matter the times, if it's been good times, bad times. Our goal has always been the same, and that is to help companies become great at sales and customer care, so they can help their customers in the best possible way. We create value by being a true partner to our customers by being local, close to our customers and combining our software and expertise. And we have 2 revenue streams, which is the software and the services. And the ARR or our annual recurring revenue, which comes from the software, stands for around 68% of our total revenue. And we've done it for quite many years now since 1990. And we scaled our business into several markets, starting in Sweden, we've gone into Nordic. And since 2020, we entered the Netherlands and since 2021, also in Germany. Now we are present in 7 markets, 12 offices, and we have almost 500 employees. If you look across our products, we have more than 7,500 customers and over 1 million users. So let me give you a sum up of Q3. If we look at the numbers, we have 11% ARR growth, 26% EBITA margin and 11% revenue growth. On the first bullet, I'm glad that we have been moving in the right direction. We are on the 11% ARR growth. The EBITA margin is on 26.3%, which can be compared to 25.0% in Q3 last year. And Expert Services, our consultant department, they keep growing with a good utilization rate. So I'm glad we're taking steps in the right direction. However, we are not satisfied. I still believe we have more to give and more potential. On the second bullet, we've continued to make investments in our AI offering. And I'm happy to say that all our products now have AI capabilities to help our customers be more efficient. We rolled out AI Assist, which is like an assistant where you can ask questions about the database where you're in. And we rolled it out to all our users in Lime CRM. And we are also rolling it out in the autumn to our Sportadmin customers. In Lime Connect, we've had an AI chat bot for many years. And now we also have a voice agent in beta. And that opens up a new market for customer communication as well. We also have Lime Go Agentic, a fully agentic product. and that we have out on the market now with very positive response among customers, both new ones and also some of ones that have migrated on the existing customer base. On the third bullet, I'm glad to see that we grow quickly outside of our home market. That shows that we can export our offering to other markets and also, we have a lot to grow in. Norway has had a good quarter. And the fastest-growing market for whole Lime is the Lime CRM part in Germany, where we have great traction, and we continue to grow beer into the utility vertical. And lastly, a few words about our position. in a world where SaaS is changing faster than ever. So we are the European verticalized platform for business-critical customer processes powered by AI, still unmistakably human. Our position has always been to be a partner to our customer. That's why we have decided to keep everything in-house and own the whole chain from development to sales, consultancy and support. We help our customers become better at customer care with local people, experts who speak the language, who understand the complexity in the verticals and who know the regulations and nuances on the specific markets. It doesn't matter if it's Finland, Germany or any other of our markets. That's always been a key factor to win. And in a world where software development becomes faster and cheaper, this is more important than ever. Another upside as the world seems to change by the day, is our size and our culture that are more important than ever. We are big enough to have built up customer relationships that we have a lot of experience. We have reference customer, but we are small enough and we have a culture that makes us extremely agile and fast paced. Being from Europe, on the other hand, has not historically been a reason for customers to buy from us. Choosing U.S. software has been the most common thing to do in Europe, and it's changing rather quickly, and it gives us a nice tailwind. Data sovereignty is talked more and more about in our customer dialogues and procurement, and that's something we clearly see in our analysis of customer calls as well. And as most of you know, our 3 biggest competitors, they are from U.S. So I believe that this can help us on our growth journey going forward. All in all, we have the same position as we've always had. Only now it serves us better than ever. So let's have a look at the order intake. If we start to look at our customer concentration, you can see that it's really low. Our top customer stands for less than 1% of our revenue, our top 10 for less than 7%. And if we look into the deals, starting with Lime CRM, we have yet another Stadtwerke that's coming this quarter with Stadtwerke Wismar. We've also grown in the utility segment in Finland together with Alva, who have expanded their solution. On the membership segment, we welcome Comascu Kollegium as a new customer. In the wholesale segment, in Finland, we welcome Telatek and the Sweden Universal Power Nordic. In the real estate segment, among others, the commercial real estate solution with [ Holger Blomstrand ]. Going over to Lime Connect, we made also a utility deal with an existing Lime CRM customer, which is Stadtwerke Witten, but they now also add the Lime Connect product. And we continue to expand with existing customers here as well, for example, with Porsche and AXA, which is really nice. In Lime Go, as I said, Lime Agentic has had a good reception at this last week and months, and we have a customer that's been with us since 2018 called Tickster, who have now gone over to the Agentic solution and really likes it. And we also welcomed a new customer, Arbetshalsa that are also working in the Agentic platform. On the Sportadmin side, we have welcomed many new organizations, among them, Fisksatra IF and Onnereds HK. And we already have a lot of organizations in the top 2 football leagues in Sweden, and we continue to expand here with a new lead partnership together with Ettan Fotboll. So with that, let's go into revenue. If we look at the overall growth, we reached 11% in Q3 or 10% organically. Over the last 12 months, it's 9%. If we break it down by geography, Sweden grew 7% in Q3 and rest of Europe grew 20%. And as I said before, I'm happy to see that we continue to grow faster in rest of Europe compared to Sweden. Now we've been on similar numbers 2 quarters in a row, it demonstrates that our vertical strategy and our product offering resonate beyond Sweden, which is critical to our long-term growth ambitions. With that, I hand over to you, Anders.

Thank you, Tommas. So turning over to our profitability. The adjusted EBITA increased by 17% to SEK 51 million in the third quarter compared with SEK 43.7 million last year. The adjusted EBITA margin improved to 26.3% from 25.0% last year. Looking at the last 12 months figures, adjusted EBITA increased by 10% from SEK 183.5 million to SEK 202 million. with a margin improving to 25.5% from 25.1%. The margin improvement is mainly a result of revenue growing faster than our costs, which I'll go through in more detail on the next slide. Personnel expenses, which is our largest expense within OpEx, amounted to SEK 104.8 million in the third quarter, an increase of 8% compared with last year. The increase was mainly driven by a higher average number of FTEs and normal annual salary increases. Recruitments have mainly been in customer-facing roles. On a last 12 months basis, personnel expenses amounted to SEK 422.5 million, an increase of 7%, reflecting the same underlying drivers as for the quarter. Personnel expenses as a share of net sales continued to decrease, amounting to 54% in the quarter and 56.9% on the last 12 months basis. showing that we continue to grow revenue faster than our personnel cost base. Then turning over to the other operating expenses, other operating expenses in the quarter amounted to SEK 36.2 million compared to SEK 34.0 million last year, corresponding to an increase of 6%. And on a last 12 months basis, other operating expenses amounted to SEK 145.4 million compared with SEK 131.2 million, an increase of 11%. The increase, both in the quarter and on a last 12 months basis, is primarily driven by higher product-related costs, growth-related items, including cloud and hosting services and product licenses. It also reflects continued investments in AI across our products and operations as well as other investments to support further growth in Sweden and in our international markets. Back to you, Tommas.

Thank you, Anders. So let's turn to our financial targets. And as you know, by now, we have reached an ARR growth of 11% compared to the target of 18%. Again, going in the right direction, which I'm happy about. Still, we can do more. We reached an EBITA margin of 26.3%. But in the last 12 months, it's on 25%, which is also trending the right way towards our target of 27% in the medium term. The net debt in relation to EBITA is 0.3 compared to the target of being below 2.5, which gives us significant financial possibilities to invest in growth and create greater value for our customers and shareholders. And for 2025, the dividend was set to 54% of the net profit, which is above our target of at least 50%. To sum it up, we keep moving in the right direction on all levels basically and with a positive trend and our position more relevant than ever. We are fully focused on carrying that momentum the rest of the year. And with that said, we are happy to take any questions you might have. All right.

So first question is, it's been a while since the last meaningful acquisition. What's the timeline for the next?

Yes, it's -- well, we did actually a very small acquisition here in the beginning of the year, right, Anders? Was it...

Yes, it was in the beginning of January.

So we did one. But Yes, we are continuously talking to a lot of different companies and have a lot of dialogues ongoing. And with that said, we don't rush into anything. We are very much evaluating everything. It needs to be a good product market fit, it needs to be a good culture, and it needs to be a good price. And we are looking mainly on two different things in that in Lime CRM to parts where we can complement our offering. Also could be interesting to get a customer base somewhere. And on the Lime Sportadmin side is the other part where we are looking into mainly international expansion, just like we've done in the Netherlands. So when we -- it's up to see, but we are continuously having dialogues.

Yes. Perfect. Next question, Expert Services in rest of Europe grew 38% year-on-year. Any particular drivers that explain the strong growth?

Yes. I would say that, as I mentioned, Norway had a good quarter in general. So we had quite some big projects in Norway. And then, of course, also Germany, where we have more and more traction, where we continue to expand with some of our existing customers, and we have quite many new projects that we are delivering on. And they are quite big projects. So of course, that has an effect.

Good. Next question coming here. Could you elaborate a bit more on Sportadmin league partnership with Ettan Fotboll deal size timing? In addition, with Sportadmin new platform, how you do intend to increase the revenue per customer?

Okay. So let's start with the cooperation. Well, Ettan Fotboll have had a cooperation before, together with a competitor of ours. And now they've decided to go with us, which, of course, we are really happy about. It doesn't oblige all the customers to buy. So we already today have, I think it's around 5 of the customers in Ettan -- in [ Division 1 ], which is the third league in Sweden. But what they are doing is promoting 1 specific supplier and partner. And in this case, it's us. So we are having new dialogues ongoing. And hopefully, we'll see more customers joining Lime Sportadmin here. And the second question was if -- let's see, with the new platform, how do you intend? Well, I mean we have more than 1 million users in our app. So it's a big reach. And I think we can do even more to support our customers and also end users with how you do better sales through the Sportadmin up and maybe how you can get some discounts in different ways. So we are looking into how we can create more value for both the teams and the end user. And then, of course, a part of the internationalization strategy is, of course, this as well that we already know how we can get more revenue per member, as I said here. So that's also part of our internationalization strategy when we find new acquisitions.