Lime Technologies AB (publ)

Hello everyone and good morning and welcome to Lime Technologies Q3 update. My name is Nils Olsson, been working at Lime since 2006 and took the CEO position in 2021. And today I'm very glad to have Anders here, our new CFO.

Hello everyone. I'm very glad to be on board with Lime. Looking forward to the journey going forward.

Perfect. Thanks for that. And let's start giving a brief overview of Lime before we jump into the Q3 presentation. So yes, and before we start, feel free to write any questions in the chat and we will answer them at the end of the session. So let's start looking into a bit of what Lime really is about. And we always been running Lime with a very long term perspective. And as you can see, that has left us with a fantastic footprint. In more now than 20 years, we have grown in average 19% per year with an EBITDA margin of 25% in average per year. And I think that's something that we, of course, are very proud about. But no matter how big we've been, how many office we had, how many customers we had, we more or less have had the same goal from the start. And that is to help our customers to become really, really good and strong in sales and customer care so they can help their customers in a good way, meaning that we focus on the end customer. And we do our best. We help our customers at the best when we combine really strong software, which we deliver in our four platforms with great expertise. And we help our customers to solve mission critical problems, which means that we become a natural part of the company's core processes. Over the years, we have scaled our business into several markets. And we started with Norway and Finland in 2010. We opened up Denmark in 2015. And from 2020, we entered Netherlands and Germany. And we also welcomed Lime Connect and Sport Admin to the Lime Group. And today we are present in seven markets, 11 offices, and we have almost 500 employees. And looking into some of our key success factors, as I started with, I think the long-term profitable goal, combining that gives us a really, really strong foundation. We have a goal to have increased the share of recurring revenue. And today we see that we have 64%. So we are moving in the right direction there. and it's a predictive model and so so i think that's that gives us a good starting point and we also have a sticky customer base meaning that we do business with many customers uh every month every year and we are not depending on one or two big customers and something that i would say is the foundation of lime that has built the success over time is a strong corporate culture we are combining strong performance with care So looking into a little bit of Q3 then, and I give you a little bit of a sum up before we jump into the more detailed slides. And as you can see, we closed the third quarter with 18% sales growth, 25% EBITDA margin and 28% ARR growth. So overall, I would say strong numbers. and as always the third quarter is a little bit special when it comes to the summer holidays in july and it also of course spills over into august august and the beginning of september uh this year were a little bit more challenging than usual uh in this period and it was It was tougher to close deals bid with both new and existing customers. However, I'm very, very pleased with our mindset and our activity level to get closer to our customers. And this led to a great pipeline development over the month and a much, much better finish in the quarter with many nice deals in all our business units. And I will come back to that in a few slides. But looking into our four different business units starting with lime crm and we are focusing on speeding up lime crm especially on the expected services side we know that there are no shortcuts and the solution is to really work close with our customers and focus on creating value for them and of course solving their pains and challenges and as i said i'm really happy with our mindset and a way of working and doing this also means that we are increasing the pace on the sales side and that will leave us with a good position when the market is opening up. If we look into LimeGo, I would say that the good performances continue. Our focus on attracting larger companies is getting results and the value of our average deal has increased over the year. Due to this, we can see the good development. We are strengthening the LimeGo team with a number of nice recruits, both on the sales and in product development. And talking about Connect, we also see a good trend continuing there. And this quarter, we have done some really nice product features, released some nice product features. talking about one of them our first version of our mobile app during the quarter and it has been one of our most requested features and i would say it has a great potential both to our new and existing customers um and another thing that i see have seen a good progress in within the quarter in lime connect is a strong development in our marketing team We have done many webinars over the quarter, and I would say it gives us a steady stream of leads, both that we can target on new sales and in upselling. And if we look into sport admin, the business in sport admin is a little bit more term based, where you see many deals happen at the end of each term. so a strong start in each term is really important for good sales in the coming period and i'm pleased if we're looking to how we handle the start in the autumn great activity levels and we have built a strong pipeline which i really hope that that could give us a good good closing for the end of the year but of course there is some nice deals which i will come back to also now in cube three last bullet point investment in future growth and i think it's important that we continue to focus on long-term profitable growth we are doing this by keeping investing in sales marketing product development and recruitment and during the quarter we have recruited more than 30 new employees onboarded them here in august which means that we are always we are building for the future and already now we are starting to fill up the positions for the onboarding in january In general, we know that the game on the market is tough and demanding, but it's something that we've been playing successfully for over 20 years. And with a strong position, we think that we have every possibility to keep gaining market shares regardless of the market conditions. So jumping into a little bit more slides on Q3. and today we will cover the order intake the revenue the profit and in the end some summaries and of course questions but starting with the ordering take and as we have communicated before Our customer concentration is low. Today, our top 10 customers stands for 7% of the revenue and the biggest customers, 1% of the revenue. And I would say in this type of business climate, it's very good for us that we're not depending on one or a few big customers. We are making deals with many customers in different regions, in different geographies, in different industries every month. in general if we look at the market situation i would say it remains similar to previous quarters with long sales processes and more decision makers involved and as i started with i think this quarter in q3 was a little bit slower than than expected in the beginning but it gave us despite this we we built the pipeline and Our ordering take closing the quarter is quite solid, I would say, with many important deals in all business areas. Looking into some of the deals that we closed, you can see that on the right hand side and we continue to do business in our industry verticals in LimeCRM. During the quarter, we welcome companies like the utility company Skagerrak Energi, a really nice brand, Finnish wholesale companies Masino, that's actually our biggest illiette on the Finnish market, and the Swedish comparison site Plisjakt, It's also nice to see that we are building a stronger and a better reference base in our membership vertical with the case, as you can see, Privathamnäkarna. And continuously, we are working with our transformation deals. This time, I'm really glad to announce Oboz, which is actually one of our first Lime CRM customers back in the days. LimeGo, we welcome customers such as Park Nordic, where they offer parking solutions for commercial buildings and office buildings. And if we look into Connect this quarter, just to give an example where we welcome LeaseTech, this is a new customer for us and a Swiss digital leasing provider. one thing that i really like with this this uh this deal is that it shows that we not only have a strong offering on the german market but it's also actually growing in the dutch region and from a sport admin perspective uh one of our core um core verticals in in sport admin is uh is swimming and therefore it feels extra good to welcome svenskilitz evening to sport admin and it's in it's an organization who wants to improve the sports of swimming so let's look into the revenue side and starting with the ARR. And as you know, we are a product company and a very important KPI for that is the ARR growth. Looking into the different drivers there, you can see our subscription alone is growing by 31% compared to Q3 23, which is a strong number. And looking at the service agreements, you can see that they are decreasing 22% in the quarter, which is in line actually with our strategy. It means that we are converting customers with with old upfront agreements into new subscription agreements. And that's an ongoing project that I've been talking about, and we will continue working with this kind of transformation. But in total, it builds up to a 28% growth in our ARR, which is a strong number. Looking at our different revenue streams, and you can see that this is the revenue streams development since 2018. And looking at subscription is steadily growing 31% in Q3 and also last 12 months you see a 31% growth in subscription. And today that stands for 60% of our revenue. Service agreement stands for four. So it means, as I said, we continue to transform our customer base. from service agreements into subscription. And in total, this adds up to 64% recurring revenue, which I'm really happy about to see that kind of development moving around from 60 up to 64. And this is exactly in line with our strategy. The old upfront payment model is more or less the same amount as last quarter, less than 1% today. And expect services today stands for 35% of the revenue, as you've seen, and we see a little bit slower pace on the expect services side. And I will definitely say we were working for better improvements in that area. So it will continue to grow, but in the long run decrease as a part of the total net sales going forward. If we look at the revenue side and looking at the growth, we reached 18% in Q3 and the last 12 months we have 18% as well. And if we look at the split between our segments, we see Sweden grows by 25% and the rest of Europe 6%. And last 12 months, 19% in Sweden and 15% in the rest of Europe. And of course, the growth in rest of Europe is nothing that we are satisfied with. But we need to look into two different angles here. Looking at the software side, we see a growth that are an okay level in the quarter. But looking at the full revenue, where we also include the expect services side, we are definitely not satisfied and we have an improvement potential going forward. And as I said, over time, we want to build a more international company. That's where we put our focus to put in more employees. We put in more marketing money. So we are building a stronger brand so we can go on an international expansion. Yes. Anders, let's look into the profit side.

Thank you, Nils. Looking into the profit, EBITDA in the third quarter reached 24.8% compared to 25.6% for the same quarter as the year before. Looking at the last 12 months figures, EBITDA Q3 24 amounted to 25.1% compared to 25.5%, which is in line with our financial targets. On the right hand side, we have the last 12 months EBITDA development over the last three years. As you can see, we reached a higher EBITDA margin of around 28% during the pandemic. Now we're back to normal and lasting level to support our future growth, investing in sales, marketing, staff, other products and so forth. The last 12 months in Q3 2024, we have reached an EBITDA of 25%, as we're now able to invest more in future growth. And as we've already communicated, we will continue to prioritize growth over profitability. Change to the next slide. And here's our OPEX development. On the left-hand side, we have our personal expenses, which is the largest expense in our profit and loss. Personal expenses in relation to net sales LTM in Q3 2024 amounted to 58% compared to 57% in Q3 2023. The increase in our personal expenses for the last latest 12 months is partly explained by our acquisition of Sport Admin, which was done in January 2024, but also due to our continuous investment in staffing and employee activities. The investment in our employees is contributing to a lower churn. Looking on the right hand side, we have our operating expenses. As you can see, our other operating expenses increased by 14% the last 12 months. The increase is partly due to the acquisition of SportAdmin and also that we are investing more in future growth by marketing, physical sales, events and product development.

Perfect, thanks for that Anders. Let's move into a summary here and looking into our financial targets. Starting with sales growth, our objective is in medium term to have a growth above 18% and last 12 months we are in line with that 18%. If we look at the EBITDA margin, we should have in medium term an EBITDA margin above 25% and today we are last 12 months of 25%. Net debt in relation to EBITDA should be less than 2.5. And we are at 1.0 today. And if we look at our dividend policy, our dividend should correspond at at least 50% of the net profit. And we ended up at 56%. So let's see if there is any questions in the chat that we can answer.

Yes. and we have first one is from stefan gaufin and it says in ceo statement you say that you have seen positive signals in customer engagement in increasing pipeline what does this mean should this give a better momentum in q4 or should this be more positive for 2025.

Great question there Stefan. I think you should see it that of course we closed less deals than expected in the first one and a half, two months or a little bit more than that actually in Q3. What we've seen then is that you of course then should build pipe. The thing is that how good then are you in converting that pipeline that you actually built due to that we didn't close any deals. Either they are more or less postponed in the future or they are more or less lost to a competitor. The good thing that I saw in this quarter that we built up the pipeline over the first months, but then we actually executed and we had a good inflow of new close deals, both on existing customer base, like the ones that I mentioned, Oboz, the transformation deals, but also on the new sales segment, which is really important for us. So of course, when we have that with us now, and I also think that we've started the first weeks after Q3 in a good way, in a good momentum. So I think that what we will see now is that we will start working with these projects and hopefully that can then increase the pace on the expect services side. Looking at the ARR development, it really depends on what you can see. When are these projects done? And of course, then there will be a split. You will see some positive effects in 2024 in Q4. But that's more normal business. But also you're building up that ARR, committed ARR into 2025. So it will be a mix. But of course, more close deals will help us to gain a better speed. The most important part now for our expect services department is to get these projects started so we have a good momentum within them.

Okay, good. Going into the second question is from Victor Lindström. And he has two questions. And the first one is, how is the coming internationalization of sport admin progressing?

I mean, we have been working with the internationalization question more or less since we started, since we took over sport admin in January, which means that from a more like internal perspective, we are preparing the product. So it can handle the international markets. There are some features that we need to have to be able to export the software internationally. I would say that is going according to plan, which is good. Then, on the other hand, we are more from a market perspective looking into or investigating different markets and how is the landscape for sports software actually working in the UK, in Denmark, in the Netherlands, in Germany, in Finland and so on. And I would say that we are narrowing that down to see more or less, okay, maybe one, two markets are a better fit to start with if we look at the whole sentiment of the market conditions. So I would say it has a good progress in general, the internationalization.

And second question is, can you elaborate on Sportadmin's impact on profits and margins in the quarter?

We don't disclose if we look into exact numbers, both on the ARR side and on the profits. But in general, when we did the acquisition, I think there was an EBITDA of 17%. So, of course, it has a little bit negative impact on the profit side and that was what we expected over the years we we acquired sport and mainly for the growth going forward and that's the important part for us as well so we will continue to invest in sport that means we can have a high pace going forward on the growth side as well uh so far i'm very satisfied with the with acquisition of sport admin and it has delivered what i expected both on growth and profitability okay

We have another question coming in from Pedrag Savinovic. How will the increased net recruitment impact the cost levels going forward? Are they fully reflected in the operating expenses for Q3? And answering to that one is that we did recruit a lot of people, a lot of new employees in August, which means that all expenses are not fully reflected in Q3.

going forward you will see a different level on that yeah and i would say in general we recruited uh in in line with when when we look into the recruitment i think that we we had a good um onboarding in in august so they start in i would say the sixth of yeah was it like 6th or 10th of august uh and it was around like 30 new employees coming in at that time um and we continue to see a quite low employee churn um it's on uh it's more or less on on yeah historically low numbers which i think is an effect of that we are doing things better internally better leadership and we are good on attracting and developing our talents But of course, it's a question on the market as well that has been a little bit tougher. And then, of course, that also reflects that people are staying. So I think over time, we will probably see a little bit higher employee churn when the market is opening up again. that's why it's also important now to fill up the onboarding program in January and that's a big focus for us at the moment and where we are looking into both junior like the trainee program will run but also find a little bit more senior especially on the sales side in rest of Europe.

Okay. Next question is coming from Anders Knutsen. Can you comment a bit on the very strong cash flow versus last year? And as you can see from the cash flow is very, very strong. It's mainly due to that we have a very good business, operating business, generating positive cash flow each and every quarter. However, there is looking comparing the two the two years here, you can see that we have a very strong effect on cash flow from current operations. That is mainly due to a timing effect from from previous year, basically. So that's that's the answer on that one. And when do you expect to see Europe to be satisfactory is the second question.

Yeah, and I think there are differences in rest of Europe. If we look into it, I can give a little bit flavor on that. I think still we are continuing to do better in LimeConnect. As you know, we had a tough 22, but I think we've seen better progress in 23 and even better progress here in 24. So I think that we have more potential. So of course, we are aiming for high growth in LimeConnect as well. But in general, I feel quite looking into where we are. I actually am quite satisfied with that development. looking into germany in general from a lime crm perspective i'm also happy with that development if we put and compare that to previous markets that we entered with lime crm netherlands denmark norway and finland we are actually having a much better pace on the german market compared to to the other markets if we put them on year one and year two and year three and so on So there are some markets where I think that we could expect more. I think that we could expect more, especially on the Finnish market. I think that we are staffed in that way that we could actually be able to deliver more results and more sales going forward. so that's a market where we are working with and i'm happy to see the new deal there with masino as i said the biggest case ever on the finnish market hopefully that could create some ripples on the water and we can get some momentum and positive positive motivation from that okay next question is from inna jypsund and she asks how is the mix between up sales versus new sales trending The mix is quite similar as before. I think that we are, since after COVID, we became much better on doing the upsell side. So looking at the revenue split. We see approximately a 50-50 split, especially on the Lime CRM side. Lime Go side, we see a little bit more higher on the new sales side. And if we look into both Connect and Sport Admin, we see also a split of around like 50-50. so i think that was the last question for today and thanks a lot for the engagement in the chat and let's i wish everyone a fantastic yeah start of or end maybe of the fall and start of the winter and if you have any questions don't hesitate just reach out and give me a call thank you very much bye