Lime Technologies AB (publ)

And welcome to Lime Technologies Q3 update. My name is Nils and I've been with the company since 2006 and been running as CEO since 2021. And we also have Anders here.

Yeah, and my name is Anders. I've been at Lime since December of last year.

Perfect. Thanks for that Anders. And I mean, if you have any questions, just feel free to write them in the chat in the end, and we will answer them at the end of this call. So before we jump into the more details of Q3, let's always start with this fantastic overview. And as you know, we've always been running Lime with a very long-term perspective, and that has left us with a fantastic footprint. In more than 20 years now, we've been growing and in average 19% per year with an EBITDA margin of 25% in average per year. And that's something that I'm really, really proud about. But no matter how more or less big we've been, how many markets we had, how many customers we had, we more or less always have had the same goal. And that is to help our customers to become really strong in sales and marketing and in customer care so they can help their customers in a good way. And we do it at our best, I would say, when we combine really strong software and our expertise within specific verticals. So we can help really helping our customers within their core processes. We've been doing this for many years now, and we've been scaling our business more or less international from 2010 onwards. We opened up Norway and Finland. We opened up Denmark in 2014 and also went a little bit more south into Europe in 2020, starting up Netherlands and then in 21 in Germany. And the latest years here with acquisitions, we have welcomed Lime Connect in 21, Sport Admin and PlanPlan in 24 as part of the Lime Group. So looking at this today, we have over one million users of our software. We have a long tail of customers, over 7,500 customers. Today we are present in seven countries, 12 offices with more than 500 employees. And looking at some of our key success factors, sorry for that. I think that more or less starting from the bottom, I think what makes Lange really unique is the strong corporate culture. That's something that we fuel with onboarding programs every year and something that is really key for our growth going forward. As I said, we have a big customer base, but also a sticky customer base. So the top 10 customers stands for less than 7%. We are also increasing the share of recurring revenue. So today it's 76% of the total revenue or recurring revenue. So it's a stable foundation in the bottom and something that we believe in is long-term profitable growth, combining growth and profit over time. And that has left us with this footprint. So, let's dig in then to the q3 report and then starting with the numbers of course we have a revenue growth in the quarter that amounts 11 we have an ebitda margin of 25 and an arr growth of 13. and putting some some color on on the quarter i would say in general i'm i'm happy to see a good progress in q3 The market climate in general is a little bit challenging, given the global situation. But if we're more or less focusing on what we can control, what we can affect, we are ramping up our sales activities in a really good way, direct after the holiday period, and also ending the quarter with winning, I would say, several key customers, both on the domestic market, but also on the international market. Over the last quarters, we've been having a good momentum in new sales, and that's something that I've been talking about more or less in all these calls. We see a little bit different this quarter where we also see a little bit better activity among our existing clients. And this combination leads to an improved overall growth, which, of course, I would say is really positive. Going in a little bit to our products and looking into our flagship product, Lime CRM, I think we continue to demonstrate a really competitive strength in the product. And that we also can see that we are validating our vertical strategy, which is focused, as you know, on utility, real estate, wholesale and membership organizations. looking at our offerings to and if yes going in a little bit on the utility market and we've been doing the nordic offering for many years and the offering towards nordic utility companies remain highly competitive and we will come back to show you a couple of deals later on but this is also true in on the german market where we both have like the individual deal sizes are bigger but also if we look at the overall market size are sustainably larger than the nordic region and in q2 we had a great success with with winning two utility companies on the german market and now we are very happy to to welcome another one you said mine franken an all-time high deal when it comes to to actually scope so so that's something that i'm really happy about in the quarter Something that I said also makes, I would say, more and more clarity is the verticalization. And that truly is a successful combination of when you combine software and deep industry expertise. This enables us to address mission critical processes for our customers. And then it's also there we create real value, strengthening both, I would say, our own, but also our customers competitiveness. At the same time, The approach directly supports when it comes to AI, and it's been a lot of talk and discussion about that the last couple of months. Because when we understand the specific processes, the decision points that are defined in each vertical, we know exactly where AI can help out and make the biggest difference for our customers. And that allows us to more or less to embed AI as a natural part of our platform, rather than just adding one or two or three features in the software. So the increased software, increased efficiency that we have had and what we can offer our customer also opens up, I would say. And that's an all other discussion for new pricing models. We are talking about the way that the software industry has been working for many years with a with a seat based pricing model. Where we are elaborating and looking into, okay, how can we do the pricing going forward in different verticals? Should it be based on property portfolio? Should it be based on number of members in the membership organization? And that's something that we will continue to elaborate with going forward. So let's then look into the agenda. And as you know, we are always looking into the order intake. We are looking into the revenue. Anders will talk about the profit. And then we will do a sum up in the end before we hand over for Q&A. So looking into the order intake then, and as I've communicated, our customer concentration is still low. Today, our top 10 customer stands for around 6.2% and our biggest customer stands for 0.8% of the total revenue. And I continue to say this, that in this kind of tougher market climate, I think it's very good because we're not depending on one or five or ten big customers. Instead, we are doing deals with many customers each month, each quarter, every year in different regions, in different verticals. As I mentioned, the market climate more or less remains the same as before. In general, we have seen good development in new sales in some quarters, especially on the LimeCRM side. And this quarter, we see a little bit more business activities towards existing clients. And of course, that's something that has that kind of positive effect on the growth side. We are welcoming several important new customers in LimeCRM, both in the home market and internationally. And I'm really, really glad to see that the long-term Yes, strategy and efforts are paying off when it comes to verticalization. This quarter, as I said, we are welcoming the big utility company in Germany, USET Mainfranken. But also, if we look at the other regions where we're focusing on utility, we have in Norway, ARNET OS, a really nice utility deal. But also here in Sweden, where we have a really good market share, Sörmlands Vatten & Avfall, also a very nice customer. If we look also more on the Danish market, where we have a different focus on verticalization, we're more focusing on membership organization, I'm pleased to see that in Q3, we are welcoming two strong brands in the membership organization. From a Connect perspective, where we see that we are mostly in Germany, we are welcoming important customers, two-week cruises. And also, I would say something that I think is quite interesting going forward, where we also in Lime Connect are winning Stadsverket Gestalt. That's also something, okay, how will we then elaborate this going forward with Lime CRM and Lime Connect? If we focus a little bit on online connect, I think that we have a big and important launch of our new AI service coming up here. And that's something that will be important going forward this fall. And also, of course, in the beginning of next year, too, that we have a good rollout of that new services. we will help the customers with faster response times we will have smarter assistance and a more intuitive i would say user experience looking into the feedback of course we tried it with several customers and so far the feedback feedback is good From a sport admin perspective, you see some nice logos at the bottom of the slide. We see that we have started the Q3 with better new sales compared to the spring. And I think that's very positive to get back in that kind of momentum. I'm also pleased to see that we are closing deals both on the Swedish market, of course, where we have a very strong position, but that we also started the fall with closing a couple of new customers in the Netherlands. From a more feature perspective and functionality, we have that kind of combination that we would like to both serve the grassroots clubs, which is the majority of all, but also, of course, the elite clubs. Therefore, it feels really good from a product perspective that we can now support the leisure activity card. Maybe from a Swedish perspective, you're known as if you have kids to make more kids be able to do sports. And also from more like, okay, a little bit more focusing on the elite side, improved scheduling and match booking functionalities in the software. So moving on over to revenue and starting with the ARR. And as a product company, of course, as you know, it's very important to look at the ARR growth. And this is something that we will follow even more closely as one of our core KPIs going forward. We are continuing a long-term transition, more or less, where we are constantly improving our platform. And because of this, we can deliver customizations, integrations, and workflows much faster to our customers. this gradually reduces the proportion of expect services and strengthen all recurring revenue as a part of this like strategic shift we are welcoming 35 new employees in august and the big difference here is a little bit more emphasized on the sales side compared to previous year where we have a lot of have had a lot of focus on the expect services side and this investment in general is aimed to more or less fuel the future growth and also where we hope to improve margins going forward. Looking into our subscription alone, we are growing that by 16% compared to Q3, 24. For you who have been following us for a while, you see that we have a decline there of 39% when it comes to service agreements, and that's according to plan. We are still transferring customers from the old service agreement into subscriptions, and that is something that we will continue going forward as well. In total, this builds up to a growth of ARR of 13%. Looking at the recurring revenue, and this more or less shows the development of our different revenue streams since 2018. As I said, subscription is growing 16% in Q3. Last 12 months, 20%. Service agreement stands for 2%. And as I said, continue that kind of transformation. And in total, that adds up to 67% recurring revenue. Upfront, more or less same as previous quarters, less than 1%. and in expect services we see an improvement in relation to q2 25 in q2 we deliver a more or less flat growth i think it's a little bit positive which is nice of course of one percent compared to the the the drop there in q2 and today expect services stands for around 32 of the total revenue and we won't expect services to continue to grow but in the long run decrease as a part of the total net sales so looking into the review and give a little bit flavor on that as well and as i mentioned we have 11 in q3 and the last 12 months is also 11 if we look at the split between the segments sweden is growing by eight percent and the rest of europe 18. and looking i mean we are still um a little bit behind our target here and deviation between outcome and expectations are mainly in expect services where we see that yeah the little bit grow growth of one percent or so in in in the quarter the main reason for that is still the same as before mainly affected by the technical development that i mentioned that our platform makes it easier to do implementation integration customization which is very positive from our customers point of view But of course, it's also that we are affected by the macro climate where we are having a harder time. And still, that's true, making sales towards existing customers, even if Q3 was slightly better compared to previous quarters. So looking at the last 12 months, we grow 11% in Sweden and 12% in the rest of Europe. So Anders, let's talk a little bit about profit.

Thank you. Then go over to the profit slide. We have the adjusted EBITDA in the quarter. Third quarter reached 25% compared to 24.8% for the same quarter the year before. The increase in EBITDA margin in the quarter is mainly driven by a higher share of recurring revenue in relation to total revenue. Looking at the last 12 months figures, EBITDA amounted to 183.5 million compared to 164.5 million. Last 12 months, adjusted EBITDA margin amounted to 25.1%. Thus, we continue to deliver an EBITDA margin in line with our financial targets. Going over to the OPEX development, personal expenses in the quarter amounted to 90.1 million SEK, an increase of 8%. The increase is explained by a higher number of employees compared to last year. Last 12 months personal expenses amounted to 422.5 million SEK, an increase of 11%. Adjusted for the acquisitions of Sportadmin and PlanPlan, the last 12 months personal expenses increased by 8%, which is again explained by a higher number of employees. The increase in personal expenses both in the quarter as well as last 12 months reflects our continued investment in staff and employee activities that enable us to further grow our business both in the short and long term. Then on the right hand side, you can see our operating expenses. Operating expenses in the quarter amounted to 34 million compared to 26.5 million last year. The cost is higher compared to last year, but is in line with previous quarters this year. Operating expenses last 12 months amounted to 131.2 million SEK, which is an increase of 15%. Adjusted for the acquisitions of Sportadmin and PlanPlan, the last 12 months increase amounts to 13%. The remaining cost increase primarily reflects investments in marketing and sales activities to support our international expansion journey. Furthermore, expenses related to growth, such as cloud and hosting services, product-related licenses and IT systems, and the larger workforce also contributed to the increase.

Perfect. Thanks a lot for that, Anders. And last slide before we jump into the Q&A. And as you can see, we have the last 12 months a growth of 11%, and that could be compared then to the medium target of 18%. We reached an EBITDA margin of 25 over the last 12 months, more or less in line with the target. Net debt in relation to EBITDA is 0.6 compared to the goal there of 2.5. And as for 24, we have a dividend corresponding to 60% out of net profit compared to the goal of at least 50%. So more or less to sum it up then, and starting with zooming out a bit, I would say our goal going forward is clear. We, of course, want to strengthen growth. I'm happy to see that we are moving in the right direction here and making improvements in Q3. Two, I think that we would like to increase the recurring revenues over time. And three, that we would like to continue to deliver mission-critical value to our customers across Europe, especially focusing on specific verticals. That's the long term. Zooming in a bit on the third quarter, we see, which I'm really happy about, that good levels of activities towards our customers direct after the vacation period, several nice deals and strategic important deals, both domestic and international. a modest increase to willingness to invest among existing customers, and that we are seeing that we are continuing already this quarter to do the shift towards increased recurring revenue. I would say that all of these are things that I feel that, yes, let's continue doing them and bring with us that into the last quarter, and that will help us to close the year in a good way. So let's thank you everyone for listening in and let me go over to some questions.

Yes. And we have one question. First question coming in. How large is the German deal on average compared to the Lime in Germany? Can you take that again? How large is a German deal on average compared to Lime?

No, but I think that in some areas, of course, it depends on the segment. But I think we are referring to this utility deal. I think that we see more or less that it's double size compared to many of the deals that we do on the domestic market, which is of course very positive for us. We see that in the German market, it reminds a lot of the Swedish market or maybe also the Norwegian in one way or another. But we see a little bit like shorter sales cycles, which is really strong. We see that, as the question was about, the deals are bigger. And we also see that we have a very big market on the German market.

So I think all these three is positive. Okay, next question. Shouldn't you increase your investments into Germany considering the momentum there? Good question.

Yes, we should. And that's something that we are working on. So we would like to increase both on sales and on consultancy when it comes to implementation, because it's really important now in the beginning to really like, of course, it's always important, but to really help our customers holding the hand throughout the process and be close to the customers. So we need to both increase capacity on the sales side, And in expect services. We have also more or less hired more now a local marketeer that can help us to build on this going forward. So I think that I totally agree. Investment should be focused on that area. And that's something that we are working on. Looking into the recruitment, of course, we have a stronger brand on the Swedish or Nordic market from a recruitment perspective. Therefore, we are actively looking all the time. It's more like more outbound in that area. and still i think it's really important not only to look for resources but continue to build a really strong foundation when it comes to culture so even if we would like resources now don't stress it we need also to build a great company over time perfect um next question then do you think the better activity among existing clients that you saw in q3 could be specific to this quarter or a sign of better times ahead I mean, of course, you are always optimistic in that sense that you always hope that this is something that will continue. I think that we've been hoping that for a very long time period now. If you go back like six months or even 12 or 18 months back that, yes, now we see something changing. What I feel that, yes, we had a better momentum, but I think that we just need to focus on the things that we can impact. And that's better facing in expect services, staying close to our customers all the time. That's when we help our customers at our best. Sales side, we focus on activities, customer meetings. And one thing that we've done a little bit different now in Q3 was more fairs in all all our business units. So it's hard to say if the market will stay in this shape or even get better or worse.

Next question. There was a good growth in expert services outside Sweden during the quarter. What would you attribute this to and is it related to any specific markets?

Now, but it's more or less that when we do good deals, we've been doing that both on the Norwegian market, we've been doing it in Germany, we've been doing it in Finland. I think, of course, that helps out to gain growth on the expect services side, which is very positive. Something that we see in that kind of kind of area where I I'm happy to see the progress in these three markets that I said, I still think that we can do better both on the Danish market. Now we have good progress with the deals that we closed, uh, the two membership organization, but that's a market where we can have, uh, uh, more pacing. And also if we look at the market in Netherlands, that's also one market where I, I think that we can improve going forward, Norway, um, Finland and Germany from a LimeCRM perspective, I think we see better progress.

Okay, next question. Can you elaborate on the cash flow from operating activities in a quarter? Yes, the difference is primarily explained by the changes in working capital, where the corresponding quarter last year was positively impacted by calendar effects. um specifically as june 30 last year fell on the weekend some customer payments were received in early july which benefited cash flow in q3 last year um in addition cash flow in the quarter was negatively impacted by approximately 5 million sec related to paid social security costs following the completion of the share savings program this year let's see next question Yep. You are quite optimistic regarding both new sales activity and demand from current customers. Is this mainly due to a general improvement in the market or rather a result of things Line has done?

It reminds a little bit on the last question, but I think that we should be proud on actually how we act, because I think that's the difference on how you restart the organization is very much up to yourself after when you come back from vacation in August. And that I would like to really praise, I would say, the organization for having that kind of, you know, starting with competition, starting with a high level of activity already more or less from the first week back. So that's something that I think that I'm really proud of. As I said, we saw a little bit signs that, yes, the market is growing. is a little bit better towards existing clients. But I also think that we should be humble to that and say, okay, let's see if that's one quarter, if that's something that will continue going forward. So I leave that for now. Let's see if we have some, maybe a final question here. Yes.

This one here. Sweden grew 8% year-on-year, while the rest of Europe grew 18% year-on-year. Do you feel like these are normalized growth numbers for each region? That should be expected going forward as well.

I think, I mean, in some markets, I mean, Sweden stands for still the majority of all revenue. So I think it's, of course, that's the big part. And if some deals are done, in and also big implementation projects are done in the rest of europe that will of course affect the growth numbers uh going forward on these markets as well uh so um but but normally i mean we should should have a higher growth that's what i expect that we should have a higher growth in rest of europe compared to the the swedish markets and that's the the fuel that we put in and that's the market that should serve us for a very long time when it comes from a growth perspective still i think that the swedish market has has a lot of growth potential as well but since the other one comes from smaller numbers i think that of course should be have a high growth Good. Thanks a lot for listening in. And I mean, if there is more questions that you feel that you would like to have answered, never hesitate. Then you can just give me or Anders a call or send an email and we will get back to you as soon as possible. So thanks again for listening in and see you soon. Bye bye. Thank you.