Lime Technologies AB (publ)

Hello everyone and a warm welcome to our Q2 call. My name is Tomas Davout and I've been at Lime since 2017. Started as CEO 1st of January this year and with me I have Anders.

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

Feel free to write any questions in the chat and we'll try to answer them at the end of the session. Looking into the agenda, we will have an overview of Lime and a sum up of Q2. We'll talk about order intake, revenue, profit, and we'll end up with a summary. So let's get started. We have always been running Lime with a long-term perspective, and that has left us with a fantastic footprint. 25 years now, we have grown on average every year, 18%. we've had an EBITDA margin of 25% as an average as well each year. And that's of course something that we are really proud of. The biggest reason I would say what 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 where we operate, 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 no matter the times, if it's been good or bad, our goal has always been the same. And that is to help companies become really, really good at sales and customer care so they can help customers in a really good way. We create value by being a true partner to our customers. We do it by being local, close to our customers, and we combine our software and expertise. And we have two revenue streams, which is the software and the services, the expertise, the AOR or annual recurring revenue. That stands for 68% today and the services for the remaining part. And we've done this for many years now. We started in Sweden. We've grown into the Nordic countries and also taken one leg down in Europe, Netherlands since 2020, Germany since 2021. And now we are present in seven markets. We have 12 offices and almost 500 employees. Across our products, we have more than 7,500 customers and over 1 million users. So let me give you a sum up of Q2. Looking at the number, we have 10% ARR growth, 25% adjusted EBITDA margin, and also EBITDA margin is the same, and 12% organic revenue growth. And on the first bullet, I'm glad that we've been moving in the right direction, basically on all levels. We are now on 10% ARR growth. which can be compared to 9% in Q1, 7% in Q4 last year. The adjusted EBITDA margin is 25.4, which can be compared to 25.0 in Q1 and 24.6 last year in Q2. Organic revenue growth 12% now compared to 8% in Q1. So I'm glad we're trending in the right direction. However, we are not satisfied and I believe we still have more to give. On the second bullet, we continue our traction in Germany. We grow deeper into the utility vertical. During the quarter, we have expanded with some existing customers. We have started cooperations with billing system providers. We've closed a nice deal with Netz Leipzig Stachwerke. That's one of the biggest Stachwerke in Germany. We have also fully integrated the acquisition of one portal and moved the customers to our Lime solutions, which opens up new possibilities to grow with them over time. On the third bullet, we continue to make investments in our AI offerings. During the quarter, we launched Workflows, an AI platform where users can build integrations and AI agents directly within their CRM environment or take help of our services department to do the same. The customer reception has been very positive and we have had record attendance when we have had webinars and customer events and so on. Our Connect AI offering that is now driving the growth in LimeConnect. We see a much higher win rate compared to our last AI offering. And we are expanding both on new customers and on existing customers. And one thing that I'm really excited about is LimeGo Agendic. It's a brand new product. It's built from scratch with the latest technology. It has 30 plus years of European CRM know-how behind it. We shouldn't mix it up with LimeCRM. That's a much bigger and more complex platform. But this is more comparable to LimeGo. It has the same DNA as LimeGo with prospecting, with real-time company data, but now it's urgent. So instead of just assisting, the AI agents actually do the work. They could research accounts, they could prep meetings, log calls, write follow-ups, and the salesperson, well, they should just focus on selling. Of course, human always got the final call if we want to make the acceptance and so on. And now we are in beta. And we're rolling it out. We will roll it out step by step, running alongside the current Lime Go as we see it. Speaking of AI, the world of SaaS is changing faster than ever. That brings, of course, a lot of challenges and more than anything, a lot of opportunities, especially for the ones that have a business that fit well in the new environment or are able to change with a new situation. And I dare to say that I believe that we really are built for this moment. And let me explain what I mean. Three shifts are reshaping the entire SaaS market right now, all at the same time, and all three play in our favor. First, we have the geopolitics. European companies are rethinking their dependence on American software. Gartner, the research firm, they expect that 75% of European companies will choose software based on sovereignty by 2030. That number is around 5% today. We are one of the biggest and largest European players out there. So of course, that is a real opportunity for us. And we're already having a lot of these conversations in our customer dialogues and the processes. Second, we have a generic. Generic is not enough anymore. Companies, they want verticalized, they want customer specific solutions that are built around how they actually work. And we've got a flexible platform, we've always had that, which makes it very easy to make customer adaptions and vertical-specific solutions. And we've also had a bet on the vertical offerings for a long time now, where we build our core offerings. Utility, real estate, membership and wholesale, that is more than 70% of our revenue. So, also fits us very well. Third, we have our AI offering and how we develop together with that. Everyone knows that they need AI, but few knows how to do it in a great way. We have always guided our customers through every tech shift before. If it's internet, mobile, cloud, SaaS, and so on. AI is no different. We are the partner who can help them hold their hands and we help them to use it. We do it in their industry on their terms. Add to all of this our size and our mindset and culture. We are not the global conglomerate. We are not a startup. We are an established European partner with a track record. We have thousands of customers, a lot of experience, and we're small enough so we can still move fast. thanks to both our size and our culture. And that's exactly the supplier or partner that can stand out in these times. All right, so let's move into ordering. If we look at our customer concentration, you can see that it's really low. Our top customer stands for 1% of our revenue, our top 10 for less than 7%. And we've also done some nice deals, so let's talk a little bit about them. If we start in LimeCRM, apart from Statsfac in Leipzig that I've already mentioned, we can also say welcome to Shell, Bayer and Möller in the real estate segment. We are expanding our solution together with BALC to support them even better in their customer journey. In LimeGO, we have welcomed HandyDay during the quarter. and we have both Skellefteå Kraft and Jönköping Energi who have chosen to integrate their Lime Go solution with a Lime CRM solution which they also have so they can work even more seamlessly. In Lime Connect I would like to highlight AXA as a new customer. They're a big Cologne based insurance company and they have more than 1,300 branches and we are just starting with some of them so of course here a big opportunity to also expand together with the customer. For Lime Sport Admin, we can also say welcome to one of Sweden's most iconic sport clubs, Brynäs IGF, which we of course are very proud of. All right, let's have a look at the revenue. Looking at overall growth, we reached 12%, as we've said, Same organically, 8% if we look over the last 12 months, which is 9% organically. But if we break it down by geography, let's see how it looks like. Sweden grew 9% in Q2 and 6% the last 12 months. If we look at the rest of Europe, here we grew 19% in Q2 and 14% last 12 months. So, of course, it's a development also from Q1 and so on, which I said, but also development of the differences here. And as I said before, I'm happy to see that we're trending in the right direction and also that we grow faster in rest of Europe compared to Sweden. It demonstrates that our vertical strategy and our product offering resonate beyond Sweden, and that is critical for our long-term growth ambitions. So with that, handing over to you, Anders.

Thank you, Thomas. So I'll go over the profit. So adjusted EBITDA increased by 16% to 52.1 million SEK in the second quarter compared to 45 million SEK last year. The adjusted EBITDA margin improved to 25.4% from 24.6% last year. Then looking at the last 12 months figures, the adjusted EBITDA increased by 9% from 179 million SEK to 194.7 million SEK, with a margin improving to 25.2% from 25.0%. And now moving on to our cost development. Personal expenses, which is our largest OPEX category, amounted in the second quarter to 118.4 million SEK, an increase of 9% compared with last year. The increase was mainly driven by a higher average number of FTEs and normal annual salary increases. On a last 12 months basis, personal expenses amounted to 443.5 million SEK, an increase of 7%, reflecting the same underlying drivers as for the quarter. Personal expenses as a share of net sales decreased to 58% in the quarter and to 57% on an last 12 months basis, reflecting a positive operating leverage. Moving over to our operating expenses, Operating expenses in the quarter amounted to 36.6 million SEK compared with 32.1 million SEK last year, corresponding to an increase of 14%. On a last 12-month basis, other operating expenses amounted to 143.2 million SEK compared with 123.7 million SEK. The increase both in the quarter and on a last 12-month basis is primarily driven by higher product related costs and 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 continued growth in Sweden and in our international markets. Back to you, Thomas.

Yes. So. moving into the summary and turning to our financial targets. So, as you know by now, we have reached an ARR growth of 10% compared to the target of 18%. Happy with the trend in the right direction. At the same time, we're not where we want to be. We reached an EBITDA margin of 25.4%, which is lower than the 27%, which is our target. As we said on our capital market day, this margin expansion will come gradually over time, and we expect full impact in the medium term, which is around two to four years. The net debt in relation to EBITDA is 0.4 compared to the target of being below 2.5, and that gives us significant financial possibilities to invest in growth going forward. And we are growing earnings per share. And for 2025, the dividend has been set at 4.5 SEK per share, which is around 60 million SEK or 54% of the net profit. And that's above our target of at least 50%. So to sum it up, we keep moving in the right direction, both on revenue and profit. And with that positive trend and a stronger relevance than ever, We will continue to give everything we got to keep the momentum going through the rest of the year to start with, and then hopefully continuing. And with that, we are happy to take any questions you might have.

All right, let's see. So first question here. Can you elaborate on the drivers in, I think I should say, ARR? which grows well in absolute terms.

Absolutely. I would say it is very similar to what we have seen before, where LimeCRM continues to deliver in a good way and it keeps being the engine of our growth and going forward. Also, what I'm really happy to see is that we have a positive trend in all the other three business units that are taking right steps. And we see that in leading metrics, but we also see that reflecting the ARR. So I would say it's a combination of many different parts. And we break it down to the countries. I mean, rest of Europe are growing. more than in Sweden as we were saying and if we if we want to say something there I want to highlight the Germany and Norway who are the the two countries that are contributing most to that all countries are growing but that's where we get the highest growth so that's also really nice to see

Okay, next question. In terms of margin, when can we see higher margin expansion and improved operating leverage?

Should you eye on this? I can start. As we said, we believe that this expansion will come over time. and we we see it as a natural thing and it is driven by the fact that I mean we see the software being a higher part of the total revenue and that has a high gross margin so that will help the leverage of the margin and then we also have AI who is helping us being more and more effective and we don't need to have the same role in the personal expenses, and yes, we are still growing, we're still investing, especially on the commercial sides on recruitment, but not in the same pace that we've done before.

Okay. Next question then. Expert services, which tends to be early cycle, is growing at a good rate, but your market comment is relatively pessimistic. However, the comments focus on the last year rather than the present. What is your current market view?

Okay, so current market view. Well, I stated in the comment that we see a little bit of longer sales cycles in Q2. We don't see a difference in demand and we don't see a difference in the win rate. But we have had a little bit longer sales cycle where it's the decisions has dragged out a little bit longer than usual. And yeah, that's maybe reflecting the market a little bit, but it's nuances. So I would say the market for me, very similar as it's been the last years. And so, yeah, not better, not worse. But as you say, we have been better staffed in our expert services department, but it's more related to also a lot of things that we have done internally and that we worked on when we saw that we had a little bit lower staffing. Okay, what can we do to change personnel around and change focus and so on? So market rather similar to some of that.

Good. Yeah, next question then. Did I get it right that Skellefteå Kraft and Jönköping Energi have integrated Lime CRM and Lime Go? If so, how does that work?

Yes Fredrik, you actually got that right. We have around 50 customers that are using both Lime Go and Lime CRM. And then they have used Lime Go for prospecting and then they've used Lime CRM for customer relationship in the long term perspective or ticketing and marketing and so on. Now, thanks to our new platform that we are having, integration platform, we have a very seamless integration between the two. So basically data can flow much easier than it's done before and that's what these two customers have expanding their solution with.

Okay, next question. EBETA margin increased with 18% compared to Q2 last year. Can we expect margins to keep increasing for the upcoming quarters?

Yeah, so a little bit similar to the question we just had. But I'm happy we're moving in the right direction. And we are increasing also earnings per share. And we're looking at long-term or mid-term, as we're saying, we want to get up to the 27%. And we see that we will do that over the two to four years and gradually over time.

Perfect. So we have another question coming in and it's about the new AI product and it reads, you have developed an entirely new AI product, LimeGo Agentic. What's your view in the potential for this product? And where do you think that most customers will come from? Existing customer base or new sales? And then third sub question into this question is what impact will it have on your revenue?

Okay, I'll try to answer it as good as I can. But we are in the beta phase of this, so it's a little bit early to say. But it is an AI-first product. It is an agentic product. and it's built on our experience from the CRM industry from 30 years experience and we're using the latest AI technology so it's it's very interesting we see big possibilities with it and but it's still a pilot so we are doing it within Lamgo our smallest business unit and but we're trying it now we have one customer who is using it as start to also show it to customers and new customers and existing customers and see what kind of traction that we can get. Perfect.

So next question then. Talking about digital sovereignty trend, in what products and segments do you see the greatest effect of this?

All right, I would say CRM and Connect. That's the two business units where we have most competitors that are US based. It's also where we see that we have most customers in like the public sector that are more and more data sensitive customers, like in the municipalities, utilities, real estate and so on. And one example is that we had actually a tender where we lost it because we had Amazon as our hosting provider. And it didn't matter that we had the servers located in Sweden, which we do, but this is what they wanted. So of course then if they ask that from us, we know that they haven't even looked into the bigger players out there that are American based. So although this is of course sad in the actual tender, this is a really interesting opportunity for us. We already today have a 100% European offering, but we don't have it cloud-based yet. And that's exactly what we're working on now. So we during the autumn can also make sure that we have a 100% European cloud-based offering. And very exciting to see what these will bring us. And when we look at it, we are actually one of the biggest, if not the biggest CRM player in Europe. So yeah, very excited to see what this will be.

Okay, that sums up all the questions.

All right. So then, as always, Don't hesitate to contact us if you have any things you want to discuss further. And with that, we wish you all a happy and fantastic summer.