Litium AB (publ)

Hello and welcome to today's broadcast with Litium, where the CEO Patrik Settlin will present the report for the first quarter of 2024. After the presentation, there will be a Q&A. If you have any questions for Patrik, you can send them in in the form you see to the right. With that said, I leave the floor to you, Patrik.

Thank you Ludwig and welcome to all participants. My name is Patrik Settlin, as Ludwig said, and I have been CEO of Litium for about four years now. I have our CEO Malin Bodolda with me in the studio, who also picks up questions that come in the chat. During the Q&A session, we pick up questions in the chat and then we come to the Q&A session at the end of the session. We run a new project. If it's a new shareholder with us, who doesn't know Litium so well, we do a flyby over the company, what we do and what we're good at, before we dive into the Q1 report and then we go through the whole thing with a look forward and a question mark. So, let's get started. For those of you who know us, you know that we are a tech company in e-commerce or in commerce. Our product is an e-commerce platform that is in its natural modular and adapted for advanced digital trade. We simply help companies become good at digital sales. The product itself is like a construction site, where a lot of the products are made by the box and driven by advanced digital trade. Then it is customized together with our partners, our solution partners, we have 40 in the Nordic and in the European world, which adjusts the construction site to the exact needs of customers and their business logic and the uniqueness of the brand. So, Litium Commerce is like a construction site that you use to customize your user experience and sell as much digital products as possible. You can use these parts of the product in and of itself. The main components are PIM, which is very central to all the solutions of advanced nature, and we use it to harmonize product data, collect images, texts, white papers, and different aspects of the video that we need and how these products are related to each other. We talk about complex products. Then we have a sales module that allows you to use product data to make decision-making decisions on the right basis and all commerce logic to bring it back into the business system. Then we have a CMS with a presentation team and global series that have worked to quickly roll out different languages and and everything that is needed to sell digitally on a global scale. So, a little short review of the platform. We have an electric customer that has found us, it is about 200 customers and it is growing at a steady pace, which is in what we call the mid-market segment. The platform is adapted and a solution for customers who sell somewhere, maybe 50 million up to 10 billion. There is no limit to platforms like that, but it is good to sell at much larger volumes than that, when it takes care of a lot of transactional load and has very high performance regardless of how much you throw on it. But now it is adapted for advanced digital trade, not for the smaller ones, they may be satisfied with a smaller solution and not so many products, not so much market, not so many customers, etc. But when you get to a level, it takes something more to be able to drive it, to make it effective, to really get the scalability in the digital market, which is where you want to be. Our customers sell all over the world, so the platform is global. It is good customers who sell in Europe, of course, in the north, but also in the United States, South America, China, the whole world, really a win-win with a lithium solution out there. About 40 solution partners, which are most prominent in digital trade in the north, we have with us, who customize the solution, take it here, we deliver everything out of the box, sometimes they are close and it goes fast in the project. Sometimes you want to do something that is specific to the adapted logistics, to the business logic you have in the company, or that you may have a lot of legacy in your text, so you have to make different adaptations for integration, etc. So that you can get the maximum effect of your investment in digital trade. Through the platform today, we have passed a good bit over 20 billion dollars, which flows in volume on a yearly basis through the platform, so it is a pretty large chunk of Nordic trade that goes through the lithium platform. A little bit like that, then we have a little logo wall here, and there are some of our customers that we work with, and it was also shown with this, the whole range from the left side of the B2B and on the right side of the B2C actors. The business models differ from the manufacturers, business models go to markets that are often built on the sales of relations to -to-consumer, and those who are moving forward, the limits of what e-commerce is, and define it almost every day. For example, we have a company called Revolucion Race, which is very far ahead in its digital trade, born as a native, and works with -to-consumer business models. This shows a little bit of the whole spectrum of the customers who choose to use lithium for their e-commerce, to take on their digital business. The platform itself is very versatile and can handle all kinds of different business models that are out there. Then we have a large inflow of B2B customers in recent years, and that is mostly due to the fact that there is a strong change, a digital transformation on the B2B side, which is coming at a fairly strong rate. Now we can see that there are companies that are growing in strength, and that you may be a few years behind the B2C to look at if we do that, but at the same time there is another sport on the B2B side, because digitalizing the sales of relations is different than digitalizing the transactional volume sales that are often on the B2C side. But the lithium platform solves this in a good way together with our partners. I want to pay attention to bringing up some customers, but this time on the previous side you may have recognized a lot of logos, if you are Swedish at least. I want to bring up one of our Finnish customers this time, Dermot Cil, who sells beauty products online. He recently won the best e-commerce site in Finland, super cool, in front of the very prominent brand in Finland. As a Swedish, I know a few quickly listed right, Marimekko for example, which is a very well known designer brand. Verko Kauppa, who I come from, is the biggest corresponding actor, who perhaps is Dustin and Kompletta in Sweden and the US, Verko Kauppa in Finland. They are the backbone of Dermot Cil, this research, and they are from 10,000 customers, so they are very statistically well developed. So it's really fun, and a big congratulations from us to you on Dermot Cil, and a big congratulations also to the partner Cloud9, who have done a fantastic job together with the customer to set up the solution. Also a little extra fun, because they have gone up to the lithium commerce cloud relatively recently and have shown fantastic, nice KPI improvements with performance and sales after the change, and now also the prices are at the top, so this is very cool. I also want to push for our own report about digital trade in B2B in the Nordic region, which we released this Monday, and it has already been downloaded hundreds of times, and I can recommend those who are interested to read in. This is a lot of different types of insights that you can take and unpack, but some of the primary things are that the driving force, for example, for B2B has changed a bit. When talking about digital trade and B2B, we have often focused on the effectiveness and internal, like eliminating internal administration, making it more effective, self-processing and so on. It has been the primary driving force for many years, but this year we see a shift, so now we are looking for more to increase sales, so this is a trend, a change in attitude, which I think is very exciting when you look forward. You really start to be able to count home investments in the form of increased value that you create, so that you can make it easier, faster, at a lower cost, go in and break new markets, for example, deliver a better customer service, better customer relations digitally than you can do in a low way, or complete your regular sales with a strong digital presence, and then you get a much better impact. And this is driving forces that have increased in value for B2B decision makers out there, and it is a clear trend. So if there are a lot of things to look at in this report, I recommend you look at it, and another big thing is that optimism is really back. You see that digital sales growth should both increase faster and with higher growth rates, and if you are prepared to invest more in digital trade than you were just a year ago, so that it has happened, thanks to the macro economy has changed a little better, so the will to invest seems to have returned. Maybe not surprising, but still worth noting. Alright, then we will dive into the Q1 of Elysium, and we had a good start on the year, if we look at the financial figures. To begin with, we have set a new financial goal for this year, and it was to deliver positive EBIT for the whole year 2024. We took a strong leap towards this goal with the results of the first quarter, and now we had a growth of 15% on turnover. We increased to 17.7 million, and I really think it is worth noting that we have 100% of this turnover of recurring characters and repetitive sales. At the same time, we managed to keep the cost flat, or even reduced by 2%, which makes it a very attractive combo of turnover and reduced cost, which of course shows a strong scalability in the business. Looking at the results, EBITDA marginals were up to 22%. It is a rather sustainable level for a company of our character, but we aim higher than that, definitely. But it is still a good step forward and a big improvement compared to last year, at around 4%, I would say. Looking at the absolute numbers, EBITDA and EBITDA both improved quite a lot. We were at 4 million on EBITDA and soon below the zero line on EBITDA. Both were strong improvements. On the EBITDA side, it was the fifth quarter in a row that we improved, and we landed in the lead with an improvement of 9 million, and we are still in the same pace here now. So it is a pretty strong march forward here, in line with the goals we have set. The cash flow is a fairly stable quarter, so we managed to deliver on last year's financial goals, which was to become cash flows positive in Q4. We did, and now we have introduced this year as well. It follows, of course, until we are able to deliver the shares, but it is still a sign of the strong stability. We are on a very good platform to work with self-financed growth forward, which we are. Looking at the business a little more operatively, we have launched the Lithium App Cloud, something we believe in a lot. It is a new structure, a new way of thinking, a marketplace where you can, as a customer, quickly and easily connect different types of third-party services to your Lithium platform. This is something new for us, we believe in it a lot, and we have started here, and the first one that came out as a public was an oil company called Enlink Oil. We ran a webinar with them this morning, and there were almost 150 participants, and it was received very well in the market. We believe in it a lot, and you take down project risks and integration costs, everything becomes much more easy to access and the supply for customers. There are something we really look forward to, we have the opportunity to see how far we can take Lithium App Cloud. Looking at the market, as I was talking about the B2B reports, optimism and investment will are back in B2B. Here they have not been as affected by macroeconomic situations and the low growth that has been for a while. Of course, the order books may not be as deep and broad as they were two years ago or one year ago, but at the same time B2B continues to report nice numbers and strong future goals. B2C has been another five, but here you also see a lot of positive signs, of course, where we all follow macroeconomic development, low economy, the rent can come down, the purchasing power can come back, thanks to that inflation is on the way down in good pace. But there may also be concrete things like that B2C trade in Sweden was up 11% in Q1, now there was a difference between the months, so you should not really shout hello yet, but if we also get a good Q2, then we can say that we have overcome the B2C side and that it should turn up there too. At the same time, as you see different expectations on the purchasing side of B2B and on the B2C side, you expect a better year 2024 than 2023 definitely, and that you see a US up to 2025 thereafter. So things are pointing up and the market is about to turn, at least our feeling. Then the last point is that we have changed the calculation model for ARR to better represent, it was a bit like Commerce Cloud and our business model now really delivers on. I will dive in a little more on the next page when we jump into the financial key words a little deeper. So here, the new ARR model, the figures are historically adjusted according to the new model. We have had a model earlier that was that our fixed rate of income was 12 months forward, while our mobile rate of income was 12 months backward. And we also had a change in the coefficient that it was compared to the corresponding period of the previous report. And then you think it's like a delta and add to the mobile income 12 months backward. So as you can hear, it's pretty complicated and what's primarily a bit of a mess is that you look forward on one income level while looking back on the other income level. And this is nothing that is taken into account in practice among us companies, so to be more comparable, a big reason that we want to change that. So we have chosen to take a model now where we look at our repetitive incomes, both the mobile and the fixed 12 months backward in time. It is most representative of the business model we have in the Lithium Commerce Cloud, which builds more and more on the mobile income, more and more automated upsell in that, given that it is paper performance for customers and so the mobile part of the income mass is going to increase. And this is the usual way. A SaaS company, there is no defined standard in this, but either you just take a fixed rate of income and look forward, it's a normal 12 months. Or if you look back, you take everything we do now, the whole 12 months period, which is an annual recurring revenue, so it's the most actual 12 months. Or the last quarter, take it once every four or the last month, once every 12, so that you get a normalized income. In any case, we have changed to look back on 12 months in time, which I think best represents the Lithium Commerce Cloud business model and as we look now and become more comparable with other SaaS companies, which we think is an advantage. And the ARR, according to the new model, was up 71.1, pretty nice growth here too, 10% growth year over year compared to earlier, and then it is a historically adjusted number. So good here too. Hoping in and look at income and gross marginals, the blue column represents income in crowns and the green dots in the middle of the columns are the gross margin. Income when it was in the bottom, 15% up, so it was a strong quarter, so 100% recurring is also a strength. If you look at other SaaS companies, many have either a consulting or different kinds of services packaged or on top of their turnover, but we are completely clean, we are pure SaaS, so we are only on the product and only recurring income. In this mix of income, this time around 85% was fixed income and 50% was moving. And then the moving, we think, will increase when we look forward here. So that when we go forward in time, the mix of this will change a bit, then the moving will grow and take a larger part of the mix. The gross margin is a little volatile in our world, on a whole year basis we are around 70% and this time it was a good improvement compared to last year, it was 66% and now we are almost 69% in the gross margin. So it's pretty normal numbers like that. And then the app cloud release and that we have gone up in service technology, that we think we will be able to lift the gross margin here over time. One three or four points up to -74% from the normal 70% if you look at the year basis. So that is something we of course follow and will talk about. So that's where we aim. In terms of profitability, here we have OPEX, the cost on the blue stacks and the green dots are marginal. So Q1 2023 to the left and Q1 2024 to the right. Here, as I already mentioned, we have flattened out the cost mass in the highlights, which is largely the same as the quarter before. So there is the effect of the efficiencies we did primarily last year, where we trimmed the business and made it even more scalable, but something we have worked with, or work with continuously, just as you should do any business. But we are very focused on making our business as scalable as it can be. So it is of course a strength to be able to keep the cost mass flat, while increasing your growth by 15%. And that is the type of profile we want when we move forward and something we actively work on to get to. And we are doing pretty well with that now. The EBITDA margin, as I mentioned, is up pretty good from last year, 22%. We are definitely aiming higher here and so that we can reach it. And in absolute numbers, EBITDA has improved to more than 2.8 million, to just below the zero line, minus 0.3. A good step towards the goal of the year, so to be positive at EBITDA level. The difference between EBITDA and EBITDA in our world is in product investments. And here we see how they have moved from last year to this year. We are largely at the same level here as well, it has dropped by 10% in the quarter. But that is something we continue to invest in our product, our platform. It is something that is incredibly important to us in the long run. We have big ambitions and it requires product investment to get there. This level, we have something good now, but we are definitely aiming far higher and want to become a better and much bigger company than we are today. Product investment is of course important to us. What is also important is our financial position. And the cash that I mentioned at the highlight, we have almost put flat in the cash from the start of the quarter to the end of the quarter. This year, which is according to the plan and good of course. So the combination of being very close to profitability at EBITDA level in Q1 and that we had a strong cash when we started, that made it possible for us to have a very stable platform to drive forward. We are self-financed and we have enough resources to invest in where we believe in the bets we want to take and the growth we want to invest in. So that feels very good. So that was the highlight about Q1. Just to skip over the questions in the chat, I can pick them up in the Q&A. Before we go into the Q&A, I just wanted to take a little glance forward here. If we start with resistance to the business, we have four main points. The first is that our business model makes us very resistant to all kinds of turbulence in the economy. The SaaS model and 100% of our revenues are repetitive. So it's a strength and stability. We have high stickiness in our product. When the customer, we have a lot of functionality out of the box, but when you have customized it to your needs and are happy with the performance, it's not a reason to change as long as you're happy with it. You're invested in what you've built and what you've invested in monetarily. It adds to the stickiness, but that's mainly the customer satisfaction, that you're happy with the delivered value you want or even more, that's the most important thing. We have a very low profile when it comes to looking historically. We have a very strong position and a good product market fit and good traction, good stickiness in the B2B market. The B2B market has been less affected by the macro situation in general. Digital transport has also been going for a long time, both B2C and B2B, but the trends are a little stronger now in B2B. There are more companies that are looking beyond their -to-market, how to make it more effective and how to digitize their relationship sales. B2C has both come a little further and have struggled with some other business challenges in recent years, which is that you may have to wait a little longer with that type of investment until you get out of this conjecture, which we are on our way out now, so that it can probably be more speedy for B2C as well. B2B, that we are strong there, has been a stabilizing factor for us in the business. And then the cash flow again. We were the cash flow of Q4, we had a stable cash flow throughout Q1. We have a strong trend on EBIT, it was 50 kV today, it improved EBIT and quite a lot, and was the goal just to stick to the direction of all those who are watching us. It is clear that we are not here to do new missions or anything like that, we are self-financed, we have our own growth, we own our own profit, and that is something we see as a great strength. And something we want to use in the future to grow further, of course. So a solid platform is a financial help to grow further. So good stability in the business, we look at growth opportunities and things like that, scale up, become more profitable. Then we have Lithium Commerce Club, our platform and product, it is top modern, it is completely refactored, it is all about functionality in this structure. It is modular, as it has always been, it delivers speed and flexibility to our customers so that you can both get out fast on the market, but also get out on the market at a very high level. You can adjust it to advanced tech stacks and products that have been built there earlier, so you can use flexibility, not to adapt to your exact business needs, if you wish, but you can also use it as much as it is and get out at a very high level. The value-added product itself in Seiden gives both the opportunity to increase the value of more sales for our customers, while also being able to make your internal processes more effective. So you can both make money and save money, or both at the same time, as most of us have done. No matter what the current situation is, there is something that our value-added product delivers to our customers. We have released a number of new technologies lately, we do that all the time, but this was a little more of a milestone, something called serverless technology, which means that we can drift all our customers, making our customers much more efficient and more dynamic, so there are nice worlds for us all. And as an effect of that, we can also release a new app cloud, which is a new way of picking up third-party services to your Lithium platform. This also allows us to open up a new revenue stream that we think can add revenue to us over time. So it works to improve profitability from both sides, both by reducing costs and increasing the ability to add new revenue to us. So that's good. Then we have our business model basically built to grow with customers, and as the market turns now and our customers start to sell more, it will also generate more revenue for us. It's so well-informed, so we have exactly the same goal here. If it goes well for our customers, it will go well for us too. So this is something that is designed in business models, so it works exactly so that we don't have to deal with, for example, manual app sales and so on, but it happens automatically, in the sense that customers sell more and use more of the platform's resources, for example. And the last point, B2B again, we really have a great opportunity in B2B. We are already strong there, we have a strong position, we have a great project market fit, we have a lot of -the-box, which B2B customers typically need to sell and digitize their relationship sales and customer service. The market is big, very big, and the underlying digital transformation of -to-market models has been a bit hidden by connections and so on, but it has been stronger in time and has become even stronger now. And again, if the will to invest is back, and if all actors are primarily B2B, then of course it is a very nice position to have a great opportunity for us to grow further. So, then I'm through here. So just a few takeaways, if you just look at this, remember this about Lithium and Q1, we usually say proofs in the pudding, and this is our pudding right now, our ingredients, and they are both quite attractive, but together they become very active solutions, but we have a slow growth, we have a growth of 15% in turnover, together with a movement margin of 22%, and both are strong improvements from last quarter or year after year. Again, 100% of our income is repetitive, we are clean in our income mass. The market is turning upward, so in the sum of this, we are very well positioned to continue to grow and grow profitably forward. So, questions?

Yes, exactly. Some of these have come in, and some of these you have been in on, but it is not wrong with some of them. But some questions about the investment vision from the customer's point of view, and a comment like, how do you see the investment appetite from the customer's point of view has changed in Q1 compared to Q3 and Q4 2023?

Compared to Q3 and Q4, these changes are gradual, but they are definitely more positive in terms of turnover now. There are more business opportunities, there are faster processes, it moves more out there. We see in our own research the attitude to investing and what you believe in your own business, and the importance of the foundation for investing in any type of product, has increased definitively. And this is very clear on the B2B side. But also B2C, even if not so much happens in a concrete business situation, it is not very different from Q3 and Q4, but it is another phase where you start to look at doing things again in a different way than the phase you have been through. So, upside down, in the investment vision.

Are you satisfied with the existing cost base, or do you see that you can do something different?

Yes, what you put in is satisfied, but the cost base now in the phase we are in, we are satisfied with it. It feels like it fits what we want to do now, the ambitions we have, where we want to invest today, we have the resources to do something on a cost level. Then it was never finished with a cost base, it depends on what we do in the business, of course, and we work with the continuity, we will always do everything. So it will adapt guaranteed when we move forward, depending on what we want to invest in to build growth, but to make it as effective and scalable as possible, if it is above the agenda all the time.

Jess, can you say something about how AppCloud has received your existing customers, and how long would it take for a wide audience to accept

AppCloud?

I have several questions, and now I am a new product, a new value offer that we have put out on the market, but just as I mentioned in the introduction, those who were first out here is a link that has an AI text management service, which is very advanced and good, and fits our customers well. We had a webinar today, there were 150 people who were part of that webinar, which speaks for itself, because there is a kind of power in this, to be able to make the type of attractive new services, newer, smarter ways of doing things in a simple way, so that you don't have to do integrations between systems, and that is clear, so the risk is zero, and the cost is zero to do that. So it is clear that it is attractive and good, and there is a great interest in AppCloud as a product, and the business model itself is not unique, it is like a marketplace, you shouldn't take big words out of your mouth, but if you have a reference, think of Apple App Store, but it is of course a completely different level, but it is the same thinking behind making different types of applications quickly accessible to our customers, to the integration platform. So we believe in that, but we will see how it develops, I don't want to leave any predictions, but we really believe in

that. You mentioned in the report that you have an ambition to present more SaaS key statements in the future, could you give us some previews of what kind of measure you are thinking of presenting?

Yes, we want to do that, and we have had an ambition for a long time, now AR is of course the king of copies among SaaS companies, how much repetitive income you have, and how they grow and so on, but there are a number of good SaaS metrics, we follow all of them internally, but primarily to raise the public, the next thing is to get closer to the next step, the so-called NRL, Net Revenue Retention, which we think is a very elegant copy, so it captures both how well the customer population expands and how the existing customer population develops in terms of revenue, so that is the closest thing, but I can't give you the time, but that's something you will see first.

A little repetition, but what is the most important change in the calculation model for AR?

The most important thing we are now looking at is the 12 months back, both on the mobile and fixed income, earlier we looked at 12 months forward on fixed and 12 months backwards on mobile, which is a bit messy, it becomes like a mixed model, so now this is much more clean and comparable, we think.

When you reach a positive EBIT, how do you want to drive the company from that point? Do you want to continue to invest in sales and organization, or do you think the revenues will grow faster than the costs in the long run?

Yes, I think the revenues will grow faster than the costs, this is more of a choice how much we want to invest in growth, that's the quick answer, and we definitely have the ambition to grow the company, to heaven is some kind of expression, but we definitely want to become a global player and a big company, and we are here to build a machine that creates value for our customers, for our partners, for ourselves and for us as owners, so it's the ambition to create that -win-win scenario, and then we will be really big, so most importantly, if we continue to invest in growth until we reach a high level, we will create a big machine, if we can break into that level, then in absolute numbers we will not have a lot of money, and we will create a lot of value for our interests.

A question about EBITDA and EBIT, the difference between EBITDA and EBITDA is product investments, does product investment include own development and purchase?

Yes, own development and purchase of product development, also if it is the one that is considered with purchase, so it is all product development costs, internal and external.

And how is a lot of what is invested in product investments, adapted to be on a positive EBITDA, or what do you think?

Of course you can do that, but we think that we invest where we believe in, and where we have resources to invest, so that's where the frames around it are, of course, but both things are important, there is no black and white answer, for us it is important to be self-funded in growth, so we have to adapt a little bit after that, but we build where we want and what we believe in, we are at that level now.

Will you increase your KAPEX activities in the future, or do you expect to invest around 21 million SEK per year?

Yes, a little bit the same answer as the last question, it depends on what we want to invest in products, so it will adapt of

course. You have been involved in it, but could you talk a little bit about how the resale goes and looks forward?

Q1 was good, we had a lot of new customers, I can name a few that I have been in touch with, we have for example Sol Elgrosisten, who is very fast growing, I had heard the name of what they do with it, we had 8848 Altitude, which is super cool, I think it's a ski brand and a little street style, we had Agroland, who is sometimes called the men in Denmark, who you could call top of mind, you may have come up with something else. Lex Automotive, they are super nice, Jelins i Gnosjö, they are a lovely and elegant company, we like that. I have just mentioned a few, it was noticed that optimism in the will to invest is returning, and you can see that it is higher business activity that we experience, and it looks like it is going on.

Final question, what do you think are the main factors behind the strong quarter?

There are many things, but it is the team primarily, Lithium and our lovely employees, we who make the same small solution partners out there, that is the root of it all. Otherwise, if you look at it financially, you want a simple answer, but it is because the turnover is growing faster than the cost. As I said, it is the value machine we are looking for, built as a scale for us all, which is good for the customers, which is good for the partners, which is good for Lithium and the stockholders. If you manage to get a win in all those boxes, then you have something that is really, really strong. That is what we have done, that was tasted, and that is what we will continue to do in the future. Thank you. Thank you. If you have any questions, or if you are watching the stream, please send a question to one of these channels, to irlithium.com, or to check out what channels you invest in, on Lithium.com or Lithium.se. Please follow us on LinkedIn, there you will see more about what is happening in the business, new customers, customers go live, other exciting things that are happening in the company, then it is good to be subscribed to our LinkedIn channel, because that is where it will be most of the time. With that said, thank you for listening, and I will see you next time, I hope to see you.