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Good morning, everyone. And welcome to Lime's First Quarterly Report in 2020. My name is Erik. I'm the CEO at Lime. And also, Magnus, our CFO, will be presenting today.
Good morning.
So let's start. And what we do is that we develop and sell CRM software, and we do that today in the Nordics. We have offices in Lund, Gothenburg, Stockholm, Gävle, Oslo, Helsinki and Copenhagen. We are about 275 employees. And soon, we will enter Netherlands as well.We have had a long history of profitable growth, and we are as [ fast ] as supplier. And today, approximately 60% of our net sales are recurring. We are not doing this with one customer. We're doing these with many hundreds of customers every year. We have a sticky customer base and more than 5,000 customers in total. And we have a strong corporate culture. We are a value-driven organization, with high engagement among our employees. And today, more than 20% of the shares are owned by the employees. We have the skin in the game.The last 12 months, we have reached SEK 305 million in turnover, and SEK 76 million EBITA.The agenda for today. First, we will look into the first quarter, the order intake, the revenue and the profitability. And after that, we will look forward and look into the situation around COVID-19, the strategy going forward and, last but not least, a summary, going through the financial targets and a short summary of Q1.So let's start with the order intake and the deals during the first quarter. The customer concentration is going down. And today, the 10 biggest customer stands for 8.2% of the revenue, and the biggest one stands for 1.1%. We have had a good order intake during the first quarter, a good mixture between small, midsized and large enterprises and also a good mixture between the verticals and the margins. To mention a few, Bostadsfrmedlingen, a big one, a public tender in Stockholm and in Sweden, in the real estate vertical; Miva, EDP, 2 deals in the utility sector; Grønn Jobb in Norway; Scanoffice in Finland; and Koenigsegg, Lindab, Bostads Förmedlingen strong global brands, and they are new customers during the first quarter. So good order intake.If we look at the net sales then, the annual recurring revenue had a growth of 19% during the first quarter compared to the first quarter, last year. If we look at the revenue streams, we can see that the subscription increased by 30%, good growth. The service agreements on a flat level stands for 14% today and upfront license decreasing, down to 2%. We had a good growth in expert services. And still, approximately 70% of the expert services revenue coming from existing customers.Total growth of 22% during the first quarter, organic 15%. If we look at the last 12 months, 19% total growth and 15% organic growth. If we look at the split between the segments, Sweden and the rest of the Nordics, Sweden had a good growth during the first quarter, 19%; and the rest of the Nordics, 33%. They are more affected than compared to Sweden because of the strict regulations they have in those countries. The last 12 months, we can see that the organic growth, 14% in Sweden -- sorry, the total growth in Sweden, 14%; and the rest of the Nordics, 47%.Let's proceed to the profitability, Magnus.
And if we then look at the EBITA margin, you can see that, we reached 28% in the first quarter of 2020 compared to 20% in 2019. And the last 12 months, we reached 25% compared to 22% in 2019. The increase in the EBITA margin is stem, mainly from 2 reasons. We have the increase in recurring revenue that we've mentioned before. We'll most likely increase our profitability going forward. But also, we have had some effect on our operating expenses due to the COVID-19 restrictions imposed by governments in our different markets.And if you then look at the right-hand side, you can see our rolling last 12-months EBITA margin. And as you can see, we've had a stable margin of around 22% during the last couple of years. And as we've mentioned before, the increase in recurring revenue will most likely increase our margin going forward. And as Erik mentioned many times, we would like to use that to invest in future growth.And if you -- if we then have a look at our operating expenses, you can see that our personnel expenses grew by 11% in the first quarter and by 13% rolling 12 months. But as you can see, as a function of net sales, the personnel expenses decreased and was 56% of net sales in the first quarter.And if you look at the right-hand side, you can see that our operating expenses grew by 2% in the first quarter and was flat last 12 months and again a function in the first quarter of government restrictions. For example, travel bans and restrictions regarding group gatherings and so on.
Thanks, Magnus. Let's look forward now and the situation around COVID-19. And the big question, are we affected? Yes, we are. We feel and we talk to customers, a lot, that are affected. And some of the customers calling us and ask to postpone their projects and cancel the projects sometimes. We also see some decrease in chargeability. We have chats and talks and meetings with our customers to help them to -- with the payments and the payment terms, and we try to be a flexible supplier. And we also see that some of the customers ask to downgrade the number of licenses. And from the second half of March, we also see that the volume intake from new customers has decreased. So we are affected.We have been through 2 tough crises, before. And the IT crisis is 2001 and the financial crisis, 2008. And we handled those crises, both with profitability and growth. And today, we are more prepared to handle our recession than -- then compared to then. Today, we have more recurring revenue, approximately 6%. We have low customer dependency, a lower customer concentration. And today, we have 4 different verticals. And 3 out of 4, utility, real estate and wholesale, are not so much affected today. Consultancy, very much affected.If we look at the strategy, we have handled the 2 other crises: the IT crisis and the financial crisis, with a tiger mentality. For us, a tiger mentality and a tiger attitude is that you have a growth mindset. You keep on investing in sales and marketing. You have a proactive behavior, trying to come up with new ideas, new innovation, new products, new campaign to acquire new customers, to gain more money, revenue into the company. For us, we don't need to work less hours during the crisis, we need to work harder. And that's the plan to keep everyone on board in the company.We try to do this ourselves. The plan is not to ask anyone else for help. No grants from the government. So the plan is to do this ourselves, to achieve the growth mindset, and use our profitability to invest in long-term profitable growth. For us, that's our tiger mentality.I'm really proud, how we have handled the crisis so far. To date, most of our employees work remote, with Teams and other digital tools. We are prepared to work remote. We do that and also before the COVID-19 situation. We have stand-ups, cooldowns, we have lunch meetings, we have coffee breaks, together on Teams. We do that to keep up the productivity, to be efficient, but also achieve the social interaction and keep the team spirit in the groups.We have a proactive behavior. We're coming up with new campaigns, new products, new innovations. And we are very close and achieved the team spirit in the company. We keep the engagement level, and we communicate a lot. I think, we need to be doing this with persistence, long term and we need to keep up the energy.The plan is to keep our strategy, achieve the growth mindset. The plan is to continue to invest in Norway, Finland and Denmark. The plan is to achieve and remain the strategy to expand into Netherlands.The plan is also to create more value for our customers, create a stickiness in our products, and we will do that by selling new licenses, add-ons and expert services through our existing customers. We will also try to move some of the customers over to our SaaS offering, according to the strategy and the plan.We will continue to invest in new functionality in our products to acquire new customers. And we know, there will appear opportunities during the crisis, for example, like acquisition and recruitments. And we will evaluate those opportunities. And hopefully, we can do some of them. We will keep the strategy to focus on our verticals.If we look at the financial targets, the sales growth should be -- the organic sales growth should be above 15%. The last 12 months, we are in line with the target, 15% organic net sales growth. The EBITA margin should be above 23%. Today, we are at 25.1%. We are above the target, and we would like to use this profitability to achieve the tiger mentality, to achieve the growth mindset. We will prioritize growth before profit also, going forward.The capital structure, the net debt in relation to EBITDA, should be less than 2.5. We are at 0.7. We have the opportunity here to do acquisition, for example, with debt.And the dividend policy. The dividend policy is to pay out 50% of the net profit. The proposal from the Board is to pay out 51% of the net profit, corresponding SEK 1.5 per share. We have decided to postpone the Annual General Meeting until end of June. We will have to follow the situation and how affected we will be by COVID-19, before we decide if we pay out the dividend. However, the plan and our proposal remains, until anything else change and we'll communicate anything else. We will also keep our financial targets, keep the growth mindset, until we say something else.Next, we got summary here. Growth. A good growth during the first quarter, 22%. The profitability in a good level, and this is good because we need this, going forward to keep the tiger mentality, 28% EBITA margin. COVID-19 situation and the impact, we are affected. Customers postpone their projects. We see the churn increases and customers ask us, if they can get better payment terms.However, we have handled the crisis in a good way so far. But we need to be persistent. We need to keep the energy. And the strategy going forward, we will keep our strategy, keep on investing in sales and marketing, recruitments, new offices in Netherlands and we would like to use the opportunities that appears during this crisis, keep the tiger mentality.Let's go over to the questions then, Magnus.
Yes, we have some questions from Predrag. So here it goes. You make some very interesting reflections in the CEO statement. Can you briefly give us examples on how you strengthened in previous crisis?
We used the profitability, both during the financial crisis and IT crisis, and we did more recruitments than we did -- than we planned, actually. And we saw that the profitability went down. But when everything turned around and then the market went up again, then we are growing faster than the competitors. So that's one of the things we would like to do.
And we have a follow-up on that. You alluded to be improving this summer on this, as well, and your margin today gives you headroom. What will you invest in?
As I said, recruitments, acquisitions, 2 examples. And we will continue to invest in our products. I believe, that there would be -- give us opportunities to recruit even more developers, going forward, and then we can keep on investing in new functionality, both for our existing customers, but also new ones.
And can you explain the drivers behind the 28% EBITA margin? What was the driver behind this? Which of the categories are pushing the margins to this level?
Would you take this one?
Yes. As I said in the presentation, 2 main factors, increasing the EBITA margin in the first quarter. We have the increase in recurring revenues, but we also have cost reduction, you could say, compared to what we planned and in relation to restrictions imposed by government. So less travels, less sales meetings and, to some extent, less consultants used and so on.
And we try to spend wisely also during our crisis. So we are taking care of our costs, and we have done that also during the first quarter and overall.
Could you elaborate on the effects and the different verticals you target?
Yes. As I said, we can see that real estate utility, they are not so much affected right now. We do deals, new deals and the projects, our customers have planned. They proceed it according to the plan. If you look at the wholesale, it's a big vertical, a big segment, and it's a little bit -- depending on what kind of industry you are in the wholesale vertical for us, but they are not so much affected right now.However, the consultancy firms and the technical consultancy firms, they are very much affected. So what we see there is that they decreased the amounts of expert services hours they buy, and also the licenses. And they are asking for better payment terms as well.And also, when we look at the small businesses, they are much more affected than the mid-sized businesses. So we try to think and try to focus on industries -- in the companies in industries that not so much affected and also in regions not so much affected right now.
Can you elaborate on the exceptionally strong cash flow in Q1? I guess, that's mine.Yes, it's, of course, the EBITA during Q1, but also we had a relatively strong development in net working capital. So those 2 together, creates a good strong cash flow for us.
Good. Okay. Anything more?
Should we do -- can you say something about current trading now in Q2?
Okay. We will not do any forecasts going forward. What -- as I said during my presentation, we will keep our financial targets until we say something else, communicate something else. And as I said, we have felt a decrease in order intake from the second half of March, especially from new customers and some decline -- decrease in the chargeability as well. So it will be a much harder quarter, the second one and also the third one, probably. But we keep up the pace, I think, in a good way, but we are humble. And we need to do -- keep up the pace persistent in the long term and keep the proactive behavior. And so...
And the final question, what churn levels do you see now?
We see -- we, as we know, measure revenue churn when -- and we're looking need, of course -- we're looking into the revenue churn more or less every day now. But the numbers are still pretty good, and they are on the same level as the levels we reported last quarter. So we don't see any big gap in the revenue churn today compared to one quarter ago.
Okay. That's it.
Good questions, I would say, and thanks for listening. If you have any more questions or if something else, don't hesitate, give me a call or send me an e-mail. We are available here 24/7 in this tough period, and we try to be as transparent as possible. So have a nice day and talk to you soon. Bye.
Bye.