Litium: No surprises in Q2, growth to ramp up in ’22e - ABG

Q2’21 ARR SEK 57m, up 21.5% y-o-y
Growth could ramp up in ’22e, driven by Litium 8
Fair value range adjusted to SEK 19-45 (19-43) per share

Litium reported Q2’21 ARR of SEK 57m, down 2.3% vs. ABGSCe, for organic ARR growth of 21.5% on a y-o-y basis. Quarterly revenues were SEK 15m, up 2.0% vs. ABGSCe, and the revenue mix improved in the quarter where subscription revenues generated 88.0% of revenues (up 5.3pp q-o-q). This was an effect of client digital storefronts generating increased levels of traffic and activity, which warranted a higher level of subscription fees. It is a part of Litium’s scalable offering and changes are made continuously. In turn, the higher subscription fees resulted in an improved gross margin, 70.0% in Q2’21, up 3.7pp q-o-q. Going forward, we estimate that the gross margin will be in the area of ~70%, which is in line with Litium’s ambitions. Operating costs (ex. cogs) were SEK -18m, slightly below ABGSCe of SEK -19m, and rose 13.6% y-o-y. As such, the operational leverage in Litium’s business model continues to show and this should eventually lead Litium to profitability. EBITDA in the quarter was SEK -0.8m vs. ABGSCe at SEK -1.4m. EBIT was SEK -3.4m vs. ABGSCe at SEK -4.0m.

In keeping with our estimate revisions, where we slightly increase our long-term margin estimates, we raise our blended fair value range (DCF & peer multiples) to SEK 19-45 (19-43) per share. In addition, we Litium is currently trading at an EV/ARR of 4.5x-2.6x for ’21e-’23e based on the current share price and our updated estimates.

Länk till analysen i sin helhet: https://www.introduce.se/foretag/Litium/Equity-research/2021/8/litium---no-surprises-in-q2-growth-to-ramp-up-in-22e/