Litium - Strong ARR growth & leverage in Q1’21
Q1’21 ARR of SEK 55m, +3.7% vs. ABGSCe, +27.3% y-o-y We increase 21e-‘23e ARR by 3.3% ‘ Fair value range of SEK 19-43 (17-39) per share Operational leverage shines through in Q1’21 Litium had a strong Q1’21, with ARR of SEK 55m, +3.7% vs. ABGSCe, for y-o-y growth of 27.3% (within Litium’s financial target of 20-40% annual organic ARR growth). The gross margin was slightly muted in the quarter, at 66.3% (-5.2pp vs.
ABGSCe), due to increased levels of traffic on customer storefronts requiring Litium to increase its investments in storefront performance (accounted for in COGS). Operational costs, excluding COGS, amounted to SEK -19m, 5.8% above ABGSCe at SEK -18m, thus growing 16.3% y-o-y. As such, the quarter again highlights the operational leverage of Litium’s business model (ARR growth of 27.5% vs.
opex growth of 16.3%), which should eventually lead Litium to profitability by our estimate. EBITDA in Q1’21 was SEK -3.2m, +22.3% vs. ABGSCe at SEK -2.6m, and EBIT was SEK -5.8m, +15.3% vs.
ABGSCe at SEK -5.0m. ARR estimate up on the report After the Q1’21 report, we raise our ARR estimates by 3.3% for ‘21e-‘23e. In the short term, we believe that the gross margin will be slightly muted (we factor in 69% in Q2’21e) due to increased traffic on customer storefronts increasing Litium’s COGS, but we think it will normalize in H2’21e to the 71-72% range.
As discussed previously, we also expect growth to be somewhat muted in the short term (due to retailers putting off investments into digital commerce solutions due to the COVID-19 lockdowns), but this should pick up from H2’21e. Fair value range up to SEK 19-43 (17-39) per share Following our estimate revisions, where we slightly increase our long-term ARR growth estimates, we raise our blended fair value range (DCF & peer multiples) to SEK 19-43 (17-39) per share. Additionally, we find that Litium is currently trading at an EV/ARR of 5.1x-3.0x for ‘21e-‘23e based on the current share price and our updated estimat....