ARR of SEK 38m, -7.4% vs. ABGSCe, +37.0% y-o-y…

…sequentially flat growth, first time since 2016

Adjusted DCF range, SEK 9-23 per share

Net sales +20.8% y-o-y, 98.4% recurring, +3.1pp vs. Q2’19
In Litium’s Q3’19 report, ARR remained flat q-o-q at SEK 38.0m, which was the first flat sequential growth since ’16 by our estimate, however it did represent a y-o-y growth of 37.0%. Reported net sales were SEK 9m, for a y-o-y growth of 20.8%, which was -13.7% below our estimate of SEK 10.5m. One highlight was 98.4% of net sales coming from recurring revenues, up 3.1pp from Q2’19. The Q3 opex was higher than we expected, at SEK 15m, mainly due to costs associated with management changes, recruitment of additional FTE’s, marketing expenses and a restructuring that caused one-off personnel costs of SEK 2m. As such, reported EBIT came in at SEK -6m, which was 23.6% below our estimate of SEK -5m.

Sales down ~6.0% ’19e-’21e, EBIT cuts look worse than they are
Simply by factoring in the quarter into our estimates, net sales for ‘19e-‘21e decline by 5.5-5.6%. We keep our opex base relatively unchanged for the same period, however we adjust the mix with higher personnel costs and lower external expenses than before. This does however yield rather large EBIT revisions percentage-wise, which in reality only represent a cut of approximately SEK 2m to ‘19e-‘21e EBIT. We keep our ARR growth figures intact for ‘20e-‘21e, at 39.9% and 35.0% respectively, but we see upside potential as Litium is optimizing its operations in Norway and Denmark, in combination with further geographical expansion by ’21e. Looking at the seasonally strong Q4 – with events like Black Friday and Christmas – we believe that Litium’s rev share agreements with its technology partners will drive strong revenues.

ARR CAGR 37.4% ’19-’21e, EV/EBIT 15.3x ’21e
After adjusting our DCF, we find a fair value range of SEK 9-23 per share. It should be noted that our DCF is based upon our new estimated number of outstanding shares i
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