• ARR +6% y-o-y, 3% below ABGSCe
• Surprisingly large beat on EBITDA (+99% vs. ABGSCe)
• Targets positive EBIT in '24

Q4'23 report

Litium reported an ARR of SEK 72.3m (-3% vs. ABGSCe 74.7m), net sales of SEK 18.5m (-1% vs. ABGSCe 18.6m), EBITDA of SEK 4.6m (+99% vs. ABGSCe 2.3m), EBIT of SEK 0.9m (vs. ABGSCe -1.4m), and net profit of SEK 0.9m (vs. ABGSCe -1.4m). With respect to ARR, the report came in just below our expectations. However, we are once again positively surprised by the company's beat on EBITDA, as Litium appears to benefit more from its cost rationalisations and operating leverage than we had previously assessed.

Thoughts and outlook

The company's decision to slim the cost base is beginning to bear fruit, as the profitability has evidently improved. We are positively surprised by the company's target to achieve positive EBIT in '24, as we have previously estimated an EBIT of SEK -1m for the year. Despite a tough market for the company's B2C clients, it is increasingly clear that the business model works well for Litium thanks to the large recurring revenue base. Overall, we continue to deem the current operating performance to be supportive of the company's long-term prospects.

Cons. estimate revisions and valuation

Based on the first impressions from the report, we anticipate consensus to make positive, low single-digit ’24e-‘25e estimate revisions with respect to EBITDA. The company is trading at an EV/ARR of ~2x based on reported figures. Litium will host a webcast today at 11:00 CET to present the Q4 report and to conduct a Q&A session.